SECURITIES AND EXCHANGE COMMISSION
| | | | | |
x | ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| | For the quarterly period ended SeptemberJune 30, 20222023 |
| | |
or |
| | |
o | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| | For the transition period from ___________ to ___________ |
For the transition period from ___________ to ___________
Commission File Number 000-54887
Bright Mountain Media, Inc.
(Exact Name of Registrant as Specified in its Charter)
| | | | | | | | |
Florida | | | 27-2977890 |
State or Other Jurisdiction of Incorporation or Organization
| | I.R.S. Employer Identification No.
|
| | | | | | | | |
6400 Congress Avenue,, Suite 2050,, Boca Raton,, FL | | 33487 |
Address of Principal Executive Offices | | Zip Code |
561-998-2440
561-998-2440
Registrant’s Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
None | | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ Nox ☒ No
o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ Nox ☒ No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer ☐ | o | | Accelerated filer ☐ | o | |
| Non-accelerated filer ☒ | x | | Smaller reporting company | ☒x | |
| | | | Emerging growth company | ☐o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ Noo ☒ No
APPLICABLE ONLY TO CORPORATE ISSUERSx
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of
NovemberAugust 11,
2022,2023, there were
149,159,461 171,281,454 shares of the issuer’s shares outstanding.
BRIGHT MOUNTAIN MEDIA, INC.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:
• | ● | our ability to fully develop the Bright Mountain Media Ad Exchange Network and services platform; |
| | |
| ● | the continued appeal of internet advertising; |
| | |
| ● | our ability to manage and expand our relationships with publishers; |
| | |
| ● | our dependence on revenues from a limited number of customers; |
| | |
| ● | the impact of seasonal fluctuations on our revenues; |
| | |
| ● | acquisitions of new businesses and our ability to integrate those businesses into our operations; |
| | |
| ● | online security breaches; |
| | |
| ● | failure to effectively promote our brand and attract advertisers; |
| | |
| ● | our ability to protect our content; |
| | |
| ● | our ability to protect our intellectual property rights; |
| | |
| ● | the success of our technology development efforts; |
| | |
| ● | additional competition resulting from our business expansion strategy; |
| | |
| ● | our dependence on third party service providers; |
| | |
| ● | our ability to detect advertising fraud; |
| | |
| ● | liability related to content which appears on our websites; |
| | |
| ● | regulatory risks and compliance with privacy laws; |
| | |
| ● | dependence on executive officers and certain key employees and consultants; |
| | |
| ● | our ability to hire qualified personnel; |
| | |
| ● | possible problems with our network infrastructure; |
| | |
| ● | ongoing material weaknesses in our disclosure controls and internal control over financial reporting; |
| | |
| ● | the impact on available working capital resulting from the payment of cash dividends to our affiliates; |
| | |
| ● | dilution to existing shareholders upon the conversion of outstanding preferred stock and convertible notes and/or the exercise of outstanding options and warrants, including warrants with cashless exercise rights; |
| | |
| ● | the illiquid nature of our common stock; |
| | |
| ● | risks associated with securities litigation; and |
| | |
| ● | provisions of our charter and Florida law which may have anti-takeover effects |
our history of losses;
•our dependence upon sales of equity securities and borrowings under our credit facility to fund operating capital;
•our ability to detect advertising fraud;
•the continued appeal of internet advertising;
•our ability to manage and expand our relationships with publishers;
•our dependence on revenues from a limited number of customers;
•the impact of seasonal fluctuations on our revenues;
•completed and proposed acquisitions;
•acquisitions of new businesses and our ability to integrate those businesses into our operations;
•online security breaches;
•failure to effectively promote our brand and attract advertisers;
•our ability to predict the impact of COVID and other future pandemics or outbreaks of disease;
•our ability to protect our content;
•our ability to protect our intellectual property rights;
•the success of our technology development efforts;
•our ability to obtain or maintain key website addresses;
•our dependence on certain third-party service providers;
•liability related to content which appears on our websites;
•dependence on executive officers and certain key employees and consultants;
•our ability to hire qualified personnel;
•regulatory risks and compliance with privacy laws;
•risks associated with potential litigation;
•limitations from our secured indebtedness;
•substantial doubts about our ability to continue as a going concern;
•ongoing material weaknesses in our disclosure controls and internal control over financial reporting;
•the limited public market for our common stock;
•additional competition resulting from our business expansion strategy;
•possible problems with our network infrastructure;
•adverse impacts to the amount of our working capital as a result of the amount of cash dividends and outstanding interest we pay affiliates;
•dilution to existing shareholders upon the conversion of outstanding convertible notes and/or the exercise outstanding options and warrants;
•provisions of our charter and Florida law which may have anti-takeover effects;
•concentration of our stock ownership and control; and
•our ability to issue additional shares of preferred stock in the future.
Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report, including the Part II, Item 2, our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on June 13, 2022 and our other filings with the Securities and Exchange Commission in their entirety. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
OTHER PERTINENT INFORMATION
Unless specifically set forth to the contrary, when used in this report the terms “Bright Mountain”, the
“Company”“Company”, “we”, “us”, “our” and similar terms refer to Bright Mountain Media, Inc., a Florida corporation, and its subsidiaries. In addition, when used in this report,
“third“second quarter of 2023” refers to the three months ended June 30, 2023, “second quarter of 2022” refers to the three months ended
SeptemberJune 30, 2022,
“third quarter of 2021” refers to the three months ended September 30, 2021, and
“2021”“2022” refers to the year ended December 31,
2021.2022. The information
which appears on,
or that can be accessed through, our website at
www.brightmountainmedia.com is not incorporated by reference in, or considered part of, this report.
Quarterly Report on Form 10-Q.
PART 1I – FINANCIAL INFORMATION
Item 1. Financial Statements
BRIGHT MOUNTAIN MEDIA, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share figures)
| | September 30, | | | December 31, * | |
| | 2022 | | | 2021* | |
| | (unaudited) | | | | |
ASSETS | | | | | | | | |
Current Assets | | | | | | | | |
Cash and cash equivalents | | $ | 412 | | | $ | 781 | |
Accounts receivable, net | | | 3,904 | | | | 3,550 | |
Prepaid expenses and other current assets | | | 769 | | | | 926 | |
Total Current Assets | | | 5,085 | | | | 5,257 | |
| | | | | | | | |
Property and equipment, net | | | 37 | | | | 65 | |
Intangible assets, net | | | 4,896 | | | | 6,069 | |
Goodwill | | | 19,645 | | | | 19,645 | |
Operating lease right-of-use asset | | | 381 | | | | — | |
Other assets | | | 240 | | | | 528 | |
Total Assets | | $ | 30,284 | | | $ | 31,564 | |
LIABILITIES AND SHAREHOLDERS’ DEFICIT | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable and accrued expenses | | $ | 9,968 | | | $ | 10,967 | |
Other liabilities | | | 2,144 | | | | 1,598 | |
Interest payable – 10% Convertible Promissory Notes– related party | | | 29 | | | | 23 | |
Interest payable – Centre Lane Senior Secured Credit Facility – related party | | | 1,855 | | | | 617 | |
Deferred revenues | | | 996 | | | | 1,162 | |
PPP Loan | | | — | | | | 1,137 | |
Note payable – BMLLC acquisition debt | | | — | | | | 250 | |
Note payable – Centre Lane Senior Secured Credit Facility – related party (current portion) | | | 2,832 | | | | 7,316 | |
Total Current Liabilities | | | 17,824 | | | | 23,070 | |
| | | | | | | | |
Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party | | | 23,582 | | | | 15,164 | |
Note Payable – 10% Convertible Promissory Notes, net of discount, related party | | | 64 | | | | 54 | |
Operating lease liability | | | 333 | | | | — | |
Total liabilities | | | 41,803 | | | | 38,288 | |
| | | | | | | | |
Commitments and Contingencies | | | - | | | | - | |
| | | | | | | | |
Shareholders’ deficit | | | | | | | | |
Convertible preferred stock, par value $0.01, 20,000,000 shares authorized: | | | | | | | | |
Series A-1, 2,000,000 shares designated, no shares issued or outstanding at September 30, 2022 and December 31, 2021 | | | — | | | | — | |
Series B-1, 6,000,000 shares designated, no shares issued or outstanding at September 30, 2022 and December 31, 2021 | | | — | | | | — | |
Series E, 2,500,000 shares designated, 125,000 shares issued and outstanding at September 30, 2022 and December 31, 2021; liquidation preference of $0.40 per share | | | 1 | | | | 1 | |
Series F, 4,344,017 shares designated, no shares issued or outstanding at September 30, 2022 and December 31, 2021 | | | — | | | | — | |
Convertible preferred stock value | | | | | | | | |
| | | | | | | | |
Common stock, par value $0.01, 324,000,000 shares authorized, 149,984,636 and 149,810,383 issued and 149,159,461 and 148,985,208 outstanding at September 30, 2022 and December 31, 2021, respectively | | | 1,500 | | | | 1,498 | |
Treasury stock, at cost; 825,175 shares at September 30, 2022 and December 31, 2021 | | | (220 | ) | | | (220 | ) |
Additional paid-in capital | | | 98,500 | | | | 98,129 | |
Accumulated deficit | | | (111,366 | ) | | | (106,144 | ) |
Accumulated other comprehensive income | | | 66 | | | | 12 | |
Total shareholders’ deficit | | | (11,519 | ) | | | (6,724 | ) |
Total liabilities and shareholders’ deficit | | $ | 30,284 | | | $ | 31,564 | |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022* |
| (unaudited) | | |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 3,350 | | | $ | 316 | |
Accounts receivable, net | 15,225 | | | 3,585 | |
Prepaid expenses and other current assets | 1,423 | | | 600 | |
Total Current Assets | 19,998 | | | 4,501 | |
Property and equipment, net | 214 | | | 40 | |
Intangible assets, net | 19,556 | | | 4,510 | |
Goodwill | 20,936 | | | 19,645 | |
Operating lease right-of-use asset | 338 | | | 367 | |
Other assets | 187 | | | 137 | |
Total Assets | $ | 61,229 | | | $ | 29,200 | |
LIABILITIES AND SHAREHOLDERS’ DEFICIT | | | |
Current liabilities | | | |
Accounts payable and accrued expenses | $ | 15,202 | | | $ | 10,317 | |
Other liabilities | 4,788 | | | 1,838 | |
Interest payable – 10% Convertible Promissory Notes– related party | 35 | | | 31 | |
| | | |
Deferred revenues | 4,863 | | | 737 | |
Note payable – 10% Convertible Promissory Notes, net of discount, related party | 75 | | | 68 | |
Note payable – Centre Lane Senior Secured Credit Facility – related party (current portion) | 4,048 | | | 4,860 | |
Total Current Liabilities | 29,011 | | | 17,851 | |
Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party | 53,061 | | | 25,101 | |
Operating lease liability | 276 | | | 319 | |
Total liabilities | 82,348 | | | 43,271 | |
| | | |
Shareholders’ deficit | | | |
Convertible preferred stock, par value $0.01, 20,000,000 shares authorized, no shares issued or outstanding at June 30, 2023 and December 31, 2022 | — | | | — | |
| | | |
| | | |
| | | |
| | | |
Common stock, par value $0.01, 324,000,000 shares authorized, 172,106,629 and 150,444,636 issued and 171,281,454 and 149,619,461 outstanding at June 30, 2023 and December 31, 2022, respectively | 1,721 | | | 1,504 | |
Treasury stock, at cost; 825,175 shares at June 30, 2023 and December 31, 2022 | (220) | | | (220) | |
Additional paid-in capital | 101,266 | | | 98,797 | |
Accumulated deficit | (124,136) | | | (114,269) | |
Accumulated other comprehensive income | 250 | | | 117 | |
Total shareholders’ deficit | (21,119) | | | (14,071) | |
Total liabilities and shareholders’ deficit | $ | 61,229 | | | $ | 29,200 | |
* | | | | | |
* | Derived from audited condensedconsolidated financial statements. |
See accompanying notes to unaudited
condensed consolidated financial
statements
BRIGHT MOUNTAIN MEDIA, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share figures)
| | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
| | | | | | | | | | | | |
Revenue | | $ | 5,244 | | | $ | 3,805 | | | $ | 14,420 | | | $ | 8,638 | |
Cost of revenue | | | 3,098 | | | | 1,708 | | | | 7,726 | | | | 4,568 | |
Gross margin | | | 2,146 | | | | 2,097 | | | | 6,694 | | | | 4,070 | |
General and administrative expenses | | | 3,323 | | | | 4,635 | | | | 10,616 | | | | 13,643 | |
Loss from operations | | | (1,177 | ) | | | (2,538 | ) | | | (3,922 | ) | | | (9,573 | ) |
Financing income (expense) | | | | | | | | | | | | | | | | |
Gain on forgiveness of PPP loan | | | — | | | | 465 | | | | 1,137 | | | | 2,172 | |
Other income (expense) | | | 18 | | | | (54 | ) | | | 58 | | | | (15 | ) |
Interest expense - Centre Lane Senior Secured Credit Facility- related party | | | (744 | ) | | | (755 | ) | | | (2,468 | ) | | | (1,318 | ) |
Interest expense - Convertible Promissory notes - related party | | | (6 | ) | | | (6 | ) | | | (17 | ) | | | (17 | ) |
Other interest expense | | | (9 | ) | | | (1 | ) | | | (10 | ) | | | (336 | ) |
Total financing income (expense) | | | (741 | ) | | | (351 | ) | | | (1,300 | ) | | | 486 | |
Income tax provision (benefit) | | | — | | | | — | | | | — | | | | — | |
Net loss | | | (1,918 | ) | | | (2,889 | ) | | | (5,222 | ) | | | (9,087 | ) |
| | | | | | | | | | | | | | | | |
Dividends | | | | | | | | | | | | | | | | |
Common stock deemed dividend | | | — | | | | (212 | ) | | | — | | | | (212 | ) |
Preferred stock dividends | | | (1 | ) | | | (62 | ) | | | (3 | ) | | | (241 | ) |
| | | | | | | | | | | | | | | | |
Net loss attributable to common shareholders | | $ | (1,919 | ) | | $ | (3,163 | ) | | $ | (5,225 | ) | | $ | (9,540 | ) |
Foreign currency translation | | | 37 | | | | 93 | | | | 54 | | | | (21 | ) |
Comprehensive loss | | $ | (1,882 | ) | | $ | (3,070 | ) | | $ | (5,171 | ) | | $ | (9,561 | ) |
| | | | | | | | | | | | | | | | |
Net loss per common share: | | | | | | | | | | | | | | | | |
Basic and diluted | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.04 | ) | | $ | (0.08 | ) |
Weighted average shares outstanding | | | | | | | | | | | | | | | | |
Basic and diluted | | | 149,159,461 | | | | 125,744,703 | | | | 149,140,312 | | | | 121,718,466 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | |
Revenue | $ | 12,616 | | | $ | 5,717 | | | $ | 14,114 | | | $ | 9,176 | |
Cost of revenue | 9,162 | | | 2,900 | | | 10,132 | | | 4,628 | |
Gross margin | 3,454 | | | 2,817 | | | 3,982 | | | 4,548 | |
General and administrative expenses | 7,374 | | | 3,443 | | | 10,802 | | | 7,293 | |
Loss from operations | (3,920) | | | (626) | | | (6,820) | | | (2,745) | |
Financing (expense) income | | | | | | | |
Gain on forgiveness of PPP loan | — | | | 296 | | | — | | | 1,137 | |
Other income | 103 | | | 39 | | | 381 | | | 39 | |
Interest expense - Centre Lane Senior Secured Credit Facility - related party | (2,244) | | | (1,160) | | | (3,407) | | | (1,994) | |
Interest expense - Convertible Promissory notes - related party | (6) | | | (6) | | | (11) | | | (11) | |
Other interest expense | (4) | | | (1) | | | (10) | | | (1) | |
Total financing (expense) | (2,151) | | | (832) | | | (3,047) | | | (830) | |
Net loss before income taxes | (6,071) | | | (1,458) | | | (9,867) | | | (3,575) | |
Income tax provision | — | | | — | | | — | | | — | |
Net loss | (6,071) | | | (1,458) | | | (9,867) | | | (3,575) | |
| | | | | | | |
Dividends | | | | | | | |
| | | | | | | |
Preferred stock dividends | — | | | (1) | | | — | | | (2) | |
| | | | | | | |
Net loss attributable to common shareholders | $ | (6,071) | | | $ | (1,459) | | | $ | (9,867) | | | $ | (3,577) | |
Foreign currency translation | 119 | | | 17 | | | 133 | | | 17 | |
Comprehensive loss | $ | (5,952) | | | $ | (1,442) | | | $ | (9,734) | | | $ | (3,560) | |
| | | | | | | |
Net loss per common share: | | | | | | | |
Basic and diluted | $ | (0.04) | | | $ | (0.01) | | | $ | (0.06) | | | $ | (0.02) | |
Weighted average shares outstanding | | | | | | | |
Basic and diluted | 166,779,390 | | 149,159,461 | | 158,291,304 | | 149,130,579 |
See accompanying notes to unaudited
condensed consolidated financial
statements
BRIGHT MOUNTAIN MEDIA, INC
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS’
(DEFICIT) EQUITYDEFICIT
For the
Three and NineSix Months Ended
SeptemberJune 30,
20222023 and
20212022
(in thousands, except share figures)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Deficit | | |
| | | | | Shares | | Amount | | Shares | | Amount | | | | | | |
Balance, December 31, 2022 | | | | | 150,444,636 | | $ | 1,504 | | | (825,175) | | $ | (220) | | | $ | 98,797 | | | $ | (114,269) | | | $ | 117 | | | $ | (14,071) | | | |
Net loss | | | | | — | | — | | | — | | — | | | — | | | (3,796) | | | — | | | (3,796) | | | |
Common stock issued for services rendered | | | | | 190,000 | | 2 | | | — | | — | | | 29 | | | — | | | — | | | 31 | | | |
Stock based compensation | | | | | — | | — | | | — | | — | | | 25 | | | — | | | — | | | 25 | | | |
Foreign currency translation, net | | | | | — | | — | | | — | | — | | | — | | | — | | | 14 | | | 14 | | | |
Balance, March 31, 2023 | | | | | 150,634,636 | | $ | 1,506 | | | (825,175) | | | $ | (220) | | | $ | 98,851 | | | $ | (118,065) | | | $ | 131 | | | $ | (17,797) | | | |
Net loss | | | | | — | | — | | | — | | — | | | — | | | (6,071) | | | — | | | (6,071) | | | |
| | | | | | | | | | | | | | | | | | | | | |
Common stock issue to Center Lane Partners | | | | | 21,401,993 | | 214 | | | — | | | — | | | 1,712 | | | — | | | — | | | 1,926 | | | |
Extinguishment of Centre Lane Credit Facility | | | | | — | | — | | | — | | — | | | 670 | | | — | | | — | | | 670 | | | |
Common stock issued for options exercised | | | | | 70,000 | | 1 | | | — | | — | | | — | | | — | | — | | | 1 | | | |
Stock based compensation | | | | | — | | — | | | — | | — | | | 33 | | | — | | | — | | | 33 | | | |
Foreign currency translation, net | | | | | — | | — | | | — | | — | | | — | | | — | | | 119 | | | 119 | | | |
Balance, June 30, 2023 | | | | | 172,106,629 | | $ | 1,721 | | | (825,175) | | | $ | (220) | | | $ | 101,266 | | | $ | (124,136) | | | $ | 250 | | | $ | (21,119) | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock | | | Common Stock | | | Treasury Stock | | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Total Stockholders’ | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Deficit | |
Balance, December 31, 2021 | | | 125,000 | | | $ | 1 | | | | 149,810,383 | | | $ | 1,498 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 98,129 | | | $ | (106,144 | ) | | $ | 12 | | | $ | (6,724 | ) |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,117 | ) | | | — | | | | (2,117 | ) |
Series E preferred stock dividend | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
Stock option vesting expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 29 | | | | — | | | | — | | | | 29 | |
Oceanside acquisition | | | — | | | | — | | | | 174,253 | | | | 2 | | | | — | | | | — | | | | 277 | | | | — | | | | — | | | | 279 | |
Balance, March 31, 2022 | | | 125,000 | | | $ | 1 | | | | 149,984,636 | | | $ | 1,500 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 98,434 | | | $ | (108,261 | ) | | $ | 12 | | | $ | (8,534 | ) |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,187 | ) | | | — | | | | (1,187 | ) |
Series E preferred stock dividend | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
Stock option vesting expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30 | | | | — | | | | — | | | | 30 | |
Foreign currency translation, net | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17 | | | | 17 | |
Balance, June 30, 2022 | | | 125,000 | | | $ | 1 | | | | 149,984,636 | | | $ | 1,500 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 98,463 | | | $ | (109,448 | ) | | $ | 29 | | | $ | (9,675 | ) |
Series E preferred stock dividend | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
Stock option vesting expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 38 | | | | — | | | | — | | | | 38 | |
Foreign currency translation, net | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 37 | | | | 37 | |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,918 | ) | | | — | | | | (1,918 | ) |
Balance, September 30, 2022 | | | 125,000 | | | $ | 1 | | | | 149,984,636 | | | $ | 1,500 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 98,500 | | | $ | (111,366 | ) | | $ | 66 | | | $ | (11,519 | ) |
Table of Contents | | Preferred Stock | | | Common Stock | | | Treasury Stock | | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Total Stockholders’ Equity | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | (Deficit) | |
Balance, December 31, 2020 | | | 8,044,017 | | | $ | 80 | | | | 118,162,150 | | | $ | 1,182 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 96,427 | | | $ | (93,932 | ) | | $ | (23 | ) | | $ | 3,514 | |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,709 | ) | | | | | | | (1,709 | ) |
Series A-1, E and F preferred stock dividend | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (89 | ) | | | — | | | | — | | | | (89 | ) |
Stock option vesting expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 68 | | | | — | | | | — | | | | 68 | |
Options exercise | | | — | | | | — | | | | 100,000 | | | | 1 | | | | — | | | | — | | | | 13 | | | | — | | | | — | | | | 14 | |
Warrants exercise | | | — | | | | — | | | | 25,000 | | | | — | | | | — | | | | — | | | | 10 | | | | — | | | | — | | | | 10 | |
Foreign currency translation, net | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (9 | ) | | | (9 | ) |
Oceanside acquisition | | | — | | | | — | | | | 379,266 | | | | 4 | | | | — | | | | — | | | | 603 | | | | — | | | | — | | | | 607 | |
Balance, March 31, 2021 | | | 8,044,017 | | | $ | 80 | | | | 118,666,416 | | | $ | 1,187 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 97,032 | | | $ | (95,641 | ) | | $ | (32 | ) | | $ | 2,406 | |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (4,489 | ) | | | — | | | | (4,489 | ) |
Series A-1, E and F preferred stock dividend | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (90 | ) | | | — | | | | — | | | | (90 | ) |
Stock option vesting expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 73 | | | | — | | | | — | | | | 73 | |
Centre Lane Partners debt financing | | | — | | | | — | | | | 3,150,000 | | | | 31 | | | | — | | | | — | | | | 2,466 | | | | — | | | | — | | | | 2,497 | |
Foreign currency translation, net | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (82 | ) | | | (82 | ) |
Balance, June 30, 2021 | | | 8,044,017 | | | $ | 80 | | | | 121,816,416 | | | $ | 1,218 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 99,481 | | | $ | (100,130 | ) | | $ | (114 | ) | | $ | 315 | |
Beginning balance | | | 8,044,017 | | | $ | 80 | | | | 121,816,416 | | | $ | 1,218 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 99,481 | | | $ | (100,130 | ) | | $ | (114 | ) | | $ | 315 | |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,889 | ) | | | — | | | | (2,889 | ) |
Series A-1, E and F preferred stock dividend | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (62 | ) | | | — | | | | — | | | | (62 | ) |
Stock option vesting expense | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 38 | | | | — | | | | — | | | | 38 | |
Centre Lane Partners debt financing | | | — | | | | — | | | | 2,000,000 | | | | 20 | | | | — | | | | — | | | | 42 | | | | — | | | | — | | | | 62 | |
Common stock deemed dividend | | | — | | | | — | | | | 10,398,700 | | | | 104 | | | | — | | | | — | | | | 108 | | | | (212 | ) | | | — | | | | - | |
Conversion of Preferred stocks | | | (7,919,017 | ) | | | (79 | ) | | | 7,919,017 | | | | 79 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | - | |
Foreign currency translation, net | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 93 | | | | 93 | |
Balance, September 30, 2021 | | | 125,000 | | | $ | 1 | | | | 142,134,133 | | | $ | 1,421 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 99,607 | | | $ | (103,231 | ) | | $ | (21 | ) | | $ | (2,443 | ) |
Ending balance | | | 125,000 | | | $ | 1 | | | | 142,134,133 | | | $ | 1,421 | | | | (825,175 | ) | | $ | (220 | ) | | $ | 99,607 | | | $ | (103,231 | ) | | $ | (21 | ) | | $ | (2,443 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Deficit |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | | | |
Balance, December 31, 2021 | 125,000 | | $ | 1 | | | 149,810,383 | | $ | 1,498 | | | (825,175) | | $ | (220) | | | $ | 98,129 | | | $ | (106,144) | | | $ | 12 | | | $ | (6,724) | |
Net loss | — | | — | | | — | | — | | | — | | — | | | — | | | (2,117) | | | | | (2,117) | |
Series E preferred stock dividend | — | | — | | | — | | — | | | — | | — | | | (1) | | | — | | | — | | | (1) | |
Stock based compensation | — | | — | | | — | | — | | | — | | — | | | 29 | | | — | | | — | | | 29 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Oceanside acquisition | — | | — | | | 174,253 | | 2 | | | — | | — | | | 277 | | | — | | | — | | | 279 | |
Balance, March 31, 2022 | 125,000 | | $ | 1 | | | 149,984,636 | | $ | 1,500 | | | (825,175) | | | $ | (220) | | | $ | 98,434 | | | $ | (108,261) | | | $ | 12 | | | $ | (8,534) | |
Net loss | — | | — | | | — | | — | | | — | | — | | | — | | | (1,458) | | | — | | | (1,458) | |
Series E preferred stock dividend | — | | — | | | — | | — | | | — | | — | | | (1) | | | — | | | — | | | (1) | |
Stock based compensation | — | | — | | | — | | — | | | — | | — | | | 30 | | | — | | | — | | | 30 | |
| | | | | | | | | | | | | | | | | | | |
Foreign currency translation, net | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | 17 | | | 17 | |
Balance, June 30, 2022 | 125,000 | | 1 | | 149,984,636 | | $ | 1,500 | | | (825,175) | | | $ | (220) | | | $ | 98,463 | | | $ | (109,719) | | | $ | 29 | | | $ | (9,946) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
See accompanying notes to unaudited
condensed consolidated financial
statements
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)(unaudited)
(in thousands)
| | 2022 | | | 2021 | |
| | For the Nine Months Ended September 30, | |
| | 2022 | | | 2021 | |
Cash flows from operating activities: | | | | | | | | |
Net loss | | $ | (5,222 | ) | | $ | (9,087 | ) |
Adjustments to reconcile net loss to net cash used in operations: | | | | | | | | |
Depreciation | | | 24 | | | | 46 | |
Amortization of debt discount | | | 923 | | | | 384 | |
Amortization of intangibles | | | 1,173 | | | | 1,189 | |
Stock based compensation | | | 97 | | | | 179 | |
Stock compensation for Oceanside shares | | | 117 | | | | 608 | |
Gain on forgiveness of PPP loan | | | (1,137 | ) | | | (2,172 | ) |
Write off doubtful accounts | | | — | | | | (293 | ) |
Warrant expense for services rendered | | | — | | | | 10 | |
Provision for bad debt | | | 87 | | | | 82 | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (387 | ) | | | 2,807 | |
Prepaid expenses and other current assets | | | 423 | | | | 636 | |
Accounts payable and accrued expenses | | | (1,024 | ) | | | (171 | ) |
Other liabilities | | | 661 | | | | (340 | ) |
Interest payable – Centre Lane Senior Secured Credit Facility, related party | | | 1,334 | | | | 945 | |
Interest payable – 10% Convertible Promissory note, related party | | | 6 | | | | 6 | |
Deferred revenue | | | (166 | ) | | | 463 | |
Net cash used in operating activities | | | (3,091 | ) | | | (4,708 | ) |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Purchase of property and equipment | | | — | | | | (3 | ) |
Net cash used in investing activities | | | — | | | | (3 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Proceeds from stock option exercises | | | 1 | | | | 14 | |
Preference dividend payments | | | (3 | ) | | | 3 | |
Principal payments received (funded) for notes receivable | | | 20 | | | | (1 | ) |
Proceeds from Centre Lane Senior Secured Credit Facility, related party | | | 3,050 | | | | 3,100 | |
Payment of interest on Centre Lane Credit Facility | | | (96 | ) | | | — | |
Repayments of BMLLC acquisition debt | | | (250 | ) | | | — | |
Proceeds from PPP loan | | | — | | | | 1,137 | |
Net cash provided by financing activities | | | 2,722 | | | | 4,253 | |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (369 | ) | | | (458 | ) |
Cash and cash equivalents at the beginning of period | | | 781 | | | | 736 | |
Cash and cash equivalents at end of period | | $ | 412 | | | $ | 278 | |
| | | | | | | | | | | |
| For the Six Months Ended June 30, |
| 2023 | | 2022 |
Cash flows from operating activities: | | | |
Net loss | $ | (9,867) | | | $ | (3,575) | |
Adjustments to reconcile net loss to net cash used in operations: | | | |
Depreciation | 46 | | | 12 | |
| | | |
Interest paid-in kind on Centre Lane Credit Facility | 2,407 | | | — | |
Amortization of operating lease right-of-use asset | 29 | | | — | |
Amortization of debt discount | 844 | | | 615 | |
Amortization of intangibles | 1,114 | | | 786 | |
Stock based compensation | 58 | | | 59 | |
Stock compensation for Oceanside shares | — | | | 117 | |
Gain on forgiveness of PPP loan | — | | | (1,137) | |
| | | |
Common stock issued for services rendered | 31 | | | — | |
(Recovery of) provision for bad debt | (27) | | | 222 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | 3,259 | | | (146) | |
Prepaid expenses and other current assets | (78) | | | 324 | |
Operating lease liability | (24) | | | 4 | |
Accounts payable and accrued expenses | (2,259) | | | (950) | |
Other liabilities | 1,496 | | | — | |
Interest payable – Centre Lane Senior Secured Credit Facility, related party | — | | | 1,390 | |
Interest payable – 10% Convertible Promissory note, related party | 4 | | | 4 | |
Deferred revenue | (627) | | | (539) | |
Net cash used in operating activities | (3,594) | | | (2,814) | |
Cash flows from investing activities: | | | |
Purchase of property and equipment | (4) | | | (4) | |
Net cash used in investing activities | (4) | | | (4) | |
Cash flows from financing activities: | | | |
Proceeds from stock option exercises | 1 | | | — | |
Preference dividend payments | — | | | (2) | |
Principal payments received for notes receivable | — | | | 6 | |
Proceeds from Centre Lane Senior Secured Credit Facility, related party | 6,626 | | | 2,700 | |
| | | |
Repayments of BMLLC acquisition debt | — | | | (250) | |
| | | |
Net cash provided by financing activities | 6,627 | | | 2,454 | |
Effect of foreign exchange rates on cash | 5 | | | — | |
Net increase (decrease) in cash and cash equivalents | 3,034 | | | (364) | |
Cash and cash equivalents at the beginning of period | 316 | | | 781 | |
Cash and cash equivalents at end of period | $ | 3,350 | | | $ | 417 | |
Supplemental disclosure of cash flow information | | | |
Cash paid for interest | $ | 161 | | | $ | — | |
Interest paid-in-kind on Centre Lane Credit Facility | $ | 2,407 | | | $ | — | |
Non-cash investing and financing activities | | | |
Recognition of right-of-use asset and operating lease liability | $ | — | | | $ | 691 | |
Issuance of common shares to Oceanside to settle share liability | $ | — | | | $ | 162 | |
Issuance of common stock for Centre Lane debt financing | $ | 1,926 | | | $ | — | |
Issuance of debt to finance acquisition of Big Village Entities | $ | 19,874 | | | $ | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
See accompanying notes to unaudited
condensed consolidated financial
statements
BRIGHT MOUNTAIN MEDIA, INC.
AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| | For the Nine Months Ended September 30, |
| | 2022 | | 2021 |
Supplemental disclosure of cash flow information | | | | | | | | |
Cash paid for Interest | | $ | 96 | | | $ | — | |
| | | | | | | | |
Non-cash investing and financing activities | | | | | | | | |
Recognition of right-of-use asset and operating lease liability | | $ | 380 | | | $ | — | |
Issuance of common shares to Oceanside to settle share liability | | $ | 162 | | | $ | — | |
Common stock deemed dividend | | $ | — | | | $ | 212 | |
Conversion of Preferred shares to Common shares | | $ | — | | | $ | 790 | |
Issuance of common stock to Centre Lane for debt issuance | | $ | — | | | $ | 2,559 | |
See accompanying notes to unaudited condensed consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
June 30, 20222023
(Unaudited)
NOTE 1 – DESCRIPTION OF BUSINESS.BUSINESS AND DEVELOPMENTS
Organization and Nature of Operations
Bright Mountain Media, Inc. (the “Company” or“Company,” “Bright Mountain” or “We”“we”), is a holding Companycompany which focuses on digital mediapublishing and advertising services.technology. The Company is engaged in content creation and advertising technology development that helps brandscustomers connect with, and market to, targeted audiences in high quality environments using a variety of formats to reach customers.digital ad formats.
Digital MediaPublishing
Our digital publishing businessdivision focuses on developing content that attracts an audience and monetizes that audience through advertising. The current portfolio of owned and operated websites is focused on moms, parenting, families, and more broadly, women. The portfolio includesconsists of popular websites including Mom.com, Cafemom.com, LittleThings.com, and MamasLatinas.com. This demographic is highly sought after by brands and their advertising agencies. We use internal and external technologies to constantly improve the effectiveness and efficiency of the content we create. Our publishing division monetizes its audiences through both direct and programmatic advertising sales.
Advertising ServicingTechnology
Our advertising technology businessdivision focuses on delivering targeted ads to audiences on owned and operated sites as well as third partythird-party publishers in a cost-effective manner through the deployment of proprietary technologies. Through acquisitionsBy developing our own proprietary technology stack, we are able to pass along efficiencies to both the demand and organic software development, we have consolidated and plan to further condense key elementssupply side of the prevailing digital advertising supply chain by eliminating industry “middlemen” and/or costly redundancy of services via our ad exchange. ecosystem. Our goal is to enable and support a streamlined, end-to-end advertising model that addresses both demand (ad buy(buy side) and publisher supply (media sell(sell side) for both direct sales teams and programmatic sales and delivery of digital advertisements using an array of audience targeting tools and advertising formats (display, audio, video, CTV, in-app). Programmatic advertising relies on artificial intelligence powered software programs that leverage data and proprietary algorithms to match the optimal selection of an ad with a bid price offered by advertisers, while direct sales involve traditional insertion order-based, pre-selected sales between an ad buyer and an advertising sales executive.advertisers. The Company generates revenue through sales of advertising services which generate revenue from advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue. Additionally, we also generate advertising services revenue from facilitating the real-time buying and selling of advertisements at scale between networks of buyers known as DSPs (Demand Side Platforms)demand side platforms ("DSPs") and sellers known as SSPs (Supply Side Platforms)supply side platforms ("SSPs").
Asset Purchase Agreement
On April 3, 2023, in accordance with certain procedures (the “Bidding Procedures”) adopted by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) in In re Big Village Holding LLCApplication, et al., jointly-administered under case No. 23-10174 (the “Bankruptcy Case”), the “Company” submitted a bid (the “Bid”) for the acquisition of certain assets of Big Village Insights, Inc., a Delaware corporation f/k/a Engine International, Inc., Big Village Agency LLC, a Delaware limited liability company f/k/a Engine USA LLC, Big Village Group Inc., a Delaware corporation f/k/a Engine Group Inc., Deep Focus, Inc., a New York corporation, EMX Digital Inc., a Delaware corporation, Balihoo, Inc., a Delaware corporation, and Big Village Media LLC, a Delaware limited liability company f/k/a Engine Media LLC in the Bankruptcy Case (collectively, the “Sellers”) related to OTC
On July 1, 2022,the Sellers’ Agency Business and Insights Business (as defined in the APA) (collectively, the “Business”). The Bid contemplated the payment of a deposit, a cash payment at Closing (as defined in the APA) and the assumption of certain of Sellers’ liabilities (the “Assumed Liabilities”), all as set forth in a definitive asset purchase agreement among the Sellers and the Company filed an application(the “APA”) and described below, for which the Company was successful.
In accordance with the Over-The-Counter (“OTC”Bidding Procedures, on April 4, 2023, the Sellers conducted an auction among qualified bidders, including the Company (the “Auction”) Markets Group Inc. for a review of its candidature to be upgraded. At the Auction, following certain negotiated modifications to the OTCQB exchangeAPA, the Company was declared the winning bidder with a bid of $20.0 million plus the Assumed Liabilities, in accordance with the modified APA. The Company delivered the deposit of $2.0 million to the escrow agent effective as of April 3, 2023.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
On April 10, 2023, the Company entered into a definitive asset purchase agreement to acquire the assets of two business units of Big Village (Big Village Insights, Inc and Big Village Agency LLC, (together, the “Big Village Entities”)) for approximately $20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility (the "Big Village Acquisition"). On April 20, 2023, the Company completed the Big Village Acquisition.
As part of the Big Village Acquisition, the Company formed BV Insights, LLC ("Insights") and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions, additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting the offer of employment by the Company.
Insights is a global business intelligence firm providing primary research, secondary research, competitive intelligence and expert insight to address customer's strategic issues. Insights' revenue is primarily derived from providing a single integrated service for research.
Agency is a digital marking service company, providing advertising technology serving advertisers and agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns. Agency's revenue is derived from the
OTC Expert market as the Company is now current with its SEC filing obligations. The application was approved on August 19, 2022.planning and execution of creative and media marketing campaigns.
Centre Lane Senior SecuredSecure Credit AgreementFacility
The Company and its subsidiaries entered into its fifteenth amendmentare parties to the Amended and Restated Senior Secured Credit Agreement between itself, the lenders party thereto 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 (“Centre Lane Partners”), dated June 5, 2020, as amended (the “Credit Agreement”).
On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Solutions Partners, LP (together with any designated affiliates thereof, the “CLP Lenders”), pursuant to which CLP Lenders would provide financing in the form of a senior secured credit facility for the Big Village Acquisition.
On April 20, 2023, the Company and its subsidiaries CL Media Holdings LLC, Bright Mountain LLC, MediaHouse, Inc., Big-Village Agency LLC, and BV Insights LLC, and Centre Lane Partners entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”). The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $$26.3 million to, among other things, finance the Acquisition. This term loan, which was provided by BV Agency, LLC, (an affiliate of Centre Lane Solutions Partners, LP) matures on April 20, 2026 and was issued at a discount of 5% or $1.3 million. Interest of 15% payable under the note payable-in-kind in lieu of cash payment up to April 30, 2024, then 5% payable quarterly in cash and 10% payable-in-kind in lieu of cash payment until maturity of April 20, 2026.
350,000
Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by CLP Lenders. The issuance of the shares of common stock were not registered under the Securities Act of 1933, as amended (“Securities Act”), in accordance with Section 4(a)(2) of the aggregate.Securities Act as a transaction by an issuer not involving a public offering. As of June 30, 2023, BV Agency, LLC and Centre Lane Partners has been determined to qualify as a related party as shares were issued to Centre Lane Partners as partown approximately 12.4% and 8.8% of the transaction. A related party is a party that can exercise significant influence overCompany’s outstanding common stock, respectively.
Reduction in Work Force
During the three and six months ended June 30, 2023, the Company
reduced its headcount by 12 and 17 employees, respectively. There were no executive officers included in
making financial and/or operating decisions.
this reduction. As a result, the Company recognized a onetime severance cost of approximately $114,000 and $236,000, respectively during the three and six months ended June 30, 2023.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and all its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements for the three and ninesix months ended SeptemberJune 30, 2022,2023, and 2021 2022
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, such unaudited
condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the
condensed consolidated financial position and the
condensed consolidated results of operations. The
condensed consolidated results of operations for periods presented are not necessarily indicative of the results to be expected for the full year or any future periods. The
condensed consolidated balance sheet information as of December 31,
2021,2022, was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31,
2021, as filed with the SEC on June 13, 2022. The interim
condensed consolidated financial statements should be read in conjunction with that report.
Going Concern and Liquidity
Historically, the Company has incurred losses, which has resulted in an accumulated deficit of approximately $111.4$124.1 million as of SeptemberJune 30, 2022.2023. Cash flows used in operating activities were $3.1$3.6 million and $4.7$2.8 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. As of SeptemberJune 30, 2022,2023, the Company had approximately a $12.7$9.0 million working capital deficit, inclusive of $412,000$3.4 million in cash and cash equivalents to cover overhead expenses.equivalents.
The Company’s ability to continue as a going concern is dependent on its ability to meet its liquidity needs through a combination of factorsfactors. The Company is currently exploring all strategic alternatives, including but not limitedrestructuring or refinancing its debts, seeking additional debt, such as borrowings under the Credit Agreement or equity capital. The ability to cashaccess the capital market is also dependent on the stock volume and cash equivalents, working capital,market price of the ongoing increaseCompany's stock, which cannot be assured. Other measures include reducing or delaying certain business activities, reducing general and administrative expenses, including a reduction in revenue through increased sales and strategic capital raises.headcount. The ultimate success of these plans is not guaranteed.
In considering our forecast for the next twelve months, and the Company's current cash and working capital, as of the filing of this Quarterly Report on Form 10Q,10-Q, the Company’s available cash will not be sufficient to fund its anticipated level of operations. As a result, such matters create a substantial doubt regarding the Company’s ability to meet ourits financial needs and continue as a going concern.
The accompanying condensedunaudited consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less, when acquired, to be cash equivalents. The Company maintains its cash with various commercial banks in the U.S. and other foreign countries in which the Company operates.
As of June 30, 2023, the Company exceeded the federally insured limit of $250,000 for interest and non-interest-bearing accounts. As of December 31, 2022, the Company's interest and non-interest-bearing accounts were within the federally insured limit.
As of June 30, 2023, the Company had cash balances with a single financial institution in excess of the FDIC insured limit by amounts of $2.9 million.
As of December 31, 2022, the Company exceeded the insurance limit for one of its international bank accounts by $66,000.
Off-balance Sheet Arrangements
There are no off-balance sheet arrangements as of June 30, 2023 and December 31, 2022.
Transaction Cost
The Company incurred significant costs directly related to the Big Village Acquisition and are recorded as an expense on the income statement. See Note 13, Business Combinations, to these consolidated financial statements for further information.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
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 condensedunaudited consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our condensedunaudited 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 condensedunaudited 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,property and equipment, the valuation of equity-based transactions, valuation of the Center Lane Senior Secured Facility carrying value regarding debt modification or extinguishment,and the valuation allowance on deferred tax assets.
Foreign Currency
We translate the financial statements of our foreign subsidiaries, which have a functional currency in the respective country’s local currency, to U.S. dollars using month-end exchange rates for assets and liabilities and actual exchange rates for revenue, costs and expenses on the date of the transaction. Translation gains and losses
as a result of consolidation are included in accumulated other comprehensive loss. Transaction gains and losses are included within “general and administrative expense” on the
condensed consolidated statements of
operations. These gainsoperations and
losses are immaterial to the financial statements.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with high credit-quality financial institutions. Such deposits may be in excess of federally insured limits. In addition, the Company maintains various bank accounts in Thailand and Israel, which are not insured. To date, we have not experienced any losses on our cash and cash equivalents.with some level of insurance. We perform periodic evaluations of the relative credit standing of the financial institutions. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.
We perform credit evaluations of our customers’ financial condition and require no collateral from our customers. We maintain an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable balances.
The Company generates revenue through salesas follows:
•selling of advertising services which generate revenue from advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue.revenue;
•generating advertising services revenue from facilitating the real-time buying and selling of advertisements at scale between networks of buyers, known as DSPs and sellers known as SSPs;
•serving advertisers and agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaigns; and
•providing primary research, secondary research, competitive intelligence and expert insight to address customer's strategic issues, where revenue is primarily derived from providing a single integrated service for research.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
The
followfollowing table provides information about concentration that exceed 10% of revenue, accounts receivable and accounts payable for the period.
SCHEDULE OF CUSTOMER CONCENTRATION RISK PERCENTAGE
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | |
Revenue Concentration | | | | | | | | | | | | | | | | |
Customers exceeding 10% of revenue | | | 2 | | | | 1 | | | | 1 | | | | — | |
% of overall revenue | | | | | | | | | | | | | | | | |
Customer 1 | | | 30.9 | % | | | 10.9 | % | | | 33.4 | % | | | — | % |
Customer 2 | | | 10.8 | % | | | — | % | | | — | % | | | — | % |
Total % of revenue | | | 41.7 | % | | | 10.9 | % | | | 33.4 | % | | | — | % |
| | | | | | | | |
| | September 30, 2022 | | | December 31, 2021 | |
Accounts Receivable Concentration | | | | | | | | |
Customers exceeding 10% of receivable | | | 2 | | | | 2 | |
% of accounts receivable | | | 46.1 | % | | | 25.0 | % |
| | | | | | | | |
| | September 30, 2022 | | | December 31, 2021 | |
Accounts Payable Concentration | | | | | | | | |
Vendors exceeding 10% of payable | | | 1 | | | | 1 | |
% of accounts payable | | | 11.9 | % | | | 11.2 | % |
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less, when acquired, to be cash equivalents. The Company maintains its cash with various commercial banks.
As
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | |
Revenue Concentration | | | | | | | |
Customers exceeding 10% of revenue | 1 | | 1 | | 1 | | 1 |
| | | | | | | |
% of overall revenue | 14.2 | % | | 41.7 | % | | 12.7 | % | | 34.9 | % |
| | | | | | | |
Total % of revenue | 14.2 | % | | 41.7 | % | | 12.7 | % | | 34.9 | % |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Accounts Receivable Concentration | | | |
Customers exceeding 10% of receivable | 2 | | 1 |
% of accounts receivable | 33.1 | % | | 43.5 | % |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Accounts Payable Concentration | | | |
Vendors exceeding 10% of payable | — | | | 2 |
% of accounts payable | — | % | | 21.8 | % |
Reclassification
During the year ended December 31,
2021, the Company exceeded the federally insured limits of $250,000 for interest and noninterest bearing deposits. The Company had cash balances with a single financial institution in excess of the FDIC insured limits by amounts of $0 and $190,000 as of September 30, 2022,
and December 31, 2021, respectively. We monitor the financial condition of such institution and have not experienced any losses associated with these accounts.
Off-balance sheet arrangements
There are no off-balance sheet arrangements as of September 30, 2022 and December 31, 2021.
Reclassification
Reclassificationreclassification of certain accounts has been made to previously reported amounts to conform to their treatment to the current period. Specifically, the Company identified a reclassification of commissions from general and administrative expenses to cost of revenue on the condensed consolidated statements of operations, reclassification between note receivable to prepaid expense and other current assets, website acquisition assets to intangible asset,assets, as well as a reclassification between property and equipment and accumulated depreciation, accrued expenses to other liabilities on the condensed consolidated balance sheets. These reclassifications had no impact on the previously reported net loss for the three and ninesix months ended SeptemberJune 30, 2022 and 2021
2022.
Effective Accounting Pronouncements
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 how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. The current guidance requires companies to calculate the implied fair value of goodwill in Step 2 by calculating the fair value of all assets (including any unrecognized intangible assets) and liabilities of the reporting unit and subtracting it from the fair value of the reporting unit previously calculated in Step 1. The amendments in this update modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our condensed consolidated financial statements for the period ended September 30, 2022.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the following: (1) hybrid tax regimes; (2) tax basis step-up in goodwill obtained in a transaction that is not a business combination; (3) separate financial statements of entities not subject to tax; (4) intra-period tax allocation exception to the incremental approach; (5) ownership changes in investments; (6) interim-period accounting for enacted changes in tax law; and (7) year-to-date loss limitation in interim-period tax accounting. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements for the period ended September 30, 2022.
In January 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this update clarify certain interactions between the guidance to account for certain equity securities. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements for the period ended September 30, 2022.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASBFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-13 (amended by ASU 2019-10), Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments. 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 iswas required to adopt the new guidance on January 1, 2023. The Company is currently evaluating theadoption of this standard did not have a material impact this guidance will have on the Company’sour consolidated financial statements.
In August 2020,statements for the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. The new standard is effective January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.six months ended June 30, 2023.
In October 2021, the FASB issued Accounting Standards Update (“ASU”)ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The adoption of this standard did not have a material impact on our consolidated financial statements for the six months ended June 30, 2023.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU No. 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). This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. The new standard is effective January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 3 –
ACCOUNTS RECEIVABLE
Accounts receivable, net consisted of the following (in thousands):following:
| | | | | | | | | | | |
(in thousands) | June 30, 2023 | | December 31, 2022 |
Accounts receivable | $ | 11,959 | | | $ | 3,447 | |
Unbilled receivables (1) | 3,757 | | | 724 | |
| 15,716 | | | 4,171 | |
Less allowance for doubtful accounts | (491) | | | (586) | |
Accounts receivable, net | $ | 15,225 | | | $ | 3,585 | |
SCHEDULE OF ACCOUNTS RECEIVABLES
| | September 30, | | | December 31, | |
| | 2022 | | | 2021 | |
Accounts receivable | | $ | 4,406 | | | $ | 4,048 | |
Unbilled receivables | | | 67 | | | | — | |
Total | | | 4,473 | | | | 4,048 | |
Less allowance for doubtful accounts | | | (569 | ) | | | (498 | ) |
Accounts receivable, net | | $ | 3,904 | | | $ | 3,550 | |
(1) - Unbilled receivables represent amounts for services rendered at the end of the period pending generation of invoice to the customer.
Bad debt expense included a recovery of $136,000 was $161,000 and an expense of $223,000 $49,000 for the three months ended SeptemberJune 30, 2022,2023, and 2021,2022, respectively, and expenses(recoveries) expense of $87,000$(27,000) and $82,000 $222,000 for the ninesix months ended SeptemberJune 30, 2023, and 2022, and 2021, respectively.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
NOTE 4 –
PREPAID COSTS AND OTHER ASSETS
Prepaid expenses and other assets consisted of the
following (in thousands):SCHEDULE OF PREPAID COSTS AND OTHER ASSETS
| | September 30, 2022 | | | December 31, 2021 | |
Prepaid insurance | | $ | 49 | | | $ | 427 | |
Prepaid consulting service agreements – Spartan (1) | | | 397 | | | | 380 | |
Prepaid software | | | 208 | | | | — | |
Deposits | | | 234 | | | | 285 | |
Other | | | 121 | | | | 362 | |
Total prepaid costs and other assets | | | 1,009 | | | | 1,454 | |
Less: Non-current other assets – Spartan (1) | | | (240 | ) | | | (528 | ) |
Total Prepaid expenses and other current assets | | $ | 769 | | | $ | 926 | |
following: | | | | | | | | | | | |
(in thousands) | June 30, 2023 | | December 31, 2022 |
Prepaid insurance | $ | 443 | | | $ | 1 | |
Prepaid consulting service agreements – Spartan (1) | 95 | | | 285 | |
Prepaid software | 107 | | | 176 | |
Deposits | 187 | | | 137 | |
Subscriptions | 638 | | | — | |
Other | 140 | | | 138 | |
Total prepaid costs and other assets | 1,610 | | | 737 | |
Less: Non-current other assets | (187) | | | (137) | |
Prepaid expenses and other current assets | $ | 1,423 | | | $ | 600 | |
| | | | | |
(1) | Spartan Capital Securities, LLC ("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-yearfive-year agreement with Spartan Capital commencing October 2018 for the provision of such services. A prepaymentDuring the years ended December 31, 2018 to December 31, 2020, a series of payments were made under the terms of this agreement, wereresulting in amounts being capitalized and amortized over the remaining life of the agreement. These amounts will be fully amortized by September 30, 2023. |
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the
following (in thousands):SCHEDULE OF PROPERTY AND EQUIPMENT
| | Estimated Useful Life (Years) | | | September 30, 2022 | | | December 31, 2021 | |
Furniture and fixtures | | | 3-5 | | | $ | 133 | | | $ | 39 | |
Computer equipment | | | 3 | | | | 245 | | | | 176 | |
Total | | | | | | | 378 | | | | 215 | |
Less: accumulated depreciation | | | | | | | (341 | ) | | | (150 | ) |
Property and equipment, net | | | | | | $ | 37 | | | $ | 65 | |
following:
| | | | | | | | | | | | | | | | | |
(in thousands) | Estimated Useful Life (Years) | | June 30, 2023 | | December 31, 2022 |
Furniture and fixtures | 3-5 | | $ | 8 | | | $ | 49 | |
Computer equipment | 3 | | 125 | | | 340 | |
Computer software | 5 | | 2,229 | | | — | |
| | | 2,362 | | | 389 | |
Less: accumulated depreciation | | | (2,148) | | | (349) | |
Property and equipment, net | | | $ | 214 | | | $ | 40 | |
Depreciation and amortization expense for the three months ended
SeptemberJune 30,
2023, and 2022
was $39,000 and
2021 was $12,000 and $12,000,$8,000, respectively, and
$24,000$46,000 and
$46,000$12,000 for the
ninesix months ended
Septemberand June 30,
2023, and 2022,
and 2021, respectively.
The amounts are included in general and administrative expenses in the consolidated statements of
operations.
operations and comprehensive loss.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
June 30, 20222023
(Unaudited)
(Unaudited)
NOTE 6 –
INTANGIBLES ASSETS, NET
Website acquisitions, net consisted of the following (in thousands):
SCHEDULE OF WEBSITE ACQUISITIONS, NET
| | September 30, 2022 | | | December 31, 2021 | |
Website acquisition assets | | $ | 1,124 | | | $ | 1,124 | |
Less: accumulated amortization | | | (921 | ) | | | (920 | ) |
Less: cumulative impairment loss | | | (200 | ) | | | (200 | ) |
Website Acquisition Assets, net | | $ | 3 | | | $ | 4 | |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Website acquisition assets | $ | 1,124 | | | $ | 1,124 | |
Less: accumulated amortization | (1,123) | | | (1,122) | |
| | | |
Website acquisition assets, net | $ | 1 | | | $ | 2 | |
Other intangible assets, net consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2023 | | As of December 31, 2022 |
| Useful Life (Years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Trade name | 2 - 10 | | $ | 8,381 | | | $ | (1,973) | | | $ | 6,408 | | | $ | 2,759 | | | $ | (1,617) | | | $ | 1,142 | |
IP/technology | 10 | | 5,821 | | | (1,047) | | | 4,774 | | | 1,983 | | | (899) | | | 1,084 | |
Customer relationships | 5 - 10 | | 13,380 | | | (5,023) | | | 8,357 | | | 6,680 | | | (4,419) | | | 2,261 | |
Non-compete agreements | 3 - 5 | | 402 | | | (386) | | | 16 | | | 402 | | | (381) | | | 21 | |
Total | | | $ | 27,984 | | | $ | (8,429) | | | $ | 19,555 | | | $ | 11,824 | | | $ | (7,316) | | | $ | 4,508 | |
During the three and six months ended June 30, 2023, the Company acquired intangible assets through the acquisition of the Big Village Entities as follows, (in thousands):
| | | | | | | | | | | | |
| Useful Life (Years) | | Amount | |
Trade name | 7 to 10 | | $ | 5,622 | | |
Developed technology | 10 | | 3,838 | | |
Customer relationships | 7 to 10 | | 6,700 | | |
Total | | | $ | 16,160 | | |
SCHEDULE OF INTANGIBLE ASSETS
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Website | $ | 1 | | | $ | 2 | |
Other intangibles | 19,555 | | | 4,508 | |
Total intangible, net | $ | 19,556 | | | $ | 4,510 | |
| | As of September 30, 2022 | | | As of December 31, 2021 | |
| | Weighted Average Useful Life (Years) | | | Gross Carrying Amount | | | Accumulated Amortization | | | Net Carrying Amount | | | Gross Carrying Amount | | | Accumulated Amortization | | | Net Carrying Amount | |
Trade name | | | 2.0 | | | $ | 2,759 | | | $ | (1,499 | ) | | $ | 1,260 | | | $ | 2,759 | | | $ | (1,141 | ) | | $ | 1,618 | |
IP/Technology | | | 7.1 | | | | 1,983 | | | | (863 | ) | | | 1,120 | | | | 1,983 | | | | (753 | ) | | | 1,230 | |
Customer relationships | | | 2.2 | | | | 6,680 | | | | (4,191 | ) | | | 2,489 | | | | 6,680 | | | | (3,494 | ) | | | 3,186 | |
Non-compete agreements | | | 0.4 | | | | 402 | | | | (378 | ) | | | 24 | | | | 402 | | | | (371 | ) | | | 31 | |
Total | | | 3.4 | | | $ | 11,824 | | | $ | (6,931 | ) | | $ | 4,893 | | | $ | 11,824 | | | $ | (5,759 | ) | | $ | 6,065 | |
| | September 30, 2022 | | | December 31, 2021 | |
Website | | $ | 3 | | | $ | 4 | |
Other intangibles | | | 4,893 | | | | 6,065 | ) |
Total intangible, net | | $ | 4,896 | | | $ | 6,069 | |
Amortization expense for the three months ended SeptemberJune 30, 2022,2023 and 20212022 was approximately $387,000$728,000 and $$390,000, respectively, and $1.1 million and $786,000 for the six months ended and June 30, 2023, and 2022, respectively.
396,000
, respectively,
Amortization expense related to both the website acquisition costs and the intangible assets. Amortizationassets and is included in general and administrative expense forin the nine months ended Septemberstatements of operations and comprehensive loss.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022, and 2021 was approximately $2023
(Unaudited)
1.2
million and $
1.2
million, respectively, related to both the website acquisition costs and the intangible assets.
As of
SeptemberJune 30,
2022,2023, expected remaining amortization expense of intangible assets and website acquisition by fiscal year is as follows (in thousands):
SCHEDULE OF AMORTIZATION EXPENSE OF INTANGIBLE ASSETS AND WEBSITE ACQUISITION
| | | | |
Remainder of 2022 | | $ | 385 | |
2023 | | | 1,542 | |
2024 | | | 1,542 | |
2025 | | | 780 | |
2026 | | | 147 | |
Thereafter | | | 497 | |
Total expected amortization expense | | $ | 4,893 | |
| | | | | |
Remainder of 2023 | $ | 1,650 | |
2024 | 3,300 | |
2025 | 2,539 | |
2026 | 1,904 | |
Thereafter | 10,163 | |
| |
Total expected amortization expense | $ | 19,556 | |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The following table represents the allocation of Goodwillgoodwill as of SeptemberJune 30, 2022,2023, and December 31, 20212022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Owned & Operated | | Ad Exchange | | Other | | Total |
December 31, 2022 | $ | 9,725 | | | $ | 9,920 | | | $ | — | | | $ | 19,645 | |
Addition | — | | | — | | | 1,291 | | | 1,291 | |
June 30, 2023 | $ | 9,725 | | | $ | 9,920 | | | $ | 1,291 | | | $ | 20,936 | |
Goodwill acquired as part of the Big Village Acquisition totals $1.3 million, and represents the value of unidentifiable intangible assets including future technology, new customer relationships and workforce. See Note 13, Business Combinations.
SCHEDULE OF CHANGES GOODWILL
| | Owned & Operated | | | Ad Exchange | | | Total | |
September 30, 2022 | | $ | 9,725 | | | $ | 9,920 | | | $ | 19,645 | |
December 31, 2021 | | $ | 9,725 | | | $ | 9,920 | | | $ | 19,645 | |
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 Goodwillgoodwill associated with the reporting unit exceeds the implied value of the Goodwillgoodwill associated with the reporting unit. No triggering events were identified
At December 31, 2022, an assessment was performedusing aqualitative assessment whichincludes consideration of the economic, industry and market conditions in addition to the overall financial performance of the Company and these assets. Our qualitative assessment did not conclude that it is more likely than not that the estimated fair value of the reporting unit is greater than the carrying value, and we performed a quantitative analysis. In a quantitative test, the fair value of a reporting unit is determined based on a discounted cash flow analysis and further analyzed using other methods of valuation. A discounted cash flow analysis requires us to make various assumptions, including assumptions about future cash flows, growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our long-term projections. Assumptions used in our impairment testing are consistent with our internal forecasts and operating plans. Our discount rate is based on our debt structure, adjusted for current period.market conditions. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment. To the extent the carrying amount exceeds its fair value, an impairment charge of the reporting unit’s goodwill would be necessary.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following (in thousands):
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Accounts payable | $ | 11,139 | | | $ | 8,585 | |
Accrued wages, commissions and bonus | 644 | | | 380 | |
Publisher cost | 763 | | | 559 | |
Professional fees | 767 | | | 677 | |
Subcontractor | 1,270 | | | — | |
Other | 619 | | | 116 | |
Total accounts payable and accrued expenses | $ | 15,202 | | | $ | 10,317 | |
NOTE 9 – OTHER LIABILITIES
Other liabilities consisted of the following (in thousands):
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| | September 30, 2022 | | | December 31, 2021 | |
Accounts payable | | $ | 7,680 | | | $ | 8,461 | |
Accrued wages, commissions and bonus
| | | 573 | | | | 1,459 | |
Publisher cost
| | | 939 | | | | — | |
Professional fees | | | 577 | | | | 775 | |
Other | | | 199 | | | | 272 | |
Total accounts payable and accrued expenses | | $ | 9,968 | | | $ | 10,967 | |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Current portion of long term lease | $ | 57 | | | $ | 38 | |
Dividend payable | 692 | | | 692 | |
Project advance expense (1) | 2,696 | | | — | |
Litigation reserves | 1,338 | | | 1,107 | |
Other current liabilities | 5 | | | 1 | |
Total other liabilities | $ | 4,788 | | | $ | 1,838 | |
(1) Represents amount advanced by customers to cover third party expenses specifically related to their project, these expenses are offset against the advance and are not part of the Company's income statement.
NOTE 910 – CENTRE LANE SENIOR SECURED CREDIT FACILITY
Effective June 1, 2020, the Company entered into a membership interest purchase agreement to acquire 100%100% of Wild Sky Media, a subsidiary (the “Purchase Agreement”). To finance this acquisition, the Company obtained a first lien senior secured credit facility from Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane Partners”) in the amount of $16.5$16.5 million, comprising $15.0of $15.0 million of initial indebtedness, repayment of Wild Sky’s existing accounts receivable factoring facility of approximately $900,000$900,000 and approximately $500,000$500,000 of expenses.
On April 4, 2023, the Company entered into a commitment letter (the “Commitment Letter”) with Centre Lane Partners, pursuant to which they would provide financing in the form of a senior secured credit facility for the acquisition of the Big Village Entities.
On April 20, 2023, the Company and its subsidiaries entered into the Seventeenth Amendment to the Credit Agreement (the “Seventeenth Amendment”) with Centre Lane Partners. The Credit Agreement was amended, as provided in the Seventeenth Amendment, to provide for an additional term loan amount of $26.3 million to, among other things, finance the Acquisition. This term loan, which was provided by BV Agency, LLC, matures on April 20, 2026 and was issued at a discount of 5% or $1.3 million. Interest of 15% payable under the note payable-in-kind in lieu of cash payment up to April 30, 2024, then 5% payable quarterly in cash and 10% payable-in-kind in lieu of cash payment until maturity of April 20, 2026.
As part of the Seventeenth Amendment, the Company is required to pay an amendment fee of 2% of the principal amount of the existing First Out and Last Out Terms Loans, totaling $706,000, additionally, an exit fee of $18,000 of the loan to finance the Big Village Acquisition. The outstanding principal on these at April 20, 2023 was $31.0 million and
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
$4.3 million, respectively. These fees total $724,000 and are due on payable at maturity. Additionally, the maturity dates were extended to April 20, 2026.
Also, in connection with the Seventeenth Amendment, on April 20, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners. The shares valued $1.9 million, based on a per share price of $0.09, which was the closing price of the Company’s common stock at close of market on April 19, 2023. The issuance of the shares of common stock were not registered under the Securities Act of 1933, as amended (“Securities Act”), in accordance with Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. As of June 30, 2023, BV Agency, LLC and Centre Lane Partners own approximately 12.4% and 8.8% of the Company’s outstanding common stock, respectively.
Including the Seventeenth Amendment, Centre Lane Partners subsequently loaned the Company an additional $8.2$36.0 million to provide liquidity to fund operations beginning in April 2021 (the “Credit(as amended, the “Centre Lane Senior Secured Credit Facility” as amended)). This Centre Lane Senior Secured Credit Facility has been determined to qualify as a related party transaction as shares were issued to Centre Lane Partners as part of the transaction. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions.
The original note issued under the Centre Lane Senior Secured Credit Facility bearsinitially bore interest at a rate of 6.0%6.0% per annum, and matures June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023.2023. The interest rate was increased to 10.0% at10.0% pursuant to the first amendment to the Centre Lane Senior Secured Credit Facility and 12% afterinterest payable under the ninth amendment, in each case, with interestnote is payable-in-kind (“PIK Interest”) in lieu of cash payment. See below for a summary
Commencing with the ninth amendment, the interest rate was increased to 12% on all subsequent draws with 8% payable quarterly in cash and 4% payable-in-kind in lieu of amendments tocash payment. These draws are known as the Credit Facility.“last in first out loans”, totaling $4.4 million inclusive of exit fees at June 30, 2023, due and payable on April 20, 2026.
There is no prepayment penalty associated with this
Centre Lane Senior Secured Credit Facility. However,
certain future capital raises do require partial or full prepayments of the
Centre Lane Senior Secured Credit
Facility.
Facility would be required in the event of certain future capital raises.
Optional Prepayment
The Company may, at
anytime,any time, voluntarily prepay, in whole or in part, a minimum of
$250,000 $250,000 of the outstanding principal of the loans, plus any accrued but unpaid interest on the aggregate principal amount of the loans being prepaid.
Repayment of Loans
The Company is required to repay in cash to Centre Lane Partners (i) commencing with the
Fiscal Quarterfiscal quarter ending on June 30, 2023, in consecutive quarterly installments to be paid on the last day of each
Fiscal Quarterfiscal quarter of the Company, an amount equal to
2.5%2.5% of the outstanding aggregate principal amount of the
Loansoriginal principal plus draws advanced by amendments 2 through 8 along with accrued and unpaid interest (after giving effect to capitalized PIK Interest) and (ii) on the
Maturity Datematurity date all outstanding
Obligationsobligations (including, without limitation, all accrued and unpaid principal and interest on the principal amounts of the Loans (including any accrued but uncapitalized PIK Interest)) of the
Loan Partiesloan parties that are due and payable on such date.
The outstanding amount for these draws at June 30, 2023 is $32.4 million, inclusive of interest paid in kind.
On June 30, 2023, the Company and its subsidiaries entered into its Eighteenth Amendment with Centre Lane Partners regarding installment payment due on June 30, 2023, to be paid in equal monthly installments on July 3, 2023, August 7, 2023 and September 5, 2023, respectively.
During the three and ninesix months ended SeptemberJune 30, 2022, and 20212023, the Company paid approximately $96,000 and $0$161,000 toward outstanding interest payable. payable, there was no payment made during the same period for 2022.
There was no payment on the principal loan balance for the three or nineand six months ended SeptemberJune 30, 2022,2023, and 2021.2022.
Fees
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Under the terms of the
Centre Lane Senior Secured Credit Facility, the Company is also required to pay Centre Lane Partners a non-refundable annual administration fee equal to
$35,000$35,000 for agency services provided under
thisthe Credit Agreement. The Credit
FacilityAgreement provides that this fee shall be in all respects fully earned, due and paid-in-kind by the Company on the effective date (“Effective Date”) of the Credit
FacilityAgreement and on each anniversary of the Effective Date during the term of this
Agreementagreement by adding and capitalizing the full amount of such fee to the outstanding principal balance of the
Loans. For the nine months ended September 30, 2022, theloans. The accumulated administrative fee
was $105,000since inception of the facility is $140,000 and is included in outstanding principal.
Default on Facility
The Credit Facility includes restrictive covenants that, among other things, require thatadministrative fee charged during the auditor’s opinion on the financial statements as ofthree months ended June 30, 2023 and for the year ended December 31, 2020, does not include a “going concern qualification.” The Company defaulted on this requirement2022 was $35,000 and on April 26, 2021, obtained a waiver of this requirement from the lender.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The below table summarizes the loan balances and accrued interest for the periods ended
SeptemberJune 30,
2022,2023, and December 31,
2021,2022, (in thousands):
SCHEDULE OF LOAN BALANCES AND ACCRUED INTEREST
| | September 30, 2022 | | | December 31, 2021 | |
| | | | | | |
Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party (Current Portion) | | $ | 2,832 | | | $ | 7,316 | |
Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party | | | 23,582 | | | | 15,164 | |
Net principal | | | 26,414 | | | | 22,480 | |
Add: debt discount | | | 3,490 | | | | 3,854 | |
Outstanding principal | | $ | 29,904 | | | $ | 26,334 | |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| | | |
Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party (Current Portion) | $ | 4,048 | | | $ | 4,860 | |
Note payable – Centre Lane Senior Secured Credit Facility – net of discount, related party | 53,061 | | | 25,101 | |
Net principal | 57,109 | | | 29,961 | |
Add: debt discount | 7,041 | | | 3,148 | |
Outstanding principal | $ | 64,150 | | | $ | 33,109 | |
The below table summarizes the movement in the outstanding principal
from inception through Septemberfor the periods ended June 30,
2023, and December 31, 2022, (in thousands):
SCHEDULE OF OUTSTANDING PRINCIPAL FROM INCEPTION
| | | | |
| | September 30, 2022 | |
Original loan | | $ | 16,417 | |
Add: | | | | |
Additional draw | | | 8,175 | |
Exit and other fees | | | 3,805 | |
Interest capitalized | | | 1,657 | |
Total | | | 13,637 | |
Less: Payment | | | (150 | ) |
Outstanding principal | | $ | 29,904 | |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Opening balance | $ | 33,109 | | | 26,334 | |
Add: | | | |
Draws | 27,816 | | | 3,050 | |
Exit and other fees | 818 | | | 621 | |
Interest capitalized | 2,407 | | | 3,104 | |
| 31,041 | | | 6,775 | |
| | | |
Outstanding principal | $ | 64,150 | | | $ | 33,109 | |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Amendments to Centre Lane Senior SecuredCredit Facility
Commencing in April 2021, the Company and certain of its subsidiaries entered into various amendments to the Senior Secured Credit Agreement withbetween itself and 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. The Credit Agreement was amended to provide for additional loans used for working capital. In addition, and as part of the transaction, there are exit fees (the "Exit Fees"), which will be added and capitalized to the principal amount of the original loan. As of SeptemberJune 30, 2022,2023, there were 15eighteen amendments to the Credit Facility.Agreement.
Consistent with FASB ASC Topic 870 470 Debt (“,(“ASC 470”), the Company is required to perform an analysis of the change in each amendment to determine whether the change is a modification or an extinguishment of debt. Under a modification, no gain or loss is recorded, and a new effective interest rate is established based on the carrying value of the debt and revised cash flow. If the debt is extinguished, the old debt is derecognized and the new debt is recorded as fair value, which becomes the new carrying value. A gain or loss is recorded for the difference between the net carrying value or the original debt and the fair value of the new debt. Interest expense is recorded based on the effective interest rate of the
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
new debt. A debt is considered extinguished if the present value of the new cash flows under the term of the new debt is at least 10%10% different from the present value of the remaining cash flows under the terms of the old debt.
In connection with the Seventeenth Amendment, the Company determined that the change was an extinguishment consistent with ASC 470, Debt, the old debt of $35.5 million was derecognized and certainthe new debt of $62.7 million was recognized at estimated fair value. A gain on extinguishment was recognized against additional paid in capital of $670,000, as Centre Lane Partners is a related party.
On June 30, 2023, the Company and its subsidiaries entered into its
fifteenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself andEighteenth Amendment with 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 $350,000 in the aggregate. This term loan maturesregarding installment payment due on June 30,
2023. In addition, and as part of the transaction, there is an Exit Fee (“the Exit Fee”) totaling $18,000 which will2023, to be
added and capitalized to the principal amount of the term loan.
Based on external assessment performed on the amendment of the Credit Facilitypaid in equal monthly installments on July 8, 2022,3, 2023, August 7, 2023 and September 5, 2023, respectively. There was no impact on principal or interest and no fees incurred by the Company determined that it was a modification, and did not recognize any gain.
for this amendment.
The below table summarizes the amendments
to the Credit Agreement that impacted principal, interest and fees that were executed by the Company since the inception of the facility to
SeptemberJune 30,
2022,2023, (in
thousands),thousands, except for share
data:SCHEDULE OF AMENDMENTS EXECUTED SINCE INCEPTION OF FACILITY
Amendment Number | | | Amendment Date | | Additional Loan $’000 | | | New Repayment Date | | New Interest Rate | | | Exit Fee (B) | | | Common Stock Issued | | | Accounting Impact |
1(A) | | | April 26, 2021 | | $ | - | | | June 30, 2025 | | | 10 | % | | $ | - | | | | 150,000 | | | Extinguishment |
2 | | | May 26, 2021 | | | 1,500 | | | June 30, 2025 | | | - | % | | | 750 | | | | 3,000,000 | | | Modification |
3 | | | August 12, 2021 | | | 500 | | | June 30, 2025 | | | - | % | | | 250 | | | | 2,000,000 | | | Modification |
4 | | | August 31, 2021 | | | 1,100 | | | June 30, 2025 | | | - | % | | | 550 | | | | - | | | Modification |
5 | | | October 8, 2021 | | | 725 | | | June 30, 2025 | | | - | % | | | 363 | | | | - | | | Extinguishment |
6 | | | November 5, 2021 | | | 800 | | | June 30, 2025 | | | - | % | | | 800 | | | | 7,500,000 | | | Modification |
7 | | | December 23, 2021 | | | 500 | | | June 30, 2025 | | | - | % | | | 500 | | | | - | | | Modification |
8 | | | January 26, 2022 | | | 350 | | | June 30, 2025 | | | - | % | | | 350 | | | | - | | | Modification |
9 | | | February 11, 2022 | | | 250 | | | June 30, 2023 | | | 12 | % | | | 13 | | | | - | | | Modification |
10 | | | March 11, 2022 | | | 300 | | | June 30, 2023 | | | - | % | | | 15 | | | | - | | | Modification |
11 | | | March 25, 2022 | | | 500 | | | June 30, 2023 | | | - | % | | | 25 | | | | - | | | Modification |
12 | | | April 15, 2022 | | | 450 | | | June 30, 2023 | | | - | % | | | 23 | | | | - | | | Modification |
13 | | | May 10, 2022 | | | 500 | | | June 30, 2023 | | | - | % | | | 25 | | | | - | | | Modification |
14 | | | June 10, 2022 | | | 350 | | | June 30, 2023 | | | - | % | | | 18 | | | | - | | | Modification |
15 | | | July 8, 2022 | | | 350 | | | June 30, 2023 | | | - | % | | | 18 | | | | - | | | Modification |
| | | | | $ | 8,175 | | | | | | | | | $ | 3,700 | | | | 12,650,000 | | | |
data): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Number | | Date | | Draw $’000 | | Repayment Date | | Interest Rate (PIK) | | Interest Rate (Cash) | Agency Fee | | Exit Fee (A) | | Common Stock Issued | | Accounting Impact | |
1 | | 04/26/21 | | $ | — | | | April 20, 2026 | | 10 | % | | $ | — | | $ | — | | | $ | — | | | 150,000 | | | Extinguishment | (B) |
2 | | 05/26/21 | | 1,500 | | | April 20, 2026 | | 10 | % | | — | | — | | | 750 | | | 3,000,000 | | | Modification | |
3 | | 08/12/21 | | 500 | | | April 20, 2026 | | 10 | % | | — | | — | | | 250 | | | 2,000,000 | | | Modification | |
4 | | 08/31/21 | | 1,100 | | | April 20, 2026 | | 10 | % | | — | | — | | | 550 | | | — | | | Modification | |
5 | | 10/08/21 | | 725 | | | April 20, 2026 | | 10 | % | | — | | — | | | 363 | | | — | | | Extinguishment | |
6 | | 11/05/21 | | 800 | | | April 20, 2026 | | 10 | % | | — | | — | | | 800 | | | 7,500,000 | | | Modification | |
7 | | 12/23/21 | | 500 | | | April 20, 2026 | | 10 | % | | — | | 70 | | | 500 | | | — | | | Modification | |
| | | | $ | 5,125 | | | | | | | | $ | 70 | | | $ | 3,213 | | | 12,650,000 | | | | |
| | | | | | | | | | | | | | | | | | |
8 | | 01/26/22 | | 350 | | | April 20, 2026 | | 10 | % | | — | | — | | | 350 | | | — | | | Modification | |
9 | | 02/11/22 | | 250 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 13 | | | — | | | Modification | |
10 | | 03/11/22 | | 300 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 15 | | | — | | | Modification | |
11 | | 03/25/22 | | 500 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 25 | | | — | | | Modification | |
12 | | 04/15/22 | | 450 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 23 | | | — | | | Modification | |
13 | | 05/10/22 | | 500 | | | April 20, 2026 | | 4 | % | | 8 | % | 35 | | | 25 | | | — | | | Modification | |
14 | | 06/10/22 | | 350 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 18 | | | — | | | Modification | |
15 | | 07/08/22 | | 350 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 18 | | | — | | | Modification | |
| | | | $ | 3,050 | | | | | | | | $ | 35 | | | $ | 487 | | | — | | | | |
| | | | | | | | | | | | | | | | | | |
16 | | 02/10/23 | | 1,500 | | | April 20, 2026 | | 4 | % | | 8 | % | — | | | 75 | | | — | | | Modification | |
17 | | 04/20/23 | | 26,316 | | | April 20, 2026 | | 15 | % | | — | % | 35 | | | 708 | | | 21,401,993 | | | Extinguishment | (C) |
| | | | $ | 35,991 | | | | | | | | $ | 140 | | | $ | 4,483 | | | 34,051,993 | | | | |
| | | | | |
(A) | Added and capitalized to the principal amount of the original loan and the original loan terms apply. |
| |
(B) | The Centre Lane Senior Secured Credit Facility was amended to permit the Company to raise up to $6,000,000 $6.0 million 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. Additionally, the Company may issue up to $800,000 $800,000 in dividends from the previous limit of $500,000 $500,000 per annum. |
| |
(B)(C) | Added15% PIK until April 20, 2024, then 5% cash and capitalized to the principal amount of the original loan and the original loan terms apply. |
Draws advanced by amendments 2 through 8 totaling $5.5 million and exit fees totaling $3.6 million, were due for full repayment on February 28, 2022. Prior to this date, the loan agreement allowed the Company to waive the accrual of
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
June 30, 2023
(Unaudited)
interest on these amounts. There was no repayment of these amounts, and as a result, on March 11, 2022, amendment 10 was executed, changing the repayment date of the outstanding principal and commencing interest accrual on the exit fees.
All amounts advanced for amendments 9 through 16 were due on June 30, 2023 along with accrued and unpaid interest, however, the maturity date was changed to April 20, 2026 with amendment 17. The outstanding amount at June 30, 2023 is $4.4 million, inclusive of interest paid in kind.
As of SeptemberJune 30, 2022,2023 and December 31,2021, the carrying value31, 2022, of the facilityCentre Lane Senior Secured Credit Facility was $26.4$57.1 million and $22.5$30.0 million, respectively, net of unamortized debt discount of $3.5$7.0 million and $3.9$3.1 million, respectively. The discount is being amortized over the remaining life of the Centre Lane Senior Secured Credit facility using the effective interest method.
Interest expense for the three and ninesix months ended SeptemberJune 30, 2022,2023, and 20212022 consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Interest expense | $ | 1,707 | | | $ | 829 | | | $ | 2,570 | | | $ | 1,386 | |
Amortization | 536 | | | 331 | | | 837 | | | 608 | |
Total interest expense | $ | 2,243 | | | $ | 1,160 | | | $ | 3,407 | | | $ | 1,994 | |
SCHEDULE OF INTEREST EXPENSE
Subsequent Events
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
Interest expense | | $ | 433 | | | $ | 520 | | | $ | 1,555 | | | $ | 945 | |
Amortization | | | 311 | | | | 235 | | | | 913 | | | | 373 | |
Total interest expense | | $ | 744 | | | $ | 755 | | | $ | 2,468 | | | $ | 1,318 | |
On July 28, 2023, the Credit Agreement was amended, to provide for an additional term loan amount of $2.0 million. This term loan matures on June 30, 2024.
See Note 23, Subsequent Events to the consolidated financial statements.
NOTE 1011 – OCEANSIDE SHARE EXCHANGE LOAN
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,July 31, 2019, and the Company acquired all of the outstanding shares of Oceanside. Pursuant to the terms of the Oceanside Merger Agreement, the Company issued 12,513,227 shares valued at $20.0$20.0 million to owners and employees of Oceanside and contingent consideration of $750,000$750,000 paid through the delivery of unsecured, interest free, one and two-year promissory notes (the “Closing Note(s)”).
At the time of the acquisition and under FASB ASC Topic 805, Business Combinations (“ASC 805”), these Closing Notes were recorded ratably as compensation expense into the statement of operations and comprehensive loss over the 24-month term and the Company recorded an accrued payable over the same period.
As of
On 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, the Company recorded a total charge of $301,000 during the third quarter of 2020, comprised of $250,000 in Compensation expense and $51,000 in Interest expense. The Company also established a reserve for the $750,000 Closing Note principal balance which is included in Litigation reserves.
rate.
On September 6, 2022, the Company’s Board of Directors (the "Board") approved a settlement with the Oceanside Shareholders providing for payment of $650,000$650,000 payable over a 50-month period commencingwhich commenced January 2023. The Company recognize a gain of approximately $286,000 which includes $100,000 for the reduction in the settlement amount and $186,000 representing interest that was previously accruedAmount unpaid as of DecemberJune 30, 2021. The amount is included in Litigation settlement in the condensed consolidated statement of operations.2023 was $572,000.
NOTE 12 –
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 11 –10% CONVERTIBLE PROMISSORY NOTES
On November 30, 2018, the Company issued 10% convertible promissory notes ("Convertible Promissory notesNotes") in the amount of $80,000$80,000 to the Chairman of the Board, a related party. The notesConvertible Notes are unsecured and mature five years from issuance and are convertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion price of $0.40$0.40 per share. A beneficial conversion feature exists on the date the convertible notesConvertible Notes were issued whereby the fair value of the underlying common stock to which the notesConvertible Notes are convertible is in excess of the face value of the noteConvertible Notes of $$80,000.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
80,000
.
The principal balance of these notesConvertible Notes payable was $80,000$80,000 at SeptemberJune 30, 20222023 and December 31, 2021,2022. The total Convertible Notes payable was $75,000 and discounts recognized upon these origination dates as a result$68,000, net of the beneficial conversion feature total $16,000discount of $5,000 and $26,000, respectively. At September$12,000, at June 30, 20222023 and December 31, 2021, the total 10% Convertible Promissory note payable was $2022, respectively.
64,000
and $54,000, net of discount, respectively.
Interest expense for the 10% Convertible Promissory noteNotes was $6,000$6,000 inclusive of interest of $2,000$2,000 and discount amortization was $4,000of $4,000 for the three months ended SeptemberJune 30, 2022,2023, and 2021, respectively.2022. Interest expense for the 10% Convertible Promissory note for the nine months ended September 30, 2022, and 2021Notes was $17,000,$11,000 inclusive of interest of $7,000$4,000 and discount amortization of $7,000 for the six months ended June 30, 2023 and 2022.
The outstanding principal and interest of the Convertible Notes is due and payable November 2023.
NOTE 13 – BUSINESS COMBINATIONS
On April 20, 2023, the Company completed the Big Village Acquisition of two business units of Big Village Holding LLC for approximately $20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility.
As part of the Big Village Acquisition, the Company formed BV Insights, LLC ("Insights") and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions, additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting the offer of employment by the Company.
The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was $allocated to goodwill and intangibles. The goodwill of $1.3 million recognized was attributable to assembled workforce
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
10,000
and strategic benefits that are expected to be achieved. Identified intangibles total $16.2 million inclusive of the below, in thousands:
| | | | | | | | | | | | | | |
| | Useful Life (Years) | | Amount |
Trade name | | 7 to 10 | | $ | 5,622 | |
Developed technology | | 10 | | 3,838 | |
Customer relationships | | 7 to 10 | | 6,700 | |
| | | | $ | 16,160 | |
The following table summarizes the allocation of the purchase price based on the estimated fair value of the acquired assets and assumed liabilities at the date of the Big Village Acquisition, in thousands:
| | | | | | | | |
Purchase price consideration | | |
Center Lane Senior Secured Credit Facility | | $ | 19,874 | |
| | |
Fair value of assets assumed | | |
Accounts receivable | | $ | 14,872 | |
Intangibles | | 16,160 | |
Goodwill | | 1,291 | |
Prepaid and other assets | | 795 | |
Property and equipment | | 216 | |
| | 33,334 | |
Fair value of liabilities assumed | | |
Accounts payable and accrued expenses | | $ | 7,271 | |
Deferred revenue | | 4,754 | |
Other current liabilities | | 1,435 | |
| | 13,460 | |
| | |
Total fair value of assets and liabilities assumed | | $ | 19,874 | |
, respectively.
We incurred costs related to the Big Village Acquisition of approximately $1.0 million during the three and six months ended June 30, 2023. Additionally, $2.8 million in cure claims was paid to accepted vendors on the closing date and $1.2 million was subsequently paid to employees representing bonus. Amounts for cure claims and bonuses are included above as part of assumed liability. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in our consolidated statements of operations.
NOTE
1214 –
PAYCHECK PROTECTION PROGRAM
The Paycheck Protection Program (“PPP”) was established by the Coronavirus Aid, Relief, and Economic Security
(“CARES”Act (the "CARES Act")
Act,and administered by the Small Business Administration (“SBA”). During
20202021 to
2021,2022, the Company and one of its
subsidiaries.subsidiaries, Wild Sky Media, entered into agreements to borrow funds under the PPP program. Under the terms of the CARES Act, PPP loan recipients could apply for and be granted forgiveness for all, or a portion of loans granted under the PPP.
Bright Mountain PPP Loan
On April 24, 2020, the Company entered into a promissory note of $465,000 with Regions Bank (the “Bright Mountain PPP Loan”) which had a two-year term and bears interest at a rate of 1.0% per annum. On January 28, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part and on July 16, 2021, the Company obtained the forgiveness of the Bright Mountain PPP Loan in whole and recorded a non-cash gain of $465,000 on the PPP forgiveness during the nine months ended September
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Second Bright Mountain PPP Loan
On February 17, 2021, the Company entered into a promissory note of
$296,000$296,000 with Regions Bank (the “Second Bright Mountain PPP Loan”) which had a
two-yeartwo-year term and bears interest at a rate of
1.0%1.0% per annum. This was the second tranche available under the PPP program and was forgiven as of June 15, 2022, and the Company recorded a non-cash gain of
$296,000$296,000 on the PPP forgiveness during the
ninethree and six months ended
SeptemberJune 30, 2022.
Wild Sky PPP Loan
Effective June 1, 2020, the Company acquired Wild Sky and assumed the $1.7 million promissory note (the “Wild Sky PPP Loan”) with Holcomb Bank received 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 of $1.7 million on the PPP forgiveness during the nine months ended September 30, 2021.
On March 23, 2021, Wild Sky entered into a promissory note of
$841,000$842,000 with Holcomb Bank (the “Second Wild Sky PPP Loan”) which had a
two-yeartwo-year term and bears interest at a rate of
1.0%1.0% per annum. This was the second tranche available under the PPP program and was forgiven as of March 23, 2022, and the Company recorded a non-cash gain of
$841,000$842,000 on the PPP forgiveness during the
ninesix months ended
SeptemberJune 30, 2022.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE
1315 –
REVENUE RECOGNITION
The following table represents our
revenuesrevenue disaggregated by type (in thousands):
SCHEDULE OF REVENUES DISAGGREGATION
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
| | | | | | | | | | | | |
Revenue: | | | | | | | | | | | | | | | | |
Digital media | | $ | 2,464 | | | $ | 2,768 | | | $ | 6,407 | | | $ | 5,828 | |
Advertising services | | | 2,780 | | | | 1,037 | | | | 8,013 | | | | 2,810 | |
Total revenues | | $ | 5,244 | | | $ | 3,805 | | | $ | 14,420 | | | $ | 8,638 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | |
Revenue: | | | | | | | |
Digital publishing | $ | 1,444 | | | $ | 2,364 | | | $ | 2,399 | | | $ | 3,988 | |
Advertising technology | 11,172 | | | 3,353 | | | 11,715 | | | 5,188 | |
Total revenue | $ | 12,616 | | | $ | 5,717 | | | $ | 14,114 | | | $ | 9,176 | |
Revenue by geographical region
consistconsists of the following (in thousands):
SCHEDULE OF REVENUE BY GEOGRAPHICAL REGION INFORMATION
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | |
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
| | | | | | | | | | | | |
Revenue: | | | | | | | | | | | | | | | | |
Unites States | | $ | 4,902 | | | $ | 3,372 | | | $ | 13,375 | | | $ | 7,536 | |
Israel | | | 342 | | | | 433 | | | | 1,045 | | | | 1,102 | |
Total revenue | | $ | 5,244 | | | $ | 3,805 | | | $ | 14,420 | | | $ | 8,638 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | |
Revenue: | | | | | | | |
Unites States | $ | 12,616 | | | $ | 5,053 | | | $ | 14,077 | | | $ | 8,108 | |
Israel | — | | | 664 | | | 37 | | | 1,068 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total revenue | $ | 12,616 | | | $ | 5,717 | | | $ | 14,114 | | | $ | 9,176 | |
Revenue by geography is generally based on the country of the Company’s contracting entity. Total United States revenue was approximately
93%100% and 88% of total revenue for the three
and nine months ended
SeptemberJune 30,
2023 and 2022, respectively, and
89%100% and
87%88% for the
three and ninesix months ended
SeptemberJune 30,
2021,2023 and 2022, respectively.
As of
SeptemberJune 30,
2022,2023, and December 31,
2021,2022, approximately
100%100% of our long-lived assets were attributable to operations in the United States. Long-lived assets include websites and other intangibles assets that are utilized in overall revenue generation.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
The movement in deferred revenue during the
ninesix months ended
SeptemberJune 30,
2022,2023 and the year ended December 31,
2021,2022 comprised the following (in thousands):
SCHEDULE OF DEFERRED REVENUE
| | September 30, 2022 | | | December 31, 2021 | |
Deferred revenue at start of the period | | $ | 1,162 | | | $ | 347 | |
Amounts invoiced during the period | | | 433 | | | | 1,059 | |
Less: revenue recognized during the period | | | (599 | ) | | | (244 | ) |
Deferred revenue at end of the period | | $ | 996 | | | $ | 1,162 | |
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Deferred revenue at start of the period | $ | 737 | | | $ | 1,162 | |
Amounts invoiced during the period | 1,561 | | | 588 | |
Business combination | 4,754 | | | — | |
Less: revenue recognized during the period | (2,189) | | | (1,013) | |
Deferred revenue at end of the period | $ | 4,863 | | | $ | 737 | |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 1416 – STOCK BASED COMPENSATION
On April 14, 2022, the Board
of Directors of the Company and the Compensation Committee of the Board adopted and approved the 2022 Bright Mountain Media Stock Option Plan (the “Stock Option Plan”). The Stock Option Plan provides for the grant of awards to eligible employees, directors and consultants in the form of stock options. The purpose of the Stock Option Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. The Stock Option Plan is the successor to the Company’s prior stock option plans (2011, 2013, 2015 and 2019 Plans) and accordingly no new grants will be made under the prior plans from and after the date
hereof.of adoption of the Stock Option Plan. The Stock Option Plan has a term of
10 years and authorizes the issuance of up to
22,500,000 shares of the Company’s common stock. As of
SeptemberJune 30,
2022, 16,524,3402023, 16,543,215 shares were remaining under the
2022Stock Option Plan for
the future issuance.
As of
SeptemberJune 30,
2022,2023, options to purchase
5,975,6605,956,785 shares of common stock were outstanding under the Stock Option Plan at a weighted average exercise price of
$0.31$0.14 per share.
Compensation expense recorded in connection with the Stock Option Plan was
$38,000$33,000 and
$100,000$30,000 for the three months ended
SeptemberJune 30,
2023 and 2022,
respectively, with $58,000 and
2021, respectively and $97,000 and $179,000$59,000 for the
ninesix months ended
SeptemberJune 30,
2022,2023 and
2021,2022, respectively. These amounts have been recognized as a component of general and administrative expenses in the accompanying
condensed consolidated financial statements.
The following table presents the activity of the Company’s outstanding stock options of common stock for the
ninesix months ended
SeptemberJune 30,
2022:SCHEDULE OF STOCK OPTION ACTIVITY
Common Stock Options | | Number of Options | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Term | | | Aggregate Intrinsic Value | |
Balance Outstanding, December 31, 2021 | | | 1,415,227 | | | $ | 0.62 | | | | 6.2 | | | $ | — | |
Granted | | | 5,070,433 | | | | 0.01 | | | | 9.6 | | | | — | |
Exercised | | | (100,000 | ) | | | — | | | | — | | | | — | |
Forfeited | | | (338,000 | ) | | | — | | | | — | | | | — | |
Expired | | | (72,000 | ) | | | — | | | | — | | | | — | |
Balance Outstanding, September 30, 2022 | | | 5,975,660 | | | $ | 0.31 | | | | 7.9 | | | $ | — | |
Exercisable at September 30, 2022 | | | 642,864 | | | $ | 0.75 | | | | 3.1 | | | $ | — | |
Unvested at September 30, 2022 | | | 5,332,796 | | | $ | 0.04 | | | | 2.1 | | | $ | — | |
The intrinsic value of the options exercised during the nine months ended September2023:
| | | | | | | | | | | | | | | | | | | | | | | |
Common Stock Options | Number of Options | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Balance Outstanding, December 31, 2022 | 6,517,660 | | $ | 0.12 | | | 7.8 | | $ | — | |
Granted | 535,000 | | $ | 0.16 | | | 9.2 | | $ | — | |
Exercised | (70,000) | | — | | | — | | | $ | — | |
Forfeited | (869,375) | | $ | 0.01 | | | — | | | $ | — | |
Expired | (156,500) | | 0.10 | | | — | | | — | |
Balance Outstanding, June 30, 2023 | 5,956,785 | | $ | 0.14 | | | 8.2 | | $ | — | |
Exercisable at, June 30, 2023 | 1,835,897 | | $ | 0.29 | | | 6.3 | | $ | — | |
Unvested at, June 30, 2023 | 4,120,888 | | $ | 0.07 | | | 9.0 | | $ | — | |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30,
2022, and 2021 was $0.
Summarized information with respect to options outstanding under the stock option plans at September 30, 2022, 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 | |
$ | 0.01 – 0.13 | | | | 5,062,433 | | | $ | 0.01 | | | | 9.6 | | | | 12,500 | | | $ | 0.01 | |
$ | 0.14 – 0.24 | | | | 225,000 | | | | 0.20 | | | | 9.88 | | | | — | | | | — | |
$ | 0.25 – 0.49 | | | | 54,000 | | | | 0.28 | | | | 0.7 | | | | 54,000 | | | | 0.28 | |
$ | 0.50 – 0.85 | | | | 501,000 | | | | 0.69 | | | | 2.7 | | | | 501,000 | | | | 0.69 | |
$ | 0.86 – 1.75 | | | | 133,227 | | | | 1.64 | | | | 7.2 | | | | 75,364 | | | | 1.63 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | | | 5,975,660 | | | $ | 0.11 | | | | 8.9 | | | | 642,864 | | | $ | 0.75 | |
2023
(Unaudited)
As of
SeptemberJune 30,
2022,2023, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of
$146,000$167,588 to be recognized through May
2026.
2030.
The following table provides the weighted average assumptions used in determining the fair value of the stock-based awards for the ninethree months ended SeptemberJune 30, 2023 and 2022:
| | | | | | | | | | | |
| June 30, 2023 | | June 30, 2022 |
Expected Term (years) | 6.25 | | 6.25 |
Expected volatility | 499 | % | | 412 | % |
Risk -free interest rate | 3.59 | % | | 2.70 | % |
Dividend yield | — | % | | — | % |
Expected forfeiture rate | — | % | | — | % |
535,000 and 4,845,433 options were issued during the six months ended June 30, 2022 and
2021:SCHEDULE OF STOCK OPTIONS WEIGHTED AVERAGE ASSUMPTIONS
| | September 30, 2022 | | | September 30, 2021 | |
Expected Term (years) | | | 6.25 | | | | 6.25 | |
Expected volatility | | | 96% - 104 | % | | | 94% - 96 | % |
Risk -free interest rate | | | 2.73% - 2.93 | % | | | 0.67 | % |
Dividend yield | | | 0 | % | | | 0 | % |
Expected forfeiture rate | | | 0 | % | | | 0 | % |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 1517 – FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2: Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals. Level 3: Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.
Fair Value Considerations
Financial instruments recognized in the condensed consolidated balance sheets consist of cash, accounts receivable, other liabilities and accounts payable. The Company believes that the carrying value of its current financial instruments approximates their fair value due to the short-term nature of these instruments. The carrying value of the Centre Lane Senior Secured Credit Facility and the 10%10% Convertible Promissory Note approximates the fair value due to their nature and level of risk.
NOTE
16 – 18– COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Company accounts for its operating lease under FASB ASC Topic 842, Leases (“(“ASC 842”), which requires lessees to recognize on the balance sheet at lease commencement, the lease assets and the related lease liabilities for the rights and obligations created by operating and finance leases with lease terms of more than 12 months.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
The Company leases its corporate offices in Boca Raton, Florida under a long-term non-cancellable operating lease agreement that expired on October 31, 2021.2021 (as amended, the “Lease”). On June 14, 2022, the Company signed a second lease addendum (“Second(the “Second Addendum”) to the leaseLease with a lease term for five years beginning upon completion of improvements to the office space by the Landlord,landlord, which was completed on September 12, 2022. The annual base rent is $96,000,$100,000, with a provision for a 3% increase on each anniversary of the rent commencement date.date. The Company has the option to renew the leaseLease for one additional five-year term.
At SeptemberJune 30, 2022,2023 the operating lease asset was $338,000 and is included under assets on the consolidated balance sheet.
At June 30, 2023, the operating lease liability was
$381,000$333,000, including current portion of $57,000 and is included under liabilities on the
condensed consolidated balance sheet.
At September 30, 2022, the operating lease asset was $381,000 and is included under assets on the condensed consolidated balance sheet.
Over the lease term, the Company is required to amortize the operating lease asset and record interest expense on the lease liability created at leaseLease commencement. Operating lease expense was approximately $6,000$40,000 and $81,000 for the three and ninesix months ended SeptemberJune 30, 2023, respectively, and there was no such expense for the same period in 2022.
Rent expense prior to commencement of the
lease was $3,000, net of landlord incentives and $95,000Lease for the three and
ninesix months ended
SeptemberJune 30, 2022
was $44,000 and $92,000, respectively.
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.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Rent expense was $60,000 and $162,000 for the three and nine months ended September 30, 2021.
As of SeptemberJune 30, 2022,2023 and December 31, 2021,2022, the right-of-use asset and lease liability for the operating lease are summarized as follows (in thousands):
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Assets | | | |
Operating lease right-of-use asset | $ | 338 | | | $ | 367 | |
| | | |
Liabilities | | | |
Operating lease liability, current | $ | 57 | | | $ | 38 | |
Operating lease liability, net of current portion | 276 | | | 319 | |
Total operating lease liability | $ | 333 | | | $ | 357 | |
Current portion of operating lease liability of $57,000 and $38,000 is included in other liabilities on the balance sheets at June 30, 2023 and December 31, 2022, respectively.
Litigation
SCHEDULE OF RIGHT OF USE ASSET AND LEASE LIABILITY
| | September 30, 2022 | | | December 31, 2021 | |
Assets | | | | | | | | |
Operating lease right-of-use asset | | $ | 381 | | | $ | - | |
| | | | | | | | |
Liabilities | | | | | | | | |
Operating lease liability, current | | $ | 48 | | | $ | - | |
Operating lease liability, net of current portion | | | 333 | | | | - | |
Total operating lease liability | | $ | 381 | | | $ | - | |
Litigation
In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Ladenburg
Synacor Litigation
In 2020, Synacor, Inc .
On July 11, 2023, Ladenburg Thalmann & Co. Inc. (“
Synacor”Ladenburg”)
commencedfiled an action against
MediaHouse, LLC, Inform, Inc. and the Company
alleging approximately $230,000 was owed based on invoices issued in 2019 in respect to that certain Content Provider & Advertising Agreement with MediaHouse. During January 2022, the Company entered into a settlement agreement related to the legal proceedings with Synacor totaling $184,000. 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 amountbreach of $40,000 to be paid on or before January 24, 2023. The Company previously reserved approximately $245,000 towards this litigation, and following the settlement, the Company recognized an adjustment of $61,000 included in litigation settlement on the condensed consolidated statements of operations.At September 30, 2022, the Company paid $108,000 in connection with the Synacor settlement agreement , leaving an outstanding balance of $76,000. This amount is included in other liabilities on the condensed consolidated balance sheet at September 30, 2022.
MediaHouse Defamation
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.
On August 2, 2022, the parties engaged in mediation, which resulted in a settlement of the lawsuit on August 4, 2022. The Company agreed to pay $62,500 over a 12-month period, with the first payment commencing on September 8, 2022, and final payment due on August 1, 2023. Approximately $57,000 was outstanding at September 30, 2022. This amount is included in other liabilities on the condensed consolidated balance sheet.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Slutzky & Winshman – Default on Obligations
Bright Mountain has been sued by plaintiffs Joey Winshman, Eli Desatnik and Nadav Slutzy (“Plaintiffs”) in a lawsuit filedcontract in the United States District Court for the Southern District of Florida, Case No. 9:23-cv-81019-AMC. Ladenburg alleges that it entered into an Investment Banking Agreement (the “Agreement”) with the Company on December 17, 2021 (the “Lawsuit”). Plaintiffs allegeSeptember 1, 2020. According to Ladenburg, that Bright Mountain defaulted on its obligationsAgreement provided that Ladenburg would be the exclusive investment advisor and banker for the Company. Ladenburg alleges that the Agreement entitles them to Plaintiffs under three promissory notesa fee for any financing transactions (debt financing or merger and acquisition transactions) that arose from the merger between Bright Mountain Israel Acquisition Ltd., a wholly owned subsidiary of Bright Mountain, and Slutzky & Winshman Ltd.
On September 6, 2022,Company engages in during the Company’s Board of Directors approved a settlement of $650,000 payable over a 50-month period commencing January 2023. See Note 10, Oceanside Share Exchange Loan for detailsterm of the settlement.
contract. In April 2023, the Company informed Ladenburg of an impending Big Village Acquisition. Ladenburg now seeks $1.5 million, plus interest, costs and attorneys’ fees and expenses as a result of that acquisition and debt financing, claiming that it is entitled to a fee. The Company disputes the allegations and disputes that Ladenburg is entitled to receive any fee since it did not perform any work pertaining to such acquisition.
Other litigation is defined as smaller claims or litigationslitigation that are neither individually ornor collectively material. It does not include lawsuits that relate to collections.
The Company is party to various other legal proceedings that arise in the ordinary course of business, separate from normal course accounts receivable collections matters. Due to the inherent difficulty of predicting the outcome of these litigations and other legal proceedings, the Company cannot predict the eventual outcome of these matters, and it is reasonably possible that some of them could be resolved unfavorably to the Company. As a result, it is possible that the Company’s results of operations or cash flows in a particular fiscal period could be materially affected by an unfavorable resolution of pending litigation or contingencies.
However,The outcome is not determinable as of the
Company believes that the resolutionissuance of these
other proceedings will not, based on information currently available, have a material adverse effect on the Company’s financial
position or results of operations.
statements.
NOTE
1719 –
STOCKHOLDERS’SHAREHOLDERS’ DEFICIT
Preferred Stocks
On August 31, 2021, W. Kip Speyer, the Company’s CEO, at that time, gave notice that all his held preferred stock was converted in accordance with the original terms. Accordingly, 7,919,017 shares of the Company’s common stock were issued to Mr. Speyer. The Company recognizes the conversion of the preferred stock on August 31, 2021 and provided all rights as a common shareholder with regard to said shares to Mr. Speyer, including all voting rights. The Company confirms that there was no inducement to convert the shares and that the correct shares were issued in accordance with the original conversion terms. Approximately $691,000 in outstanding dividend related to this preferred stock is included in other liabilities on the condensed consolidated balance sheet.
The Company has authorized 20,000,000 shares of preferred stock with a par value of $0.01$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”) and 10% Series F Convertible Preferred Stock (“Series F Stock”).
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%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%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%10% per annum and automatically converts into shares of our common stock on August 30, 2022. The Series E pays dividends at the rate of 10% per annum and automatically converted into shares of our common stock on November 21, 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 the 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. |
•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;
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
June 30, 20222023
(Unaudited)
•(Unaudited)
At September 30, 2022,the shares rank junior to the 10% Series A Convertible Preferred Stock and December 31, 2021, 125,000 shares ofour 10% Series E Stock were issuedConvertible 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 outstanding. There$0.40 per share for the Series F-3; and
•the shares are no shares of Series A-1 Stock, Series B Stock, Series B-1 Stock, Series C Stock, Series D or Series F Stock issued and outstanding.not redeemable by the Company. Other designations, rights and preferences of each of series of preferred stock are identical, including (i) including:
•shares do not have voting rights, except as may be permitted under Florida law, (ii) law;
•are convertible into shares of our common stock at the holder’s option on a one for one basis, (iii) basis;
•are entitled to a liquidation preference equal to a return of the capital invested,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 Convertible Preferred Stock
There were $no shares of preferred stock issued or outstanding at June 30, 2023, and December 31, 2022.
1,000
during
At June 30, 2023 and December 31, 2022, accrued unpaid preference dividend was $692,000 payable to the
three months ended September 30, 2022Company's Chairman, Mr. Kip Speyer, and
for Series E and F Convertible Preferred Stock were $0 duringis included under other liabilities in the
three months ended September 30, 2021. Dividends paid for Convertible Preferred Stock were $2,000 during the nine months ended September 30, 2022 and for Series E and F Convertible Preferred Stock were $3,000 during the nine months ended September 30, 2021.
consolidated balance sheet.
Shares of Common Stock under the Stock Option Plan
On April 14, 2022, the Board
of Directors of the Company and the Compensation Committee of the Board adopted and approved the 2022 Bright Mountain Media Stock Option Plan (the “Stock Option Plan”). The Stock Option Plan is a term of
10 years and authorizes the issuance of up to
22,500,000 shares of the Company’s common stock. As of
SeptemberJune 30,
2022, 16,524,3402023, 16,543,215 shares were remaining under the 2022 Plan for
the future issuance.
Issue
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
During the ninethree and six months ended SeptemberJune 30, 2023, the Company issued shares of our common stock as follows (in thousands, except share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, 2023 | | June 30, 2023 |
| | Shares (#) | | Value | | Shares (#) | | Value |
Shares issued to Centre Lane related to debt financing | | 21,401,993 | | | $ | 1,926 | | | 21,401,993 | | | $ | 1,926 | |
Common stock issued for options exercised | | 70,000 | | | 1 | | 70,000 | | | 1 |
Common stock issued for services rendered | | — | | — | | 190,000 | | | 31 |
| | 21,471,993 | | | $ | 1,927 | | | 21,661,993 | | | $ | 1,958 | |
During the six months ended June 30, 2022, the Company issued a net 174,253 shares of our common stock for the following concepts (in thousands, except share data):
| | | | | | | | | | | |
| Shares (#) | | Value |
| | | |
| | | |
| | | |
| | | |
Shares issued to Oceanside employees per the acquisition agreement valued at $1.60 | 174,253 | | $ | 279 | |
Total | 174,253 | | $ | 279 | |
Treasury Stocks
SCHEDULE OF COMMON SHARES ISSUED DURING THE PERIOD
| | Shares (#) | | | Value | |
Shares issued to Oceanside employees per the acquisition agreement valued at $1.60 | | | 174,253 | | | $ | 279 | |
During the
nine monthsyear ended
September 30,December 31, 2021,
the Company issued a net 16,052,966 shares of ourthree shareholders relinquished their Bright Mountain common stock
forshares. A total of 825,175 shares were acquired with a value of $220,000. The shares are being held as Treasury Stock by the
following concepts (in thousands, except share data):
| | Shares (#) | | | Value | |
Shares issued to Centre Lane related to debt financing | | | 5,150,000 | | | $ | 2,559 | |
Options exercised by employees | | | 100,000 | | | | 14 | |
Warrants exercised | | | 25,000 | | | | 10 | |
Stock issued for deemed dividend (1) | | | 10,398,700 | | | | - | |
Shares issued to Oceanside employees per the acquisition agreement valued at $1.60 | | | 379,266 | | | | 607 | |
Total | | | 16,052,966 | | | $ | 3,190 | |
(1) | 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 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. This issuance was determined to be a deemed dividend. |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberWarrants
At June 30,
2022(Unaudited)
Warrants
At September 30, 2022,2023, we had 35,823,31631,173,316 common stock warrants outstanding to purchase shares of our common stock with an exercise price ranging between $0.65$0.65 and $1.00$1.00 per share. A summary of the Company’s warrants outstanding as of SeptemberJune 30, 2023, is presented below:
| | | | | | | | | | | | | | |
Warrants as of June 30, 2023 Exercise Price | | Number Outstanding | | Gross cash proceeds if exercised |
$ | 1.00 | | | 4,992,308 | | $ | 4,992 | |
$ | 0.65 | | | 10,725,000 | | $ | 6,971 | |
$ | 0.75 | | | 15,456,008 | | $ | 11,592 | |
| | 31,173,316 | | $ | 23,555 | |
Approximately 4,825,000 common stock warrants expired during the six months ended June 30, 2023.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
At December 31, 2022,
we had 35,998,316 common stock warrants outstanding to purchase shares of our common stock with an exercise price ranging between $0.65 and
2021, respectively$1.00 per share. A summary of the Company’s warrants outstanding as of December 31, 2022, is presented below:
SCHEDULE OF WARRANT OUTSTANDING
Warrants as of September 30, 2022 | | | Number | | | Gross cash proceeds | |
Exercise Price | | | Outstanding | | | if exercised | |
$ | 1.00 | | | | 4,817,308 | | | $ | 4,817,308 | |
$ | 0.65 | | | | 15,550,000 | | | $ | 10,107,500 | |
$ | 0.75 | | | | 15,456,008 | | | $ | 11,592,006 | |
| | | | | 35,823,316 | | | $ | 26,516,814 | |
Warrants as of September 30, 2021 | | | Number | | | Gross cash proceeds | |
Exercise Price | | | Outstanding | | | if exercised | |
$ | 1.00 | | | | 4,817,308 | | | $ | 4,817,308 | |
$ | 0.65 | | | | 15,550,000 | | | $ | 10,107,500 | |
$ | 0.75 | | | | 15,456,008 | | | $ | 11,592,006 | |
| | | | | 35,823,316 | | | $ | 26,516,814 | |
During 2021, a total of 25,000 warrants were exercised at $0.40 per share.
Treasury Stocks
During the year ended December 2020, the Company executed a settlement agreement with three shareholders who relinquished their Bright Mountain common stock shares. A total of 825,175 shares were acquired with a value of $220,000. The shares are being held as Treasury Stock by the Company and will be resold at later dates.
| | | | | | | | | | | | | | |
Warrants as of December 31, 2022 Exercise Price | | Number Outstanding | | Gross cash proceeds if exercised |
$ | 1.00 | | | 4,992,308 | | $ | 4,992 | |
$ | 0.65 | | | 15,550,000 | | $ | 10,108 | |
$ | 0.75 | | | 15,456,008 | | $ | 11,592 | |
| | 35,998,316 | | $ | 26,692 | |
NOTE 1820 – LOSS PER SHARE
As of SeptemberJune 30, 2022,2023, and September 30, 2021,2022, there were 149,984,636172,106,629 and 149,810,383149,984,636 shares of common stock issued, respectively, and 149,159,461171,281,454 and 148,985,208149,159,461 shares of common stock outstanding, respectively. Outstanding shares as of SeptemberJune 30, 2022,2023, and September 30, 2021,2022, have been adjusted to reflect 825,175 treasury shares.
Basic net loss per share is computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period.
Diluted
earningsloss per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Conversion or exercise of the potential common shares is not reflected in diluted earnings per share unless the effect is dilutive. The dilutive effect, if any, of outstanding common share equivalents is reflected in diluted earnings per share by application of the treasury stock method, and if-converted method as applicable.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The following tables reconcile actual basic and diluted earnings per share for the three and ninesix months ended SeptemberJune 30, 2022,2023, and September 30, 20212022 (in thousands, except per share data).
SCHEDULE OF LOSS PER SHARE
| | | | | | | | | | | | | | | | |
| | Three Months ended | | | Nine Months ended | |
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
Net loss | | $ | (1,918 | ) | | $ | (2,889 | ) | | $ | (5,222 | ) | | $ | (9,087 | ) |
Preferred stock dividends | | | (1 | ) | | | (274 | ) | | | (3 | ) | | | (453 | ) |
Net loss available to common shareholders, basic and diluted computation | | | (1,919 | ) | | | (3,163 | ) | | | (5,225 | ) | | | (9,540 | ) |
| | | | | | | | | | | | | | | | |
Weighted average shares - denominator basic and diluted computation | | | 149,159,461 | | | | 125,744,703 | | | | 149,140,312 | | | | 121,718,466 | |
Loss per common share – basic and diluted | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.04 | ) | | $ | (0.08 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Loss per share: | | | | | | | |
Numerator: | | | | | | | |
Net loss | $ | (6,071) | | $ | (1,458) | | $ | (9,867) | | $ | (3,575) |
Preferred stock dividends | — | | | (1) | | | — | | | (2) | |
Net loss available to common shareholders | $ | (6,071) | | | $ | (1,459) | | | (9,867) | | | (3,577) | |
Denominator | | | | | | | |
Weighted-average common shares outstanding | | | | | | | |
Basic and diluted | 166,779,390 | | 149,159,461 | | 158,291,304 | | 149,130,579 |
Net loss per common share | | | | | | | |
Basic and diluted | $ | (0.04) | | | $ | (0.01) | | | $ | (0.06) | | | $ | (0.02) | |
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
The anti-dilutive securities excluded from the weighted-average shares used to calculate the diluted net loss per common share were as follows:
SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDED FROM THE WEIGHTED-AVERAGE SHARES
| | | | | | |
| | As of | |
| | September 30, 2022 | | | September 30, 2021 | |
Shares subject to outstanding common stock options | | | 5,975,660 | | | | 915,227 | |
Shares subject to outstanding warrants | | | 35,823,316 | | | | 35,823,316 | |
Shares subject to preferred stock | | | 125,000 | | | | 125,000 | |
Anti-dilutive securities excluded from the weighted-average shares | | | 125,000 | | | | 125,000 | |
| | | | | | | | | | | |
| As of June 30, |
| 2023 | | 2022 |
Shares unvested and subject to exercise of stock options | 5,956,785 | | 6,188,660 |
Shares subject to warrants stock conversion | 31,173,316 | | 35,823,316 |
Shares subject to convertible preferred stock conversion | — | | | 125,000 |
Shares subject to convertible notes stock conversion | 200,000 | | | 200,000 | |
NOTE
1921 –
RELATED PARTIES
Centre Lane Partners
Centre Lane Partners, Master Credit Fund II, L.P. (“Centre Lane Partners”), who sold the Wild Sky business to the Company in June 2020 has partnered and assisted the Company from a liquidity perspective during 20212022 and through the ninesix months ended SeptemberJune 30, 2022. 2023.
Additionally, in connection with the Seventeenth Amendment, on June 30, 2023, the Company issued 21,401,993 shares of common stock of the Company to BV Agency, LLC, an entity beneficially owned by Centre Lane Partners.
This relationship has been determined to qualify as a related party. party, BV Agency, LLC and Centre Lane Partners own approximately 12.4% and 8.8% of the Company’s outstanding common stock, respectively.
A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions. Through SeptemberJune 30, 2022,2023, the Company has entered into fifteen18 amendments to the Amended and Restated Senior Secured Credit agreementAgreement between itself and Centre Lane Partners. See Note 9 -10, Centre Lane Senior Secured Credit Facility for more information.
The total related party debt owed to Centre Lane Partners was
$29.9$64.2 million and
$26.3$33.1 million as of
SeptemberJune 30,
20222023 and December 31,
2021,2022, respectively. See Note
9,10, Centre Lane Senior Secured Credit Facility, for
details on this facility.
more information.
Convertible Promissory Note
As discussed in Note
11,12, 10% Convertible Promissory
Note,Notes, the note payable to the Chairman of the Board amounted to
$80,000 $80,000 and
$80,000$80,000 as of
SeptemberJune 30,
2022,2023, and December 31,
2021, respectively,2022, respectively. See Note
11,12, 10% Convertible Promissory
NoteNotes for further discussion on these notes payable.
During the three months ended SeptemberJune 30, 2022,2023, and 2021,2022, the Company paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $2,000$0 and $0,$1,200, respectively, held by affiliates of the Company.
During the
ninesix months ended
SeptemberJune 30,
2022,2023, and
2021,2022, the Company paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of
$3,000$0 and
$3,000,$2,500, respectively, held by affiliates of the Company.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberAt June 30, 2022
(Unaudited)
Oceanside Acquisition
The unsecured2023 and interest free Closing Notes of $750,000 relatedDecember 31, 2022, accrued unpaid preference dividend was $692,000. These amounts are payable to the Oceanside acquisition were recorded ratably as compensation expense into the condensed consolidated statement of operations and comprehensive loss over the 24-month term and an accrued payable is being recognized over the same period.
As of August 15, 2020, the Company did not make payment on the 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. The Company established a reserve for the $750,000 which was included in litigation reserves.
On September 6, 2022, the Company’s Board of Directors approved a settlement of $650,000 payable over a 50 month period commencing January 2023. The Company recognize a gain of approximately $286,000 which includes $100,000 for the reduction in the settlement and $186,000 representing interest that was previously accrued up to December 30, 2021, the amount is included in Litigation settlement in the condensed consolidated statement of operations.
Company's Chairman, Mr. Kip Speyer.
The Company recorded
$0$0 tax provision for the three and
ninesix months ended
SeptemberJune 30,
2022,2023, and
2021,2022, due in large part to its expected tax losses for the period and maintaining a full valuation allowance against its net deferred tax assets.
At SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company had no unrecognized tax benefits or accrued interest and penalties recorded. No interest and penalties were recognized during the three and ninesix months ended SeptemberJune 30, 2022,2023, and 2021.2022.
BRIGHT MOUNTAIN MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
NOTE 2123 – SUBSEQUENT EVENTS
Centre Lane Senior Secure Credit Facility Amendment
Management has considered subsequent events through November 14, 2022,On July 28, 2023, the date this reportCompany and its subsidiaries, CL Media Holdings LLC, Bright Mountain LLC, MediaHouse, Inc., Big-Village Agency LLC, and BV Insights LLC, and Centre Lane Partners entered into the Nineteenth Amendment to the Credit Agreement (the “Nineteenth Amendment”). The Credit Agreement was issued,amended, as provided in the Nineteenth Amendment, to provide for an additional term loan amount of $2.0 million to, among other things, finance the integration and there were no events that required additional disclosure.further growth of the Company post-Acquisition. This term loan matures on April 20, 2026.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the
condensed consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K
filed withfor the
Securities and Exchange Commission on June 13,year ended December 31, 2022. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31,
2021,2022, and in any subsequent filing we make with the SEC.
Business Overview
Organization and Nature of Operations
Bright Mountain Media, Inc. (the “Company” or “Bright Mountain” or “We”), is a holding Companycompany which focuses on digital mediapublishing and advertising services.technology. The Company is engaged in content creation and advertising technology development that helps brandscustomers connect with, and market to, targeted audiences in high quality environments using a variety of formats to reach customers.digital advertising ("ad") formats.
Digital MediaPublishing
Our digital publishing businessdivision focuses on developing content that attracts an audience and monetizes that audience through advertising. The current portfolio of owned and operated websites is focused on moms, parenting, families, and more broadly, women. The portfolio includesconsists of popular websites including Mom.com, Cafemom.com, LittleThings.com, and MamasLatinas.com. This demographic is highly sought after by brands and their advertising agencies. We use internal and external technologies to constantly improve the effectiveness and efficiency of the content we create. Our publishing division monetizes its audiences through both direct and programmatic advertising sales.
Advertising ServicingTechnology
Our advertising technology businessdivision focuses on delivering targeted ads to audiences on owned and operated sites as well as third partythird-party publishers in a cost-effective manner through the deployment of proprietary technologies. Through acquisitions and organic software development, we have consolidated and plan to further condense key elements of the prevailing digital advertising supply chain by eliminating industry “middlemen” and/or costly redundancy of services via our ad exchange. By developing our own proprietary technology stack, we are able to pass along efficiencies to both the demand and supply side of the ecosystem. Our goal is to enable and support a streamlined, end-to-end advertising model that addresses both advertiser demand (ad buy(buy side) and publisher supply (media sell(sell side) for both direct sales teams and programmatic sales and delivery of digital advertisements using an array of audience targeting tools and advertising formats (display, audio, video, CTV,connected television (CTV), in-app). Programmatic advertising relies on artificial intelligence powered software programs that leverage data and proprietary algorithms to match the optimal selection of an ad with bid pricesprice offered by advertisers.
The Company generates revenue through sales of advertising services which generate revenue from advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue. We also generate advertising services revenue from facilitating the real-time buying and selling of advertisements at scale between networks of buyers, known as DSPs and sellers known as SSPs. Additionally, following the acquisition of Big Village’s agency and insights divisions, advertising technology is also derived from consumer insights and creative media services. Revenue is primarily derived from providing a single integrated service for research, planning and execution of creative and media marketing campaigns.
Asset Purchase Agreement
On April 20, 2023, the Company completed the acquisition of two business units of Big Village (Big Village Insights, Inc and Big Village Agency LLC, (together, the “Big Village Entities”)) for approximately $20.0 million, plus assumed liabilities, in an all-cash transaction funded by a senior secured credit facility (the "Big Village Acquisition").
As part of the Big Village Acquisition, the Company formed BV Insights, LLC (“Insights”) and Big-Village Agency, LLC ("Agency") to incorporate the assets acquired in the transactions, additionally, letters of employment were extended to certain legacy employees of the Big Village Entities, resulting in a total of 203 employees accepting the offer of employment by the Company.
Insights is a global business intelligence firm providing primary research, secondary research, competitive intelligence and expert insight to address customer's strategic issues. Insights' revenue is primarily derived from providing a single integrated service for research.
Agency is a digital marking service company, providing advertising technology serving advertisers
while direct sales involve traditional insertion order-based, pre-selected sales between an ad buyer and
an advertising sales executive.
agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns. Agency's revenue is derived from the planning and execution of creative and media marketing campaigns.
Key FactorFactors Affecting Our Performance
Seasonal Fluctuations. Typically advertising technology companies report a material portion of their revenues during the third and fourth calendar quarter as a result of holidayback to school and holidays related adadvertising spend. Our experience since transitioning to focus solely on advertising has been consistent with this trend. Because of seasonal fluctuations, there can be no assurance that the results of any particular quarter will be indicative of results for the full year or for future years or quarters.
Limited Number of Customers. During the ninesix months ended SeptemberJune 30, 2023 and 2022 one customer represented 33.4%12.7% and 34.9% of revenue, respectively.
Managing Industry Dynamics. We operate in the rapidly evolving digital advertising industry. Advances in programmatic advertising technologies, which is the efficient and automated method of purchasing ads online, has enabled publishers to auction their ad inventory to more buyers, simultaneously in real time. As advertisers keep pace with ongoing changes in the way that consumers view and interact with digital media there was no such concentrationwill be further innovation. We believe our focus on our customers has allowed us to understand their needs and our ongoing innovation has enabled us to quickly adapt to changes in the industry, develop new solutions and do so cost effectively. Our performance depends on our ability to keep pace with industry changes and the evolving needs of our customers while continuing our cost efficiency.
Additionally, companies are looking for new means to target their messaging to their desired audiences as regulatory concerns accelerate the same periodimpact on existing industry standards. Tech companies will be limited in 2021. The losshow they monetize personal information for advertising purposes.
Two highly visible examples of this
customers couldtrend are the impending degradation of Google’s third-party cookie and the data security measures embedded within Apple’s iPhone. This has created a need for companies to find new methods to better understand their target audiences, and have
a material adverse impact on our results of operations in future periods.
the tools to reach those audiences.
Key Operating and Financial Metrics
We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. The following is our analysis for the three and ninesix months ended SeptemberJune 30, 2022,2023 and 2021,2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Revenue | $ | 12,616 | | | $ | 5,717 | | | $ | 14,114 | | | $ | 9,176 | |
Cost of revenue | 9,162 | | | 2,900 | | | 10,132 | | | 4,628 | |
Gross margin | 3,454 | | | 2,817 | | | 3,982 | | | 4,548 | |
General and administrative expenses | 7,374 | | | 3,443 | | | 10,802 | | | 7,293 | |
Total financing income (expense) | (2,151) | | | (832) | | | (3,047) | | | (830) | |
Net loss | (6,071) | | | (1,458) | | | (9,867) | | | (3,575) | |
| | | | | | | |
Adjusted EBITDA (1) | $ | (1,856) | | | $ | 39 | | | $ | (3,942) | | | $ | (1,389) | |
(1) | | Three Months Ended | | | Nine Months Ended | |
| | September 30, 2022 | | | September 30, 2021 | | | September 30, 2022 | | | September 30, 2021 | |
| | | | | | | | | | | | |
Revenue | | $ | 5,244 | | | $ | 3,805 | | | $ | 14,420 | | | $ | 8,638 | |
Net loss | | $ | (1,918 | ) | | $ | (2,889 | ) | | $ | (5,222 | ) | | $ | (9,087 | ) |
Adjusted EBITDA (1) | | $ | (509 | ) | | $ | (490 | ) | | $ | (542 | ) | | $ | (4,636 | ) |
| (1) | For a reconciliation of net loss to Adjusted EBITDA see “EBITDA and Adjusted EBITDA”,For a reconciliation of net loss to Adjusted EBITDA see “Use of Non-GAAP Financial Measures” below. |
Revenue
The Company generates revenue through salesas follows:
•selling of advertising services which generate revenue from advertisements placed on the Company’s owned and managed sites, as well as from advertisements placed on partner websites, for which the Company earns a share of the revenue. Additionally, we also generaterevenue;
•generating advertising services revenue from facilitating the real-time buying and selling of advertisements at scale between networks of buyers, known as DSPs (Demand Side Platforms) and sellers known as SSPs (Supply Side Platforms).SSPs; •serving advertisers and agencies by providing access to premium inventory, leveraging data to optimize programmatic campaigns, where revenue is derived from the planning and execution of creative and media marketing campaigns; and
•providing primary research, secondary research, competitive intelligence and expert insight to address customer's strategic issues, where revenue is primarily derived from providing a single integrated service for research.
Revenue increased
38% in$6.9 million or 121% for the three months ended
SeptemberJune 30,
2022, when2023, compared to the same period in
2021.2022. Revenue increased
67% in$4.9 million or 54% for the
ninesix months ended
SeptemberJune 30,
2022, when2023, compared to the same period in
2021.2022. See below for a detailed analysis of revenue for the three and
ninesix months ended
SeptemberJune 30,
2022.
Non-GAAP Financial Measure
EBITDA2023, and Adjusted EBITDA2022.
Cost of Revenue
To provide investors with additional information regarding our financial results, we have disclosed EBITDA,
Cost of revenue includes internal labor and payment to third parties for services performed to drive revenue, which is a non-GAAP financial measure that we calculate as net income before interest, taxes, depreciationinclude revenue share paid for ad exchange on third party sites, advertising fees, personnel costs, technology and amortizationdata related costs, fees paid for content creation, influencers, writers and Adjusted EBITDA, which represents EBITDA adjusted for certain unusualsales commission.
Costs of revenue increased approximately $6.3 million or
infrequent items (such as changes in the fair value of financial instruments and warrants).
We report adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles (“GAAP”). This measure is one of the primary metrics by which we evaluate the performance of our business, on which our internal budgets are based. We believe that investors have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We endeavor to compensate216% for the limitationsthree months ended June 30, 2023 compared to 2022. Costs of revenue increased approximately $5.5 million or 119% for the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and description of the reconciling items, including quantifying such itemssix months ended June 30, 2023 compared to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure.
Our adjusted EBITDA is defined as operating income/loss excluding:
| ● | non-cash stock option compensation expense; |
| ● | depreciation; |
| ● | Non-restructuring severance expenses |
| ● | Nonrecurring professional fees; |
| ● | acquisition-related items consisting of amortization expense and impairment expense; |
| ● | interest; and |
| ● | amortization on debt discount. |
We believe this measure is useful2022. See below for analysts and investors as this measure allows a more meaningful year-to-year comparison of our performance. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole. The above items are excluded from adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, adjusted EBITDA corresponds more closely to the cash operating income/loss generated from our business. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations and comprehensive loss of certain expenses. As a result, you should not consider these in isolation or as a substitute fordetailed analysis of our results as reported under GAAP, including net loss, which we consider to be the most directly comparable GAAP financial measure. Somecost of these limitations are:
| ● | although depreciation is a non-cash charge, the assets being depreciated may have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflect cash capital expenditure requirementsrevenue for such replacements or for new capital expenditure requirements; |
| ● | EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and |
| ● | EBITDA and Adjusted EBITDA do not reflect tax payments that may represent a reduction in cash available. |
A reconciliation of net loss before taxes to non-GAAP EBITDA and Adjusted EBITDA is as follows (in thousands):
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | |
Net loss before tax plus: | | $ | (1,918 | ) | | $ | (2,889 | ) | | $ | (5,222 | ) | | $ | (9,087 | ) |
Depreciation expense | | | 12 | | | | 12 | | | | 24 | | | | 46 | |
Amortization expense | | | 387 | | | | 396 | | | | 1,173 | | | | 1,189 | |
Amortization of debt discount | | | 314 | | | | 238 | | | | 923 | | | | 384 | |
Other interest expense | | | 11 | | | | 3 | | | | 17 | | | | 343 | |
Interest expense - Centre Lane Senior Secured Credit Facility and Convertible Promissory Notes- related party | | | 433 | | | | 520 | | | | 1,555 | | | | 945 | |
EBITDA | | | (761 | ) | | | (1,720 | ) | | | (1,530 | ) | | | (6,180 | ) |
Stock compensation expense | | | 38 | | | | 100 | | | | 214 | | | | 399 | |
Nonrecurring professional fees | | | 350 | | | | 903 | | | | 657 | | | | 1,063 | |
Bad debt expense (recovery) | | | (136 | ) | | | 223 | | | | 87 | | | | 82 | |
Non-restructuring severance expense | | | - | | | | 4 | | | | 30 | | | | - | |
Adjusted EBITDA | | $ | (509 | ) | | $ | (490 | ) | | $ | (542 | ) | | $ | (4,636 | ) |
For the three and ninesix months ended SeptemberJune 30, 2022,2023, and 2021,2022.
General and Administrative Expenses
General and administrative expenses consist primarily of (i) personnel and related costs for our executive, finance and accounting, human resources, and, administrative personnel, including salaries, benefits, bonuses, and stock-based compensation; (ii) legal, accounting and other professional service fees; (iii) other corporate expenses; (iv) information technology costs; and (v) facility costs.
General and administrative expenses increased approximately $3.9 million or 114% for the three months ended June 30, 2023 compared to
disclose an adjusted EBITDA that accurately represents actual operations, we have excluded2022. General and administrative expenses increased approximately $3.5 million or 48% for the
PPP loan forgiveness fromsix months ended June 30, 2023 compared to 2022. See below for a detailed analysis of general and administrative expenses for the
calculation.
three and six months ended June 30, 2023 and 2022. Results of Operations
The following is our analysis of the results of operations for the periods indicated below. This analysis should be read in conjunction with ourthe consolidated financial statements includingand the related notes to the financial statements.those statements that are included elsewhere in this Quarterly Report on Form 10-Q.
Three Months Ended
SeptemberJune 30,
2022,2023 Compared to Three Months Ended
SeptemberJune 30,
2021
2022
Net loss from operations for the quarter ended SeptemberJune 30, 2022,2023 was $2.0$6.1 million as compared to a net loss of $2.9$1.5 million for the same period last year.in 2022. The following is our analysis for the period.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2023 | | 2022 | | Change | | % Change | | |
| | | | | | | | | |
Revenue | $ | 12,616 | | | $ | 5,717 | | | $ | 6,899 | | | 121 | % | | increased |
Cost of revenue | 9,162 | | | 2,900 | | | 6,262 | | | 216 | % | | increased |
Gross margin | 3,454 | | | 2,817 | | | 637 | | | 23 | % | | increased |
General and administrative expense | 7,374 | | | 3,443 | | | 3,931 | | | 114 | % | | increased |
Loss from operations | (3,920) | | | (626) | | | (3,294) | | | 526 | % | | increased |
Financing (expense) income | (2,151) | | | (832) | | | (1,319) | | | 159 | % | | increased |
| | | | | | | | | |
Net loss | (6,071) | | | (1,458) | | | (4,613) | | | 316 | % | | increased |
| | | | | | | | | |
Gross margin % | 27 | % | | 49 | % | | (22) | % | | (44) | % | | decreased |
Revenue
| | For the Three Months Ended September 30, | | | | | | | |
| | 2022 | | | 2021 | | | Change | | | % Change | | | | |
| | | | | | | | | | | | | | | |
Revenue | | $ | 5,244 | | | $ | 3,805 | | | $ | 1,439 | | | | 38 | % | | | Increase | |
Cost of revenue | | | 3,098 | | | | 1,708 | | | | 1,390 | | | | 81 | % | | | Increase | |
Gross margin | | | 2,146 | | | | 2,097 | | | | 49 | | | | 2 | % | | | Increase | |
General and administrative expense | | | 3,323 | | | | 4,635 | | | | (1,312 | ) | | | (28 | )% | | | Decrease | |
Loss from operations | | | (1,177 | ) | | | (2,538 | ) | | | 1,361 | | | | 54 | % | | | Decrease | |
Financing expense (income) | | | (741 | ) | | | (351 | ) | | | (390 | ) | | | (111 | )% | | | Increase | |
Provision (benefit) for income taxes | | | - | | | | - | | | | - | | | | - | | | | | |
Net loss | | $ | (1,918 | ) | | $ | (2,889 | ) | | $ | 971 | | | | 34 | % | | | Decrease | |
| | | | | | | | | | | | | | | | | | | | |
Gross margin % | | | 41 | % | | | 55 | % | | | (14 | )% | | | (26 | )% | | | Decrease | |
Revenue
Revenue
Our revenue showed an overall increase of $6.9 million or 121% for the three months ended SeptemberJune 30, 2022, increased $1.4 million or 38% when2023 compared to the same period in 2021. The increase2022 and was largely attributable to Ad Services, which increased 168%. This growth has been driven by our abilitya combination of the Big Village Acquisition offset by macroeconomics factors coupled with overall reduction in spending by some partners due to leverage our digital media assets to attract top advertisers,inflationary concerns, which in turn has allowed us to onboard direct premium publishers, especially in the CTV market. This led to an increase in volume,lower than normal rates. Macroeconomic impact was noted significantly by direct sales for the digital publishing customers as well as ratesreduction in traffic. We also noted one of our partners changing its platform to favor short video and overall revenue.other "creator" content over news and media type content.
The Company focuses on digital publishing and advertising technology.
Digital Publishing
Digital publishing decreased by $895,000 or 38% for the three months ended June 30, 2023 compared to the same period in 2022. Approximately 93%$1.5 million or 12% of the Company’s revenue for the three months ended June 30, 2023 was generated from our digital mediapublishing customers withincompared to $2.4 million or 41% for the United Statessame period in 2022.
Advertising Technology
Advertising technology increased by $7.8 million or 233% for the three months ended June 30, 2023 compared to the same period in 2022. Approximately $11.2 million or 89% of America (“US”) with 7%the Company’s revenue for the three months ended June 30, 2023 was generated from our advertising technology customers compared to $3.4 million or 59% for the same period in 2022. The increase is attributable to the Big Village Entities which represents $9.2 million or 82% of advertising technology sales and 73% of overall revenue for the three months ended June 30, 2023.
During the three months ended June 30, 2023, approximately 100% of advertising technology revenue was generated in the U.S. and 0% was generated from our business in Israel, compared to 89%80%and 20% in the USU.S. and 11% in Israel, respectively, for the same period in 2021.2022. During the latter part of 2022, the Company started scaling down its operations in Israel and focusing more on its U.S. market in advertising technology to capitalize on more attractive revenue streams.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| | 2023 | | 2022 | | Change | | % Change | | |
Direct salaries and labor cost | | $ | 2,528 | | | $ | — | | | $ | 2,528 | | | 100 | % | | increased |
Direct project cost | | 2,576 | | | — | | | 2,576 | | | 100 | % | | increased |
Non-direct project cost | | 2,390 | | | — | | | 2,390 | | | 100 | % | | increased |
Revenue share | | 1,131 | | | 1,654 | | | (523) | | | (32) | % | | decreased |
Content creation | | 307 | | | 365 | | | (58) | | | (16) | % | | decreased |
Sales commission | | 196 | | | 298 | | | (102) | | | (34) | % | | decreased |
Other | | 34 | | | 583 | | | (549) | | | (94) | % | | decreased |
| | $ | 9,162 | | | $ | 2,900 | | | $ | 6,262 | | | 216 | % | | increased |
Costs of revenue increased $1.4$6.3 million or 81%216% for the three months ended SeptemberJune 30, 2023, compared to the same period for 2022. Approximately $7.5 million or 82% in cost of revenue is attributable to the Big Village Entities for the three months ended June 30, 2023.
Direct Salaries and Labor
Direct salaries and labor cost was $2.5 million for the three months ended June 30, 2023 and represents 28% of overall cost of revenue and represent salary and labor cost of employees that works directly on customer's project for the Big Village Entities.
Direct salaries and labor cost also includes approximately $1.2 million for the three months ended June 30, 2023, representing bonus paid to the employees of Big Village as part of the Big Village Acquisition.
Direct Project Cost
Direct project cost was $2.6 million for the three months ended June 30, 2023 and represents 28% of overall cost of revenue and includes payments made to third-parties that are directly attributable to completion of project to allow for revenue recognition for the Big Village Entities.
Non-Direct Cost
Non-direct cost was $2.4 million for the three months ended June 30, 2023 and represents 26% of overall cost of revenue, these cost are overall client services that are not specifically related to a particular project.
Revenue Share
Revenue share cost represents $1.1 million or 12% and 57% overall cost of revenue for the three months ended June 30, 2023 and 2022, respectively, and represents payments to media providers and website publishers.
Gross Margin
Our gross margin increased $637,000 or 23% for the three months ended June 30, 2023, compared to the same period for 2022.
General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2023 | | 2022 | | Change | | % Change |
| | | | | | | |
Personnel cost | $ | 2,017 | | | $ | 1,579 | | | $ | 438 | | | 28 | % |
Legal expense | 607 | | | 231 | | | 376 | | | 163 | % |
Professional fees | 2,789 | | | 665 | | | 2,124 | | | 319 | % |
Insurance | 272 | | | 152 | | | 120 | | | 79 | % |
Depreciation and amortization expense | 766 | | | 398 | | | 368 | | | 92 | % |
Website expense | 378 | | | 339 | | | 39 | | | 12 | % |
Other | 545 | | | 79 | | | 466 | | | 590 | % |
Total | $ | 7,374 | | | $ | 3,443 | | | $ | 3,931 | | | 114 | % |
| | | | | | | |
Gross margin as a percentage of general and administrative expense | 47 | % | | 82 | % | | (35) | % | | (43) | % |
General and administrative expenses increased $3.9 million, or 114% for the three months ended June 30, 2023, compared to the same period in 2021. These costs include2022. The reduction is primarily due to a combination of factors as discussed below.
Personnel Cost
Personnel cost increased by approximately $438,000 or 28% for the three months ended June 30, 2023 compared to the same period in 2022. This change is mainly driven by a combination of an increase and reduction in head count.
During the three months ended June 30, 2023, the Company's headcount increased by 205 employees, with 203 employees attributable to the Big Village Acquisition. Personnel cost for Big Village employees are allocated between cost of revenue and general and administrative expenses depending on their contribution to certain revenue generated projects. Amount included in general and administrative expenses was $194,000 with $2.5 million included under cost of revenue for the three months ended June 30, 2023.
During the three months ended June 30, 2023, the Company's headcount was reduced by 12 employees that were terminated as a reduction in force. The Company incurred severance cost of approximately $114,000 which was paid subsequent to the quarter end.
The Company incurred severance cost of approximately $29,000 associated with head count reduction during the same period for 2022.
Legal Fees
Legal fees increased $376,000 or 163%, for the three months ended June 30, 2023, compared to the same period in 2022. Approximately $359,000 represents cost associated with the Big Village Acquisition.
Professional Fees
Professional fees increased $2.1 million or 319%, for the three months ended June 30, 2023, compared to the same period in 2022. Approximately $685,000 represents cost associated with the Big Village Acquisition.
Financing Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2023 | | 2022 | | Change | | % Change | | |
| | | | | | | | | |
Interest expense | $ | 2,254 | | | $ | 1,167 | | | $ | 1,087 | | | 93 | % | | |
Gain of forgiveness of PPP loan | — | | | (296) | | | 296 | | | (100) | % | | |
Other expense (income) | (103) | | | (39) | | | (64) | | | 164 | % | | |
Total financing expense (income) | $ | 2,151 | | | $ | 832 | | | $ | 1,319 | | | 159 | % | | |
Financing expense increased $1.3 million or 159% for the three months ended June 30, 2023, compared to the same period 2022. This increase was largely attributable to a $1.1 million increase in interest expense related to the Centre Lane Senior Secured Credit Facility, which reflected higher principal and fees due to the Centre Lane Senior Secured Credit Facility amendments during the year ended December 31, 2022 and through the quarter end. This increase was offset by a reduction in the Paycheck Protection Program ("PPP") loan forgiveness amount, which was $296,000 in 2022.
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Net loss from operations for the six months ended June 30, 2023 was $9.9 million as compared to a net loss of $3.6 million for the same period in 2022. The following is our analysis for the period.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 | | Change | | % Change | | |
| | | | | | | | | |
Revenue | $ | 14,114 | | | $ | 9,176 | | | $ | 4,938 | | | 54 | % | | increased |
Cost of revenue | 10,132 | | | 4,628 | | | 5,504 | | | 119 | % | | increased |
Gross margin | 3,982 | | | 4,548 | | | (566) | | | (12) | % | | decreased |
General and administrative expense | 10,802 | | | 7,293 | | | 3,509 | | | 48 | % | | increased |
Loss from operations | (6,820) | | | (2,745) | | | (4,075) | | | 148 | % | | increased |
Financing (expense) income | (3,047) | | | (830) | | | (2,217) | | | 267 | % | | increased |
| | | | | | | | | |
Net loss | $ | (9,867) | | | $ | (3,575) | | | $ | (6,292) | | | 176 | % | | increased |
| | | | | | | | | |
Gross margin % | 28 | % | | 50 | % | | (22) | % | | (44) | % | | decreased |
Revenue
Our revenue showed an overall increase of $4.9 million or 54% for the six months ended June 30, 2023 compared to the same period in 2022 and was driven by a combination of the acquisition of the Big Village Entities offset by macroeconomics factors coupled with overall reduction in spending by some partners due to inflationary concerns, this has led to lower than normal rates. Macroeconomic impact was noted significantly by direct sales for the digital publishing customers as well as reduction in traffic. We also noted one of our partners changing its platform to favor short video and other "creator" content over news and media type content.
Digital Publishing
Digital publishing reduced by $1.6 million or 39% for the three months ended June 30, 2023 compared to the same period in 2022. Approximately $2.4 million or 17% of the Company’s revenue for the six months ended June 30, 2023 was generated from our digital publishing customers compared to $4.0 million or 43% for the same period in 2022.
Advertising Technology
Advertising technology increased by $6.5 million or 126% for the six months ended June 30, 2023 compared to the same period in 2022. Approximately $11.7 million or 83% of the Company’s revenue for the six months ended June 30,
2023 was generated from our advertising technology customers compared to $5.2 million or 57% for the same period in 2022. The increase is attributable to the Big Village Entities which represents 79% or $9.2 million of advertising technology sales and 65% of overall revenue for the six months ended June 30, 2023.
During the six months ended June 30, 2023, approximately 100% of advertising technology revenue was generated in the U.S. and 0% was generated from our business in Israel, compared to 79% and 21% in the U.S. and Israel, respectively, for the same period in 2022. During the latter part of 2022, the Company started scaling down its operations in Israel and focusing more on its U.S. market in advertising technology to capitalize on more attractive revenue streams.
Cost of Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | |
| | 2023 | | 2022 | | Change | | % Change | | |
Direct salaries and labor | | $ | 2,528 | | | $ | — | | | $ | 2,528 | | | 100 | % | | increased |
Direct project and other cost | | 2,576 | | | — | | | 2,576 | | | 100 | % | | increased |
Non-direct project cost | | 2,390 | | | — | | | 2,390 | | | 100 | % | | increased |
Revenue share | | 1,617 | | | 2,447 | | | (830) | | | (34) | % | | decreased |
Content creation | | 598 | | | 672 | | | (74) | | | (11) | % | | decreased |
Sales commission | | 247 | | | 336 | | | (89) | | | (26) | % | | decreased |
Other | | 176 | | | 1,173 | | | (997) | | | (85) | % | | decreased |
| | $ | 10,132 | | | $ | 4,628 | | | $ | 5,504 | | | 119 | % | | increased |
Direct Salaries and Labor
Direct salaries and labor cost was $2.5 million for the six months ended June 30, 2023 and represents 25% of overall cost of revenue and represent salary and labor cost of employees that works directly on customer's project for the Big Village Entities.
Direct salaries and labor cost also includes approximately $1.2 million for the six months ended June 30, 2023, representing bonus paid to the employees of Big Village as part of the Big Village Acquisition.
Direct Project Cost
Direct project cost was $2.6 million for the six months ended June 30, 2023 and represents 25% of overall cost of revenue and includes payments made to third-parties that are directly attributable to completion of project to allow for revenue recognition for the Big Village Entities.
Non-Direct Cost
Non direct cost was $2.6 million for the six months ended June 30, 2023 and represents 24% of overall cost of revenue, these cost are overall client services that are not specifically related to a particular project.
Revenue Share
Revenue share
cost represents $1.6 million or 16% and $2.4 million or 53% overall cost of revenue for the six months ended June 30, 2023 and 2022, respectively, and represents payments to media providers and website publishers.
The increase was largely attributable to revenue share payments which increased $1.2 million. The Company started expanding its usage of ad exchange on third party’s site which is also associated with the increase noted in revenue as discussed above.
Our gross margin
increased $49,000decreased $566,000 or
2% when12% for the six months ended June 30, 2023, compared to the same period for
2021,2022 which is consistent with the increase noted in revenue and cost of revenue.
General and Administrative Expenses
| | For the Three Months Ended September 30, | | | | | | | |
| | 2022 | | | 2021 | | | Change | | | % Change | | | | |
| | | | | | | | | | | | | | | |
Personnel cost | | $ | 1,663 | | | $ | 1,978 | | | $ | (315 | ) | | | (16 | )% | | | Decrease | |
Depreciation and amortization expense | | | 399 | | | | 408 | | | | (9 | ) | | | (2 | )% | | | Decrease | |
Legal expense | | | 53 | | | | 92 | | | | (39 | ) | | | (42 | )% | | | Decrease | |
Professional fees | | | 827 | | | | 1,248 | | | | (421 | ) | | | (34 | )% | | | Decrease | |
Insurance | | | 146 | | | | 136 | | | | 10 | | | | 7 | % | | | Increase | |
Other | | | 235 | | | | 773 | | | | (538 | ) | | | (70 | )% | | | Decrease | |
Total | | $ | 3,323 | | | $ | 4,635 | | | $ | (1,312 | ) | | | (28 | )% | | | Decrease | |
| | | | | | | | | | | | | | | | | | | | |
Gross margin as a percentage of general and administrative expense | | | 65 | % | | | 45 | % | | | 19 | % | | | 43 | % | | | Increase | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2023 | | 2022 | | Change | | % Change | | |
| | | | | | | | | |
Personnel cost | $ | 3,762 | | | $ | 3,300 | | | $ | 462 | | | 14 | % | | increased |
Legal fees | 660 | | | 312 | | | 348 | | | 112 | % | | increased |
Professional fees | 3,574 | | | 1,416 | | | 2,158 | | | 152 | % | | increased |
Insurance | 431 | | | 296 | | | 135 | | | 46 | % | | increased |
Depreciation and amortization | 1,160 | | | 798 | | | 362 | | | 45 | % | | increased |
Website expense | 687 | | | 692 | | | (5) | | | (1) | % | | decreased |
Other | 528 | | | 479 | | | 49 | | | 10 | % | | increased |
Total | $ | 10,802 | | | $ | 7,293 | | | $ | 3,509 | | | 48 | % | | increased |
| | | | | | | | | |
Gross margin as a percentage of general and administrative expense | 37 | % | | 62 | % | | (25) | % | | (41) | % | | decreased |
General and administrative expenses
decreased $1.3increased $3.5 million, or
28%48% for the
threesix months ended
SeptemberJune 30,
2022,2023, compared to the same period in
2021.2022. The reduction is
primarily due to a combination of factors as discussed below.
Professional Fees
Professional fees decreased $421,000
Personnel Cost
Personnel cost increased approximately $462,000 or
34%, when14% for the six months ended June 30, 2023 compared to the same period
for 2021. The amount for 2021 was higher due to cost incurred for audit and consultant fees which represented 63% of professional fees compared to 90% for 2021. This expense was in
connection with the Company’s restatement of its financial results for the period January 1, 2019, to December 31, 2021.
Personnel Cost
Personnel cost decreased $315,000 or 16% when compared to the same period for 2021.2022. This change is mainly driven by an increase in head count, as a result of the acquisition of Big Village Entities.
During the six months ended June 30, 2023 the Company's headcount increased by 205 employees, with 203 employees attributable to the Big Village Acquisition. Personnel cost for Big Village employees are allocated between cost of revenue and general and administrative expenses depending on their contribution to certain revenue generated projects. Amount included in general and administrative expenses was $194,000 with $2.5 million included under cost of revenue for the six months ended June 30, 2023.
During the six months ended June 30, 2023, the Company's headcount was reduced by 17 employees including 12 employees that were terminated as a reduction in force. The Company incurred severance cost of approximately $236,000 which was paid subsequent to the quarter end.
The Company incurred severance cost of approximately $29,000 associated with head count of 21 employeesreduction during the same period for 2022.
Legal Expense
Legal fees increased $348,000 or
26%. Total employees at September112%, for the six months ended June 30,
2022, was 59 compared to 80 at September 30, 2021.
Legal Expense
Legal expense is a combination of legal fees and litigation settlement amounts. During the period, the Company incurred cost of $350,000 in legal fees offset by a credit of $297,000 in litigation settlement, resulting in a net decrease of $39,000 or 42%2023, compared to the same period in 2021. The credit in litigation settlement is mainly attributable to reversal of previous accrual related to2022. Approximately $359,000 represents cost associated with the Slutzky & Winshman and Synacor litigation as discussed in Note 16, Commitment and Contingencies.
Financing expense (income)
| | For the Three Months Ended September 30, | | | | | | |
| | 2022 | | | 2021 | | | Change | | | % Change | | | |
| | | | | | | | | | | | | | |
Interest expense | | $ | 759 | | | $ | 761 | | | $ | (2 | ) | | | - | % | | Decrease |
Gain of forgiveness of PPP loan | | | - | | | | (465 | ) | | | (465 | ) | | | (100 | )% | | Decrease |
Other expense (income) | | | (18 | ) | | | 55 | | | | 73 | | | | 133 | % | | Decrease |
Total financing expense (income) | | $ | 741 | | | $ | 351 | | | $ | 390 | | | | 111 | % | | Increase |
Financing costProfessional fees increased $390,000,$2.2 million or 111%152%, for the threesix months ended SeptemberJune 30, 2022,2023, compared to the same period in 2022. Approximately $685,000 represents cost associated with the Big Village Acquisition.
Financing Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2023 | | 2022 | | Change | | % Change | | |
| | | | | | | | | |
Interest expense | $ | 3,428 | | | $ | 2,006 | | | $ | 1,422 | | | 71 | % | | increased |
Gain of forgiveness of PPP loan | — | | | (1,137) | | | 1,137 | | | (100) | % | | decreased |
Other expense (income) | (381) | | | (39) | | | (342) | | | 877 | % | | increased |
Total financing expense (income) | $ | 3,047 | | | $ | 830 | | | $ | 2,217 | | | 267 | % | | increased |
Financing expense increased $2.2 million or 267% for
2021.the six months ended June 30, 2023, compared to the same period 2022. This increase was largely attributable to
$465,000 in the Paycheck Protection Program loan forgiveness during the three months ended September 30, 2021, which offset the overall finance cost.
Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021
Net loss from operations for the quarter ended September 30, 2022, was $5.2a $1.4 million as compared to a net loss of $9.1 million for the same period last year. The following is our analysis for the period.
| | For the Nine Months Ended September 30, | | | | | | |
| | 2022 | | | 2021 | | | Change | | | % Change | | | |
| | | | | | | | | | | | | | |
Revenue | | $ | 14,420 | | | $ | 8,638 | | | $ | 5,782 | | | | 67 | % | | Increase |
Cost of revenue | | | 7,726 | | | | 4,568 | | | | 3,158 | | | | 69 | % | | Increase |
Gross margin | | | 6,694 | | | | 4,070 | | | | 2,624 | | | | 64 | % | | Increase |
General and administrative expense | | | 10,616 | | | | 13,643 | | | | (3,027 | ) | | | (22 | )% | | Decrease |
Loss from operations | | | (3,922 | ) | | | (9,573 | ) | | | 5,651 | | | | 59 | % | | Decrease |
Financing expense (income) | | | (1,300 | ) | | | 486 | | | | (1,786 | ) | | | (368 | )% | | Decrease |
Provision (benefit) for income taxes | | | - | | | | - | | | | - | | | | - | | | |
Net loss | | $ | (5,222 | ) | | $ | (9,087 | ) | | $ | 3,865 | | | | 43 | % | | Decrease |
| | | | | | | | | | | | | | | | | | |
Gross margin % | | | 46 | % | | | 47 | % | | | (1 | )% | | | (1 | )% | | Decrease |
Revenue
Revenue for the nine months ended September 30, 2022, increased $5.8 million or 67% compared to the same period for 2021. The increase was largely attributable to Ad Services which increased $8.0 million or 185%. This growth has been driven by our ability to leverage our digital media assets to attract top advertisers, which in turn has allowed us to onboard direct premium publishers, especially in the CTV market. This led to an increase in volume, as well as rates and overall revenue.
Approximately 93% of the Company’s revenue was generated from our digital media customers in the US and 7% was generated from our business in Israel, compared to 87% in the US and 13% in Israel for the same period in 2021.
Cost of Revenue
Costs of revenue increased $3.2 million or 69% for the nine months ended September 30, 2022, compared to the same period for 2021. These costs include revenue share payments to media providers and website publishers. The increase was largely attributable to revenue share payments which increased $2.9 million. The Company started expanding its usage of ad exchange on third party’s site which is also associated with the increase noted in revenue as discussed above.
Gross Margin
Our gross margin increased $2.6 million or 64% when compared to the same period for 2021, which is consistent with the increase noted in revenue and cost of revenue.
General and Administrative Expenses
| | For the Nine Months Ended September 30, | | | | | | |
| | 2022 | | | 2021 | | | Change | | | % Change | | | |
| | | | | | | | | | | | | | |
Personnel cost | | $ | 4,955 | | | $ | 6,750 | | | $ | (1,795 | ) | | | (27 | )% | | Decrease |
Depreciation and amortization expense | | | 1,197 | | | | 1,235 | | | | (38 | ) | | | (3 | )% | | Decrease |
Legal fees | | | 365 | | | | 405 | | | | (40 | ) | | | (10 | )% | | Decrease |
Professional Fees | | | 2,243 | | | | 2,983 | | | | (740 | ) | | | (25 | )% | | Decrease |
Insurance | | | 450 | | | | 440 | | | | 10 | | | | 2 | % | | Increase |
Other | | | 1,406 | | | | 1,830 | | | | (424 | ) | | | (23 | )% | | Decrease |
Total | | $ | 10,616 | | | $ | 13,643 | | | $ | (3,027 | ) | | | (22 | )% | | Decrease |
| | | | | | | | | | | | | | | | | | |
Gross margin as a percentage of general and administrative expense | | | 63 | % | | | 30 | % | | | 33 | % | | | 111 | % | | Increase |
General and administrative expenses decreased $3.0 million or 22% for the nine months ended September 30, 2022, compared to the same period in 2021. The reduction is due to a combination of factors as discussed below.
Professional Fees
Professional fees decreased $740,000 or 25% when compared to the same period for 2021. The amount for 2021 was higher due to cost incurred for audit and consultant fees which represented 68% of professional fees compared to 87% for 2022. This expense was in connection with the Company’s restatement of its financial results for the period January 1, 2019, to December 31, 2021.
Personnel Cost
Personnel cost decreased $1.8 million or 27% when compared to the same period for 2021. This change is mainly driven by a reduction in head count of 21 employees or 26%. Total employees at September 30, 2022 was 59 compared to 80 at September 30, 2021.
Legal Expense
Legal expense is a combination of legal fees and litigation settlement amounts. During the nine months ended September 30, 3022, the Company incurred cost of $662,000 in legal fees offset by a credit of $297,000 in litigation settlement, resulting in a net decrease of $40,000 or 10%. The credit in litigation settlement is mainly attributable to reversal of a previous accrual related to the Slutzky & Winshman and Synacor litigation, as discussed in Note 16, Commitment and Contingencies.
Financing expense (income)
| | For the Nine Months Ended September 30, | | | | | | | |
| | 2022 | | | 2021 | | | Change | | | % Change | | | | |
| | | | | | | | | | | | | | | |
Interest expense | | $ | 2,494 | | | $ | 1,672 | | | $ | 822 | | | | 49 | % | | | Increase | |
Gain of forgiveness of PPP loan | | | (1,137 | ) | | | (2,172 | ) | | | 1,035 | | | | (48 | )% | | | Decrease | |
Other expense (income) | | | (57 | ) | | | 14 | | | | (71 | ) | | | (507 | )% | | | Decrease | |
Total financing expense (income) | | $ | 1,300 | | | $ | (486 | ) | | $ | 1,786 | | | | (368 | %) | | | Increase | |
Financing cost increased $1.8 million or 368% for the nine months ended September 30, 2022, compared to the same period for 2021. This increase was largely attributable to $822,000 increase in interest expense related to the Centre Lane Senior Secured Credit Facility, which showedreflected higher principal and fees due to the Credit FacilityAgreement amendments during the nine monthsyear ended September 30, 2022.December 31, 2022 through the quarter end. This increase was offset by a reduction in the Paycheck Protection Program ("PPP") loan forgiveness amount, which was $1.1 million comparedin 2022.
Use of Non-GAAP Financial Measure
Non-GAAP results are presented only as a supplement to $2.2 millionthe financial statements and for use within management's discussion and analysis based on U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information is provided to enhance the same periodreader's understanding of the Company's financial performance, but non-GAAP measures should not be considered in isolation or as a substitute for 2021, resultingfinancial measures calculated in accordance with GAAP.
All of the items included in the reconciliation from net loss to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, etc.) or (ii) items that management does not consider to be useful in assessing the Company's ongoing operating performance (e.g., M&A costs, income taxes, gain on sale of investments, loss on disposal of assets, etc.). In the case of the non-cash items, management believes that investors can better assess the Company's operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company's ability to generate free cash flow or invest in its business.
We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a
higherconsistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense,
for 2022.taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company's performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.
A reconciliation of net loss before taxes to non-GAAP EBITDA and Adjusted EBITDA is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | |
Net loss before tax plus: | (6,071) | | | (1,458) | | | (9,867) | | | (3,575) | |
Depreciation expense | 39 | | | 8 | | | 46 | | | 12 | |
Amortization of intangibles | 728 | | | 390 | | | 1,114 | | | 786 | |
Amortization of debt discount | 540 | | | 335 | | | 844 | | | 615 | |
Other interest expense | 8 | | | 1 | | | 10 | | | 1 | |
Interest expense - Centre Lane Senior Secured Credit Facility and Convertible Promissory Notes - related party | 1,709 | | | 836 | | | 2,573 | | | 1,396 | |
EBITDA | (3,047) | | | 112 | | | (5,280) | | | (765) | |
Stock compensation expense | 33 | | | 30 | | | 58 | | | 176 | |
Gain on forgiveness of PPP loan | — | | | (296) | | | — | | | (1,137) | |
Non-restructuring severance expense | 114 | | | 29 | | | 236 | | | 29 | |
Non-recurring professional fees | 685 | | | 164 | | | 685 | | | 308 | |
Non-recurring legal fees | 359 | | | — | | | 359 | | | — | |
Adjusted EBITDA | $ | (1,856) | | | $ | 39 | | | $ | (3,942) | | | $ | (1,389) | |
Liquidity and Capital Resources
Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarizedsummarizes total current assets, total current liabilities and net working capital (deficit) at Septemberas of June 30, 2022 as2023, compared to December 31, 2021.2022.
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Total current assets | $ | 19,998 | | | $ | 4,501 | |
Total current liabilities | 29,011 | | | 17,851 | |
Net working capital deficit | $ | (9,013) | | | $ | (13,350) | |
| | September 30, 2022 | | | December 31, 2021 | |
Total current assets | | $ | 5,085 | | | $ | 5,257 | |
Total current liabilities | | | 17,824 | | | | 23,070 | |
Net working capital deficit | | $ | (12,739 | ) | | $ | (17,813 | ) |
As of SeptemberJune 30, 2022,2023, we had a cash balance of $412,000$3.4 million compared with a cash balance of $781,000 at$0.3 million as of December 31, 2021. During 2021, we implemented policies and procedures around cash collections to prevent the aging of accounts receivables which continues in 2022. Cash collection efforts have been successful, and we feel that we have appropriately reserved for uncollectible amounts at September 30, 2022.
During the
ninesix months ended
SeptemberJune 30,
2023 and 2022, the Company received
$3.1$6.6 million
and $2.7 million, respectively, in debt financing from Centre Lane
Partners.Partners Master Credit Fund II, L.P. (“Centre Lane Partners"). The use of the funds was for general working capital
needs. During May 26, 2021, through December 31, 2021,needs and to fund the
Company received $5.1 million in debt financing fromBig Village Acquisition. See Note 10, Centre Lane
Partners. The use of the funds wasSenior Secured Credit Facility for
general working capital needs.
more information.
Going Concern and Liquidity
Historically, the Company has incurred losses, which has resulted in an accumulated deficit of approximately $111.4$124.1 million as of SeptemberJune 30, 2022.2023. Cash flows used in operating activities were $3.1$3.6 million and $4.7$2.8 million for the ninesix months ended SeptemberJune 30, 2022,2023 and 2021,2022, respectively. As of SeptemberJune 30, 2022,2023, the Company had approximately a $12.7$9.0 million in working capital deficit, inclusive of $412,000$3.4 million in cash and cash equivalents to cover overhead expenses.equivalents.
The Company’s ability to continue as a going concern is dependent on its ability to meet its liquidity needs through a combination of factorsfactors. The Company is currently exploring all strategic alternatives, including but not limitedrestructuring or refinancing its debts, seeking additional debt, such as borrowings under the Credit Agreement or equity capital. The ability to cashaccess the capital market is also dependent on the stock volume and cash equivalents, working capital,market price of the ongoing increaseCompany's stock, which cannot be
assured. Other measures include reducing or delaying certain business activities, reducing general and administrative expenses, including a reduction in revenue through increased sales and strategic capital raises.headcount. The ultimate success of these plans is not guaranteed.
In considering our forecast for the next twelve months,
and the
Company's current cash and working capital, as of the filing of this
Quarterly Report on Form
10Q,10-Q, the Company’s available cash will not be sufficient to fund its anticipated level of operations. As a result, such matters create a substantial doubt regarding the Company’s ability to meet
ourits financial needs and continue as a going concern.
The accompanying
condensedunaudited consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.
The following table summarizes our cash flows from operating, investing, and financing activities for the ninesix months period ended SeptemberJune 30, 2022,2023 and 20212022 (in thousands):
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 |
Statement of Cash Flows Data: | | | |
Total cash (used in) provided by: | | | |
Operating activities | (3,594) | | | (2,814) | |
Investing activities | (4) | | | (4) | |
Financing activities | 6,627 | | | 2,454 | |
Effect of foreign exchange rates on cash | 5 | | | — | |
Increase (decrease) in cash and cash equivalents | 3,034 | | | (364) | |
| | Nine Months Ended September 30, |
| | 2022 | | 2021 |
Statement of Cash Flows Data: | | | | | | | | |
Total cash (used in) provided by: | | | | | | | | |
Operating activities | | $ | (3,091 | ) | | $ | (4,708 | ) |
Investing activities | | | - | | | | (3 | ) |
Financing activities | | | 2,722 | | | | 4,253 | |
Decrease in cash and cash equivalents | | $ | (369 | ) | | $ | (458 | ) |
Operating Activities
For the
ninesix months ended
SeptemberJune 30,
2022,2023, cash used in operating activities was
$3.1$3.6 million. The primary factors affecting our operating cash flows during the period were our net loss of
$5.2$9.9 million, adjusted for non-cash charges of
$1.2$1.1 million for
depreciation and amortization of
our property, equipment and intangible assets,
$923,000$844,000 of amortization of debt discount,
$97,000$58,000 of stock-based compensation expense,
$117,000 of stock compensation for Oceanside shares, $87,000 for$2.4 million in interest paid in kind on the
provision of bad debt, $1.1 million from the gain on forgiveness of PPP loanCentre Lane Credit Facility and a
$842,000 net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $661,000 increase in other liabilities and a $1.3 million increase in accrued interest, offset by a $1.0 million decrease in accounts payable, a $166,000 decrease in deferred revenue, and a $387,000 increase in accounts receivable.
For the nine months ended September 30, 2021, cash used in operating activities was $4.7 million. The primary factors affecting our operating cash flows during the period were our net loss of $9.1 million, adjusted for non-cash charges of $1.2 million for depreciation and amortization of our property, equipment and intangible assets, $384,000 of amortization of debt discount, $180,000 of stock-based compensation expense, $607,000 of stock compensation for Oceanside shares, $82,000 for the provision of bad debt, $2.2 million from the gain on forgiveness of PPP loan and a $4.3$1.8 million net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $3.3 million increase in accounts receivables offset by a $2.3 million increase in accounts payable and accrued expenses, an increase in other liabilities of $1.5 million, and a $627,000 increase in deferred revenue.
For the six months ended June 30, 2022, cash used in operating activities was $2.8
million. The primary factors affecting our operating cash flows during the period were our net loss of $3.6 million,
adjusted for non-cash charges of $786,000 for amortization of intangible assets, $615,000 of amortization of debt discount, $59,000 of stock-based compensation expense, $117,000 of stock compensation for Oceanside shares, $222,000 for the provision of bad debt, $1.1 million from the gain on forgiveness of PPP loan and a $88,000 net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $950,000 increase in accounts payable and accrued expenses, a $146,000 decrease in accounts receivable, a
$636,000 decrease$1.4 million increase in
interest payable on Centre Lane Senior Secured Credit Facility, and a $539,000 increase in deferred revenue, offset by a $324,000 increase in prepaid
expenses and other current
assets, a $463,000 increase in deferred revenues, and a $945,000 increase in accrued interest, offset by a $171,000 decrease in accounts payable and a $340,000 decrease in other liabilities.
assets.
Investing Activities
Cash used in investing activities of $0$4,000 and $3,000 for$4,000 for the ninesix months ended SeptemberJune 30, 2023,2022, and
2021,2022, respectively, was due entirely to the purchase of property and equipment.
Financing Activities
During the ninesix months ended SeptemberJune 30, 2023, and 2022 the Company raised $3.1$6.6 million and $2.7 million, respectively, of debt financing from Centre Lane Senior Secured Credit Facility, which was used primarily to fund our working capital.
Duringcapital and the nine months ended September 30, 2021, the Company raised $3.1 million of debt financing which was used primarily to fund our working capital.Big Village Acquisition.
Contractual Obligations and Commitments
The Company leases its corporate offices under a long-term non-cancellable operating lease agreement that expired on October 31, 2021. On June 14, 2022, the Company signed a second lease addendum (“Second Addendum”) to the lease with a lease term for five years beginning upon completion of improvements to the office space by the Landlord, which was completed on September 12, 2022. The annual base rent is $96,000, with a provision for a 3% increase on each anniversary of the rent commencement
date.date, the lease expires in 2027. The Company has the option to renew the lease for one additional five-year term. See Note
16,18, Commitment and Contingencies for details regarding the Company’s lease.
There were no other material changes in our contractual obligations and commitments from those disclosed above and in the Annual Report on Form 10-K for the year ended December 31,
2021, filed with the SEC on June 13, 2022.
Off-Balance Sheet Arrangements
As of
SeptemberJune 30,
2022,2023, there were no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
Critical Accounting Policies and Estimates
Our
condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these
condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the assumptions and estimates associated with revenue recognition, accounts receivable allowances, income taxes, equity-based compensation, intangibles and goodwill valuation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the Company’s audited condensed consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with2022.
Business Combination
We account for acquisitions under FASB ASC Topic 805, Business Combinations, ("ASC 805"). In general, the SECacquisition method of accounting requires companies to record assets acquired and liabilities assumed at their respective fair market values at the date of acquisition. We primarily estimate fair value of identified intangible assets using discounted cash flow analyses based on June 13, 2022,market participant based inputs. Any amount of the purchase price paid that is in excess of the estimated fair values of net assets acquired is recorded as goodwill in our condensed consolidated balance sheets. Transaction costs, as well as costs to reorganize acquired companies, are expensed as incurred in our condensed consolidated statement of operations. The Company has allocated the purchase price based on preliminary estimates of fair value for the assets acquired and liabilities assumed using information currently available. Adjustments, if any, to the preliminary allocation are not expected to be material.
Recent
accounting pronouncements
Accounting Pronouncements
Recent accounting pronouncements are detailed in the “Summary of Significant Accounting Policies” in Note 2 to our unaudited condensed consolidated financial statements.
Smaller Reporting Company Status
We are a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our
voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We have operations within
As a smaller reporting company as defined in Rule 12b-2 of the
United States and limited operations with customers located in Israel and vendors in Thailand, andExchange Act, we are
exposednot required to
market risks in the ordinary course of our business, including the effects of interest rate changes, inflation and exchange rate charges. Information relatinginclude information otherwise required by this Item 3 to
quantitative and qualitative disclosures about these market risks is set forth below.
Interest Rate Risk
We consider all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Other exposure to interest rate risk relates to our Senior Secured Credit Facility which did not have an unusual impact on our business for the nine months ended September 30, 2022.
Inflation Rate Risk
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Foreign Currency Exchange Rate Risk
The Company has operations in Israel and Thailand and reports financial results in US dollars. As a result, there is a foreign currency exchange rate translation risk; however, these risks are limited to operating expenses and not significant to our overall operations. The exchange rate risk to our financial statements is immaterial.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls
The Company’s management, with the participation of the Company’s Chief Executive Officer and
procedures” as such term is defined in Rule 13a-15(e) under Securities Exchange ActChief Financial Officer, have evaluated the effectiveness of
1934 (the “Exchange Act”). In designing and evaluating ourthe Company’s disclosure controls and procedures
our management recognized that disclosure controls(as defined in Rules 13a-15(e) and
procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that15d-15(e) under the
objectivesExchange Act) as of
disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
June 30, 2023. Based on ourthat evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the endperiod ended June 30, 2023, due to the existence of the period covered by this report, management has concluded that ourmaterial weaknesses in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective sucheffective.
Our senior management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board, senior management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the information relatingdegree of compliance with the policies or procedures may deteriorate. We continue to our Company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses inreview our internal control over financial reporting as describedand may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. 2022, because of the effect of the materialweaknesses described below, management concluded that based upon this assessment that the Company’s internal control over financial reporting was not effective as of December 31, 2022.
As set forth below, management will take steps to remediate the material weaknesses identified below. Notwithstanding the material weaknesses described below, we have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition and results of operations as of and for the quarter ended June 30, 2023.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that results in more thanthere is a remote likelihoodreasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected.detected on a timely basis. As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, management identified the material weakness described below:
In conducting an analysis of the Centre Lane Senior Secured Credit Facility, errors were identified in connection with the accounting related to Amendments No. 8 – 15 of the Centre Lane Senior Secured Credit Facility, which resulted in the understatement of interest payable and interest expense for each of the interim quarterly periods ended June 30, 2022, and September 30, 2022 and the year-to-date 2022 period.
During the six months ended June 30, 2023, the Company commenced its remediation plan to enhance controls relating to the accounting of its debt arrangements that includes the following:
•Internal interest calculations are prepared and compared to the model provided by the external evaluators, along with outstanding principal and carrying value;
•Quarterly statements are being received from Centre Lane Partners where the balances are compared to internal schedules;
•Monthly journal entries for interest expense and supporting documentation are being reviewed by an individual independent of its preparation as part of the month end close; and
•Monthly reconciliations are being performed to support the month end close, which are being reviewed and evidenced by both preparer’s and reviewer’s signature to demonstrate independence and accountability.
Also, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, management had previously identified the following material weaknesses, which caused management to conclude that as of December 31, 2021 our internal controls over financial reporting were not effective at the reasonable assurance level:
•Insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting functions due to limited personnel;
•The Company’s systems that impact financial information and disclosures have ineffective information technology controls;
•Inadequate controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements are reflected and properly recorded;
•Management evaluation of (i) the disclosure controls and procedures and (ii) internal control over financial reporting was not sufficiently comprehensive due to limited personnel;
•Ineffective controls and procedures in area of review and preparation of Form 10-K and other filings on a timely basis; and
•Inadequate controls surrounding information provided to third party valuation reports in connection with acquisitions to ensure that the financial information is accurate and free from misstatements.
Commencing in the year ended December 31, 2022, the Company implemented a remediation plan to remediate the material weaknesses identified during the year ended December 31, 2021 as follows:
•We have implemented changeshired a new Chief Financial Officer with extensive knowledge of implementing procedures to remediate material weaknesses in companies.
•We have expanded our finance department through the hiring of a certified public accountant with previous experience as an auditor and knowledge of SEC filings and technical issues. We believe this will strengthen our finance department as we work towards segregation of duties, strong internal controls and provide guidance to enhance our current staff. Management will further expand the accounting and finance function by hiring additional staff to ensure segregation of duties is enforced.
•We no longer rely on a third-party consultant to prepare our SEC filings, and this is now being done internally.
•We have engaged a third-party company to assist the Company with SOX compliance.
•We are in the process of completing our information technology general controls ("ITGC") risk assessment and moving forward to document and implement controls over the revenue process.
We will continue to monitor and evaluate the effectiveness of our internal controlcontrols over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until we increase our headcount of accounting and administrative staff to improve our internal controls over financial reporting.
Changes in Internal Control over Financial Reporting. We continue to strategically planReporting
Other than the matters set forth above, there were no changes in our internal control over financial reporting through this fiscalidentified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter Q3 2022.ended June 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
For a description of developments to legal proceedings during the ninesix months ended SeptemberJune 30, 2022,2023, see “Litigation” under Note 16,18, “Commitments and Contingencies” to our consolidated financial statements.
Item 1A. Risk
factors.
We incorporate by referenceFactors.
There have been no material changes to the risk factorsRisk Factors previously disclosed in Part I, Item 1A of our 2021Annual Report on Form 10-K.10-K for the year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
No. | | Exhibit Description | | Form | | Date Filed | | Number | | Herewith |
| | | | | | | | | | |
2.1 | | | | 8-K | | 4/13/23 | | 2.1 | | |
| | | | | | | | | | |
10.1 | | | | 8-K | | 4/26/23 | | 10.1 | | |
| | | | | | | | | | |
10.2 | | | | 8-K | | 4/26/23 | | 10.2 | | |
| | | | | | | | | | |
10.3 | | | | | | | | | | Filed |
| | | | | | | | | | |
10.5 | | | | 8-K | | 8/3/23 | | 10.1 | | |
| | | | | | | | | | |
10.6 | | | | 8-K | | | | 10.2 | | |
| | | | | | | | | | |
31.1 | | | | | | | | | | Filed |
| | | | | | | | | | |
31.2 | | | | | | | | | | Filed |
| | | | | | | | | | |
32.1* | | | | | | | | | | Filed |
| | | | | | | | | | |
32.2* | | | | | | | | | | Filed |
| | | | | | | | | | |
101.INS | | Inline XBRL Instance Document | | | | | | | | Filed |
| | | | | | | | | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | Filed |
| | | | | | | | | | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | Filed |
| | | | | | | | | | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | Filed |
| | | | | | | | | | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | Filed |
| | | | | | | | | | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | Filed |
| | | | | | | | | | |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) | | | | | | | | |
* This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| BRIGHT MOUNTAIN MEDIA, INC. |
| | |
NovemberAugust 14, 20222023 | By: | /s/ Matthew Drinkwater |
| | Matthew Drinkwater, |
| | Chief Executive Officer and Director (Principal Executive Officer |
| Officer) |
| | |
| By: | /s/ Miriam Martinez |
| | Miriam Martinez, |
| | Chief Financial Officer (Principal Financial and Accounting OfficerOfficer) |