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May 14, 2019
333-231033
Telephone:
Telephone:
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box, and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
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Large accelerated filer |
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Non-accelerated filer |
| Smaller reporting company |
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| Emerging growth company | ☑ |
Title of Each Class of Securities to be Registered |
| Proposed Maximum Aggregate Offering Price(1) |
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| Amount of Registration Fee |
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Common stock, $0.01 par value per share(2)(3) |
| $ | 8,050,000 |
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| $ | 810.64 |
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Warrants to purchase common stock(3) |
| $ | 80,500 |
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| 8.11 |
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Common stock underlying Warrants(2)(3) |
| $ | 8,050,000 |
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| 810.64 |
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Representative’s Warrants(4) |
| $ | — |
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| — |
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Common stock underlying Representative’s Warrants(2)(5) |
| $ | 503,125 |
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| 50.66 |
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Total |
| $ | 16,683,625 |
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| $ | 1,680.05 |
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| Title of Each Class of Securities to be Registered | Amount To Be Registered | Proposed Maximum Offering Price Per Unit (1) | Proposed Maximum Aggregate Offering Price | Amount of Registration fee (1)(2) |
| Common stock, par value $0.01 per share | 28,425,000 | $2.00 | $56,850,000 | $6,890.22 |
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stock offered hereby, would result in gross proceeds to us of approximately $9.4 million, but under certain circumstances such warrants may be exercised via cashless exercise. In addition, we will pay all fees and expenses incident to the registration of the resale of shares of our common stock under this prospectus. The selling security holders from time to time may offer and sell the shares of our common stock held by them directly or through one or more underwriters, broker-dealers or agents on terms to be determined at the time of sale, as described in more detail in this prospectus under “Plan of Distribution” beginning on page 21. No shares of our common stock may be sold without delivery of this prospectus describing the method and terms of the offering of such shares.
requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”
common stock.
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We have granted a 45-day option to the underwriters to purchase up to [_________] additional shares of common stock and/or [_____] additional warrants solely to cover over-allotments, if any.
The underwriters expect to deliver our securities to purchasers in this offering on or about [__________], 2016.
Joseph Gunnar & Co.
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TABLE OF CONTENTS
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Neither______, 2019
Neither we nora security registered under the underwriters have done anything that would permit this offering or possession or distributionregistration statement of which this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.
a part.
Unless the context suggests otherwise, referencesheading "Where You Can Find Additional Information."
2017. The information which appears on our website at www.brightmountainmedia.com is not part of this prospectus.
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Common stock offered by the selling security holders: |
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| Common stock to be outstanding after the offering: | 78,711,364 shares, assuming the issuance of 14,462,500 shares upon the exercise on a cash basis of warrants | shares upon the exercise of options or the exercises of any outstanding options or other warrants. | |
| OTCQB Symbol: |
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| BMTM |
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Risk factors: | Investing in our securities involves | ||
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that we have deemed to be immaterial. All forward-looking statements made by us or on our behalf are qualified by the risks described below. operating expenses and other obligations as they become due.SELECTED FINANCIAL DATAThe following summary of our selected unaudited condensed consolidated financial information for 2018 and 2017 and has been derived from, and should be read in conjunction with, our audited financial statements included elsewhere in this prospectus.Selected consolidated income statement data Year Ended December 31, 2018 2017 Revenue $1,735,649 $1,104,017 Gross profit $357,272 $432,731 Selling, general and administrative expenses $3,494,858 $2,596,827 Total other income (expense) $(993,728) $(405,609)Net loss from continuing operations $(4,131,314) $(2,569,705)Loss from discontinued operations $(1,092,750) $(424,391)Net loss $(5,224,064) $(2,994,096)Total preferred stock dividends $111,940 $17,645 Net loss attributable to common shareholders $(5,336,004) $(3,011,741)Selected consolidated balance sheet data December 31, 2018 2017 Working capital (deficit) $881,949 $(395,315)Total current assets $2,473,630 $1,726,337 Total assets $5,025,848 $3,718,717 Total current liabilities $1,591,681 $2,121,652 Total liabilities $1,603,369 $3,375,495 Total shareholders' equity $3,422,479 $343,222 An investment in our offered securitiescommon stock involves a highsignificant degree of risk. You should not invest in our common stock unless you can afford to lose your entire investment. You should consider carefully consider the following risksrisk factors and all of the other information contained in this prospectus including our consolidated financial statements and related notes, before investingdeciding to invest in our securities. While we believe that thecommon stock. The risks and uncertainties described below are the material risks currently facing us, additional riskshighlight potential events, trends or other circumstances that we do not yet know of or that we currently think are immaterial may also arise and materiallycould adversely affect our business. If any of the following risks materialize, our business, financial condition, and results of operations, could be materiallycash flows, liquidity or access to sources of financing, and adversely affected. In that case,consequently, the trading pricemarket value of our common stockstock. These risks could cause our future results to differ materially from historical results and warrants could decline, and youfrom guidance we may lose someprovide regarding our expectations of future financial performance. The risks described below are not an exhaustive list of all the risks we face. There may be others that we have not identified or all of your investment.WE HAVE A HISTORY OF LOSSES.We incurred a net loss of $1,180,864 for the first six months of 2016 and net losses of $1,673,094$5,224,064 and $1,510,636,$2,994,096, respectively, for 20152018 and 2014.2017, which includes losses of $1,092,750 and $424,391, respectively, for discontinued operations. AtJune 30, 2016 December 31, 2018 we had an accumulated deficit of $7,338,619.$17,042,966. While our revenues increased 30%57.2% for the first six months of 20162018 from the comparable period2017, our gross profit margin declined from 39.2% in 2015 and increased 45%2017 to 20.6% in 2015 from 2014,2018. In addition, in 2018 our selling, general and administrative expenses, or“SG&A”or “SG&A”, have continued to increase. Of the 61% increaseincreased 34.6% in our SG&A in the three months ended June 30, 20162018 from the comparable period in 2015, 50% of the increase represented an increase in non-cash expenses. Of the 19% increase in SG&A in 2015 as compared to 2014, 20% of the increase represented the increase in our non-cash expenses.2017. We anticipate that our operating expensesSG&A will continue to increase in 2019 and beyond, and we may continue to incur losses in future periods until such time, if ever, as we are successful in significantly increasing our revenues and cash flow.gross profit to a level to fund our operating expenses. There are no assurances that we will be able to significantly increase our revenues and cash flowgross profit to a level which supports profitable operations and provides sufficient funds to pay our obligations.Our auditorsWE ARE DEPENDENT UPON SALES OF EQUITY SECURITIES AND LOANS FROM OUR CHIEF EXECUTIVE OFFICER TO PROVIDE OPERATING CAPITAL.We do not generate sufficient gross profit to pay our operating expenses and we reported losses from continuing operations of $4,131,314 and $2,569,705 in 2018 and 2017, respectively. Historically we have been dependent upon the purchase of equity securities or convertible notes by Mr. Kip Speyer, our Chief Executive Officer, to provide operating capital. During 2018 and 2017 he invested $530,000 and $1,760,000, respectively, in our company. During 2018 and 2017 we paid him $281,882 and $171,254, respectively, in dividend and interest payments on these investments. In addition, between January 2018 and January 2019 we raised substantial doubts$6,000,000 through the sale of our equity securities in private placements. After payment of the cash commissions to Spartan Capital Securities LLC ("Spartan Capital"), a broker dealer and member of FINRA who served as placement agent in the offerings, we used $1,400,000 of the net proceeds to pay Spartan Capital a non-accountable expense allowance, various consulting and advisory fees and are using the balance for working capital, including to fund our abilityoperating loss. While we expect to seek to raise additional working capital through the sale of our securities in private or public transactions, we are not a party to any binding agreements and there are no assurances we will be able to raise any additional third party capital. Mr. Speyer is also under no obligation to continue to lend us money or purchase equity securities from us. If we are not able to raise sufficient additional working capital as needed, absent a going concernsignificant increase in our revenues we may be unable to grow our company.OUR ECONOMIC PERFORMANCE HAS RAISED SUBSTANTIAL DOUBTS AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.Our consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced substantial and recurring losses from operations, which losses have caused an accumulated deficit of $7,338,619$17,042,966 at June 30, 2016. We have been and expect to continue funding our business until, if ever, we generate sufficient cash flow to internally fund our business, with and through sales of our securities.December 31, 2018. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We anticipate that our operating expenses will continue to increase and we will continue to incur substantial losses in future periods until we are successful in significantly increasing our revenues and cash flow. There are no assurances that we will be able to increase our revenues and cash flow to a level, which supports profitable operations and provides sufficient funds to pay our obligations. If we are unable to meet those obligations, we could be forced to cease operations in which event investors would lose their entire investment in our company.There are no assurances our transition to an advertising and subscription revenue based model will be successful.During the fourth quarter of 2015, we began to transition our company to a digital media company that will generate most of its revenue from the sales of advertising on its websites thereby reducing our dependence on product sales revenues. During 2016 we also plan to expand our current subscription offering to include subscriptions to certain of our additional websites. While we believe that this natural evolution of our model will permit us to concentrate our efforts on growing our highest profit opportunities through the leverage of our website portfolios and growing Internet audience, there are no assurances we will be successful in these efforts. In addition to increasing our dependence on our relationship with Google until such time as we are able to launch the Bright Mountain AdNetwork, we will become subject to significant competition from a variety of companies on a global scale with few barriers to entry in our market and many of these competitors have better name recognition and are better capitalized than our company. As a result, we may not be able to keep pace with our competitors’ marketing campaigns, pricing policies, and technological advances. We will also be required to adapt to rapidly changing technologies and industry standards and continually improve the speed, performance, features, ease of use and reliability of our websites. This includes making our products and services compatible and maintaining compatibility with multiple operating systems, desktop and mobile devices, and evolving network infrastructure. If we are unable to effectively adapt to competitive factors and compete effectively in the marketplace, it would have a material adverse effect on our business, results of operations, financial condition and the price of our common stock.
We do not know how long it will take us to establish the Bright Mountain Media AdNetwork or what the ultimate cost will be.
A key component of our strategy is the establishment of the Bright Mountain Media AdNetwork, a programmatic advertising network which will both sell digital advertisements on our company owned websites as well as providing third party websites with modest traffic a means by which they may be able to sell their digital advertising inventory at higher CPMs based upon the highly targeted nature of our demographics. In an effort to establish the Bright Mountain Media AdNetwork as soon as practicable we prefer to acquire existing technology as opposed to developing it from scratch. While we have engaged in early stage discussions with several companies, we are not a party to any agreement or understanding regarding any future acquisitions. We have allocated a portion of the proceeds from this offering to fund the establishment of the network. However, as we are unable to predict when the Bright Mountain Media AdNetwork will be established or what the ultimate costs to us will be, we may be required to use substantially more funds than allocated which may reduce the amounts we spend in other identified areas.
If we fail to detect advertising fraud or other actions that impact our advertising campaign performance, we could harm our reputation with advertisers or agencies, which would cause our revenue and business to suffer.
We
Product sales represented 77%greatly hindered which will reduce the value of our total revenues for the first six months of 2016services and 83% and 90%, respectively, of our total revenues in the 2015 and 2014. We sell our products through various distribution portals, which include Amazon and eBay, and through direct sales. During the first six months of 2016, Amazon accounted for 91%, eBay accounted for 5% and direct sales accounted for 4% of our total revenue from product sales. During 2015, Amazon accounted for 88%, eBay accounted for 6%, and direct sales accounted for 6% of our total revenue from product sales. During 2014, Amazon accounted for 86%, eBay accounted for 13%, and direct sales accounted for 1% of our total revenue from product sales. A substantial amount of payments for our products sold are processed through PayPal and Stripe and Amazon handles certain fulfillment of product orders for us. Our agreements with any of these companies may be terminated at will. Due to high concentration and reliance on these portals, and the dependence on PayPal and Stripe, the loss of a working relationship with any of these entities could adversely affectimpact our results of operations in future periods. Given the dominance
Our product sales revenues are presently dependent upon our relationships with two vendors. There are no assurances weassurance that the results of any particular quarter will be able to continue to rely on those relationships inindicative of results for the full year or for future periods.
We purchase a substantial amount of the products we sell through our websites from two vendors: Citizens Watch Company of America, Inc., and Bulova Corporation. Citizens Watch Company of America, Inc. accounted for 39% and Bulova Corporation accounted for 17% of total products purchased in the first six months of 2016. These two vendors accounted for 34% and 26%, respectively, of total products purchased in 2015 and 51% and 28%, respectively, of total products purchased in 2014. While we seek to continue to expand our product lines by adding companies to our list of vendors, and continue to expand our product lines and vendor relationships, due to our high reliance on these two vendors, the loss of one of these vendors could adversely affect our operations. We do not have any long term contracts with either vendor and these relationships can be terminated at will. There are no assurances our efforts to diversify our vendor base will be successful.
We are presently dependent on our relationship with Google AdSense to generate revenues from advertising sales.
We offer display advertising on our websites either through direct advertisements or through numerous third party providers, including Google AdSense. Approximately 23% of our total revenue in the first six months of 2016 from services came from Google AdSense. Approximately 36% of our 2015 total revenue from services came from Google AdSense as compared to 49% in 2014. From time-to-time Google may implement policy changes that could impact our ability to display ads. While we expect that once developed and launched, all of our advertising revenue will come from the Bright Mountain Media AdNetwork. Until such time, however, if our revenues from Google AdSense continue to increase in future periods, such potential policy changes could cause volatility in our advertising revenue and earnings and the loss of the access to Google AdSense could have an adverse effect on our business.
The acquisition of new businesses is costly and these acquisitions may not enhance our financial condition.
Online security breaches could harm our business.
We must promote the Bright Mountain brand to attract and retain users, advertisers and strategic partners.
We may expend significant resources to protect our content or to defend claims of infringement by third parties, and if we are not successful we may lose rights to use significant material or be required to pay significant fees.
Failure to protect our intellectual property rights or claims by others that we infringe their intellectual property rights could substantially harm our business.
Developing and implementing new and updated applications, features and services for our websites may be more difficult than expected, may take longer and cost more than expected and may not result in sufficient increases in revenue to justify the costs.
Our technology development efforts may not be successful in improving the functionality of our network, which could result in reduced traffic on our websites.
We are dependent upon consultants to provide content for our warisboring.com website.
In connection with our acquisition of the warisboring.com website and associated content in January 2016, we entered into a Website Management Services Agreement with the seller under which he was engaged to manage the website for us on a full-time basis. Under the terms of this agreement he is also responsible for providing continuing access to the same content group which provided content to the website before we acquired it. We are dependent upon this group of contributors to provide proprietary content for this website. We do not have any agreements with these individual content providers and there are no restrictions on these independent contractors which prohibit them from providing content to competing websites. If we should lose the services of one or more of these content providers for this website our ability to provide proprietary content on this website will be in jeopardy until such time as we are able to recruit and engage suitable replacement content providers.
Our ability to deliver our content depends upon the quality, availability, policies and prices of certain third-party service providers.
We may be held liable for content, blogs or third party links on our website or content distributed to third parties/
Our business strategy to expand our operations will subject us to even greater competitive disadvantages than we currently face and we will be competing with companies with much greater resources than we have.
The market for digital online advertising solutions is competitive and dynamic. Most of our competitors will have substantial competitive advantages, such as greater name recognition, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. There are no assurances we will ever be able to effectively compete in this market.
Our management may be unable to effectively integrate our acquisitions and to manage our growth and we may be unable to fully realize any anticipated benefits of these acquisitions.
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DIGITAL. THE LOSS OF EITHER OF THEIR SERVICES COULD HARM OUR ABILITY TO OPERATE OUR BUSINESS IN FUTURE PERIODS. reporting obligations under Federal securities laws.We depend on the services of our Chief Executive Officer and our Vice PresidentWE DEPEND ON THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER AND OUR VICE PRESIDENT - Digital and the loss of either of their services could harm our ability to operate our business in future periodsOur success largely depends on the efforts, reputation and abilities of W. Kip Speyer, our Chief Executive Officer, and Todd F. Speyer, our Vice President - Digital. While we are a party to an employment agreement with Mr. Kip Speyer and do not expect to lose his services in the foreseeable future, the loss of the services of Mr. Kip Speyer could materially harm our business and operations in future periods. We are not a party to an employment agreement with Mr. Todd Speyer, his son. While we do not expect to lose the services of Mr. Todd Speyer in the foreseeable future, if he should choose to leave our company our business and operations could be harmed until such time as we were able to engage a suitable replacement for him.We must hire, integrate and/or retain qualified personnel to support our expected business expansion.WE MUST HIRE, INTEGRATE AND/OR RETAIN QUALIFIED PERSONNEL TO SUPPORT OUR EXPECTED BUSINESS EXPANSION.Our success also depends on our ability to attract, train and retain qualified personnel. In addition, because our users must perceive the content of our websites as having been created by credible and notable sources, our success also depends on the name recognition and reputation of our editorial staff. In addition, we need to hire an experienced Chief Financial Officer and expand our accounting department to add additional accounting personnel who are experienced in U.S. generally accepted accounting principles (GAAP) and periodic reporting obligations of public companies such as ours. Competition for qualified personnel is intense and we may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. If we fail to attract and retain qualified personnel, our business will suffer.We deliver advertisementssuffer and we may be unable to users from third-party ad networks which exposestimely meet our users to content and functionality over which we do not have ultimate control.WE DELIVER ADVERTISEMENTS TO USERS FROM THIRD-PARTY AD NETWORKS WHICH EXPOSES OUR USERS TO CONTENT AND FUNCTIONALITY OVER WHICH WE DO NOT HAVE ULTIMATE CONTROL.We display pay-per-click, banner, cost per acquisition or "CPM"“CPM”, direct, and other forms of advertisements to users that come from third-party ad networks. We do not control the content and functionality of such third-party advertisements and, while we provide guidelines as to what types of advertisements are acceptable, there can be no assurance that such advertisements will not contain content or functionality that is harmful to users. Our inability to monitor and control what types of advertisements get displayed to users could have a material adverse effect on our business, financial condition and results of operations.Our services may be interrupted if we experience problems with our network infrastructureOUR SERVICES MAY BE INTERRUPTED IF WE EXPERIENCE PROBLEMS WITH OUR NETWORK INFRASTRUCTURE.The performance of our network infrastructure is critical to our business and reputation. Because our services are delivered solely through the Internet, our network infrastructure could be disrupted by a number of factors, including, but not limited to:·unexpected increases in usage of our services;·computer viruses and other security issues;·interruption or other loss of connectivity provided by third-party internet service providers;·natural disasters or other catastrophic events; and·server failures or other hardware problems.●unexpected increases in usage of our services;●computer viruses and other security issues;●interruption or other loss of connectivity provided by third-party Internet service providers;●natural disasters or other catastrophic events; and●server failures or other hardware problems.If our services were to be interrupted, it could cause loss of users, customers and business partners, which could have a material adverse.Our systems may fail due to natural disasters, telecommunications failures and other events, any of which would limit user trafficOUR SYSTEMS MAY FAIL DUE TO NATURAL DISASTERS, TELECOMMUNICATIONS FAILURES AND OTHER EVENTS, ANY OF WHICH WOULD LIMIT USER TRAFFIC.Our websites are hosted by third party providers. Any disruption of in the computing platform at these third party providers could result in a service outage. Fire, floods, earthquakes, power loss, telecommunications failures, break-ins, supplier failure to meet commitments, and similar events could damage these systems and cause interruptions in the hosting of our websites. Computer viruses, electronic break-ins or other similar disruptive problems could cause users to stop visiting our website and could cause advertisers to terminate any agreements with us. In addition, we could lose advertising revenues during these interruptions and user satisfaction could be negatively impacted if the service is slow or unavailable. If any of these circumstances occurred, our business could be harmed. Our insurance policies may not adequately compensate us for losses that may occur due to any failures of or interruptions in our systems. We do not presently have a formal disaster recovery plan.
Privacy concerns could impair our business.
We are subject to a number of regulatory risks
Risks Related to this Offering and Ownership of our Securities
Prior to this offering our common stock was quoted on the OTCQB Tier of the OTC Markets and it was thinly traded. In addition, prior to this offering there has been no market for the warrants. An active trading marketare presently involved in our common stock or the warrants may never develop or be sustained following this offering. The public offering price for our common stock and warrants was determined through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of our common stock or the warrants after this offering. The market value of our common stock or the warrants may decrease from the public offering price. As a result of these and other factors, you may be unable to resell your shares of our common stock or warrants at or above the public offering price. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares or warrants. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into collaborations or acquire companies or products by using our shares of common stock as consideration. The market price of our offered securities may be volatile, and you could lose all or part of your investment.
The trading price of the shares of our common stock and warrants following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:
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In addition, the stock market in general, and digital media companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of these risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of the shares of our common stock and warrants.
We may be subject to securities litigation which is expensivedescribed later in this prospectus. This litigation is both costly and could diverttime consuming and has resulted in the diversion of management attention.
The market price of the sharestime and resources. While we believe that all or a portion of our common stock and warrants may be volatile, andcosts are covered by insurance, there are no assurances that they are covered nor are there assurances that we will prevail in the past companies that have experienced volatility inlitigation.
If you purchase shares of common stock and warrants in this offering, you will incur immediate and substantial dilution in the book value of the sharesownership of our common stock.
The proposed public offering price of the shares of our common stock is substantially higher than the net tangible book value per share of our common stock. Investors purchasing shares of common stock and warrants in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing shares of common stock and warrants in this offering will incur immediate dilution of $[_______] per share, based on an assumed public offering price of $[_____] per share. Further, investors purchasing shares of common stock and warrants in this offering will contribute approximately [____]% of the total amount invested by shareholders since our inception, but will own, as a result of such investment, only approximately [___]% of the shares of common stock outstanding immediately following this offering. As a result of the dilution to investors purchasing shares of common stock and warrants in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. Further, because we may need to raise additional capital to fund our anticipated level of operations, we may in the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of equity or equity-linked securities, together with the exercise of outstanding options and any additional shares issued in connection with acquisitions, if any, may result in further dilution to investors.
We are an “emerging growth company” and we are able to take advantage of reduced disclosure and governance requirements applicable to emerging growth companies, which could result in our shares of common stock or warrants being less attractive to investors.
In 2013, we elected to become an “emerging growth company,” as defined in the JOBS Act, and we as such we are able to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our shares of common stock or warrants less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our shares of common stock or warrants and the market price of such securities may be more volatile.
Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.
Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
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in our internal control over financial reporting also resulted in a material weakness in our disclosure controls. While we have implementedadded a plansecond certified public accountant to remediate these weaknesses, we cannot assure you that we will be able to remediate these weaknesses, which could impair our ability to accurately and timely reportfinance department, our financial position, results of operations or cash flows. Our failure to remediate the material weaknesses identified above or the identification of additional material weaknesses in the future could adversely affect our ability to report financial information, including our filing of quarterly or annual reports with the SEC on a timely and accurate basis. Moreover, our failure to remediate the material weaknesses identified above or the identification of additional material weaknesses could prohibit us from producing timely and accurate financial statements, which may adversely affect our the market price of shares of our common stock.
Because we do not anticipate paying anywhich pays cash dividends onwhich are owned by Mr. W. Kip Speyer, our capital stock in the foreseeable future, capital appreciation, if any, will be your sole sourceCEO, and Mr. Richard Rogers, a member of potential gain.
We have never declared orour board of directors. During 2018 we paid cash dividends on our capital stock. We currently intendof $111,940 to retain allthese affiliates. These dividend amounts are in addition to the $189,355 of our future earnings, if any,interest payments we made to finance the growth and development of our business. In addition,Mr. Speyer under the terms of any future debt agreements may preclude us from paying dividends. As a result,convertible promissory notes which were exchanged for one of the series of outstanding preferred stock in November 2018. The payment of these cash dividends and interest payments reduces the amount of capital appreciation, if any,we have available to devote to the growth of our company.
Sales of a substantial number of shares of our outstanding common stock, in the public market, or the perception such sales may occur, could cause the market pricewhich will have a dilutive effect on our existing shareholders.
Sales ofexercisable at $0.65 per share which are held by Spartan Capital are exercisable on a substantialcashless basis. This means that the holder, rather than paying the exercise price in cash, may surrender a number of warrants equal to the exercise price of the warrants being exercised. It is possible that the warrant holders will use the cashless exercise feature. In that event, it will deprive us of approximately $975,000 of additional capital which might otherwise be obtained if the warrants were exercised on a cash basis.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that couldfurther have a material adversefurther dilutive effect on our business and cause the market price of our shares of common stock or warrants to decline. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. If we do not invest the net proceeds from this offering in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause the price of our shares of common stock or warrants to decline.
shareholders.
Some provisions of our charter documents and Florida law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our shareholders and may prevent attempts by our shareholders to replace or remove our current management.
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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the trading price of our common stock or warrants and trading volume could decline.
The trading market for our shares of our common stock and warrants will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our shares of common stock or warrants. If no securities or industry analysts commence coverage of our company, the trading price for our shares of our common stock and warrants would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our securities or publish inaccurate or unfavorable research about our business, the price of our shares of common stock or warrants would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the trading price of our shares of common stock or warrants and trading volume to decline.
The warrants are a risky investment. You may be unable to exercise your warrants for a profit.
The warrants will have an exercise period of five years from the closing of this offering. If the price of our shares of common stock does not increase to an amount sufficiently above the exercise price of the warrants during the exercise period of the warrants, you may be unable to recover any of your investment in the warrants. There can be no assurance that any of the factors that could impact the trading price of our common stock will result in the trading price increasing to an amount that will exceed the exercise price or the price required for you to achieve a positive return on your investment in the warrants.
Holders of the warrants will have no rights as common shareholders until they acquire our common stock.
Until you acquire shares of our common stock upon exercise of the warrants, you will have no rights with respect to our common stock issuable upon exercise of the warrants, including the right to vote. Upon exercise of your warrants, you will be entitled to exercise the rights of a common shareholder only as to matters for which the record date occurs after the exercise date.
Our company has a concentration of stock ownership and control, which may have the effect of delaying, preventing, or deterring a change of control
The conversion
At August 18, 2016 we had 100,000stock may never develop or, if developed, sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Further, an inactive market may also impair our 10% Series A convertible preferred stock outstanding. These shares are convertible intoability to raise capital by selling shares of our common stock on a one for one basis at the optionand may impair our ability to enter into business combinations with other companies by using our shares of the holder at any time until December 30, 2017, at which time they are automatically converted into common stock if not previously converted.as consideration. The conversion of these shares of preferred stock will result in the issuance of an additional 100,000 shares of our common stock. In addition, the designations, rights and preferences of the 10% Series A convertible preferred stock provide that a 10% annual dividend is payable in sharesmarket price of our common stock atmay be volatile, and you could lose all or part of your investment.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This prospectus 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:
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You should read thoroughly this prospectus and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statementscommon stock previously issued and issuable upon exercise of the warrants to purchase shares of our common stock by these cautionary statements including those made in Risk Factors appearing elsewhere in this prospectus. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. New risk factors emergethe selling security holders from time to time pursuant to this prospectus. The proceeds from the offering are solely for the account of the selling security holders. See “Selling Security Holders.”
We estimate we will receive
We currently expect to use the net proceeds of this offering primarily to fund the continued development of our company as follows:
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We have engaged in early stage discussions with third parties regarding the possible acquisition of existing technology which would be used to develop the Bright Mountain Media AdNetwork. However, as of the date of this prospectus we are not a party to any agreement or understanding with any third parties. Depending upon the structure of any future acquisition we may seek to use our equity securities as a component of the consideration in the transaction. The amount of proceeds from this offering used for the Bright Mountain Media AdNetwork may change significantly depending upon our ability to acquire existing technology or if we are required to internally develop it. As of the date of this prospectus we are also not a party to any agreement or understanding related to future acquisitions of additional website properties and there are no assurances we will deploy any of the proceeds from this offering for these future acquisitions.
Any proceeds we may receiveus from the exercise of the warrants will be used for working capital and general working capital.
Our expectedcorporate purposes. This represents our best estimate of the manner in which we will use any net proceeds we receive from this offering based on the status of our business, but we have not reserved or allocated amounts for specific purposes and we cannot specify with certainty how or when we would use any net proceeds. We will have broad discretion in the application of any net proceeds we receive from this offering, and we could use any such proceeds for purposes other than those currently contemplated. Until the funds are used, we intend to invest any net proceeds from this offering representsin interest-bearing money market or other accounts.
Name of selling security holder | No. of shares beneficially owned (1) | No. of shares being registered (1) | No. of shares owned after the offering | % owned after the offering |
| John V. Aksak | 500,000 | 500,000 | 0 | - |
| Judson A. Church | 500,000 | 500,000 | 0 | - |
| Brian T. Chapman | 125,000 | 125,000 | 0 | - |
| Brian Campbell | 125,000 | 125,000 | 0 | - |
Daniel E. Pettit Revocable Trust (2) | 500,000 | 500,000 | 0 | - |
| John DeWar | 4,500,000 | 4,500,000 | 0 | - |
Andrew A. Handwerker (3) | 9,560,388 | 500,000 | 9,060,388 | 14.1% |
Davis Living Trust (4) | 175,000 | 175,000 | 0 | - |
| Donald Pearson | 250,000 | 250,000 | 0 | - |
| Peter Ginkel | 50,000 | 50,000 | 0 | - |
| Donald Manthe | 50,000 | 50,000 | 0 | - |
| David Vogel | 325,000 | 325,000 | 0 | - |
| E. Russell Black | 25,000 | 25,000 | 0 | - |
| Christine Gayron and Brian Gayron, JTWROS | 50,000 | 50,000 | 0 | - |
| Robert Susie | 250,000 | 250,000 | 0 | - |
| H. Edward Dobroski | 1,250,000 | 1,250,000 | 0 | - |
| David Werdiger | 125,000 | 125,000 | 0 | - |
| Ashar Qureshi | 225,000 | 225,000 | 0 | - |
| Allen Stoye | 375,000 | 375,000 | 0 | - |
| Ronald Lyon | 500,000 | 500,000 | 0 | - |
| Perry Harris | 100,000 | 100,000 | 0 | - |
| Ricard Shaller | 75,000 | 75,000 | 0 | - |
| Herman Thoms | 125,000 | 125,000 | 0 | - |
| Thomas Pinger | 50,000 | 50,000 | 0 | - |
| Howard Fishman SEP IRA | 75,000 | 75,000 | 0 | - |
| Maureen Handwerker | 162,000 | 150,000 | 12,000 | ≤1% |
| David Jacobs | 50,000 | 50,000 | 0 | - |
| Dean Porch | 150,000 | 150,000 | 0 | - |
| Barton Niemeyer and Patricia Niemeyer, JTWROS | 100,000 | 100,000 | 0 | - |
| Fred Schiffler | 375,000 | 375,000 | 0 | - |
| Robert Hill | 50,000 | 50,000 | 0 | - |
| Arnold Morse | 50,000 | 50,000 | 0 | - |
1st Out Bail Bonds (5) | 50,000 | 50,000 | 0 | - |
| Thomas Gioseffi | 50,000 | 50,000 | 0 | - |
| Jay Burgardt | 700,000 | 700,000 | 0 | - |
| Kenneth Knudsen | 150,000 | 150,000 | 0 | - |
| Ingron Tynes | 625,000 | 625,000 | 0 | - |
| Marcia Steele | 525,000 | 525,000 | 0 | - |
| Thomas Bardertscher | 100,000 | 100,000 | 0 | - |
| Jonathan C. Beeler | 250,000 | 250,000 | 0 | - |
| Robert Bernardo | 50,000 | 50,000 | 0 | - |
| Robert J. Bernardo | 50,000 | 50,000 | 0 | - |
| Tim Boffey | 250,000 | 250,000 | 0 | - |
| Sam Borgia and Anna Rose Borgia, JTWROS | 375,000 | 375,000 | 0 | - |
| Glyn Carter | 50,000 | 50,000 | 0 | - |
Collegiate Tutoring Inc. (6) | 75,000 | 75,000 | 0 | - |
| Robert T. Crane | 250,000 | 250,000 | 0 | - |
| Jeffrey Creskoff | 50,000 | 50,000 | 0 | - |
| Thomas C. Deloach | 50,000 | 50,000 | 0 | - |
| Jerry Grove | 577,500 | 577,500 | 0 | - |
| James Guilford and Amy W. Guilford, JTWROS | 125,000 | 125,000 | 0 | - |
| Scot E. Hall | 75,000 | 75,000 | 0 | - |
| Gerald Harmon | 625,000 | 625,000 | 0 | - |
| Larry Hauskins | 250,000 | 250,000 | 0 | - |
| W. Steven Heise | 50,000 | 50,000 | 0 | - |
| Roger Kriete | 125,000 | 125,000 | 0 | - |
| Eric Moritz | 625,000 | 625,000 | 0 | - |
| Alan Robinovitz | 125,000 | 125,000 | 0 | - |
| Paul Roderick | 50,000 | 50,000 | 0 | - |
| Curtis Ross | 400,000 | 400,000 | 0 | - |
| Stacey Zander | 1,150,000 | 1,150,000 | 0 | - |
| Guilio Bernardi and Ana Bernardi, JTWROS | 250,000 | 250,000 | 0 | - |
| John A. Miller | 250,000 | 250,000 | 0 | - |
| Harold R. Osborne | 62,500 | 62,500 | 0 | - |
| Terry M. Seiders | 50,000 | 50,000 | 0 | - |
| Harbans Lal | 100,000 | 100,000 | 0 | - |
| Phillip Woods | 50,000 | 50,000 | 0 | - |
| Carl A. Yacapraro and Mildred E. Yacapraro, JTWROS | 300,000 | 300,000 | 0 | - |
| Larry G. Adkins | 800,000 | 800,000 | 0 | - |
| John R. Nardone | 135,000 | 135,000 | 0 | - |
| Scott Roe | 125,000 | 125,000 | 0 | - |
| Jeffrey Erickson | 125,000 | 125,000 | 0 | - |
| Louis K.R. Beene | 250,000 | 250,000 | 0 | - |
Hampton Growth Resources, LLC (7) | 125,000 | 125,000 | 0 | - |
Johnson Revocable Trust (8) | 100,000 | 100,000 | 0 | - |
Eddie A. Fischer Irrevocable Trust 2005 (9) | 1,000,000 | 1,000,000 | 0 | - |
218-17 LLC (10) | 150,000 | 150,000 | 0 | - |
| David W. Forti and Jennifer Forti, JTWROS | 50,000 | 50,000 | 0 | - |
| Stephen Shaper | 250,000 | 250,000 | 0 | - |
| Stanley M. Simmons and Lisa L. Simmons, JTWROS | 300,000 | 300,000 | 0 | - |
| Fred E. Weidner and Burdena Weidner, JTWROS | 125,000 | 125,000 | 0 | - |
| Donald Morgenroth | 250,000 | 250,000 | 0 | - |
| Alan E. Baker and Desiree D. Baker, JTWROS | 250,000 | 250,000 | 0 | - |
| Randall Lowry | 250,000 | 250,000 | 0 | - |
| Craig Houston | 100,000 | 100,000 | 0 | - |
| Timothy Richard | 250,000 | 250,000 | 0 | - |
| John Ronge | 50,000 | 50,000 | 0 | - |
Shuari Investments PTY Ltd. (11) | 125,000 | 125,000 | 0 | - |
| Dale Schumann | 225,000 | 225,000 | 0 | - |
| Forrest Manheimer | 50,000 | 50,000 | 0 | - |
| Robert Geller | 50,000 | 50,000 | 0 | - |
| Thomas Cannon | 50,000 | 50,000 | 0 | - |
| Jason Goldblatt | 50,000 | 50,000 | 0 | - |
Wendell Locke | 50,000 | 50,000 | 0 | - |
Spartan Capital Securities, LLC | 2,500,000 | 0 | - | |
28,425,500 |
| Exercise Price: | The exercise price per whole share of common stock purchasable upon exercise of the warrants is $0.65 per share. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets, including cash, stock or other property to our shareholders; |
| Exercisability: | The warrants are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance. If we failed to timely file the resale registration statement registering the resale of the shares of common stock issuable upon exercise of the warrant or at any time thereafter during the exercise period if there is not an effective registration statement registering such shares, or the prospectus contained therein is not available for the issuance of the such shares to the holder for a period of at least 60 days following the delivery of a suspension notice as described in the warrant, then the warrants may also be exercised, in whole or in part, at such time by means of a “cashless exercise”. No fractional shares of our common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will round up the shares to be issued to the holder to the next whole share; |
| Call Right: | Providing that there is an effective registration statement registering the shares of our common stock issuable upon exercise of the warrants, during the exercise period, upon 30 days prior written notice to the holder following the date on which the last sale price of our common stock equals or exceeds $1.50 per share for 10 consecutive trading days, as may be adjusted for stock splits, stock dividends and similar corporate events, if the average daily trading volume of our common stock is not less than 30,000 shares during such 10 consecutive trading day period, we have the right to call any or all of the warrants at a call price of $0.01 per underlying share; |
| Exercise Limitation: | A holder will not have the right to exercise any portion of the warrant if the holder together with its affiliates would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon at least 61 days’ prior notice from the holder to us; |
| Transferability: | Subject to applicable laws, the warrants may be offered for sale, sold, transferred or assigned without our consent; |
| Fundamental Transactions: | In the event of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization or reclassification of our common stock, any consolidation or merger of Bright Mountain with or into any corporation (other than a consolidation or merger with another corporation in which we are the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of the warrant), or in case of any sale of all or substantially all of our assets, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction; and |
| Rights as a Shareholder: | The holder of a warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the warrant. |
addition to similar rights granted to Spartan Capital in connection with the 2018 private placement.
Pending use
High Low 2014 First quarter ended March 31, 2014 $ — $ — Second quarter ended June 30, 2014 $ 0.75 $ 0.75 Third quarter ended September 30, 2014 $ 0.75 $ 0.75 Fourth quarter ended December 31, 2014 $ 0.80 $ 0.70 2015 First quarter ended March 31, 2015 $ 0.75 $ 0.70 Second quarter ended June 30, 2015 $ 0.65 $ 0.65 Third quarter ended September 30, 2015 $ 0.70 $ 0.51 Fourth quarter ended December 31, 2015 $ 0.85 $ 0.51 2016 First quarter ended March 31, 2016 $ 0.75 $ 0.69 Second quarter ended June 30, 2016 $ 0.85 $ 0.6884 Third quarter ended September 30, 2016 (through August 23, 2016) $ 0.85 $ 0.85 PRICE RANGE OF OURThe selling security holders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling security holder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the shares of common stock and that there is no underwriter or coordinating broker acting in connection with the proposed sale of the shares of common stock offered hereby by the selling security holder.The common stock offered hereby will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any person engaged in the distribution of the shares of common stock offered hereby may not simultaneously engage in market making activities with respect to the shares of common stock for the applicable restricted period, as defined by Regulation M, prior to the commencement of the distribution. In addition, the selling security holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the shares of common stock by the selling security holders or any other person.We are required to pay certain fees and expenses incurred by us incident to the registration of the shares of common stock. We will pay all expenses of the registration of the shares of common stock, estimated to be approximately $62,000 in total, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling security holder will pay all underwriting discounts and selling commissions, if any.Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.Market InformationOur common stock is currently quoted on the OTCQB Tier of the OTC Markets under the symbol "BMTM." Although our common stock has been quoted in the over the counter market since December 27, 2013, the first trade did not occur until May, 2014. Our common stock has been thinly traded. The reported high and low bid prices for the common stock are shown below for the periods indicated.“BMTM”. The quotations reflect inter-dealer prices, without retail mark-up, markdownmark-down or commission,commissions, and may not necessarily represent actual transactions.The last sale priceAs of April 15, 2019, there were 64,248,864 shares of our common stock outstanding and approximately 203 holders of record of our common stock. However, we believe that there are more beneficial holders of our common stock as reported on the OTCQB on June 13, 2016, the last reported transaction, was $0.85 per share. As of August 18, 2016, there were approximately 55 record owners of our common stock.We intend to apply to list the shares of our commonmany beneficial holders hold their stock and the warrants on the Nasdaq Capital Market under the symbols "[_______]" and "[________W]", respectively. No assurance can be given that our applications will be approved or that a trading market will develop.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| Plans approved by our shareholders: | |||
| 2011 Stock Option Plan | 720,000 | 0.14 | 9,000 |
| 2013 Stock Option Plan | 351,000 | 0.28 | 132,000 |
| 2015 Stock Option Plan | 956,000 | 0.68 | 375,000 |
| Plans not approved by shareholders: | - | - | - |
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You should readdirectors and majority shareholder adopted the information in this table together with the section titled “Management’s Discussion2011 Stock Option Plan and Analysisreserved for issuance an aggregate of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The data presented in the following table is for illustrative purposes only, does not purport to reflect what our actual financial position would have been in this offering (and the use of proceeds contemplated hereby) actually taken place on such date and is not necessarily indicative of our financial position as of the specified date or in the future.
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| As of June 30, 2016 (unaudited) |
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Cash |
| $ | 116,489 |
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| $ | 366,489 |
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Long term debt to related parties, net |
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| 285,806 |
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Preferred stock, par value $0.01 per share, 20,000,000 shares authorized, 5,200,000 shares issued and outstanding actual, stated value $1.00 per share, 100,000 shares issued and outstanding pro forma and pro forma as adjusted |
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| 52,000 |
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| 1,000 |
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Common stock, $0.01 par value, 324,000,000 shares authorized; 37,464,821 shares issued and outstanding, actual; 44,387,131 shares issued and outstanding, pro forma; _________ shares issued and outstanding, pro forma as adjusted |
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| 374,648 |
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| 443,871 |
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Additional paid-in capital |
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| 8,333,304 |
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Accumulated deficit |
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| (7,338,619 | ) |
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Total shareholders’ equity |
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| 1,421,333 |
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| 1,957,139 |
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Total capitalization |
| $ | 1,823,352 |
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| $ | 2,323,628 |
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If you invest in our common stock and warrants, your ownership interest will be diluted to the extent of the difference between the public offering price in this offering per share offered hereby and the pro forma as adjusted net tangible book value per share of our common stock immediately after the consummation of this offering. Net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of shares of common stock then issued and outstanding.
Our historical net tangible book value as of June 30, 2016 (unaudited) as approximately $682,737, or $0.018 per share of common stock. On a pro forma basis, after giving effect to:
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Our net tangible book value at June 30, 2016 would have been approximately $[___________] or $[_________] per share of common stock. After giving effect to our receipt of net proceeds from the sale of [________]900,000 shares of our common stock for awards under the plan. On April 1, 2013, our board of directors and [________] warrants atmajority shareholder adopted our 2013 Stock Option Plan and reserved for issuance an assumed public offering priceaggregate of $[______] per share after deducting estimated underwriting discounts900,000 shares of common stock under the plan. On May 22, 2015, our board of directors authorized our 2015 Stock Option Plan, which was ratified by our shareholders on June 17, 2015. We have reserved for issuance an aggregate of 1,000,000 shares of common stock under the 2015 Stock Option Plan. The maximum aggregate number of shares of our common stock that will be subject to grants made under the 2015 Stock Option Plan to any individual during any calendar year is 100,000 shares.
Assumed public offering price per share |
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Historical net tangible book value per share as of June 30, 2016 |
| $ | 0.018 |
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Pro forma net tangible book value per share |
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Dilution per share to new investors in this offering |
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Each $[________] (decrease) in the assumed public offering price of $[_____] per share would increase the pro forma as adjusted dilution to new investors by approximately $[________] per share, assumingdirectors administers each plan. Other than the number of shares reserved for issuance under each of these plans, the terms of the plans are identical. Under each plan we are authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock options. The material terms of each option granted pursuant to any plan will contain the following terms:
The following table summarizes, on a pro forma as adjusted basis as of June 30, 2016 (unaudited), the differences between the number of shares of common stock purchased from us, the total price and the average price per share paid by existing shareholders and by the new investors in this offering, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, at an assumed public offering price of $[____] per share.
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Existing shareholders(2) |
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| [____] | % |
| $ | [____] |
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| $ | [____] |
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| [____] | % |
| $ | [____] |
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|
| [____] | % |
| $ | [____] |
|
Total(2) |
|
| [____] |
|
|
| 100 | % |
| $ | [____] |
|
|
| 100 | % |
| $ | [____] |
|
———————
|
|
|
|
| |
| |
| |
| |
|
To the extent that options and warrants are exercised or we issue additional shares of common stockentitled in the future, there will be further dilutionelection of directors (without consideration of the rights of any class of stock to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital throughelect directors by a separate class vote), (ii) the sale or other disposition of equityall or convertible debt securities, the issuancesubstantially all of these securities could result in further dilution to our shareholders.
SELECTED CONSOLIDATED FINANCIAL DATA
The tables below summarizeassets, or (iii) a liquidation or dissolution of our consolidated financial informationcompany; or
Consolidated Statementsvoting power of Operations Data:
|
| Six Months Ended June 30, |
|
| Year ended December 31, |
| ||||||||||
|
| 2016 |
|
| 2015 |
|
| 2015 |
|
| 2014 |
| ||||
|
| (unaudited) |
|
| (unaudited) |
|
|
|
|
|
|
| ||||
Total revenues |
| $ | 883,585 |
|
| $ | 682,030 |
|
| $ | 1,692,079 |
|
| $ | 1,169,186 |
|
Gross profit |
|
| 376,064 |
|
|
| 222,111 |
|
|
| 543,741 |
|
|
| 348,207 |
|
Selling, general and administrative expenses |
|
| 1,519,053 |
|
|
| 943,215 |
|
|
| 2,214,238 |
|
|
| 1,858,634 |
|
Loss from operations |
|
| (1,142,989 | ) |
|
| (721,104 | ) |
|
| (1,670,497 | ) |
|
| (1,510,427 | ) |
Total other expense |
|
| (37,875 | ) |
|
| (878 | ) |
|
| (2,597 | ) |
|
| (209 | ) |
Net loss |
|
| (1,180,864 | ) |
|
| (721,982 | ) |
|
| (1,673,094 | ) |
|
| (1,510,636 | ) |
Preferred stock dividends |
|
| 218,186 |
|
|
| 145,458 |
|
|
| 338,684 |
|
|
| 208,831 |
|
Net loss attributable to common shareholders |
| $ | (1,399,050 | ) |
| $ | (867,440 | ) |
| $ | (2,011,778 | ) |
| $ | (1,719,467 | ) |
Basic and diluted net loss per share |
| $ | (0.04 | ) |
| $ | (0.02 | ) |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
Weighted average shares outstanding – basic and diluted |
|
| 36,927,554 |
|
|
| 36,285,718 |
|
|
| 34,587,695 |
|
|
| 32,612,378 |
|
Consolidated Balance Sheet Data:
|
| June 30, |
|
| December 31, |
| ||||||
|
| 2016 |
|
| 2015 |
|
| 2014 |
| |||
|
| (unaudited) |
|
|
|
|
|
|
| |||
Cash |
| $ | 116,489 |
|
| $ | 416,187 |
|
| $ | 590,236 |
|
Working capital |
| $ | 903,216 |
|
| $ | 1,246,265 |
|
| $ | 1,138,903 |
|
Total assets |
| $ | 2,033,359 |
|
| $ | 2,319,591 |
|
| $ | 1,950,968 |
|
Total liabilities |
| $ | 612,026 |
|
| $ | 498,448 |
|
| $ | 318,189 |
|
Accumulated deficit |
| $ | (7,338,619 | ) |
| $ | (6,157,755 | ) |
| $ | (4,484,661 | ) |
Total shareholders' equity |
| $ | 1,421,333 |
|
| $ | 1,821,143 |
|
| $ | 1,632,779 |
|
similar expressions to identify forward-looking statements. Three Months Ended Six Months Ended June 30, June 30 % Increase June 30 June 30 % Increase Product sales $ 336,042 $ 323,848 4 % $ 683,821 $ 585,572 17 % Revenues from services 123,128 48,099 156 % 199,764 96,458 107 % Total revenues 459,170 371,947 23 % 883,585 682,030 30 % Cost of sales – products 236,986 271,809 (13 %) 507,521 459,919 10 % Cost of sales - products as a percentage of product sales 70.5 % 83.9 % (16 %) 74.2 % 78.5 % (6 %) Gross profit 222,184 100,138 122 % 376,064 222,111 69 % Selling, general and administrative expenses 732,339 487,473 50 % 1,519,053 943,215 61 % (Loss) from operations $ (510,155 ) $ (387,335 ) 32 % $ (1,142,989 ) $ (721,104 ) 59 % In addition to our corporate website, we 2015 2014 % Increase Product sales $ 1,408,481 $ 1,050,394 34 % Revenues from services 283,598 118,792 139 % Total revenues 1,692,079 1,169,186 45 % Cost of sales – products 1,148,338 820,979 40 % Cost of sales - products as a percentage of product sales 81.5 % 78.2 % 3.3 % Gross profit 543,741 348,207 56 % SG&A expenses 2,214,238 1,858,634 19 % (Loss) from operations $ (1,670,497 ) $ (1,510,427 ) 11 % For the Six Months Ended June 30, For the Years Ended December 31, (unaudited) 2016 2015 2015 2014 Net (loss) $ (1,180,864 ) $ (721,982 ) $ (1,673,094 ) $ (1,510,636 ) plus: Stock compensation expense 77,124 29,124 59,327 69,890 Stock issued for services 54,930 37,350 51,630 27,500 Adjusted net (loss) $ (1,048,810 ) $ (655,508 ) $ (1,562,137 ) $ (1,413,246 ) Depreciation expense 6,679 6,757 14,248 11,335 Amortization expense 124,425 86,136 181,905 147,006 Amortization on debt discount 18,715 — 260 — Interest expense 21,758 891 — — Impairment expense — — 70,531 24,716 Adjusted EBITDA $ (877,223 ) $ (561,724 ) $ (1,295,193 ) $ (1,230,189 ) Media through the addition of internally developed software products that will vertically integrate our business model through our own ad serving, header bidding and owned RTB platform which will increase sales and gross profit margins; and future.MANAGEMENT’SAND RESULTS OF OPERATIONSYou should read theThe following discussion and analysis of our financial condition and results of operations togetherfor the years ended December 31, 2018 and 2017 should be read in conjunction with ourthe audited consolidated financial statements and relatedthe notes to those statements that are included elsewhere in this prospectus. ThisOur discussion and other parts of this prospectus containincludes forward-looking statements based upon current expectations that involve riskrisks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a resultActual results and the timing of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual resultsevents could differ materially from the results describedthose anticipated in or implied by thethese forward-looking statements containedas a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in the following discussionthis prospectus. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and analysis.OverviewWe areHistorically we have operated as a digital media holding company for online assets primarily targeted to the military and public safety sectors. We own websites, which are customized to provide our niche users, including active duty, reserve and retired military, law enforcement, and fire fighters with information and news that may be of interest to them. We generate revenues from two segments, product sales and services. Services consist of advertising revenue and subscriptions. Within our product sales segment, we generate product sales revenue through e-commerce distributors portals such as Amazon and eBay, and direct sales though proprietary websites and a retail location. The following graph provides historical quarterly total revenue in the respective periods presented:Quarterly Total Revenue($ in thousands)![[bmtm_s1008.gif]](https://capedge.com/proxy/S-1/0001553350-16-002428/bmtm_s1008.gif)
Key Second Quarter 2016 highlights include:·total revenue of $459,170 and revenue growth of 23% in the three months ended June 30, 2016 as compared to the three months ended June 30, 2015;·total revenue of $883,585 and revenue growth of 30% for the six months ended June 30, 2016 from the comparable period in 2015;·services revenue growth of 156% quarter over quarter for the three months ended June 30, 2016 compared to the comparable quarter in 2015;·services revenue growth of 107% period over period for the first six months of 2016 compared to the first six months of 2015;·product sales revenue growth of 4% quarter over quarter for the three months ended June 30, 2016 compared to the comparable quarter in 2015;·product sales revenue growth of 17% period over period for the first six months of 2016 compared to the comparable period in 2015;·acquired two new web properties; and·raised $800,000 in new capital through the sale of equity and debt securities.Many of these increases are being powered by website traffic increases of 53% for the first six months of 2016 compared to the first six months of 2015 as a result of organic growth and acquisitions. The following graph provides information on the annual traffic to our proprietary websites over the respective quarterly periods presented:Quarterly Website Traffic (Visits)![[bmtm_s1010.gif]](https://capedge.com/proxy/S-1/0001553350-16-002428/bmtm_s1010.gif)
2016 has been and will continue to be a transitional year for our company as we invest in the infrastructure required to create more content, website traffic and expand our ability to sell our advertising inventory. Historically, a majority of our revenues have come from product sales. As a result of the consistent increase in both the overall site traffic as well as unique visitors to our websites, we believe our company has reached sufficient critical mass to begin the multi-year transition to a digital media company that generates most of its revenue from the sales of advertising on its websites, the sale of subscriptions to our websites and, once established, the sale of advertising utilizing the Bright Mountain Media AdNetwork. We believe that this natural evolution of our model will permit us to concentrate our efforts on growing our highest profit opportunities through the leverage of our website portfolios and growing Internet audience. To begin implementing the next segment of our business model, during the fourth quarter of 2015 we began a rebranding of our company which included a name change to “Bright Mountain Media, Inc.”Since inception we have chosen to be a provider of quality website content to our niche market through our content staff of writers and others which, in our opinion, has been the principle reason for the growth in our website traffic. Following this offering we expect to begin adding more content staff including writers, graphic designers, videographers and social media personnel, as well as former military and public safety individuals to create additional content for our websites. We believe these steps will help drive additional traffic to our websites which in turn will allow us to better leverage the highly targeted website traffic on our web properties and increase advertising revenues.Utilizing proceeds from this offering we also intend to establish the Bright Mountain Media AdNetwork, a programmatic advertising network. The Bright Mountain Media AdNetwork will be a location where small to medium publisher websites in the military, public safety and first responder space can gather to build scale and interact with the advertising exchanges to sell their inventory in real time. By establishing our own programmatic advertising network which will provide advertisers and publishers access to a highly targeted demographics we believe we should be able to realize higher CPMs thereby increasing our advertising revenues. We are in early stage discussions with several companies for the acquisition of existing technology as a means to accelerate the establishment of our own advertising network. We are not, however, a party to any agreements or understandings at this time.A key component of our growth also remains our acquisition strategy for web properties. We remain committed to expanding our portfolio of web properties in 2016 and beyond with additional acquisitions that fit strategically into our business objectives. So far in 2016, we have acquired www.warisboring.com and www.sargeslist.com. Our ability to continue our acquisition strategy, however, is dependent on our ability to raise additional working capital, both to fund the costs of the transactions as well as the integration and expansion of the acquired companies and web properties. During the first quarter of 2016 we also entered into a publishing distribution agreement with A Medium Corporation for www.warisboring.com content which was migrated to the Medium platform, a social publishing platform that offers hosting and other services.While we continue to increase our revenues, we reported a net loss of $1,180,864 for the first six months of 2016. During the six months ended June 30, 2016 our average total monthly operating overhead was approximately $253,000 of which, approximately $152,000 was cash operating overhead. As we continue to grow our business we expect that our monthly cash operating overhead will continue to increase as we add personnel, although at a lesser rate and we are not able at this time to quantify the amount of this expected increase.Without giving effect to this offering, we do not anticipate that we will generate sufficient revenue to fund our operations for the next 12 months. As a result, we will need to raise additional working capital, including through this offering, to fund our ongoing operations as well as to provide additional funds for the further evolution of our business including the expenses of this offering. During first six months of 2016 we raised $800,000 in capital through the sale of equity and debt securities to a related party. Without giving effect to this offering, we presently estimate we will need to raise at least $2,000,000 to satisfy our working capital needs for the next 12 months. Without giving effect to this offering, we do not have any firm commitments for this necessary capital and there are no assurances we will be successful in raising the capital upon terms and conditions, which are acceptable to us, if at all. If we are unable to raise the necessary additional working capital, absent a significant increase in our revenues, of which there is no assurance, we will be unable to continue to grow our company and may be forced to reduce certain operating expenses in an effort to conserve our working capital.Going concernFor the six months ended June 30, 2016, we reported a net loss of $1,180,864, cash used in operating activities of $911,503 and we had an accumulated deficit of $7,338,619 at June 30, 2016. The report of our independent registered public accounting firm on our audited consolidated financial statements at December 31, 2015 and 2014 and for the years then ended contains an explanatory paragraph regarding substantial doubt of our ability to continue as a going concern based upon our net losses, cash used in operations and accumulated deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.Results of operationsResults of operations for the three and six month periods ending June 30, 2016 compared to the three and six month periods ending June 30, 2015.
(unaudited)
(unaudited)
2016
2015
2016
2015RevenueRevenues increased in both our product sales and service revenues for both the three and six month periods ending June 30, 2016 over comparable periods of the prior year. The increase in product sales primarily reflects our increased effort in on-line marketing of our products directly through our owned websites as well as through third parties. The increase in service revenues reflects the increase in visitor traffic to our previously existing websites as well as traffic from additional websites acquired in 2016 and 2015.currently own 25 websites, and partner with a third party on two additional websites under a revenue sharing arrangement entered into in January 2016. To date we have reported minimal revenues under this agreement. We intend to continue our concentration on increasing our website traffic through organic growth as well as our program of website acquisitions focused on our targeted market segment.Cost of SalesCost of product sales as a percentage of produce sales has declined for both the three and six month periods ending June 30, 2016 compared to the prior year. This decline was due in large part to larger discounts being offered on to us by our vendors on many of our watch products in 2015 that were not offered in 2016. These discounts were intended to liquidate slower moving items for a measured period, which was successful. We also increased the number of brands we carry in the 2016 period from the 2015 period. During 2016 we continue to seek to expand our product lines and strengthen our purchasing power to minimize the negative effect of selling discontinued and/or slow moving products. We do not incur any cost of sales related to our service revenues.SG&A ExpensesSelling, general and administrative expenses increased for both the three and six month periods ending June 30, 2016 over the comparable periods of the preceding year. This increase is both in amounts recognized as well as selling, general and administrative expenses as a percentage of revenues, totaling 159% and 172% for the three and six months ended June 30, 2016 compared to 131% and 138% for the comparable periods of the preceding year.A significant portion of the increase in selling, general and administrative expenses between years was attributable to non-cash expenses recognized including amortization expense attributable to websites acquired of $61,582 and $124,425 for three and six month periods ending June 30, 2016 compared to $45,801 and $86,136 for the same periods in 2015. In addition, stock options compensation expense totaled $59,551 and $77,124 in 2016 compared to $15,390 and $29,124 in 2015, respectively. This increase in option compensation expense is expected to increase as we continue to attract qualified employees while minimizing, as much as possible, cash demands related to increased staffing. During the first quarter 2016 we increased staffing to support targeted growth with salaries and employee medical expenses increasing 79% and 71% for the three and six month periods ending June 30, 2016 compared to the same periods in 2015. During the second quarter 2016, we implemented a partial staff reduction to reduce staffing and related costs. However, following this offering we expect to increase our staffing levels to support our expected growth. Legal fees increased 196% and 22% in 2016 over the prior year which includes 41% paid in stock in 2016. Rent expense increased 67% and 87%, respectively, between periods reflecting expansion of our corporate offices.Selling, general and administrative expenses are expected to continue to increase as we execute our planned growth strategy of increasing website visits both organically and through targeted acquisitions.Year ended December 31, 2015 as compared to the year ended December 31, 2014RevenueOverall, our revenues increased 45% in 2015 over 2014. In 2015 revenues from product sales increased by 34% over 2014, and revenues from services increased 139% over 2014. The increase in both our product sales and revenues from services reflects the impact of increased visitor traffic as a result of additional websites acquired during 2015 and organic growth from cross traffic to our full family of sites.Cost of salesThe increase in cost of sales as a percentage of revenue for product sales of 3.3% in 2015 as compared to 2014 is primarily attributed to the discounted sale of discontinued products from one vendor, which reduced our gross profit margin. We continue to expanded our product lines and strengthen our purchasing power to minimize the negative effect of selling discontinued products.SG&A expensesOverall, SG&A expense increased 19% in 2015 as compared to 2014. The increase in total SG&A expenses for 2015 as compared to 2014 can be attributed to ongoing expansion of our business and our need to add employees to manage our growth. Material components of the year over year increase in SG&A expenses in 2015 as compared to 2014 included payroll and medical expense, which increased 34% in 2015 over 2014; rent expense, which increased 56% in 2015 over 2014; and insurance expense, which increased 59% in 2015 over 2014. These increases were offset by decreases in website expense, which decreased by 53% in 2015 over 2014; and advertising and marketing expense, which decreased by 68% in 2015 over 2014. The cash portion of our SG&A expense was $1,887,968 in 2015 as compared to $1,605,687 in 2014. The cash portion of our SG&A expenses in 2015 were 112% of our total revenues as compared to 137% in 2014. Included in our SG&A expenses are certain non-cash expenses, including stock compensation expense, depreciation expense, amortization expense and impairment expense. These non-cash items totaled $326,270 for 2015 and $252,947 for 2014. The increase in these non-cash items constituted 20% of the total increase of SG&A expenses year over year.Non-GAAP financial measuresWe report Adjusted net (loss) to measure our overall results because we believe it better reflects our net results by excluding the impact of non-cash equity based compensation. We use Adjusted EBITDA to measure our operations by excluding interest and certain additional non-cash expenses. These measures are one of the primary metrics by which we evaluate the performance of our business, and upon which our internal budgets are based. We believe the presentation of Adjusted net (loss) and Adjusted EBITDA enhances our investors’ overall understanding of the financial performance of our business.We believe these measures are useful for analysts and investors as the measures allow a more meaningful year-to-year comparison of our performance. The above items are excluded from the Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income/loss generated from our business. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses. 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.The following is an unaudited reconciliation of net (loss) to Adjusted net (loss) and Adjusted EBITDA for the periods presented:Liquidity and capital resourcesLiquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of June 30, 2016 we had $116,489 in cash and cash equivalents and working capital of $903,216, as compared to cash and cash equivalents of $416,187 in cash and cash equivalents and working capital of $1,246,265 at December 31, 2015. Our principal sources of operating capital have been equity and debt financings from related parties. During the six months ended June 30, 2016 we continued to use our working capital to purchase additional websites as well as to fund our operating expenses. During the six months ended June 30, 2016, we purchased two websites for an aggregate amount of $265,000 of which $115,000 was paid in cash and the balance of $150,000, is payable monthly in an amount equal to 30% of the net revenues from the website, when collected, with the total amount of the earn out to be paid by January 4, 2019. In July 2016 and August 2016 our chief executive officer invested an additional $250,000 in our company, including the purchase of $100,000 principal amount of 12% convertible promissory notes and the purchase of 300,000 shares of common stock for $150,000. In August 2016 the holders of $600,000 principal amount of our 12% convertible promissory notes, including the $100,000 principal amount of notes purchased by our chief executive officer in July 2016, converted those notes into shares of our common stock, thereby satisfying those obligations and eliminating future dividend payments. In August 2016 the holders of substantially all outstanding shares of our preferred stock converted those securities into shares of our common stock. Following these conversions, which left 100,000 shares of our 10% Series A convertible preferred stock remaining outstanding, we have substantially reduced all future dividend payments on our preferred stock. Lastly, in August 2016 our chief executive officer invested an additional $150,000 into our company through the purchase of common stock.Cash flowsNet cash flows used in operating activities was $911,503 for the six months ended June 30, 2016 as compared to $785,357 used in operating activities for the same period in 2015. In the six months ended June 30, 2016 we used cash primarily to fund our net loss of $1,180,864.Net cash flows used in operating activities was $1,591,611 for 2015 as compared to $1,668,378 used in operating activities for 2014. In 2015 we used cash primarily to fund our net loss of $1,673,094, and for increases in our inventory of more than $277,442. The increase in our inventory of 37% at December 31, 2015 from December 31, 2014 reflects increased inventory related to an expansion of product lines.Net cash flows used in investing activities was $136,858 for the six months ended June 30, 2016 as compared to $160,272 used in investing activities for the same period in 2015 due to the purchase of fixed assets, the cash acquisition costs associated with the purchase of two websites in the six months ended June 30, 2016, and cash payment obligations related to a website acquired in 2015.Net cash flows used in investing activities was $196,979 for 2015 as compared to $586,910 used in investing activities for 2014 due to the purchase of fixed assets and the acquisition of websites totaling $439,500 for 2015, of which the fair value of $262,500 was paid through issuance of 350,000 shares of our common stock.Net cash flows provided from financing activities was $748,663 for the six months ended June 30, 2016 as compared to $644,763 for the same period in 2015. In both periods, cash was provided from the sale of our securities, net of repayments of debt obligations.Net cash flows provided from financing activities was $1,614,541 for 2015 as compared to $1,675,892 for 2014. In both periods, cash was provided from the sale of our securities, net of repayments of debt obligations.Critical accounting policiesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our audited consolidated financial statements appearing elsewhere in this prospectus.Recent accounting pronouncementsThe recent accounting standards that have been issued or proposed by the Financial Accounting Standards Board, or "FASB," or other standards-setting bodies as described in Note 1 to our audited consolidated financial statements appearing elsewhere in this prospectus that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.Off balance sheet arrangementsAs of the date of this prospectus, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.OverviewWe are a digital media holding company for online assets primarily targeted to the military and public safety sectors. We are dedicated to providing “those that keep us safe” places to go online where they can do everything from staying current on news and events affecting them, to looking for jobs, sharing information, communicating with the public, and purchasing products. We own and manage25 websites which are customized to provide our niche users, including active, reserve and retired military, law enforcement, first responders and other public safety employees with products, information and news that we believe may be of interest to them. We also own an ad network which was acquired in September 2017.We have placed a particular emphasis on providing quality content on our websites to drive traffic increases. Our websites feature timely, proprietary and aggregated content covering current events and a variety of additional subjects targeted to the specific demographics of the individual website. Our business strategy requires us to continue to provide this quality content to our niche markets and to grow our business, operations and revenues both organically and through acquisitions.Presently,acquisitions as we generateexpand our business past the original niche markets into mainstream digital audiences.A key component of our growth is the expansion in our ad network business. Our ad network creates revenue from two segments:other publisher’s content, as well as our own, in the form of a revenue share based on ad impressions we deliver. For this reason, the managerial focus will be in increasing our total impressions delivered to grow our total advertising revenue. Last year, we delivered approximately 2.2 billion advertising impressions. These impressions include both our targeted demographics and the larger general demographics from our ad network. During 2018 we have grown our business through sales efforts including:●establishing favorable contract terms with many key advertising demand parties;●supply relationships with approximately 200 digital publishers;●over 50 real time bidding (“RTB”) clients;●proprietary software to collect and report results for publisher clients;●ability and software to quickly and efficiently detect fraudulent traffic; and●highly scalable sales and ad operations functions.We believe that the exit from all of our E-commerce businesses at December 31, 2018 will allow us to concentrate all of our resources to our best and fastest growing business opportunities. While we are presently accessing third party RTB platforms, we are currently working on the development of our own proprietary RTB platform, display and video ad serving software, and header bidding technology, as we move to vertically integrate higher margin software products into our ad network business model. The platform, which is in the pre-Alpha stage, is being developed for us by AdsRemedy, a third party consulting firm that provides support services to us.Going ConcernFor the year ended December 31, 2018, we reported a net loss from continuing operations of $4,131,314, a loss of $1,092,750 related to discontinued operations, net cash used in operating activities of $3,970,013 and we had an accumulated deficit of $17,042,966 at December 31, 2018. The reports of our independent registered public accounting firms on our audited consolidated financial statements at December 31, 2018 and 2017 and for the years then ended contain explanatory paragraphs regarding substantial doubt of our ability to continue as a going concern based upon our net losses, cash used in operations and accumulated deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our audited consolidated financial statements appearing elsewhere in this prospectus do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to significantly increase our revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.Results of Operations For the Year EndedDecember 31, 2018 2017 Revenues $1,735,649 $1,104,017 Cost of revenues 1,378,377 671,286 Gross profit 357,272 432,731 Selling, general and administrative expenses 3,494,858 2,596,827 Loss from continuing operations (3,137,586) (2,164,096)Total other income (expense) (993,728) (405,609)Net loss from continuing operations (4,131,314) (2,569,705)Discontinued operations (1,092,750) (424,391)Net loss (5,224,064) (2,994,096)Total preferred stock dividends 111,940 17,645 Net loss attributable to common shareholders $(5,336,004) $(3,011,741)RevenueAdvertising revenues increased approximately 57.2% in 2018 over 2017. The increase in our revenues in 2018 is primarily attributable to the impact of a full year of operation of our ad network which we acquired in the fourth quarter of 2017. With our operational focus on this one operating segment of our business we expect that our revenues will increase in 2019, although there can be no assurances.Cost of SalesCost of sales as a percentage of revenues increased approximately 18.5%, from approximately 61% in 2017 to approximately 79% in 2018. During 2018 we offered publishers favorable payouts in an effort to attract more publishers to our ad network as we expanded its operations, which resulted in the decrease in our gross profit margins. As we continue to expand our ad network during 2019 we will seek to increase our gross margins to the 2017 level. However, as we operate in a highly competitive industry, there are no assurances our efforts will be successful. Selling, General and Administrative (“SG&A”) ExpensesSG&A expenses increased by approximately $898,031 for 2018 compared to 2017. Our selling, general and administrative expenses were 201% of our total revenues for 2018 as compared to 235% for 2017. The increase in our SG&A expenses reflects increases in both cash and non-cash expenses in the 2018 period. During 2018, the increases in our cash SG&A expenses were primarily attributable to increases in payroll expense, travel and entertainment, professional fees, and website and other expenses. The approximate $79,941 increase in our payroll costs in 2018 reflects our increased staffing to support the expected growth of our company and the addition of staffing in our accounting department to improve our accounting and reporting processes. Our travel and entertainment expense increased approximately $29,816 in 2018 which represents costs to attend various trade shows and increased travel related to our capital raising efforts. Professional fees increased approximately $502,539 in 2018 from 2017 which is primarily related to legal fees associated with ongoing litigation and increased audit and review fees. During 2018 our website expenses, which includes ad network site development, maintenance and hosting costs, increased approximately $32,557 and our other expenses, which includes wire transfer fees for payments by vendors, increased approximately $63,864, both of which reflect a full year of operations of Daily Engage Media following our acquisition of that entity in September 2017. Non-cash increases in SG&A in 2018 are primarily attributable to the amortization of $277,500 of the $1,360,000 of cash consulting and advisory fees we paid Spartan Capital as described earlier in this prospectus, as well an approximate $321,623 increase in our provision for bad debt expense to account for the possibility we will not collect certain accounts receivable and to reflect the past due nature of a loan we made to Kubient, Inc.SG&A expenses are expected to continue to increase in a controlled manner as we execute our planned growth strategy of increasing website visits both organically and through targeted acquisitions and providing the needed administrative support and the hiring of an experienced Chief Financial Officer for the increased level of activities. We are unable at this time, however, to predict the amount of the expected increase.Total other income (expense)Total other income (expense) primarily reflects interest expense associated with our borrowings under a non-convertible and several convertible notes. Our Chief Executive Officer loaned us an additional $1,460,000 during 2017 under a series of 6% to 12% convertible notes bringing the total notes payable to him at November 7, 2018 to $2,035,000. On November 8, 2018 we entered into a note exchange agreement with Mr. Speyer pursuant to which he exchanged these convertible promissory notes for three sub-series of a new series of convertible preferred stock in a transaction which is described later in this prospectus under “Certain Relationships and Related Transactions.” This transaction resulted in a $579,233 loss on the exchange of convertible notes. Interest under these notes prior to the exchange transaction totaled $370,963, inclusive of $196,375 amortization of the related debt discount for 2018 and $323,112, inclusive of $168,613 in amortization of the related debt discount for 2017.In addition, we recorded interest of $35,971 and $51,389 for 2018 and 2017, respectively on a $500,000 note payable issued in November 2016 to us to an unrelated third party. This note was satisfied on December 26, 2018.Discontinued OperationsDuring the 2018 and 2017 we recorded a loss from discontinued operations $1,092,750 and $424,391, respectively. The loss is attributable to our product sales segment which was discontinued effective December 31, 2018. The discontinuation of this segment was a strategic decision by our management which we believe permits us to focus our operational efforts on the advertising segment. During 2018 we recognized $326,000 of impairment losses compared to $61,000 for the 2017 period.Preferred stock dividendsWe paid stock dividends on one series of our preferred stock which was held by an unrelated third party, and services. Services include advertingcash dividends on two additional series of our preferred stock which are held by affiliates. The increase in preferred stock dividends in 2018 from 2017 primarily reflects the exchange of the convertible notes payable to equity by Mr. Speyer as described later in this prospectus. Under the series of preferred issued to him in the exchange we pay him cash dividends which are identical to the interest rate he previously received on the convertible notes, and the shares of preferred will automatically convert into shares of our common stock on the dates and at the same conversion rates as the convertible notes.Liquidity and capital resourcesLiquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of December 31, 2018, we had a balance of cash and cash equivalents of $1,042,457 and working capital of $881,949 as compared to cash and cash equivalents of $101,231 and negative working capital of $395,315 at December 31, 2017. Our current assets increased 43% at December 31, 2018 from December 31, 2017 which reflects the substantial increase in our cash balance and increases in our prepaid expenses primarily attributable to the consulting and advisory agreements with Spartan Capital, offset by decreases in accounts receivable as well as the impact on the decrease in assets held for sale for discontinued operations and current assets related to those discontinued operations.Our current liabilities decreased 25% at December 31, 2018 from December 31, 2017 which primarily reflects a 27% decrease in accounts payable and a 70% decrease in the current portion of long-term debt reflecting the exchange of convertible notes payable for preferred stock by our Chief Executive Officer, offset by increases in accrued expenses related to legal fees and the recordation of a previously undisclosed liability of $197,500 at Daily Engage Media prior to the closing of the acquisition, as well as a reduction in current liabilities associated with our discontinued operations.During 2018 we raised net proceeds of $5.1 million through the sale of our securities in private placements, as well as an additional $450,000 through the sale of preferred stock to our Chief Executive Officer and $80,000 through the issuance of convertible promissory notes to him. During 2019 we have raised an additional $888,950 in net proceeds through the sale of our securities. After payment of $1,360,000 to Spartan Capital as cash compensation under the terms of various consulting and advisory agreements, we used approximately $570,000 to repay debt to unrelated third parties, and of the net proceeds for $3.8 million to fund our operating losses during 2018, and are using the additional proceeds for working capital as well as for a loan to an unrelated third party which matures in April 2019.We have also entered into various loan transactions with unrelated third parties, including:●inSeptember 2018 we enteredintoa non-binding letter of intent with Kubient,Inc. to acquireKubient,Inc.The closing of the transaction was subject to a number of conditions precedent, including satisfactory due diligence on our part and the execution of definitive agreements. Thereafter, inOctober 2018 we lent Kubient, Inc. $75,000 under the terms of an unsecured 6% note due on January 31, 2019,provided, however, that if the share exchange or merger as contemplated by the non-binding letter of intent with Kubient, Inc. was consummated on or prior to the maturity date, the outstanding principal of the note would be forgiven by us and the purchase price contemplated by the non-binding letter of intent reduced. We subsequently determined not to proceed with the proposed transaction. The note is now in default; and●on April 25, 2019, we entered into an amended non-binding letter of intent with Inform, Inc. pursuant to which we may acquire Inform, Inc. in an all stock transaction. The amended non-binding letter of intent replaced in its entirety the February 2019 non-binding letter of intent previously entered into by the parties. Between February 2019 and April 2019, we lent Inform, Inc. an aggregate of $544,500 under the terms of 6% promissory notes which initially matured on April 30, 2019. As collateral for the repayment of the notes, the chief executive officer of Inform, Inc. has pledged his shares in Inform, Inc. under the terms of a security agreement. On April 25, 2019, in connection with the amended non-binding letter of intent, we extended the due date of these notes to June 30, 2019. We utilized a portion of the proceeds from the sale of our securities as described earlier in this section for this loan. As our due diligence on Inform, Inc. continues and we cannot predict at this time if we will proceed with this transaction, investors should not place undue reliance on the amended non-binding letter of intent .Our operations do not provide sufficient cash to pay our cash operating expenses and we have historically been dependent upon loans and equity purchases from Mr. Speyer to provide sufficient funds for our operations. During 2018 we were also materially dependent upon the capital raised in the private placements. If we are unable to increase our revenues to a level which provides sufficient funds to pay our operating expenses without relying upon loans and equity purchases from related parties or third party investment capital, our ability to continue to as a going concern are in jeopardy. We expect that we will need to raise an additional $ 2,000,000 in capital during 2019 for use in our operations. We also expect to continue to seek to raise capital from private sources during 2019, however we are not a party to any agreement or understanding for firm commitments for this capital. Any delay in raising sufficient funds will delay the continued implementation of our business strategy and could adversely impact our ability to significantly increase our revenues in future periods. In addition, if we are unable to raise the necessary additional working capital, absent a significant increase in our revenues, of which there is no assurance, we will be unable to continue to grow our company and may be forced to reduce certain operating expenses in an effort to conserve our working capital. Cash flowsNet cash used in operating activities totaled $3,970,013 and $1,725,749 for 2018 and 2017, respectively. During 2018, we used cash primarily to fund our net loss of $5,224,064 for the period as well as increases in prepaid expenses and expansion plans. Cash used during 2017 was used primarily to fund our net loss of $2,994,096 during the period.Net cash provided by investing activities totaled $13,970 in 2018 as compared to net cash used in investing activities of $224,429 for 2017. Cash used included the purchase of fixed assets in 2018 and 2017 of $15,183 and $329 and cash used in the acquisition of Daily Engage Media, net of $207,801 during 2017. We sold equipment and received $15,182 in cash during 2018.Net cash provided by financing activities totaled $4,919,312 and $1,885,251 during 2018 and 2017, respectively. In both periods, cash was provided from the sale of our securities, net of repayments of debt obligations and the payable of cash dividends on our Series E and F convertible preferred stock to related parties.Non-GAAP MeasuresWe report adjusted earnings before income taxes, depreciation and amortization (“EBITDA”) from continuing operations as a supplemental measure to 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 compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and description of the reconciling items, including quantifying such items to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure.Our adjusted EBITDA from continuing operations is defined as operating income/loss excluding:●non-cash stock option compensation expense;●non-cash loss on note exchange transaction with our Chief Executive Officer;●depreciation;●acquisition-related items consisting of amortization expense and impairment expense;●interest; and●amortization on debt discount.We believe this measure is useful for analysts and investors as this measure allows a more meaningful year-to-year comparison of our performance. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole. The above items are excluded from adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, adjusted EBITDA corresponds more closely to the cash operating income/loss generated from our business. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expensesThe following is an unaudited reconciliation of net (loss) from continuing operations to adjusted EBITDA for the periods presented: For the Year Ended December 31, 2018 2017 Net loss from continuing operations $(4,131,314) $(2,569,705)plus: Stock compensation expense 24,128 108,090 Depreciation expense 13,220 13,950 Amortization expense 189,948 191,731 Amortization on debt discount 207,285 181,426 Impairment expense - 9,375 Interest expense 210,559 406,252 Loss on extinguishment of convertible debt 579,233 - Adjusted EBITDA from continuing operations $(2,906,941) $(1,658,881)Critical accounting policiesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and subscriptions. expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, valuation of inventory, intangible assets, and equity based transactions. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 3 to our audited consolidated financial statements appearing elsewhere in this prospectus.Recent accounting pronouncementsThe recent accounting standards that have been issued or proposed by the Financial Accounting Standards Board (FASB) or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. These recent accounting pronouncements are described in Note 3 to our notes to consolidated financial statements appearing later in this prospectus.Off balance sheet arrangementsAs of the date of this prospectus, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.BUSINESSHistorically we have operated as a digital media holding company for online for online assets primarily targeted to the military and public safety sectors. In addition to our corporate website, we own and/or manage 25 websites which are customized to provide our niche users, including active, reserve and retired military, law enforcement, first responders and other public safety employees with products, information and news that we believe may be of interest to them. We also own an ad network which was acquired in September 2017. We have placed a particular emphasis on providing quality content on our websites to drive traffic increases. Our websites feature timely, proprietary and aggregated content covering current events and a variety of additional subjects targeted to the specific demographics of the individual website. Our business strategy requires us to continue to provide this quality content to our niche markets and to grow our business, operations and revenues both organically and through acquisitions as we expand our business past the original niche markets into mainstream digital audiences.We have invested in our infrastructure and acquisitions and placed an emphasis on providing quality content on our websites necessary to drive traffic to our websites. With the exit from our E-Commerce businesses effective December 31, 2018, we believe that we have advanced our transition to becoming a digital media company. We believe that with this action, our business, results of operations and financial condition will be positively impacted in the long term.Our advertising network matches advertisers with publishers. It offers video, display, mobile and native ads, providing focused promotion for advertisers of products and services while helping websites monetize their visitor traffic. Our advertising exchange platform is being developed to be a trading desk for publishers and advertisers where they will be able to log-in and choose from various features. Publishers will be able to select a variety of advertising units for their video, mobile, display and native advertisements and also have the ability to create their own unique advertising formats. Advertisers will be able to choose where their advertisements will be seen using our filters or by connection directly with the publisher through our platform.We have grown our business through sales efforts including:●establishing favorable contract terms with many key advertising demand parties;●supply relationships with approximately 200 digital publishers;●over 50 RTB clients;●proprietary software to collect and report results for publisher clients;●ability and software to quickly and efficiently detect fraudulent traffic; and●highly scalable sales and ad operations functions.Bright Mountain Media Ad Network BusinessWhile more than 80%we are currently accessing third party RTB platforms, we are currently working on the development of our own proprietary RTB platform, display and video ad serving software, and header bidding technology, as we move to vertically integrate higher margin software products into our ad network business model. The platform, which is the pre-Alpha stage, is being developed for us by AdsRemedy, a third party consulting firm that provides support services to us.Our new platform is expected to have a significant impact on our revenues and its capabilities will include:●server integration with several ad exchanges, making for extremely quick ad deployments;●leading targeting technology, allowing advertisers to pinpoint their marketing efforts to reach various demographics across mobile, tablet, and desktop;●capable of handling any ad format, including video, display, and native ads;●ad serving and self-service features; and●ability for advertisers and publishers to conduct private deals.We believe that the exit from the E-Commerce business will have the following benefits during 2019 and beyond:●allow us to concentrate all our efforts on the Ad Network, advertising technology, and advertising software business; and●change the digital market for young male audiences and advertisers by being the first vertically integrated publisher/ad network in our demographic.Our StrategyThe exit from all of our E-commerce businesses at December 31, 2018 allows us to concentrate all of our resources to our best and fastest growing business opportunities.Our business strategy focuses on two primary elements:●first, the organic growth of our existing Ad Network and owned and operated websites.●second, the very selective acquisition of related businesses in our space that are generated from product sales,complimentary to our growth strategy.To implement this strategy, we intend to monetize our website traffic by attracting local, national and international advertisers, begin selling subscriptions to our websites and establishingto:●accelerate the organic growth of Bright Mountain AdNetwork.●leverage our Management and Acquisition Agreement with Spartan Capital described earlier in this prospectus to help locate and introduce companies in our space that will compliment our acquisition business strategy.Currently, in addition to our corporate website, www.brightmountainmedia.com, we own the following website properties which we have acquired or developed since 2013:● Advertisetothemilitary.com ● Militaryhousingrentals.com ·Advertisetothemilitary.com·Militarystarter.com·Bootcamp4me.com·Popularmilitary.com·Bootcamp4me.org·Sargeslist.com·Brightwatches.com·Teacheraffairs.com·Coastguardnews.com·Thebright.com·Fdcareers.com·Thebrightmail.com·Fireaffairs.com·Usmclife.com·Firefightingnews.com·Wardocumentaryfilms.com·Gopoliceblotter.com·Warisboring.com·JQPublicblog.com·Welcomehomeblog.com·Leoaffairs.com·Thebravestonline.com·Leofundme.com·Thebrightnetwork.com·Militaryhousingrentals.comWe also partner with a third party on twosix additional websites, havokjournal.com, a newsArticle107News.com, 24HourCampFire.com, Retail Salute, ChicagoFireWire.com, and information website targeted to active duty and veteran military, and 107News.com, a military humor and satire websites,yuuut.com, under a revenue sharing arrangement.Overarrangements.Discontinued OperationsHistorically we generated revenues from two segments, our advertising segment and our product sales segment. Revenues from the past three years we have experienced rapid visitor growth, both organically and through acquisitions. With 25 website properties in addition to our corporate website, annual visits toproduct sales segment included revenues from two of our websites have increased nearly 5,000% from approximately 840,000 in 2013 to more than 40,000,000 visits in 2015. While we will continue to add additional website properties, we believe that our visitor traffic has achieved sufficient critical mass to permit us to aggressively implement our strategy to monetizeoperate as e-commerce platforms, including Bright Watches and our traffic by:·launching the Bright Mountain Media AdNetwork, a programmatic advertising network similar to Google Ad Sense or the Advertising.com platform, to our niche demographics;·expanding internally or through outsourcing a sales force or call center to market direct ads to our websites and the launching of the Bright Mountain Media AdNetwork;·begin selling subscriptions to selective of our websites;·pursue local, national and international advertisers whose targets are our niche users; and·seek ancillary sources of revenues through new products and services such as lead sales and employment advertisements.Accordingly, we believe the three primary elements to increasing our revenues are:·launching the Bright Mountain Media AdNetwork to our niche demographics with either acquired or developed technology;·starting the sales and marketing initiatives and outreach to sell direct ads to our websites and recruit websites in our niche demographic to join the Bright Mountain Media AdNetwork; and·integrating and exposing our e-commerce efforts to our website traffic.We intend to create value for advertisers with a streamlined, simple advertising model that leverages our data, content and technology to connect advertisers with their target audience. To implement our strategy, we intend use the proceeds from this offering to:·engage additional sales associates to sell our advertising and to begin marketing the Bright Mountain Media AdNetwork to similar websites in the military, public safety and first responder niche;·add more content staff, including writers, graphic designers, videographers and social media personnel;·expand and improve our content by hiring, among others, former military and public safety individuals;·add IT, administration, sales support and advertising operation personnel;·align our company more closely with ad exchanges;·acquire additional websites and improve existing websites;·seek advertising network acquisitions; and·provide additional products and services for our users in an effort to increase our e-commerce sales.We currently use social media, such as YouTube, Twitter and Facebook, as additional distribution methods of our content. As the behavior of Internet consumers continues to change, distribution of our content via traditional methods such as our websites may become less effective, and new distribution strategies may need to be accelerated. Consumers are increasingly using social networking sites, such as Facebook and Twitter, to communicate and to acquire and disseminate information. As consumers migrate more towards social networks, we expect to continue to build social elements into our content in order to make them available on social networks. We also expect to begin expanding our content to include video and audio.We also believe in giving back to those who do so much for our country. We have made donations to the following charities:·Semper Fi Fund·Operation Homefront·Team Rubicon·Paradox Sports·American Military Partner Association·Special Operations Warrior Foundation·Hope for the Warriors·U.S. First Responders Association·Fisher House Foundation·Vetsville Cease Fire House·Toys for Tots·Connected Warriors·Badge of Honor Memorial Foundation·National Law Enforcement Officers Memorial·Blue Alert FoundationFund·Under The ShieldThe market and our demographicsOur niche market for the military and public safety sectors consists of a targeted U.S. demographic of in excess of 40 million users including their spouses, plus their parents and other direct family members, which could increase the U.S. targeted market to approximately 100 million users. We also believe there are another estimated 100 million military and public safety personnel and their families outside the U.S. The largest segments of the market are military veterans and retired firefighters and law enforcement. The following chart provides insight into our targeted demographics in the United States:![[bmtm_s1012.gif]](https://capedge.com/proxy/S-1/0001553350-16-002428/bmtm_s1012.gif)
Sources: (1) U.S. Bureau of Labor Statistics; (2) FBI; (3) National Fire Protection Association; (4) U.S. Department of Defense 2017 Budget; (5) U.S. Department of Defense 2014, Demographics Profile of the Military Community; (6) U.S. Department of Veterans Affairs Population Tables; and (7) National Survey of Veterans.As a homogeneous group, our user profile should be attractive to local, national and international companies whose advertising budgets are shifting from print media, radio and television to the Internet. We believe that the market for the military and public safety providers is fragmented, and that we have an opportunity to become a leading player in the market through growth, consolidation and the creation of the Bright Mountain Media AdNetwork which will be specifically targeted to our niche demographics.As a result of the consistent increase in both the overall site trafficBlack Helmet, as well as unique visitorsBright Watches’ retail location. During 2018 we began to our websites, we believe our company has reached sufficient critical mass to transition to a digital media company that generates most of its revenue from the sales of advertising on its websites. Together with revenues from our to-be-established Bright Mountain Media AdNetwork, we believe that this natural evolution of our model will permit us to concentrate our efforts on growing our highest profit opportunities through the leverage of our website portfolios and the growing Internet audience. This is reinforced with our belief that digital marketing and advertising channels will experience budget increases as traditional print and other channels are likely to see budget reductions.We do anticipate, however, a time lag between the increase in expenses and the increase in advertising revenues as we implement our business strategy.Current business and revenue streamsWe have several revenue streams generated directly from our websites. The revenue streams consist principally of product sales and advertising revenue, which is generated primarily through the display of paid listings as well as display advertisements appearing on our websites and subscriptions. We generate advertising revenue either directly from companies who pay us a monthly fee for advertising space, or by users “clicking” on website advertisements utilizing several ad network partners such as Google AdSense. We generate subscription revenues by the sale of access to career postings on one of our websites. The term of the subscriptions range from one month to 12 months and range in price from $8.95 to $77.00. Revenues are recognized, on a net basis, over the term of the subscription period. We generate product revenues by the sale of watches, clocks and apparel through our websites BrightWatches.com and Gopoliceblotter.com as well as through e-commerce distributor portals such as Amazon and eBay. Additionally, we expandedde-emphasize our product sales segment by addingas we placed more emphasis on our advertising segment. Management, prior to December 31, 2018, with the appropriate level of authority, determined to discontinue the operations of Black Helmet and Bright Watches effective December 31, 2018.The decision to exit all components of our product sales segment have resulted in these businesses being accounted for as discontinued operations. We recorded a retail locationloss, net of income taxes, of $1,092,750 in Delray Beach, FL in2018 for the fourth quarter of 2014. During the third quarter of 2016discontinued operations.Subsequent to December 31, 2018, we are expandingaggressively marketing the remaining Bright Watches’ inventory in an effort to liquidate such inventory as quickly as possible. In addition, in March 2018 we sold the assets which were used in our existing retail space at this locationBlack Helmet apparel E-Commerce business to provide additional retail and inventory space. We believe that having a retail presence has allowed us to expand our product lines.BrightWatches.com and Gopoliceblotter.com are both fully active web-based “stores” wherein shoppers can purchase a variety of products including watches, clocks and apparel. We maintain an inventory of watches and clocks. Customers that purchase products from Brightwatches.com pay us directly in a fully enabled payment and checkout process that permits payments for purchases using credit cards through the Internet-based payment processing service PayPal. Our watches and clocks are also available for purchase through eBay and Amazon. Fulfillment of our orders of watches and clocks are either handled directly by Amazon when purchases are made through it or by us for purchases made through eBay or BrightWatches.com. Customers that purchase products from Gopoliceblotter.com pay us directly in a fully enabled payment and checkout process that permits payments for purchases using credit cards through the Internet-based payment processing service Stripe. Our apparel products are also available on Amazon. Fulfillment of orders of apparel is either handled directly by Amazon when purchases are made through it, shipped directly by aunaffiliated third party who produces the apparel for us or shipped by us.Our strategyAs we transition to a digital media company, we continue to focus our efforts in the target markets of military, law enforcement, and first responders – groups known by many advertisers and brands as ‘our country’s heroes.’ Our business strategy is to provide quality content that focuses on all of these audience segments which we believe allows us to reach a deeper and broader niche demographic than our competitors.Our objective is to maintain and improve our position as a leading digital media company in our niche market, by, among other things:·hiring and contracting talented content creators;·expanding our website portfolio within our niche market organically and through acquisitions;·achieving a dominant market share of our ‘heroes’ audience segments in order to be a single source for advertisers and brands to connect with them; and·expanding our sales force and marketing efforts.A key element to our strategy is the establishment of the Bright Mountain Media AdNetwork, a programmatic advertising network. We believe this will allow us to substantially increase the size of our audience within our niche demographic that can be sold to advertisers and brands. Programmatic advertising networks are designed to help marketers and their agencies connect with consumers through digital media at moments when that connection is most likely to be influential and most likely to achieve the advertiser’s objectives. Programmatic buying is the automated purchase of digital advertising inventory through a combination of machine-based transactions, data and algorithms. Real time bidding, or “RTB,” a subset of programmatic buying, is the real-time purchase and sale of advertising inventory on an impression-by-impression basis on ad exchanges. Programmatic buying and RTB are emerging and growing trends in the buying and selling of digital advertising inventory. The recognition by advertisers that an increased use of programmatic buying and RTB systems may constitute an effective way to achieve their campaign goals and cost savings, and the recognition by digital media property owners that they may achieve greater returns from an increased use of programmatic buying and RTB systems.The key components of the Bright Mountain Media AdNetwork are expected to include:·the sale of all digital advertising inventory on Bright Mountain Media owned websites directly to brands and advertisers, as well as on ad exchanges which are online marketplaces where digital advertising spaces are bought and sold;·the sale of digital advertising inventory from similar web properties not owned by us directly to brands, advertisers and ad exchanges for which we will receive a commission;·software that will facilitate the sale of ad inventory as well as software that will deliver the paid-for advertising to all websites within the Bright Mountain Media AdNetwork;·the ability to leverage our combined audience size in the Bright Mountain Media AdNetwork to command higher paying advertising across our network of web properties;·the eventual expansion to represent websites beyond our initial niche scope to include broader demographic segments; and·expansion of "our heroes" demographic to include all men aged 18 to 50.We believe that the combination of our owned websites’ ad inventory with an ever-growing ad inventory from websites which we represent will uniquely position our company as the largest single source for brands and advertisers to reach these desired ‘hero’ audiences.The Bright Mountain Media AdNetwork is expected to market all the Bright Mountain Media owned advertising inventory together with similar websites in our demographic. We believe this strategy will create scale to attract interest from potential brands and advertisers, advertising networks and advertising exchanges. Simply put, the programmatic nature of this network will allow for:·first, selling the advertising inventory in real time at the highest possible price;·second, the program will interact with all the publishers in the Bright Mountain Media AdNetwork reporting impressions, ad fill rates, CPMs, click through rates, and estimated revenue; and·third, we plan to incorporate into this software a platform where advertisers can directly purchase on the Bright Mountain Media AdNetwork.We will also continue to seek strategic acquisitions of websites that are related to our core mission and niche demographic which, to date, have been instrumental to our growth strategy. We believe that all of the programs and efforts to develop organic website traffic, and bring users and consumers to our websites, will continue to be enhanced through the addition of strategic acquisitions of other Internet properties. We are committed to adding to our website portfolio in 2016 and beyond with additional Internet properties that will fit strategically into our business objectives, so that we keep scaling up our website portfolio and increase our internet reach and traffic. While we will use a portion of the proceeds from this offering for acquisitions, we hope to use our stock as currency, in whole or in part, for acquisitions, particularly as we begin discussions with various advertising networks.As we increase and expand our website portfolio and technology base, we believe that will realize cost and operating efficiencies by consolidating sales, technical and administrative support, as well as shared content and overhead costs.Acquisition strategyOur acquisition strategy is a reflection of our primary goals and is a basic tool to help accelerate the achievements of our core objectives which are:·growth of visitor traffic in our core demographics;·growth of our service revenue; and·leveraging our visitor traffic to further the growth of our e-commerce segment.Once we acquire a website property, we improve the look and feel of the website to increase its appeal to our audience and add additional content targeted to the specific demographics of the acquired website property. In many instances we retain the services of the prior operator of the acquired website property for a transition period following the transaction to ensure a seamless integration into the Bright Mountain family of websites. It has been our experience that the improvements we make to acquired website properties have significantly increased historic website traffic to these sites.We expect to continue our acquisition strategy of website properties following the completion of this offering. This strategy will continue to be:·only make acquisitions that fill strategic objectives;·concentrate our acquisition strategy on attractively valued targets;·make prudent use of our common stock as a currency;·improve and redesign content of acquired websites;·use acquisitions to accelerate scaling up to achieve core objectives;·as acquisitions become larger, look to add managers; and·as we become a larger company we expect acquisitions to become more significant and strategic.Recent developmentsIn January 2016 we closed the acquisition of the www.warisboring.com website and all content and rights associated therewith pursuant to the terms and conditions of the Website Asset Purchase Agreement dated December 4, 2015 with War Is Boring, Ltd. Co. and its principal David Axe. The aggregate purchase price of the assets was $250,000,$175,000, of which $100,000$20,000 was paid at closing and the balance of $150,000 will be paid monthly in an amount equal to 30% of the net revenues from the website, when collected, with the total amount of the earn out to be paid by January 4, 2019. We also entered into a Website Management Services Agreement with Mr. Axe pursuant to which we engaged him to act as website manager for the www.warisboring.com website utilizing the War Is Boring, Ltd. content group. Underis payable under the terms of this agreement we agreed to pay Mr. Axe a monthly feepromissory note in the principal amount of $5,000$155,000 and pay the associated feesbearing interest at 15% per annum. The note is secured by a guarantee of the content group. The initial termprincipal of the agreement is for three yearspurchaser.Intellectual PropertyWe currently rely on a combination of trade secret laws and may be renewed for an additional one year period uponrestrictions on disclosure to protect our intellectual property rights. Our success depends on the mutual consentprotection of the parties.proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our software documentation and other proprietary information. We own various service marks and trademarks, which are registered with the United States Patent and Trademark Office including the following:“THE BRIGHT NETWORK” Design and Service Mark;“THEBRIGHT.COM” Logo Trade Mark and Service Mark;“BRIGHT MOUNTAIN” Service Mark; andIn addition to www.brightmountainmedia.com and www.thebright.com, we own multiple domain names that we may terminate the agreement upon 30 days’ noticeor may not operate in the event Mr. Axe should engage in willful misconduct as defined in the agreement.Key relationshipsWe purchase a substantial amount of the products we sell through our websites from two vendors: Citizens Watch Company of America, Inc., and Bulova Corporation. During the first six months of 2016, purchases from Citizens accounted for 39% and purchases from Bulova accounted for 17% of the total products purchased. These two vendors accounted for 34% and 26%, respectively, of total products purchased in 2015 and 51% and 28%, respectively, of total products purchased in 2014.We sell many of our products through various e-commerce distribution portals, which include Amazon and eBay. During the first six months of 2016, these two distributor portals accounted for 91% and 5%, respectively of our total revenue. During 2015, these two portals accounted for 88% and 6%, respectively, of our total sales, and during 2014, these two portals accounted for 86% and 13%, respectively of our total product sales. A substantial amount of payments for our products sold are processed through PayPal and Stripe.We offer display advertising on our websites either through direct advertisements or through numerous third party providers, including Google AdSense. Google AdSense is a free service, which displays text or image ads that correspond to the keywords of the content of the page on which the ad is shown. Each time a user of a host website clicks on an AdSense advertisement, Google provides a flat fee to the operators of that website on behalf of the applicable advertiser. Approximately 23% of our total revenue in the first six months of 2016 from services came from Google AdSense. Approximately 36% of our 2015 total revenue from services came from Google AdSense as compared to 49% in 2014.TechnologyOne of our websites is hosted on Dreamhost, five of our websites are hosted on Media Temple, and the remaining company-owned websites are hosted with WPEngine. Our top technical priority is the fast and reliable delivery of pages and ads to our users. Our systems are designed to handle traffic and network growth. We rely on multiple tiers of redundancy/failover and third-party content delivery network to achieve our goal of 24 hours, seven-days-a-week Website uptime. Regular automated backups protect the integrity of our data. Our servers are continuously monitored by numerous third-party and open-source monitoring and alerting tools.
We believe that we can effectively compete in the marketplace for the following reasons:
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Praetorian Digital.
Intellectual property
We currently rely on
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(1)
trademarks and service marks are renewable for additional 10-year periods.
In addition to www.brightmountainmedia.com and www.thebright.com, we own multiple domain names that we may or may not operate in the future. However, as with phone numbers, we do not have and cannot acquire any property rights in an Internet address. The regulation of domain namesself-regulatory bodies in the United States and abroad that focus on consumer protection or data privacy. In particular, this scrutiny has focused on the use of cookies and other technology to collect or aggregate information about Internet users’ online browsing activity. Because we, and our clients, rely upon large volumes of such data collected primarily through cookies, it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices, including providing consumers with notice of the types of data we collect and how we use that data to provide our services.
Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management resources and other factors.
Employees
Government regulation
Aspects of the digital marketing and advertising industry and how our business operates are highly regulated. We are subject to a number of domestic and, to the extent our operations are conducted outside the U.S., foreign laws and regulations that affect companies conducting business on the Internet and through other electronic means, many of which are still evolving and could be interpreted in ways that could harm our business. In particular, we are subject to rules of the Federal Trade Commission, or “FTC,” the Federal Communications Commission, or “FCC,” and potentially other federal agencies and state laws related to our advertising content and methods, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or “CAN-SPAM Act,” which establishes certain requirements for commercial electronic mail messages and specifies penalties for the transmission of commercial electronic mail messages that follow a recipient’s opt-out request or are intended to deceive the recipient as to source or content, and federal and state regulations covering the treatment of member data that we collect from endorsers.
U.S. and foreign regulations and laws potentially affecting our business are evolving frequently. We currently have not developed our internal compliance program nor do we have policies in place to monitor compliance. Instead, we rely on the policies of our publishing partners. If we are unable to identify all regulations to which our business is subject and implement effective means of compliance, we could be subject to enforcement actions, lawsuits and penalties, including but not limited to fines and other monetary liability or injunction that could prevent us from operating our business or certain aspects of our business. In addition, compliance with the regulations to which we are subject now or in the future may require changes to our products or services, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our services. Any such action could have a material adverse effect on our business, results of operations and financial condition.
The FTC adopted “Guides Concerning the Use of Endorsements and Testimonials in Advertising” on October 5, 2009. These guides recommend that advertisers and publishers clearly disclose in third-party endorsements made online, such as in social media, if compensation was received in exchange for said endorsements. Because some of our marketing campaigns entail the engagement of consumers to refer other consumers in their social networks to view adds or take action, and both we and the consumer may earn cash and other incentives, any failure on our part to comply with these guides may be damaging to our business. We currently do not take any steps to monitor compliance with these guides. In the event of a violation, the FTC could potentially identify a violation of the guides, which could subject us to a financial penalty or loss of endorsers or advertisers.
In the area of information security and data protection, many states have passed laws requiring notification to users when there is a security breach for personal data, such as the 2002 amendment to California’s Information Practices Act, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. The costs of compliance with these laws may increase in the future as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.
We are also subject to federal, state, and foreign laws regarding privacy and protection of user data. Any failure by us to comply with these privacy-related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of data protection laws, and their application to the Internet is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner that is not consistent with our current data protection practices. Complying with these varying requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our members’ privacy and data could result in a loss of member confidence in our services and ultimately in a loss of members and customers, which could adversely affect our business.
Legal proceedings
We are not a party to any material pending legal proceedings.
History
Board
The following table providesNote 4 of the notes to our audited consolidated financial statements appearing later in this prospectus.
| Name | Age | Positions | ||
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W. Kip Speyer |
| Chief Executive Officer, President and Chairman of the Board, principal financial and accounting officer | ||
Todd F. Speyer |
| Vice President, Digital; Director | ||
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Charles H. Lichtman |
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Richard Rogershas been a member of our board of directors since July 2013. For more than the past five years, Mr. Rogers has been the president and chief executive officer of On Course Insurance, Inc., which provides custom insurance analysis to create the appropriate customer solution for its clients. As an independent agency, On Course Insurance represents multiple insurance carriers. Mr. Rogers has been in the insurance industry since 1985. Mr. Rogers is a graduate of West Chester University and earned his Bachelor of Science Degree in pre-law in 1978. Mr. Rogers' business experience, with a concentration in a regulated industry, was the factor considered by our board of directors in concluding that he should be serving as a director of our company.
Randolph Pohlman, PhD.,has served as a member of our board of directors since March 2015. He is the Dean Emeritus and adjunct Professor of the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University, the largest independent institution of higher education in the State of Florida and among the top 20 largest independent institutions nationally. He served as the Dean of the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University from 1995 through 2009. Prior to his arrival at Nova Southeastern University, Dr. Pohlman was a senior executive at Koch Industries, Inc., the second largest privately held company in the United States. He was recruited to Koch Industries, Inc. via Kansas State University, where for more than 10 years, he served in a variety of administrative and faculty positions, including holding the L.L. McAninch Chair of Entrepreneurship and Dean of the College of Business. Dr. Pohlman also served as a Visiting Research Scholar at the University of California, Los Angeles, and was a member of the Executive Education Advisory Board of the Wharton School of the University of Pennsylvania. From March 2012 until September 2014 Dr. Pohlman was a member of the board of directors of As Seen On TV, Inc. Dr. Pohlman served in the U.S. Air Force from 1968 to 1973, achieving the rank of Captain. Dr. Pohlman's extensive business experience and service on other public company boards were factors considered by our board of directors in concluding that he should be serving as a director of our company.
Leadership structure, independence of directors and risk oversight
Mr. W. Kip Speyer serves as both our Chief Executive Officer and Chairman of our board of directors. Messrs. Rogers, Davenport and Lichtman and Dr. Pohlman are considered independent directors within the meaning of Rule 5605 of the NASDAQ Marketplace Rules, but none are considered a “lead” independent director.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of risks we face, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management process designed and implemented by management are adequate and functioning as designed. To do this, the chairman of the board meets regularly with management to discuss strategy and the risks facing our company. Senior management attends the board meetings and is available to address any questions or concerns raised by the board on risk management and any other matters. The chairman of the board and independent members of the board work together to provide strong, independent oversight of our company’s management and affairs through its standing committees and, when necessary, special meetings of independent directors.
Board committees
In May 2015 our board of directors established a standing Audit Committee and a standing
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Audit Committee
The Audit Committee assists the board in fulfilling its oversight responsibility relating to:
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The Audit Committee is composed of three directors, each of whom has been determined by the board of directors to be independent within the meaning of Rule 5605 of the NASDAQ Marketplace Rules. The board has determined that Dr. Pohlman qualifies as an “audit committee financial expert” as defined by the SEC.
Compensation Committee
The Compensation Committee assists the board in:
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The Compensation Committee is charged with ensuring that our compensation programs are competitive, designed to attract and retain highly qualified directors, officers and employees, encourage high performance, promote accountability and assure that employee interests are aligned with the interests of our shareholders. The Compensation Committee is composed of two directors, both of whom have been determined by the board of directors to be independent within the meaning of Rule 5605 of the NASDAQ Marketplace Rules.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee:
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The purpose of the Corporate Governance and Nominating Committee is to assess the performance of the board and to make recommendations to the board from time to time, or whenever it shall be called upon to do so, regarding nominees for the board and to ensure our compliance with appropriate corporate governance policies and procedures. The Corporate Governance and Nominating Committee is composed of two directors, both of whom have been determined by the board of directors to be independent within the meaning of Rule 5605 of the NASDAQ Marketplace Rules.
Shareholder nominations
Shareholders who would like to propose a candidate may do so by submitting the candidate’s name, resume and biographical information to the attention of our Corporate Secretary. All proposals for nomination received by the Corporate Secretary will be presented to the Corporate Governance and Nominating Committee for appropriate consideration. It is the policy of the Corporate Governance and Nominating Committee to consider director candidates recommended by shareholders who appear to be qualified to serve on our board of directors. The Corporate Governance and Nominating Committee may choose not to consider an unsolicited recommendation if no vacancy exists on the board of directors and the committee does not perceive a need to increase the size of the board of directors. In order to avoid the unnecessary use of the Corporate Governance and Nominating Committee’s resources, the committee will consider only those director candidates recommended in accordance with the procedures set forth below. To submit a recommendation of a director candidate to the Corporate Governance and Nominating Committee, a shareholder should submit the following information in writing, addressed to the Corporate Secretary of Bright Mountain at our main office:
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Code of Ethics and Conduct
We have adopted a Code of Ethics and Conduct which applies to our board of directors, our executive officers and our employees. The Code of Ethics and Conduct outlines the broad principles of ethical business conduct we adopted, covering subject areas such as:
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A copy of our Code of Ethics and Conduct is available on our website at www.brightmountainmedia.com. We will mail a copy of our Code of Ethics and Conduct, without charge, to any person desiring a copy, by written request to us at our principal offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487.
Limitation on liability
The Florida Business Corporation Act permits the indemnification of directors, employees, officers and agents of Florida corporations. Our amended and restated articles of incorporation and our amended and restated bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Florida Business Corporation Act.
The provisions of the Florida Business Corporation Act that authorize indemnification do not eliminate the duty of care of a director, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Florida law. In addition, each director will continue to be subject to liability for:
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The statute does not affect a director’s responsibilities under any other law, such as the federal securities laws. The effect of the foregoing is to require our company to indemnify our officers and directors for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
Insofar as the limitation of, or indemnification for, liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling us pursuant to the foregoing, or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such limitation or indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Director compensation
In August 2016 our board of directors adopted a compensation policy for our independent directors under which directors will receive an option grant for each board meeting, of an option to purchase 2,500 shares for meetings attended in person or an option to purchase 2,000 shares for meetings attended telephonically. All option grants will be made at fair market value. Committee members do not receive any additional compensation for committee membership.
During 2015 we did not have established standard compensation arrangements for our non-employee directors, and the compensation payable to each non-employee director for services on the board was determined by the board. From time to time we issued compensatory stock options to our independent directors. The following table provides information concerning the compensation paid to our independent directors for their services as members of our board of directors for 2015. The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses which we may have paid:
Director compensation
Name |
| Fees earned or paid in cash ($) |
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| All other compensation ($) |
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Richard Rogers |
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Todd Davenport |
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Charles H. Lichtman |
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| 22,392 |
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| 22,392 |
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Dr. Randolph Pohlman |
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| 17,224 |
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| 17,224 |
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The following table summarizes all compensation recorded by us in the past two years for:
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Summary Compensation Table
Name and principal position |
| Year |
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| Option Awards ($) |
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| No equity incentive plan compensation ($) |
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| Non-qualified deferred compensation earnings ($) |
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| All other compensation ($) |
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W. Kip Speyer, |
| 2015 |
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| 94,000 |
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| 94,000 |
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Chief Executive Officer |
| 2014 |
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| 70,833 |
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| 5,000 |
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| 75,833 |
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Annette Casacci, |
| 2015 |
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| 76,107 |
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| 76,107 |
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Chief Financial Officer(1) |
| 2014 |
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| 71,660 |
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(1)
Ms. Casacci served
| Name and principal position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | No equity incentive plan compensation ($) | Non-qualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |
| W. Kip Speyer, | 2018 | 165,000 | 41,250 | — | — | — | — | 2,400 | 208,650 | |
| Chief Executive Officer | 2017 | 165,000 | — | 1,200 | — | — | — | — | 166,250 | |
| Todd Speyer | 2018 | 100,650 | — | — | — | — | — | — | 100,650 | |
| Vice President, digital | 2017 | 97,000 | — | 1,200 | — | — | — | — | 98,200 |
In June 2016, Dennis Healey joined our company as Chief Financial Officer. Mr. Healey, who is not a party to an employment agreement, receives an annual base salary of $85,000 and was granted options to purchase 100,000 sharesequity incentive plan awards for each of our common stock, vesting 25,000 per year, with an exercise price equalother executive officers outstanding as of $0.85 per share, as additional compensation.
December 31, 2018:
OPTION AWARDS | STOCK AWARDS | ||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
| W. Kip Speyer | — | — | — | — | — | — | — | — | — |
| Todd Speyer | 180,000 | 0 | 0 | 0.14 | 1/3/21 | 0 | 0 | 0 | 0 |
75,000 | 25,000 | 0 | 0.65 | 10/27/25 | 0 | 0 | 0 | 0 | |
$100,000, a bonus of 40% of his then base salary; (iii) for annual revenues of $4,000,0001 to $4,500,000 and a minimum EBITDA of $150,000, a bonus of 65% of his then base salary; and (iv) for annual revenues of $4,500,001 or greater and a minimum EBITDA of $175,000, a bonus of 80% of this then base salary.
The employment agreement contains customary non-compete and confidentiality provisions. We have also agreed to indemnify Mr. Speyer pursuant to the provisions of our amended and restated articles of incorporation and amended and restated by-laws.
Outstanding equity awards
fair market value. Committee members do not receive any additional compensation for committee membership.
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| OPTION AWARDS |
| STOCK AWARDS |
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Name |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
| Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
| Option Exercise Price ($) |
| Option Expiration Date |
| Number of Shares or Units of Stock That Have Not Vested |
| Market Value of Shares or Units of Stock That Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
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W. Kip Speyer |
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Annette Casacci(1) |
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| 90,000 |
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| 0.2778 |
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| 6/17/2023 |
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On June 24, 2016, the effective date of Ms. Casacci's resignation, the vesting dates of all previously granted but unvested options accelerated to June 24, 2016 and all options held by Ms. Casacci remain exercisable through their respective original terms.
Securities authorized for issuance under equity compensation plans
The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our shareholders as of December 31, 2015.
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
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| Weighted average exercise price of outstanding options, warrants and rights |
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| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
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Plans approved by our shareholders: |
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2011 Stock Option Plan |
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| $ | 0.20 |
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2013 Stock Option Plan |
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| 766,000 |
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| $ | 0.49 |
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2015 Stock Option Plan |
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| 35,000 |
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| $ | 0.65 |
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| 965,000 |
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Plans not approved by shareholders: |
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| n/a |
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| n/a |
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Our stock option plans
We currently have three stock option plans: our 2011 Stock Option Plan, our 2013 Stock Option Plan and our 2015 Stock Option Plan.
On April 20, 2011, our board of directors for 2018. The information in the following table excludes any reimbursement of out-of-pocket travel and majority shareholder adopted the 2011 Stock Option Planlodging expenses which we may have paid:
| Name | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other Compensation($) | Total ($) |
| Richard Rogers | 4,500 | — | — | — | — | — | 4,500 |
| Todd Davenport | 5,000 | — | — | — | — | — | 5,000 |
| Charles Lichtman | 2,500 | — | — | — | — | — | 2,500 |
On April 1, 2013, our board of directors. Messrs. Rogers, Davenport and Lichtman are considered independent directors within the meaning of the NYSE American Company Guide, but none are considered a “lead” independent director.
Onaffairs through its standing committees and, when necessary, special meetings of independent directors.
Director | Audit Committee | Compensation Committee | Corporate Governance and Nominating Committee |
| Charles H. Lichtman | ✓ | ✓ | |
| Todd Davenport | ✓ | ✓ | ✓ |
| Richard Rogers | ✓ |
The purposeaddress along with a current written statement from the record holder of the plansshares that reflects the recommending person’s beneficial ownership of our common stock; and
Each plan also contains a change of control provision that provides upon a “Change of Control” where our company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Compensation Committee determines otherwise, all outstanding options that are not exercised shall be assumed by, or replaced with comparable options or rights by the surviving corporation (or a parent of the surviving corporation), and other outstanding grants shall be converted to similar grants of the surviving corporation (or a parent of the surviving corporation). In the event of a Change of Control, the Compensation Committee may, but shall not be obligated to, take any of the following actions with respect to any criminal action or all outstanding grants:
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Insofar as the limitation of, | |
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Any surrender, termination or settlement will take place asindemnification for, liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling us pursuant to the foregoing, or otherwise, we have been advised that, in the opinion of the date of the Change of ControlSecurities and Exchange Commission, such limitation or such other dateindemnification is against public policy as the Compensation Committee specifies. The Committee shall have no obligation to take any of the foregoing actions, and,expressed in the absence of any such actions, outstanding grants shall continue in effect according to their terms. For the purpose of the plans, “Change of Control” means:
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The consummation of this offering will not trigger the Change of Control provisions in these plans.
We were not a party to any related party transactions during the last two years or the subsequent interim period, other than the purchase of our securities by members of our board of directorsSecurities Act and a principal shareholder as described in the notes to our consolidated financial statements appearing elsewhere in this prospectus, which such purchases were on the same terms and conditions as made available to unaffiliated third parties in the various private offerings.
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| Amount and Nature of |
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| % of Class |
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Name of Beneficial Owner |
| Beneficial Ownership |
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| Prior to Offering |
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| After the Offering |
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W. Kip Speyer |
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| 22,461,880 |
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| 50.6 | % |
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| [___] | % |
Todd F. Speyer(1) |
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| 720,400 |
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| 1.6 | % |
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| [___] | % |
Dennis W. Healey(2) |
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| — |
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| — |
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Richard Rogers(3) |
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| 451,000 |
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| 1.0 | % |
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| [___] | % |
Todd Davenport(4) |
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| 90,000 |
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| ≤1 | % |
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| [___] | % | |
Charles H. Lichtman(5) |
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| 1,256,037 |
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| 2.8 | % |
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| [___] | % |
Randolph Pohlman, PhD(6) |
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| 50,000 |
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| ≤1 | % |
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| [___] | % | |
All directors and executive officers as a group (seven persons)(1)(2)(3)(4)(5)(6) |
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| 25,029,317 |
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| 56.0 | % |
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| [___] | % |
Andrew A. Handwerker(7) |
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| 8,810,388 |
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| 19.8 | % |
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| [___] | % |
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | % of Class Before the Offering | % of Class After the Offering |
W. Kip Speyer (1) | 29,324,602 | 41.2% | 34.2% |
Todd F. Speyer (2) | 796,500 | 1.2% | 1.0% |
Richard Rogers (3) | 637,000 | 1.0% | 0.8% |
Todd Davenport (4 | 126,500 | 0.2% | 0.2% |
Charles H. Lichtman (5) | 1,407,537 | 2.2% | 1.8% |
All directors and executive officers as a group (five persons) (1)(2)(3)(4)(5) | 32,292,139 | 45.0% | 37.4% |
Andrew A. Handwerker (6) | 9,560,388 | 14.9% | 12.2% |
a conversion price of $0.40 per share.
options.
options.
options.
options.
The number of shares of common stock beneficially owned by Dr. Pohlman includes 10,000 shares underlying vested stock options but excludes 90,000 shares underlying options which have not yet vested.
(7)
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described below. the 10% Series A convertible preferred stock includes: 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; OTCQB on April 16, 2019, equaled approximately $59,950,000. his or her shares without any volume limitations; an affiliate, however, can sell such number of shares within any three-month period as does not exceed the greater of: sale. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSPreferred stock purchasesDuring 2017, Mr. W. Kip Speyer, our Chairman and Chief Executive Officer, purchased an aggregate of 1,250,000 shares of our 10% Series E Convertible Preferred Stock at a purchase price of $0.40 per share. We used the proceeds from these sales for working capital.During 2017, Mr. Richard Rogers, a member of our board of directors, purchased an aggregate of 125,000 shares of our 10% Series E Convertible Preferred Stock at a purchase price of $0.40 per share. We used the proceeds from this sale for working capital.During 2018, Mr. Speyer purchased an aggregate of 1,125,500 shares of our 10% Series E Convertible Preferred Stock at a purchase price of $0.40 per share. We used the proceeds from these sales for working capital.In 2018 and 2017 we paid cash dividends on these outstanding shares of our 10% Series E Convertible Preferred Stock and the three sub-series of our Series F Convertible Preferred Stock described below of $83,232 and $29,707, and $11,303 to Mr. Speyer and Mr. Rogers, respectively.Note Exchange AgreementFrom time to time Mr. Speyer lent us funds for working capital under the terms of various convertible promissory notes. On November 7, 2018 we entered into a Note Exchange Agreement with Mr. Speyer pursuant to which we exchanged:●$1,075,000 principal amount and accrued but unpaid interest due Mr. Speyer under 12% Convertible Promissory Notes maturing between September 26, 2021 and April 10, 2022 for 2,177,233 shares of our newly created Series F-1 Convertible Preferred Stock in full satisfaction of those notes;●$660,000 principal amount and accrued but unpaid interest due Mr. Speyer under 6% Convertible Promissory Notes maturing between April 19, 2022 and July 27, 2022 for 1,408,867 shares of our newly created Series F-2 Convertible Preferred Stock in full satisfaction of those notes; and●$300,000 principal amount and accrued but unpaid interest due Mr. Speyer under 10% Convertible Promissory Notes maturing between August 1, 2022 and August 30, 2022 for 757,917 shares of our newly created Series F-3 Convertible Preferred Stock in full satisfaction of those notes.Convertible notesDuring November 2018, we issued and sold Mr. Speyer two five year unsecured convertible notes in the aggregate principal amount of $80,000. These notes, which are convertible at the option of the holder at any time at a conversion price of $0.40 per share, will automatically convert into shares of our common stock on the fifth anniversary of the date of issuance. We used the proceeds from these notes for working capital.Our authorized capital is 324,000,000 shares of common stock, par value $0.01 per share, and 20,000,000 shares of blank check preferred stock, par value $0.01 per share. We have previously designated four series2,000,000 shares of the preferred stock consisting ofas 10% Series A convertible preferred stock, 2,500,000 shares of the preferred stock as 10% Series B convertible preferred stock, 10% Series CE convertible preferred stock and 10%an aggregate of 4,344,017 shares in the various sub-series of Series D convertible preferred stock. At August 18, 2016, there were 44,387,131 shares of common stock and 100,000 shares of 10% Series A convertibleF preferred stock issued and outstanding.Common stockHolders of common stock are entitled to one vote for each share on all matters submitted to a shareholder vote. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of our liquidation, dissolution or winding up, subject to the preferences of any shares of our preferred stock which may then be outstanding, each outstanding share entitles its holder to participate in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock.Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions for the common stock. The rights of the holders of common stock are subject to any rights that may be fixed for holders of preferred stock, when and if any preferred stock is authorized and issued. All outstanding shares of common stock are duly authorized, validly issued, fully paid and non-assessable.Preferred stockOur board of directors, without further shareholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of theAt April 15, 2019 there were 64,248,864 shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. Our board of directors may authorize the issuance of preferred stock, which ranks senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our board of directors can fix limitations and restrictions, if any, upon the payment of dividends on both classes of our common stock to be effective while any shares ofissued and outstanding.Preferred stock10% Series A convertible preferred stock are outstanding.As set forth above, we have previously designated four series of preferred stock, including:·2,000,000 shares of 10% Series A convertible preferred stock;·1,000,000 shares of 10% Series B convertible preferred stock;·2,000,000 shares of 10% Series C convertible preferred stock; and·2,000,000 shares of 10% Series D convertible preferred stock.The designations, rights and preferences of each series of our preferred stock is as follows:·●the shares have no voting rights, except as may be provided by Florida law;●the stock has a stated value of $0.50 per share and ranks senior to all other classes of our securities;●in the event of a liquidation or winding up of our company, the holders of the 10% Series A convertible preferred are entitled to a liquidation preference equal to a return of the capital invested;●the shares will be entitled to a 10% dividend, payable in shares of our common stock, at the rate of one share of common stock for each 10 shares of 10% Series A convertible preferred stock, payable annually on the 10th business day of January;●the shares of 10% Series A convertible preferred stock are convertible into shares of our common stock on a one for one basis at the option of the holder, subject to automatic conversion by us upon either the five year anniversary of the date of issuance or in the event of a change of control of our company as defined in the designations. The conversion formula is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events; and●the shares are redeemable at our option upon 20 days’ notice for an amount equal to the amount of capital invested.On April 15, 2019 there were no voting rights, except as may be provided by Florida law;·the stock has a stated value of $0.50 per share and ranks senior to all other classes of our securities;·in the event of a liquidation or winding up of our company, the holders of the 10% Series A convertible preferred are entitled to a liquidation preference equal to a return of the capital invested;·the shares will be entitled to a 10% dividend, payable in shares of our common stock, at the rate of one share of common stock for each 10 shares of 10% Series A convertible preferred stock, payable annually on the 10th business day of January;·the shares of 10% Series A convertible preferred stock are convertible into shares of our common stock on a one for one basis at the option of the holder, subject to automatic conversion by us upon either the five year anniversary of the date of issuance or in the event of a change of control of our company as defined in the designations. The conversion formula is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events; and·the shares are redeemable at our option upon 20 days’ notice for an amount equal to the amount of capital invested.On August 17, 2016 we had 1,900,000 shares of our 10% Series A convertible preferred stock outstanding. On August 18, 201610% Series E convertible preferred stock●the shares have no voting rights, except as may be provided by Florida law;●the stock has a stated value of $0.50 per share and ranks senior to all other classes of our securities, except for our 10% Series A convertible preferred stock;●in the event of a liquidation or winding up of our company, the holders of 1,800,000the 10% Series E convertible preferred stock are entitled to a liquidation preference equal to a return of the capital invested;●the shares pay a 10% cash dividend, payable monthly as may be permitted under Florida law out of those shares converted funds legally available therefor;●the shares of 10% Series A convertible preferred stock including accrued but unpaid dividends on those shares into an aggregate of 1,908,673 shares of our common stock.10% Series B convertible preferred stock·the shares have no voting rights, except as may be provided by Florida law;·the stock has a stated value of $0.50 per share and ranks senior to all other classes of our securities, except for our 10% Series A convertible preferred stock;·in the event of a liquidation or winding up of our company, the holders of the 10% Series B convertible preferred stock are entitled to a liquidation preference equal to a return of the capital invested;·the shares will be entitled to a 10% dividend, payable in shares of our common stock, at the rate of one share of common stock for each 10 shares of 10% Series B convertible preferred stock, payable annually on the 10th business day of January;·the shares of 10% Series BE convertible preferred stock are convertible into shares of our common stock on a one for one basis at the option of the holder, subject to automatic conversion by us upon either the five year anniversary of the date of issuance or in the event of a change of control of our company as defined in the designations. The conversion formula is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events; and·the shares are redeemable at our option upon 20 days’ notice for an amount equal to the amount of capital invested.At August 17, 2016 we had 1,000,000 shares of 10% Series B convertible preferred stock outstanding. On August 18, 2016 the holder of those shares converted the outstanding shares of 10% Series B convertible preferred stock together with accrued but unpaid dividends on those shares into an aggregate of 1,060,375 shares of our common stock.10% Series C convertible preferred stock·the shares have no voting rights, except as may be provided by Florida law;·the stock has a stated value of $0.50 per share and ranks senior to all other classes of our securities, except for our 10% Series A convertible preferred stock and our 10% Series B convertible preferred stock;·in the event of a liquidation or winding up of our company, the holders of the 10% Series C convertible preferred stock are entitled to a liquidation preference equal to a return of the capital invested;·the shares will be entitled to a 10% dividend, payable in shares of our common stock, at the rate of one share of common stock for each 10 shares of 10% Series C convertible preferred stock, payable annually on the 10th business day of January;·the shares of 10% Series C convertible preferred stock are convertible into shares of our common stock on a one for one basis at the option of the holder, subject to automatic conversion by us upon either the five year anniversary of the date of issuance or in the event of a change of control of our company as defined in the designations. The conversion formula is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events; and·the shares are redeemable at our option upon 20 days’ notice for an amount equal to the amount of capital invested.At August 17, 2016 we had 1,800,000 shares of 10% Series C convertible preferred stock outstanding. On August 18, 2016 the holders of those shares converted the outstanding shares of 10% Series C convertible preferred stock together with accrued but unpaid dividends on those shares into an aggregate of 1,908,675 shares of our common stock.10% Series D convertible preferred stock·the shares have no voting rights, except as may be provided by Florida law;·the stock has a stated value of $0.50 per share and ranks senior to all other classes of our securities, except for our 10% Series A convertible preferred stock, our 10% Series B convertible preferred stock and our 10% Series C convertible preferred stock;·in the event of a liquidation or winding up of our company, the holders of the 10% Series D convertible preferred stock are entitled to a liquidation preference equal to a return of the capital invested;·the shares will be entitled to a 10% dividend, payable in shares of our common stock, at the rate of one share of common stock for each 10 shares of 10% Series D convertible preferred stock, payable annually on the 10th business day of January;·the shares of 10% Series D convertible preferred stock are convertible into shares of our common stock on a one for one basis at the option of the holder, subject to automatic conversion by us upon either the five year anniversary of the date of issuance or in the event of a change of control of our company as defined in the designations. The conversion formula is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events; and·the shares are redeemable at our option upon 20 days’ notice for an amount equal to the amount of capital invested.At August 17, 2016 we had 500,000 shares of 10% Series D convertible preferred stock outstanding. On August 18, 2016 the holder of those shares converted the outstanding shares of 10% Series D convertible preferred stock together with accrued but unpaid dividends on those shares into an aggregate of 530,187 shares of our common stock.We have no present intent to issue any additional shares of any series of our preferred stock. We expect to file an amendment to our amended and restated articles of incorporation returning all the previously designated series of 10% Series B convertible preferred stock, 10% Series C convertible preferred stock and 10% Series D convertible preferred stock to the status of authorized but undesignated blank check preferred. At such time as the remaining 100,000 shares of 10% Series A convertible stock are converted, we expect to file an amendment to our amended and restated articles of incorporation returning all the designated series of 10% Series A convertible preferred stock to the status of authorized but undesignated blank check preferred.Stock optionsAs of June 30, 2016, there are issued and outstanding stock options to purchase 1,847,000 shares of common stock, of which 1,327,000 are exercisable, with a weighted average exercise price of $0.28 per share.Warrants to be Issued in this OfferingThe following is a brief summary of certain terms and conditions of the warrants to be issued in connection with this offering and are subject in all respects to the provisions contained in the warrants.Form. The warrants will be issued in electronic book-entry form to the investors. You should review a copy of the form of warrant, which is filed as an exhibit to the registration statement of which this prospectus forms a part, for a complete description of the terms and conditions applicable to the warrants.Exercisability. The warrants are exercisable at any time after their original issuance, expected to be [_____], 2016, and at any time up to the date that is five years after their original issuance. The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may, in its sole discretion, elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.Exercise Limitation. A holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect toon a one for one basis at the exercise, as such percentage ownership is determined in accordance with the termsoption of the warrants. However, any holder, may increase or decrease such percentagesubject to any other percentage not in excess of 9.99%automatic conversion by us upon at least 61 days’ prior notice fromeither the holder to us.Exercise Price. The exercise price per whole share of common stock purchasable upon exercisefive year anniversary of the warrants is expected to be $[___] per share [125%date of public offering priceissuance or in the event of common stock]a change of common stock.control of our company as defined in the designations. The exercise priceconversion formula is subject to appropriateproportional adjustment in the event of certainstock splits, stock dividends and distributions,similar corporate events; and●the shares are redeemable at our option upon 20 days’ notice for an amount equal to the amount of capital invested.On April 15, 2019 we had 2,500,000 shares of our 10% Series E convertible preferred stock splits,outstanding, which such shares are owned by our Chief Executive Officer and a member of our board of directors.Series F convertible preferred stock combinations, reclassifications or similar events affecting our commonThe Series F convertible preferred stock and also upon any distributions of assets,has three series, including cash,the 12% Series F-1 convertible preferred stock, or other property to our shareholders. In addition, the exercise price is subject to one adjustment in the event“Series F-1,” consisting of 2,177,233 shares, 6% Series F-2 convertible preferred stock, or “Series F-2,” consisting of 1,408,867 shares, and 10% Series F-3 convertible preferred stock, or “Series F-3,” consisting of 757,917 shares. The designations, rights and preferences of the saleSeries 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 duringstock.The Series F-1 pays dividends at the one-year period following the daterate of issuance at a price12% per share less than the exercise price then in effect (or securities convertible or exercisableannum and automatically converts into common stock at a conversion or exercise price less than the exercise price then in effect) to such lesser price subject to customary exceptions.Transferability. Subject to applicable laws, the warrants may be offered for sale, sold, transferred or assigned without our consent.Exchange Listing. We intend to apply for the listing of the warrants offered in this offering on The Nasdaq Capital Market under the symbol “[_____W].” No assurance can be given that such listing will be approved or that a trading market will develop.Fundamental Transactions. In the event of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction.Rights as a Shareholder. Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock on April 10, 2022. The Series F-2 pays dividends at the holderrate of a warrant does not have6% per annum and automatically converts into shares of our common on July 27, 2022. The Series F-3 pays dividends at the rights or privilegesrate of a holder10% per annum and automatically converts into shares of our common stock including anyon August 30, 2022. Additional terms of the designations, rights and preferences of the Series F-1, Series F-2 and Series F-3 include:●the shares have no voting rights, untilexcept 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 exercisesinto shares of our common stock on a 1:1 basis. The conversion ratio is proportionally adjusted in the warrant.●the shares rank junior to our 10% Series A Convertible Preferred Stock and our 10% Series E Convertible Preferred Stock;●in the event of a liquidation or winding up of our 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 us.On April 15, 2019 all shares of Series F-1, Series F-2 and Series F-3 are outstanding and are owned by our Chief Executive Officer.WarrantsA description of the terms of our outstanding warrants to purchase 14,462,500 shares appears earlier in this prospectus under “Selling Security Holders.”Between January and April 2019 we issued warrants to purchase an additional 1,960,000 shares of our common stock in various financing transactions with exercise prices ranging from $0.65 to $0.75 per share. The terms of these warrants are substantially identical to the terms of our other outstanding warrants.Transfer agentThe transfer agent and registrar for our common stock is Island StockVStock Transfer, 15500 Roosevelt Boulevard, Clearwater, FL 33760.NASDAQ listingWe intend to apply for a listingLLC, 18 Lafayette Place, Woodmere, NY 11598.SHARES AVAILABLE FOR FUTURE SALEAs of April 15, 2019, we had 64,248,864 shares of common stock outstanding, not including shares issuable upon the exercise of outstanding warrants, stock options and other convertible securities. All shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by our “affiliates,” as that term is defined in Rule 144 promulgated under the Securities Act. The outstanding shares of our common stock and warrants on the Nasdaq Capital Market under the symbols “[____]” and “[______W]”, respectively. No assurance can be given that such listingsnot included in this prospectus will be approved or that a trading market will develop.SHARES ELIGIBLE FOR FUTURE SALEFuture sales of our common stock in the public market, or the availability of such sharesavailable for sale in the public market could adversely affect market prices prevailing from time to time. Basedas follows:Public FloatOf our outstanding shares, 34,274,010 shares are beneficially owned by our executive officers, directors and affiliates. The remaining 29,974,854 shares constitute our public float which, based on the number of shares outstanding as of the date of this prospectus, upon the completion of this offering, [__________] shareslast sale price of our common stock will be outstanding, assuming no exercise ofreported on the over-allotment option, the warrants, the Representative’s Warrants or outstanding options.Rule 144Pursuant toIn general, under Rule 144, of the Securities Act,as currently in effect, a person who has beneficially owned restricted shares of our common stock for at least six months, would beincluding the holding period of prior owners other than affiliates, is entitled to sell their securities provided that:·such person is not deemed to have been one●1% of the number of our affiliates at the time of, or at any time during, the three months preceding, a sale; and·we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.Persons who have beneficially owned restricted shares of our common stock for at least six months but whothen outstanding, which equaled 642,489 shares as of April 15, 2019, or●the average weekly trading volume of our common stock, assuming our shares are our affiliates at the time of, or at any timethen traded on a national securities exchange, during the three monthsfour calendar weeks preceding the filing of a sale, would be subjectnotice on Form 144 with respect to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:·1% of the total number of shares of common stock then outstanding; or·the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.Sales by our affiliates under Rule 144 are also limited by manner of salesubject to manner-of-sale provisions, and notice requirements and to the availability of current public information about us.For purposes of the six-month holding period requirement of Rule 144, a person who beneficially owns restricted shares of our common stock issued pursuant to a cashless exercise of a warrant shall be deemed to have acquired such shares, and the holding period for such shares shall be deemed to have commenced on the date the warrant was originally issued.Lock-up agreementsOur executive officers and directors and a principal shareholder have agreed to enter into lock-up agreements with the representative of the underwriters. See “Underwriting – Lock up agreements” appearing later in this prospectus.
Joseph Gunnar & Co., LLC is acting as representative of the underwriters. We have entered into an underwriting agreement dated [_______], 2016 with the representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stock and warrants listed next to its name in the following table:
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The underwriters are committed to purchase all the shares of common stock and warrants offered by us other than those covered by the over-allotment option described below, if they purchase any shares of common stock and warrants. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and a legal opinion.
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.
The underwriters are offering the shares of our common stock and warrants, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase up to [_____] shares of common stock and/or warrants to purchase up to [____] shares of common stock from us solely to cover over-allotments, if any. If the underwriters exercise all or part of this option, they will purchase securities covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total price to the public will be $[_____] and the total net proceeds, before expenses, to us will be $[____].
Discounts
The following table shows the public offering price, underwriting discount, non-accountable expense allowance and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
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The underwriters propose to offer the common stock and warrants offered by us to the public at the public offering price set forth on the cover of this prospectus. In addition, the underwriters may offer some of the securities to other securities dealers at such price less a concession of $[___] per share of common stock and $[____] per warrant. If all of the shares of common stock and warrants offered by us are not sold at the public offering price, the representative may change the offering price and other selling terms by means of a supplement to this prospectus.
We have agreed to pay the representative a non-accountable expense allowance of 1% of the public offering price at the closing. We have paid an expense deposit of $25,000 to the representative, which will be applied against accountable expenses.
We have also agreed to pay the following expenses of the representative relating to the offering:
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We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount, will be approximately $[___________].
Discretionary accounts
The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Lock-up agreements
Pursuant to lock-up agreements, directors and officers and any other 5% or greater holder of outstanding shares of our common stock, as of the date of this prospectus, will enter into customary “lock-up” agreements in favor of the representative of the underwriters pursuant to which these persons will agree, for a period of six months from the date of this prospectus in the case of our directors and officers, and three months from the date of this prospectus in the case of any other 5% or greater holder of outstanding shares, that they will neither offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities without the representative of the underwriters’ prior written consent. In addition, each of us and any of our successors will agree, for a period of three months from the closing of this offering, that each will not:
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Representative’s Warrants
We have agreed to issue to the representative, or its designees, warrants to purchase up to a total of [•] shares of common stock (5% of the shares of common stock sold in this offering). The Representative’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the offering, which period shall not extend further than five years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G). The Representative’s Warrants are exercisable at a per share price equal to 125% of the public offering price per share in the offering. The Representative’s Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying the Representative’s Warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Representative’s Warrants or the underlying securities for a period of 180 days from the date of this prospectus.
The exercise price and number of shares issuable upon exercise of the Representative’s Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the Representative’s Warrant exercise price.
Right of first refusal
Until 24 months after the closing date of the offering, the representative of the underwriters’ will have a right of first refusal to act as sole investment banker, book-runner and/or placement agent for any future public or private equity and debt offering, including all equity linked financings, that we conduct during such 24-month period.
Electronic offer, sale and distribution of shares
A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters or selling group members. The representative of the underwriters may agree to allocate a number of securities to underwriters and selling group members for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us, and should not be relied upon by investors.
Stabilization
In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.
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These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
Passive market making
In connection with this offering, underwriters and selling group members may engage in passive market making transactions in our common stock and warrants on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the securities and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.
Other relationships
Certain of the underwriters and their affiliates may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they may in the future receive customary fees.
Offer restrictions outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
European Economic Area — Belgium, Germany, Luxembourg and Netherlands
The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:
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France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2 and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2 and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the “ISA”), nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societe la Borsa), (“CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
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Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
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Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
Japan
The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissao do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to be distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).
This document is personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor has the company received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by the company.
No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to the company.
In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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www.sec.gov
. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the Securities and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Callers in the United States can also call 1-202-551-8090 for further information on the operations of the public reference facilities.We are subject to the information and periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at http://www.brightmountainmedia.com. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus.
F-3 Consolidated Consolidated Consolidated Consolidated Notes to INDEX TO FINANCIAL STATEMENTSPage No. Condensed consolidated balance sheets at June 30, 2016 (unaudited) and December 31, 2015F-2Report of Independent Registered Public Accounting Firm F-2 Condensed consolidated statementReport of operations for the three and six months ended June 30, 2016 and 2015 (unaudited)Condensed consolidated statement of change in shareholders' equity for the six months ended June 30, 2016 (unaudited)F-4Condensed consolidated statement of cash flows for the six months ended June 30, 2016 and 2015 (unaudited)F-5Notes to condensed consolidated financial statements June 30, 2016 (unaudited)F-6Report of independent registered public accounting firmF-25balance sheetsBalance Sheets at December 31, 20152018 and 2014F-26statementsStatements of operationsOperations for the years ended December 31, 20152018 and 2014F-27statementStatements of changesChanges in shareholders' equityShareholders’ Equity for the years ended December 31, 20152018 and 2014F-28statementsStatements of cash flowCash Flows for the years ended December 31, 20152014 and 2014F-30consolidated financial statementsConsolidated Financial Statements December 31, 20152018 and 2014F-31
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
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| June 30, |
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| December 31, |
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| 2016 |
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| 2015 |
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| (unaudited) |
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ASSETS |
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Current Assets |
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Cash |
| $ | 116,489 |
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| $ | 416,187 |
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Accounts Receivable |
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| 39,147 |
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| 42,449 |
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Prepaid Costs and Expenses |
|
| 57,868 |
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| 109,927 |
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Inventories |
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| 1,015,932 |
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| 1,053,890 |
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Total Current Assets |
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| 1,229,436 |
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| 1,622,453 |
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Fixed Assets, net |
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| 50,247 |
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| 51,305 |
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Website Acquisition Assets, net |
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| 738,596 |
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| 630,286 |
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Other Assets |
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| 15,080 |
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| 15,547 |
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Total Assets |
| $ | 2,033,359 |
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| $ | 2,319,591 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
| $ | 325,151 |
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| $ | 323,782 |
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Premium Finance Loan Payable |
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| 1,069 |
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| 52,406 |
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Total Current Liabilities |
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| 326,220 |
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| 376,188 |
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Long Term Debt to Related Parties, net |
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| 285,806 |
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| 122,260 |
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Total Liabilities |
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| 612,026 |
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| 498,448 |
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Commitments and contingencies (Note 7) |
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Shareholders' equity |
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Preferred stock, par value $0.01, 20,000,000 shares authorized, 5,200,000 issued and 5,200,000 outstanding respectively |
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Series A, 2,000,000 shares designated, 1,900,000 and 1,900,000 shares issued and outstanding |
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| 19,000 |
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| 19,000 |
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Series B, 1,000,000 shares designated, 1,000,000 and 1,000,000 shares issued and outstanding |
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| 10,000 |
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|
| 10,000 |
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Series C, 2,000,000 shares designated, 1,800,000 and 1,800,000 shares issued and outstanding |
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| 18,000 |
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|
| 18,000 |
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Series D, 2,000,000 shares designated, 500,000 and 500,000 shares issued and outstanding |
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| 5,000 |
|
|
| 5,000 |
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Common stock, par value $.01, 324,000,000 shares authorized, 37,464,821 issued and outstanding at June 30, 2016, and 35,885,059 issued and outstanding at December 31, 2015, respectively. |
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| 374,648 |
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| 358,850 |
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Additional paid-in-capital |
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| 8,333,304 |
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| 7,568,048 |
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Accumulated Deficit |
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| (7,338,619 | ) |
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| (6,157,755 | ) |
Total shareholders’ equity |
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| 1,421,333 |
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| 1,821,143 |
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Total liabilities and shareholders’ equity |
| $ | 2,033,359 |
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| $ | 2,319,591 |
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See accompanying notes to unaudited condensed consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2016 |
|
| 2015 |
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| 2016 |
|
| 2015 |
| ||||
Product Sales |
| $ | 336,042 |
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| $ | 323,848 |
|
| $ | 683,821 |
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| $ | 585,572 |
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Revenues from Services |
|
| 123,128 |
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|
| 48,099 |
|
|
| 199,764 |
|
|
| 96,458 |
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Total Revenue |
|
| 459,170 |
|
|
| 371,947 |
|
|
| 883,585 |
|
|
| 682,030 |
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Cost of sales – Products |
|
| 236,986 |
|
|
| 271,809 |
|
|
| 507,521 |
|
|
| 459,919 |
|
Gross profit |
|
| 222,184 |
|
|
| 100,138 |
|
|
| 376,064 |
|
|
| 222,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 732,339 |
|
|
| 487,473 |
|
|
| 1,519,053 |
|
|
| 943,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (510,155 | ) |
|
| (387,335 | ) |
|
| (1,142,989 | ) |
|
| (721,104 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 6 |
|
|
| 5 |
|
|
| 10 |
|
|
| 13 |
|
Interest expense |
|
| (21,758 | ) |
|
| (446 | ) |
|
| (37,885 | ) |
|
| (891 | ) |
Total other income (expense), net |
|
| (21,752 | ) |
|
| (441 | ) |
|
| (37,875 | ) |
|
| (878 | ) |
Net loss before taxes |
|
| (531,907 | ) |
|
| (387,776 | ) |
|
| (1,180,864 | ) |
|
| (721,982 | ) |
Income taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| (531,907 | ) |
|
| (387,776 | ) |
|
| (1,180,864 | ) |
|
| (721,982 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A, Series B, Series C & Series D preferred |
|
| 110,197 |
|
|
| 72,642 |
|
|
| 218,186 |
|
|
| 145,458 |
|
Total preferred stock dividends |
|
| 110,197 |
|
|
| 72,642 |
|
|
| 218,186 |
|
|
| 145,458 |
|
Net loss attributable to common shareholders |
| $ | (642,104 | ) |
| $ | (460,418 | ) |
| $ | (1,399,050 | ) |
| $ | (867,440 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
| $ | (0.02 | ) |
| $ | (0.01 | ) |
| $ | (0.04 | ) |
| $ | (0.02 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – Basic and diluted |
|
| 37,377,483 |
|
|
| 39,046,279 |
|
|
| 36,927,554 |
|
|
| 36,285,718 |
|
See accompanying notes to unaudited condensed consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS’ EQUITY
For the six months ended June 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
| Total |
| |||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
|
| Accumulated |
|
| Shareholders' |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
|
| Deficit |
|
| Equity |
| |||||||
Balance -December 31, 2015 |
|
| 5,200,000 |
|
| $ | 52,000 |
|
|
| 35,885,059 |
|
| $ | 358,850 |
|
| $ | 7,568,048 |
|
|
| $ | (6,157,755 | ) |
| $ | 1,821,143 |
|
Common stock issued for services ($.695/share) |
|
|
|
|
|
|
|
|
|
| 64,000 |
|
|
| 640 |
|
|
| 43,840 |
|
|
|
|
|
|
|
| 44,480 |
|
Common stock issued for services ($.67/share) |
|
|
|
|
|
|
|
|
|
| 7,000 |
|
|
| 70 |
|
|
| 4,620 |
|
|
|
|
|
|
|
| 4,690 |
|
Common stock issued for services ($.75/share) |
|
|
|
|
|
|
|
|
|
| 3,600 |
|
|
| 36 |
|
|
| 2,664 |
|
|
|
|
|
|
|
| 2,700 |
|
Common stock issued for services ($.85/share) |
|
|
|
|
|
|
|
|
|
| 3,600 |
|
|
| 36 |
|
|
| 3,024 |
|
|
|
|
|
|
|
| 3,060 |
|
Sale of common stock for cash ($.50/share) pursuant to Subscription Agreement |
|
|
|
|
|
|
|
|
|
| 1,000,000 |
|
|
| 10,000 |
|
|
| 490,000 |
|
|
|
|
|
|
|
| 500,000 |
|
Common stock issued for 10% dividend payment pursuant to Series A preferred stock Subscription Agreements |
|
|
|
|
|
|
|
|
|
| 181,699 |
|
|
| 1,817 |
|
|
| (1,817 | ) |
|
|
|
|
|
|
| — |
|
Common stock issued for 10% dividend payment pursuant to Series B preferred stock Subscription Agreements |
|
|
|
|
|
|
|
|
|
| 100,000 |
|
|
| 1,000 |
|
|
| (1,000 | ) |
|
|
|
|
|
|
| — |
|
Common stock issued for 10% dividend payment pursuant to Series C preferred stock Subscription Agreements |
|
|
|
|
|
|
|
|
|
| 180,000 |
|
|
| 1,800 |
|
|
| (1,800 | ) |
|
|
|
|
|
|
| — |
|
Common stock issued for 10% dividend payment pursuant to Series D preferred stock Subscription Agreements |
|
|
|
|
|
|
|
|
|
| 39,863 |
|
|
| 399 |
|
|
| (399 | ) |
|
|
|
|
|
|
| — |
|
Stock option compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 77,124 |
|
|
|
|
|
|
|
| 77,124 |
|
Beneficial Conversion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 149,000 |
|
|
|
|
|
|
|
| 149,000 |
|
Net loss for the six months ended June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,180,864 | ) |
|
| (1,180,864 | ) |
Balance – June 30, 2016 |
|
| 5,200,000 |
|
| $ | 52,000 |
|
|
| 37,464,821 |
|
| $ | 374,648 |
|
| $ | 8,333,304 |
|
|
| $ | (7,338,619 | ) |
| $ | 1,421,333 |
|
See accompanying notes to unaudited condensed consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
| For the Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2016 |
|
| 2015 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net Loss |
| $ | (1,180,864 | ) |
| $ | (721,982 | ) |
Adjustments to reconcile net loss to net cash used in operations: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 6,679 |
|
|
| 6,757 |
|
Amortization of Debt Discount |
|
| 18,715 |
|
|
| — |
|
Amortization |
|
| 124,425 |
|
|
| 86,136 |
|
Stock option compensation expense |
|
| 77,124 |
|
|
| 29,124 |
|
Common stock issued for services |
|
| 54,930 |
|
|
| 37,350 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
| 3,302 |
|
|
| (9,207 | ) |
Inventory |
|
| 37,958 |
|
|
| (219,795 | ) |
Prepaid costs and expenses |
|
| 52,059 |
|
|
| 23,908 |
|
Other assets |
|
| 467 |
|
|
| (467 | ) |
Accounts payable |
|
| (106,298 | ) |
|
| (17,181 | ) |
Net cash used in operating activities |
|
| (911,503 | ) |
|
| (785,357 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
| (5,621 | ) |
|
| (7,272 | ) |
Purchase of websites |
|
| (131,237 | ) |
|
| (153,000 | ) |
Net cash used in investing activities |
|
| (136,858 | ) |
|
| (160,272 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Sale of common stock |
|
| 500,000 |
|
|
| 290,000 |
|
Sale of Preferred stock |
|
|
|
|
|
| 400,000 |
|
Payments on premium finance loan |
|
| (51,337 | ) |
|
| (45,237 | ) |
Long term Debt – Loan from Related Parties |
|
| 300,000 |
|
|
| — |
|
Net cash provided by financing activities |
|
| 748,663 |
|
|
| 644,763 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
| (299,698 | ) |
|
| (300,866 | ) |
Cash at beginning of period |
|
| 416,187 |
|
|
| 590,236 |
|
Cash at end of period |
| $ | 116,489 |
|
| $ | 289,370 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 13,714 |
|
| $ | 890 |
|
Income Taxes |
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and financing activities |
|
|
|
|
|
|
|
|
Common stock issued for purchase of websites |
|
| — |
|
| $ | 262,500 |
|
Premium finance loan payable recorded as prepaid |
| $ | 38,060 |
|
| $ | — |
|
Payable for purchase of website |
| $ | 150,000 |
|
| $ | — |
|
During the six months ended June 30, 2016, the Company recorded a beneficial conversion for debt discount to additional paid-in-capital of $149,000.
During the six months ended June 30, 2016, the Company issued 501,562 shares of its common stock as dividends to the holders of its Series A, Series B, Series C, and Series D Stock only.
During the six months ended June 30, 2016, the Company recorded $32,732 of discount related to the present value of the future monthly payments associated with the acquisition of warisboring.com
See accompanying notes to unaudited condensed consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Bright Mountain Media, Inc., formerly known as Bright Mountain Acquisition Corporation, is a Florida corporation formed
The Company is a media holding companysubsidiaries (the “Company") as of online assets. We sell various products through our proprietary websitesDecember 31, 2018, and retail location,the related consolidated statements of operations, shareholders’ equity, and through third party e-commerce distributor portals. Our websites provide content designed to attract and retain targeted Internet audiences. We generate revenues from two segments, product sales and services. Services consist of advertising revenue and subscription revenue. Our advertising revenue is generated primarily through the display of paid listings as well as display advertisements appearing on our websites.
The Company obtained approximately 23% and 25% of its revenue from servicescash flows for the threeyear ended December 31, 2018, and six month periods ended June 30, 2016 from a third-party provider, namely Google AdSence. Paid listings are priced on a price per click basis and when a user submits a search query and then clicks on a Google AdSence paid listing displayedthe related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in response toall material respects, the query, Google bills the advertiser that purchased the paid listing directly and shares a portionconsolidated financial position of the fee charged toCompany as of December 31, 2018 and the advertiser with the Company. The Company's remaining 77%consolidated results of their operations and 75% of revenuetheir cash flows for the same periods from services was from other third-party providers, direct advertising, and subscriptions.
Bright Mountain plans to grow its business through organic growth and acquisitions. year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Our websites contain a number of sections with demographically oriented information including originally written news content, blogs, forums, career information, and video.
Basis of Presentation
The interim unaudited condensed consolidatedaccompanying financial statements included herein have been prepared byassuming that the Company pursuantwill continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced recurring net losses, cash outflows from operating activities, and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
December 31, | ||
2018 | 2017 | |
| ASSETS | ||
| Current assets | ||
| Cash and Cash Equivalents | $1,042,457 | $101,231 |
| Accounts Receivable, net | 561,470 | 900,770 |
| Note Receivable, net | 18,750 | — |
| Prepaid Expenses and Other Current Assets | 611,206 | 92,322 |
| Current Assets - Discontinued Operations | 239,747 | 632,014 |
| Total current assets | 2,473,630 | 1,726,337 |
| Property & Equipment, net | 5,464 | 31,905 |
| Website Acquisition Assets, net | 113,741 | 300,349 |
| Intangible Assets, net | 221,117 | 569,334 |
| Goodwill | 988,926 | 446,426 |
| Prepaid Services/Consulting Agreements - Long Term | 1,162,500 | — |
| Other Assets | — | 23,700 |
| Other Assets - Discontinued Operations | 60,470 | 620,666 |
| Total Assets | $5,025,848 | $3,718,717 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current Liabilities | ||
| Accounts Payable | $655,229 | $897,260 |
| Accrued Expenses | 465,032 | 90,000 |
| Accrued Interest to Related Party | 947 | — |
| Premium Finance Loan Payable | 92,537 | 63,133 |
| Deferred Revenues | 4,163 | 9,735 |
| Long Term Debt, Current Portion | 229,844 | 767,071 |
| Current Liabilities - Discontinued Operations | 143,929 | 294,453 |
| Total Current Liabilities | 1,591,681 | 2,121,652 |
| Long Term Debt to Related Parties, net | 11,688 | 1,198,893 |
| Long Term Debt, net of Current Portion | — | 54,950 |
| Total Liabilities | 1,603,369 | 3,375,495 |
| Commitments and contingencies | ||
| Shareholders' Equity | ||
| Convertible Preferred stock, par value $0.01, 20,000,000 shares authorized, | ||
| Series A, 2,000,000 shares designated, 0 and | ||
| 100,000 shares issued and outstanding for December 31, 2018 and 2017, respectively | — | 1,000 |
| Series B, 0 and 1,000,000 shares designated, 0 and | ||
| 0 shares issued and outstanding for December 31, 2018 and 2017, respectively | — | — |
| Series C, 0 and 2,000,000 shares designated, 0 and | ||
| 0 shares issued and outstanding for December 31, 2018 and 2017, respectively | — | — |
| Series D, 0 and 2,000,000 shares designated, 0 and | ||
| 0 shares issued and outstanding for December 31, 2018 and 2017, respectively | — | — |
| Series E, 2,500,000 shares designated, | ||
| 2,500,000 and 1,375,000 issued and outstanding for December 31, 2018 and 2017, respectively | 25,000 | 13,750 |
| Series F, 4,344,017 and 0 shares designated, | ||
| 4,344,017 and 0 issued and outstanding for December 31, 2018 and 2017, respectively | 43,440 | — |
| Common stock, par value $0.01, 324,000,000 shares authorized, | ||
| 62,125,114 and 46,168,864 issued and outstanding for December 31, 2018 and 2017, respectively | 621,252 | 461,689 |
| Additional paid-in capital | 19,775,753 | 11,685,685 |
| Accumulated Deficit | (17,042,966) | (11,818,902) |
| Total shareholders' equity | 3,422,479 | 343,222 |
| Total Liabilities and Shareholders' Equity | $5,025,848 | $3,718,717 |
For the Year Ended December 31, | ||
2018 | 2017 | |
| Revenues | ||
| Advertising | $1,735,649 | $1,104,017 |
| Cost of revenue | ||
| Advertising | 1,378,377 | 671,286 |
| Gross profit | 357,272 | 432,731 |
| Selling, general and administrative expenses | 3,494,858 | 2,596,827 |
| Loss from continuing operations | (3,137,586) | (2,164,096) |
| Other income (expense) | ||
| Interest income | 3,349 | 643 |
| Loss on extinguishment of convertible debt | (579,233) | — |
| Interest expense | (46,881) | (83,140) |
| Interest expense - related party | (370,963) | (323,112) |
| Total other expense | (993,728) | (405,609) |
| Net Loss from Continuing Operations | (4,131,314) | (2,569,705) |
| Loss from Discontinued Operations | (1,092,750) | (424,391) |
| Net Loss | (5,224,064) | (2,994,096) |
| Preferred stock dividends | ||
| Series A, Series E, and Series F preferred stock | 111,940 | 17,645 |
| Total preferred stock dividends | 111,940 | 17,645 |
| Net loss attributable to common shareholders | $(5,336,004) | $(3,011,741) |
| Basic and diluted net loss for continuing operations per share | $(0.08) | $(0.06) |
| Basic and diluted net loss for discontinued operations per share | $(0.02) | $(0.01) |
| Basic and diluted net loss per share | $(0.10) | $(0.07) |
| Weighted average shares outstanding - basic and diluted | 51,560,351 | 45,290,360 |
Additional | Total | ||||||
Preferred Stock | Common Stock | Paid-in | Accumulated | Shareholders' | |||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | |
| Balance – January 1, 2017 | 100,000 | $1,000 | 44,901,531 | $449,016 | $9,944,744 | $(8,824,806) | $1,569,954 |
| Common stock issued for 10% dividend payment pursuant to Series A preferred stock Subscription Agreements | — | — | 10,000 | 100 | (100) | — | — |
| Issuance of Series E preferred stock ($0.40/share) | 1,375,000 | 13,750 | — | — | 536,250 | — | 550,000 |
| Series E 10% preferred stock dividend | — | — | — | — | (11,303) | — | (11,303) |
| Stock option vesting expense | — | — | — | — | 108,090 | — | 108,090 |
| Common stock issued as compensation | — | — | 28,500 | 285 | 22,515 | — | 22,800 |
| Common stock issued for services ($0.85/share) | — | — | 3,600 | 36 | 3,024 | — | 3,060 |
| Beneficial conversion feature | — | — | — | — | 615,625 | — | 615,625 |
| Common stock issued for cash ($0.40/share) | — | — | 125,000 | 1,250 | 48,750 | — | 50,000 |
| Common stock issued in acquisition | — | — | 1,100,233 | 11,002 | 418,090 | — | 429,092 |
| Net loss for the year ended December 31, 2017 | — | — | — | — | — | (2,994,096) | (2,994,096) |
| Balance – December 31, 2017 | 1,475,000 | 14,750 | 46,168,864 | 461,689 | 11,685,685 | (11,818,902) | 343,222 |
| Common stock issued for 10% dividend payment pursuant to Series A preferred stock Subscription Agreements | — | — | 10,000 | 100 | (100) | — | — |
| Issuance of Series E preferred stock ($0.40/share) | 1,125,000 | 11,250 | — | — | 438,750 | — | 450,000 |
| Series E preferred stock dividend | — | — | — | — | (82,232) | — | (82,232) |
| Series F preferred stock dividend | — | — | — | — | (29,708) | — | (29,708) |
| Preferred Series F issued for extinguishment of convertible debt | 4,344,017 | 43,440 | — | — | 1,929,141 | — | 1,972,581 |
| Stock option vesting expense | — | — | — | — | 24,128 | — | 24,128 |
| Common Stock issued for services | — | — | 10,000 | 100 | 7,400 | — | 7,500 |
| Debt Discount on convertible note | — | — | — | — | 70,000 | — | 70,000 |
| Units consisting of one share of common stock and one warrant issued for cash ($0.40 per unit), net of costs | — | — | 14,836,250 | 148,363 | 4,992,689 | — | 5,141,052 |
| Stock issued to Spartan Capital for prepaid consulting contract | — | — | 1,000,000 | 10,000 | 740,000 | — | 750,000 |
| Preferred Stock Series A conversion to common stock | (100,000) | (1,000) | 100,000 | 1,000 | — | — | — |
| Net loss for the year ended December 31, 2018 | — | — | — | — | — | (5,224,064) | (5,224,064) |
Balance – December 31, 2018 | 6,844,017 | $68,440 | 62,125,114 | $621,252 | $19,775,753 | $(17,042,966) | $3,422,479 |
For the Years Ended | ||
December 31, | ||
2018 | 2017 | |
| Cash flows from operating activities: | ||
| Net loss | $(5,224,064) | $(2,994,096) |
| Addback: Loss attributable to discontinued operations | 1,092,750 | 424,391 |
| Adjustments to reconcile net loss to net cash used in operations: | ||
| Depreciation | 13,220 | 13,950 |
| Amortization of debt discount | 207,285 | 181,426 |
| Amortization | 189,948 | 191,731 |
| Loss on extinguishment of convertible debt | 579,233 | — |
| Impairment | — | 9,375 |
| Stock option compensation expense | 24,128 | 108,090 |
| Common stock and warrants issued for services | 7,500 | 25,860 |
| Gain on sale of fixed assets | (749) | — |
| Provision for bad debt | 321,623 | 56,620 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 54,403 | (406,027) |
| Prepaid expenses and other current assets | (8,883) | (7,497) |
| Prepaid services/consulting agreements | (922,500) | — |
| Other assets | 23,700 | 86,988 |
| Accounts payable | (231,515) | (8,099) |
| Accrued expenses | 177,532 | 78,889 |
| Accrued interest - related party | 715 | (5,592) |
| Deferred revenues | (5,572) | — |
| Cash used in continuing operations for operating activities | (3,701,246) | (2,243,991) |
| Cash (used in) provided by discontinued operations for operating activities | (268,767) | 518,242 |
| Net cash used in operating activities | (3,970,013) | (1,725,749) |
| Cash flows from investing activities: | ||
| Proceeds from sale of property and equipment | 15,183 | (329) |
| Cash paid for property and equipment | (1,213) | — |
| Cash paid for acquisition, net of cash received | - | (207,801) |
| Net cash provided by (used in) investing activities from continuing operations | 13,970 | (208,130) |
| Cash used in discontinued operations for investing activities | - | (16,299) |
| Net cash provided by (used in) investing activities | 13,970 | (224,429) |
| Cash flows from financing activities: | ||
| Proceeds from issuance of common stock, net of commissions | 5,141,052 | 50,000 |
| Proceeds from issuance of preferred stock | 450,000 | 550,000 |
| Increase in insurance premium notes payable | 29,404 | 9,490 |
| Dividend payments | (111,940) | (11,303) |
| Principal payment on notes payable | (594,204) | (172,936) |
| Note receivable funded | (75,000) | — |
| Proceeds from long-term debt - related parties | 80,000 | 1,460,000 |
| Net cash provided by financing activities | 4,919,312 | 1,885,251 |
| Net increase (decrease) in cash and cash equivalents including cash and cash equivalents classified within assets related to discontinued operations | 963,269 | (64,927) |
| Net (decrease) increase in cash and cash equivalents classified within assets related to discontinued operations | (22,043) | 21,077 |
| Net increase (decrease) in cash and cash equivalents | 941,226 | (43,850) |
| Cash and cash equivalents at beginning of period | 101,231 | 145,081 |
| Cash and cash equivalents at end of year | $1,042,457 | $101,231 |
| Supplemental disclosure of cash flow information | ||
| Cash paid for: | ||
| Interest | $185,444 | $215,908 |
| Non-cash investing and financing activities | ||
| Premium finance loan payable recorded as prepaid | $104,249 | $92,322 |
| Beneficial conversion of debt discount to additional paid in capital | $70,000 | $615,625 |
| Adjustment to Goodwill for unrecorded liability assumed in the acquisition of Daily Engage Media Group, LLC | $197,500 | $— |
| Common stock issued for acquisition of Daily Engage Media Group, LLC | $— | $429,092 |
| Notes payable issued for acquisition of Daily Engage Media Group, LLC | $— | $380,000 |
| Accounts receivable charged against notes payable - Daily Engage Media Group, LLC | $19,525 | $125,313 |
| Issuance of Common Stock for prepaid consulting services | $750,000 | $— |
| Series F Preferred Stock issued in exchange for extinguishment of $2,035,000, net of discount of $662,625 | $1,972,581 | $— |
year ended December 31, 2018. The company had an accumulated deficit of $17,042,966 at December 31, 2018. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period. The Company's continuation as a going concern is dependent upon its ability to generate revenues, control its expenses and its ability to continue obtaining investment capital and loans from related parties and outside investors to sustain its current level of operations.
and Basis of Presentation
F-6
BRIGHT MOUNTAIN MEDIA, INC.accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 605, AND SUBSIDIARIES
(formerly known"Revenue Recognition"
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
is billed monthly. The Company subsequently settles these transactions with publishers at which time adjustments for invalid traffic may impact the amount collected.
We adopted accounting guidance for financialfair values measurements and non-financial assets and liabilities in accordance with ASC 820 “Fair Value Measurements and Disclosures.” This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost)disclosures (ASC 820). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
liabilities;
active; and
F-7
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
December 31, 2017, using significant unobservable inputs (Level 3):
Fair Value measurement using Level 3 | |
| Fair Value at December 31, 2016 | $1,191,357 |
| Long term debt added during 2017 | 1,840,000 |
| Principal reductions during 2017 | (160,334) |
| Adjustment to fair value | — |
| Balance at December 31, 2017 | $2,871,023 |
| Long term debt additions during 2018 | 90,000 |
| Principal reductions during 2018 | (2,651,179) |
| Adjustment to fair value | — |
| Balance at December 31, 2018 | $309,844 |
The Company is also subject to adjustments from traffic settlements that are deducted from open invoices.
Inventories
Inventories consist As of finished goodsDecember 31, 2018 and are stated at2017, the lower of cost or market using the first in, first out (FIFO) method. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
Revenue Recognition
The Company recognizes revenue on our products in accordance with ASC 605, “Revenue Recognition.” Under these guidelines, revenue is recognized on sales transactions when all of the following exist: persuasive evidence of an arrangement did exist; delivery of product has occurred; the sales price to the buyer is fixed or determinable; and collectability is reasonably assured. The Company has several revenue streams generated directly from its websiterecorded an allowance for doubtful accounts of $228,779 and specific revenue recognition criteria for each revenue stream is as follows:
$40,000, respectively.
·
Sale of merchandise directly to consumers: The Company's product sales are recognized either FOB shipping point or FOB destination, dependent on the customer. Revenues are therefore recognized at point of ownership transfer, accordingly.
·
Advertising revenue is received directly form companies who pay the Company a monthly fee for advertising space.
·
Advertising revenues are generated by users “clicking” on website advertisements utilizing several ad network partners: Revenues are recognized, on a net basis, upon receipt of payment by the ad network partner since the revenue is not determinable until it is received.
·
Subscription revenues are generated by the sale of access to career postings on one of our websites. The term of the subscriptions range from one month to twelve months. Revenues are recognized, on a net basis, over the term of the subscription period. All sales are final per the subscription Terms of Use.
The Company follows the guidance of ASC 605-50-25, “Revenue Recognition, Customer Payments.” Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products included in inventories. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold. Cash incentives provided to our customers are recognized as a reduction of the related sale price, and, therefore, are a reduction in sales.
Cost of Sales
Components of costs of sales include product costs, shipping costs to customers and any inventory adjustments.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.
F-8
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
Sales Return Reserve Policy
Our return policy generally allows our end users to return purchased products for refund or in exchange for new products. We estimate a reserve for sales returns, if any, and record that reserve amount as a reduction of sales and as a sales return reserve liability. Sales to consumers on our web site generally may be returned within a reasonable period of time.
Product Warranty Reserve Policy
The Company is a retail distributor of products and warranties are the responsibility of the manufacturer. Therefore, the Company does not record a reserve for product warranty
statements.
F-9
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
Website acquisition costs are amortized over five years. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. While it is likely that we will have significant amortization expense as we continue to acquire websites, we believe that intangible assets represent costs incurred by the acquired website to build value prior to acquisition and the related amortization and impairment charges of assets, if applicable, are not ongoing costs of doing business. Non-cash amortization loss is included in selling, general and administrative expenses on the accompanying statement of operations. For the three months ended June 30, 2016 and June 30, 2015, non-cash amortization expense was $61,582 and $45,801, respectively. For the six months ended June 30, 2016 and June 30, 2015, non-cash amortization expense was $124,425 and $86,136, respectively. For the three and six months ended June 30, 2016 and June 30, 2015, non-cash impairment expense was $0 and $0 respectively.
Advertising, Marketing and Promotion Costs
Advertising, marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying consolidated statement of operations. For the six monthsyears ended June 30, 2016December 31, 2018 and June 30, 2015,2017, advertising marketing and promotionmarketing expense was $12,106$289,018 and $14,537,$307,621, respectively, of which $0 and $33,518, was attributable to continuing operations, respectively.
F-10
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
Interest and penalties associated with unrecognized tax expenses are recognized as tax expenses in the Statement of Operations.
In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments.
F-11
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
use asset with a similar obligation.
statement
s.In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern,” which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the condensed consolidated financial statements.
In July 2015, FASB issued ASU No. 2015-11, “Inventory (Topic 330)350): Simplifying the Measurement of Inventory” more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS).Test for Goodwill Impairment. The amendments in this ASU dosimplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this pronouncement, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognize an impairment change for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized is not apply to inventoryexceed the total amount of goodwill allocated to that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, thisreporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscal years, beginning after December 15, 2016, includingand interim periods within those fiscal years. For all other entities,years, beginning after December
NOTE 2 - GOING CONCERN
The accompanying condensed consolidated financial statementsFinancial Statements.
At Acquisition | Liability Assumed | Adjustment | Measurement Date | |
| Tangible assets acquired | $361,770 | $— | $— | $361,770 |
| Liabilities assumed | $(562,006) | (197,500)(1) | — | (759,506) |
| Net liabilities assumed | $(200,236) | $(197,500) | $— | $(397,736) |
| Exchange platform | $50,000 | $— | $(50,000)(2) | $— |
| Tradename | 150,000 | — | (118,000)(2) | 32,000 |
| Customer relationships | 250,000 | — | (63,000)(2) | 187,000 |
| Non-compete agreements | 192,000 | — | (114,000)(2) | 78,000 |
| Unallocated purchase price | 446,426 | 197,500 | 345,000 | 988,926 |
| Total purchase price | $1,088,426 | $197,500 | $— | $1,285,926 |
December 31, 2017 | |
| Total revenue | $2,455,210 |
| Total expenses | 5,593,061 |
| Net loss attributable to common shareholders | $(3,137,851) |
| Basic and diluted net loss per share | $(0.07) |
Year ended December 31, | ||
| Discontinued Operations | 2018 | 2017 |
| Cash and Cash Equivalents | $16,747 | $38,790 |
| Inventory, net | 223,000 | 593,224 |
| Total Current Assets – Discontinued Operations | 239,747 | 632,014 |
| Property and Equipment, net | 49,347 | 57,835 |
| Intangible Assets, net | — | 491,508 |
| Prepaid Rents | — | 50,417 |
| Other Assets | 11,123 | 20,906 |
| Total Other Assets – Discontinued Operations | 60,470 | 620,666 |
| Total Assets - Discontinued Operations | 300,217 | 1,252,680 |
| Accounts Payable | 127,512 | 264,711 |
| Accrued Expenses | — | 10,856 |
| Deferred Rents | 16,417 | 18,886 |
| Total Current Liabilities – Discontinued Operations | 143,929 | 294,453 |
| Net Assets (Liabilities) Discontinued Operations | $156,288 | $958,227 |
Year ended December 31, | ||
2018 | 2017 | |
| Revenues | $1,268,657 | $2,577,331 |
| Cost of revenue | 974,873 | 1,904,586 |
Gross profit | 293,784 | 672,745 |
Selling general, and administrative expenses | 1,388,087 | 1,096,744 |
| Loss from operations - discontinued operations | (1,094,303) | (423,999) |
| Other income (expense) | 1,553 | (392) |
| Loss from discontinued operations | $(1,092,750) | $(424,391) |
| Basic and fully diluted net loss per share | $(0.02) | $(0.01) |
Year ended December 31, | ||
| Cash (used in) provided by operations for discontinued operations: | 2018 | 2017 |
| Loss from discontinued operations | $(1,092,750) | $(424,391) |
| Depreciation | 13,069 | 12,179 |
| Amortization of website acquisitions and intangibles | 165,066 | 135,798 |
| Impairment of website acquisitions and intangibles assets | 326,442 | 61,029 |
| Provision for bad debts | 1,437 | — |
| Product refund reserve | (21,000) | 11,580 |
| Provision for inventory reserve | (27,448) | 22,448 |
| Change in Assets and Liabilities Classified as Discontinued Operations: | ||
| Inventory | 457,759 | 426,688 |
| Deposits | 8,765 | |
| Prepaid rents | 50,417 | 46,523 |
| Accounts payable | (137,200) | 197,351 |
| Accrued Expenses | (10,856) | 10,151 |
| Deferred Rents | (2,468) | 18,886 |
| Change in cash (used in) provided by discontinued operations | $(268,767) | $518,242 |
| Cash used in investing activities for discontinued operations: | ||
| Purchase of property and equipment included in discontinued operations | $— | $(16,299) |
| Net decrease in cash and cash equivalents from discontinued operations | $(22,043) | $21,077 |
December 31, | ||
2018 | 2017 | |
| Prepaid Insurance | $101,206 | $92,322 |
| Current portion of prepaid service agreements | 510,000 | - |
| Prepaid Expenses and Other Current Assets | $611,206 | $92,322 |
December 31, | Depreciable Life | ||
2018 | 2017 | (Years) | |
| Furniture and Fixtures | $36,374 | $51,411 | 3-5 |
| Computer Equipment | 57,112 | 56,142 | 3 |
Total Property and Equipment | 93,486 | 107,553 | |
| Less: Accumulated Depreciation | (88,022) | (75,648) | |
Total Property and Equipment, net | $5,464 | $31,905 | |
2018 | 2017 | |
| Website Acquisition Assets | $1,116,846 | $1,166,846 |
| Less: accumulated amortization | (802,709) | (666,101) |
| Less: accumulated impairment loss | (200,396) | (200,396) |
| Website Acquisition Assets, net | $113,741 | $300,349 |
| Useful Lives | 2018 | 2017 | |
| Tradename | 5 years | $32,000 | $150,000 |
| Customer relationships | 5 years | 187,000 | 250,000 |
| Non-compete agreements | 5-8 years | 78,000 | 192,000 |
Total Intangible Assets | 297,000 | 592,000 | |
Less: accumulated amortization | (75,883) | (22,666) | |
| Intangible assets, net | $221,117 | $569,334 |
| | Year ended December 31, | |
2018 | 2017 | |
| Contingency accrued for DEM payable settlement | $197,690 | $— |
| Accrued dividends | 25,548 | — |
| Accrued interest | 361 | 12,500 |
| Accrued legal fees | 94,200 | 77,500 |
| Other accrued expenses | 51,979 | — |
| Accrued traffic settlements | 95,254 | — |
| Total Accrued Expenses | $465,032 | $90,000 |
| Fair value of preferred Series F-1 | $995,076 |
| Fair value of preferred Series F-2 | 643,904 |
| Fair value of preferred Series F-3 | 333,601 |
| Total consideration | 1,972,581 |
| Principal balance of convertible notes | 2,035,000 |
| Accrued interest | 20,963 |
| Discount on convertible notes | (662,615) |
| Net Carrying value of debt extinguished | $1,393,348 |
| Loss on extinguishment of debt | $579,233 |
Management plans to continue to raise additional capital through private placementsissuance and is exploring additional avenuesconvertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion price of $0.40 per share. A beneficial conversion feature exists on the date the convertible notes were issued whereby the fair value of the underlying common stock to which the notes are convertible into is in excess of the face value of the note of $70,000.
F-12
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation$154,499 for the years ended December 31, 2018 and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE2017, respectively and discount amortization was $196,375 and $168,613, respectively.
(Unaudited)
The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unableentered into a promissory note agreement with an unaffiliated party in the principal amount of $500,000. The note was unsecured and carries an interest rate of 10% per annum payable in arrears at maturity. An amendment made on September 30, 2017 reduced the interest rate from the original 25% to continue as a going concern.
NOTE 3 – ACQUISITIONS
As previously disclosed10%. In addition, the note holder reduced the accrued interest due under the note from approximately $106,000 to $50,000 at September 20, 2017. This reduction in our Annual Report on Form 10-Kaccrued interest of approximately $56,000 reduced interest expense for the year endingended December 31, 2015, on January 2, 2016,2017. The maturity date was amended and extended from the former maturity date of April 30, 2018 to December 31, 2018 and may be prepaid at any time without notice or prepayment penalty. During the year ended December 31, 2018 the note balance was paid in full.
Customer and related relationships |
| $ | 39,578 |
|
Website |
|
| 177,690 |
|
Total |
| $ | 217,268 |
|
The above estimated discounted fair value of the intangible assets are based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the asset acquired,December 31, 2017.
Pro forma results
The following table sets forth the unaudited pro forma results of the Company as if the acquisition of the website had taken place on the first day of the period presented. These combined results are not necessarily indicative of the results that may have been achieved had the website been acquired as of the first day of the period presented.
| Three months |
| Six months |
| |||
Total revenue | $ | 476,497 |
|
| $ | 884,130 |
|
Net loss |
| (336,696 | ) |
|
| (642,822 | ) |
Basic and diluted net loss per common share | $ | (0.01 | ) |
| $ | (0.02 | ) |
There were no costs of acquisition incurred as a result of this purchase.
As previously disclosed in our Annual Report on Form 10-K for the year ending December 31, 2015, on February 12, 2015, the Company entered into a Website Asset Purchase Agreement to purchase a website for a purchase price of $15,000. The payment terms was $15,000 payable at the February 12, 2016 closing. The asset acquisition was accounted for as a purchase of assets in accordance with Rule 11-01 (d) of Regulation S-X and ASC 805-10-55-4. There were no costs of acquisition incurred as a result of the asset purchase.
F-13
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
At June 30, 2016 and December 31, 2015, website acquisition assets consisted of the following:
|
| June 30, |
|
| December 31, |
| ||
|
| 2016 |
|
| 2015 |
| ||
Website Acquisition Assets |
| $ | 1,287,179 |
|
| $ | 1,054,444 |
|
Less: Accumulated Amortization |
|
| (453,336 | ) |
|
| (328,911 | ) |
Less: Impairment Loss |
|
| (95,247 | ) |
|
| (95,247 | ) |
Website Acquisition Assets, net |
| $ | 738,596 |
|
| $ | 630,286 |
|
Non-cash amortization expense for the three and six month periods ending June 30, 2016 and June 30, 2015 totaled $61,582 and $124,425, respectively, and $45,801 and $86,136, respectively.
NOTE 4 – INVENTORIES
At June 30, 2016 and December 31, 2015 inventories consisted of the following:
|
| June 30, |
|
| December 31, |
| ||
|
| 2016 |
|
| 2015 |
| ||
Product Inventory: Clocks and Watches |
| $ | 969,565 |
|
| $ | 1,017,220 |
|
Product Inventory: Other Inventory |
|
| 46,367 |
|
|
| 36,670 |
|
Total Inventory Balance |
| $ | 1,015,932 |
|
| $ | 1,053,890 |
|
NOTE 5 – SEGMENT INFORMATION
The Company has two identifiable segments as of June 30, 2016; products and services. The products segment sells merchandise directly to customers thorough e-commerce distributor portals such as Amazon and eBay and through our proprietary websites and retail location. The services segment is focused on producing advertising revenue generated by users “clicking” on website advertisements utilizing several ad network partners and direct advertisers and subscription revenue generated by the sale of access to career postings on one of our websites.
The following information represents segment activity for the three and six month periods ended June 30, 2016. Comparable information is presented for the respective periods in 2015:
|
| For the three months ended June 30, 2016 |
|
| For the six months ended June 30, 2016 |
| ||||||||||||||||||
|
| Products |
|
| Services |
|
| Total |
|
| Products |
|
| Services |
|
| Total |
| ||||||
Revenues |
| $ | 336,042 |
|
| $ | 123,128 |
|
| $ | 459,170 |
|
| $ | 683,821 |
|
| $ | 199,764 |
|
| $ | 883,585 |
|
Amortization |
| $ | — |
|
| $ | 61,582 |
|
| $ | 61,582 |
|
| $ | — |
|
| $ | 124,425 |
|
| $ | 124,425 |
|
Depreciation |
| $ | 2,176 |
|
| $ | 1,169 |
|
| $ | 3,345 |
|
| $ | 4,888 |
|
| $ | 1,791 |
|
| $ | 6,679 |
|
Loss from operations |
| $ | (267,198 | ) |
| $ | (242,957 | ) |
| $ | (510,155 | ) |
| $ | (680,802 | ) |
| $ | (462,187 | ) |
| $ | (1,142,989 | ) |
Segment Assets |
| $ | 1,203,841 |
|
| $ | 829,518 |
|
| $ | 2,033,359 |
|
| $ | 1,203,841 |
|
| $ | 829,518 |
|
| $ | 2,033,359 |
|
|
| For the three months ended |
|
| For the six months ended |
| ||||||||||||||||||
|
| June 30, 2015 |
|
| June 30, 2015 |
| ||||||||||||||||||
|
| Products |
|
| Services |
|
| Total |
|
| Products |
|
| Services |
|
| Total |
| ||||||
Revenues |
| $ | 323,848 |
|
| $ | 48,099 |
|
| $ | 371,947 |
|
| $ | 585,572 |
|
| $ | 96,458 |
|
| $ | 682,030 |
|
Amortization |
| $ | — |
|
| $ | 45,801 |
|
| $ | 45,801 |
|
| $ | — |
|
| $ | 86,136 |
|
| $ | 86,136 |
|
Depreciation |
| $ | 2,979 |
|
| $ | 442 |
|
| $ | 3,421 |
|
| $ | 5,795 |
|
| $ | 962 |
|
| $ | 6,757 |
|
Loss from operations |
| $ | (286,424 | ) |
| $ | (100,911 | ) |
| $ | (387,335 | ) |
| $ | (522,400 | ) |
| $ | (198,704 | ) |
| $ | (721,104 | ) |
Segment Assets |
| $ | 1,381,335 |
|
| $ | 828,209 |
|
| $ | 2,209,544 |
|
| $ | 1,381,335 |
|
| $ | 828,209 |
|
| $ | 2,209,544 |
|
F-14
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
The following information represents further detail on segment revenues for the three and six month periods ended June 30, 2016 and 2015:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| (unaudited) |
|
| (unaudited) |
| ||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Direct Product Sales |
| $ | 29,236 |
|
| $ | 24,607 |
|
| $ | 60,176 |
|
| $ | 40,757 |
|
Distributor Product Sales |
| $ | 306,806 |
|
| $ | 299,241 |
|
| $ | 623,645 |
|
| $ | 544,815 |
|
Services |
| $ | 123,128 |
|
| $ | 48,099 |
|
| $ | 199,764 |
|
| $ | 96,458 |
|
Total Revenue |
| $ | 459,170 |
|
| $ | 371,947 |
|
| $ | 883,585 |
|
| $ | 682,030 |
|
NOTE 6 –LONG TERM DEBT TO RELATED PARTIES
Beneficial Conversion Feature
As previously disclosed in our Annual Report on Form 10-K for the year ending December 31, 2015, on December 22 and 29, 2015,DEM, the Company issued 12% convertiblepromissory notes that have conversion prices that create a beneficial conversion.totaling $380,000. The notes maturehave no stated interest rate and matured on December 22September 19, 2018 and 29, 2020 respectively. These notes are convertible at the optionCompany is in default pending the final outcome of the holders into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital.legal matters. The debt discount is amortized to interest expense over the five-year lifebalance of the notes using the effective interest method. During the year ending 2015, the Company recognized a debt discount of $78,000payable at December 31, 2018 and amortized $260. During the three2017 were $165,162 and six months ending June 30, 2016, the Company amortized $3,943 and $7,887 respectively of debt discount.
On February 9, 2016, the Company issued 12% convertible notes that have conversion prices that create a beneficial conversion.$254,687, respectively. This note matures on February 9, 2021. These notes are convertible atwas not paid off by the optionmaturity date due to pending litigation. See further discussion in Note 11, under Legal.
December 31, 2018 Balance | December 31, 2017 Balance | |
$500,000 10% Promissory Note with an unaffiliated party issued on November 30, 2016, maturing and repaid by December 31, 2018. | $— | $500,000 |
$150,000 non-interest bearing Note Payable issued on January 6, 2016 for the acquisition of the WarIsBoring.com website maturing on January 4, 2019 | 57,181 | 67,334 |
| Non-interest bearing Promissory Note issued for the DEM acquisition on September 19, 2017 which matured on September 19, 2018. The original note was $380,000 of which $35,000 was reclassified in 2018 to the Service Agreement listed below. | 165,162 | 254,687 |
| $45,000 non-interest bearing Note Payable issued on August 23, 2018 and maturing on April 23, 2019 associated with a Service Agreement through August 23, 2020. | 7,501 | — |
| Total Debt | $229,844 | $822,021 |
| Less Short Term Debt | 229,844 | 767,071 |
| Long Term Debt | $— | $54,950 |
| 2019 | $229,844 |
On May 19, 2016, the Company issued 12% convertible notes that have conversion prices that create a beneficial conversion. This note matures on May 19, 2021. These notes are convertible$63,133 at the option of the holders into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the notes using the effective interest method. During the six months ended June 30, 2016, the Company recognized a debt discount of $50,000. During the three and six months ended June 30, 2016, the Company amortized $1,167 and $1,167 respectively of debt discount.
December 31, 2017.
F-15
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
On June 10, 2016, the Company issued 12% convertible notes that have conversion prices that create a beneficial conversion. This note matures on June 10, 2021. These notes are convertible at the option of the holders into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the notes using the effective interest method. During the six months ended June 30, 2016, the Company recognized a debt discount of $25,000. During the three and six months ended June 30, 2016, the Company amortized $278 and $278 respectively of debt discount.
On June 25, 2016, the Company issued 12% convertible notes that have conversion prices that create a beneficial conversion. This note matures on June 25, 2021. These notes are convertible at the option of the holders into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the notes using the effective interest method. During the six months ended June 30, 2016, the Company recognized a debt discount of $35,000. During the three and six months ended June 30, 2016, the Company amortized $136 and $136 respectively of debt discount.
facilities under non-cancellable operating leases at December 31, 2018 are as follows:
Operating Leases | |
| 2019 | $109,582 |
| 2020 | 112,763 |
| 2021 and thereafter | 115,642 |
| Total minimum lease payments | $337,987 |
Rent commitments have decreased because two leases were not renewed and the Company down sized the space rented at its corporate headquarters.
Legal
F-16
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporationbusiness. Regardless of the outcome, litigation can have an adverse
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
settlement costs
,diversion of management resources and otherfactors.See Part II, Item I, Legal Proceedings for further discussion.The Company entered into various contracts or agreements in the normal course of business, which may contain commitments. During the six months ended June 30, 2016 and June 30, 2015,
During the six months ended June 30, 2016 and June 30, 2015at December 31, 2018 the Company is owed $108,817 and a note receivable of $75,000 and we have reserved a total of $136,000 against these balances.
Total payments for the six months ended June 30, 2016 and June 30, 2015 were $88,000 and $58,363 respectively.
On January 2, 2016, the Company closedhas made a determination that it will not pursue the acquisition of warisboring.com pursuantKubient, Inc.
amortized over a twelve-month period.
The Company amended this agreement April 1, 2017 for an additional term of three years. The Chief Executive Officer's base annual salary was increased to $77,500 in January, 2015, $96,000 in July 2015, and to $125,000 effective October 1, 2015$165,000 upon recommendation of the Compensation Committee of the board of directors. Effective May 16, 2016 the Chief Executive Officer’s base salary was voluntarily decreased to $95,000 as part of a Company expense reduction initiative.
The agreement will terminate upon the Chief Executive Officer's death or disability. In the event of a termination upon his death, the Company is obligated to pay his beneficiary or estate an amount equal to one year base salary plus any earned bonus at the time of his death. In the event the agreement is terminated as a result of his disability, as defined in the agreement, he is entitled to continue to receive his base salary for a period of one year. The Company is also entitled to terminate the agreement either with or without cause, and the Chief Executive Officer is entitled to voluntarily terminate the agreement upon one year's notice to the Company. In the event of a termination by the Company for cause, as defined in the agreement, or voluntarily by the Chief Executive Officer, the Company is obligated to pay him the base salary through the date of termination. In the event the Company terminates the agreement without cause, the Company is obligated to give him one years' notice of the Company's intent to terminate and, at the end of the one year period, pay an amount equal to two times his annual base salary together with any bonuses which may have been earned as of the date of termination. A constructive termination of the agreement will also occur if the Company materially breaches any term of the agreement or if a successor company to Bright Mountain Media, Inc. fails to assume the Company's obligations under the employment agreement. In that event, the Chief Executive Officer will be entitled to the same compensation as if the Company terminated the agreement without cause.
F-17
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
During the year ended December 31, 2015 the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party director and founder. The note issued was for an amount of $100,000 with a maturity date of December 22, 2020 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on January 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During the three and six-month periods ended June 30, 2016, Company amortized $1,971 and $3,943, respectively, related to this convertible note. During the three and six-month periods ended June 30, 2016, the Company recognized interest expense of $3,033 and $6,066, respectively, related to this convertible note.
During the year ended December 31, 2015 the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party. The note issued was for an amount of $100,000 with a maturity date of December 28, 2020 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on January 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During the three and six-month periods ended June 30, 2016, Company amortized $1,971 and $3,943, respectively, related to this convertible note. During the three and six-month periods ended June 30, 2016, the Company recognized interest expense of $3,033 and $6,066, respectively, related to this convertible note.
During the six months ended June 30, 2016, the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party director and founder. The note issued was for an amount of $100,000 with a maturity date of February 9, 2021 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on March 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During the three and six-month periods ended June 30, 2016, the Company recognized a discount of $39,000 and amortized $1,972 and $3,077, respectively, related to this convertible note. During the three and six-month periods ended June 30, 2016, the Company recognized interest expense of $3,033 and $4,733, respectively, related to this convertible note.
During the six months ended June 30, 2016, the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party director and founder. The note issued was for an amount of $100,000 with a maturity date of May 19, 2021 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on June 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During the six months ended June 3 2016, the Company recognized a discount of $50,000 and amortized $1,167 related to this convertible note. During the six months ended June 30, 2016, the Company recognized interest expense of $1,400 related to this convertible note.
F-18
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
During the six months ended June 30, 2016, the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party director and founder. The note issued was for an amount of $50,000 with a maturity date of June 10, 2021 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on July 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During the six months ended June 3 2016, the Company recognized a discount of $25,000 and amortized $278 related to this convertible note. During the six months ended June 30, 2016, the Company recognized interest expense of $333 related to this convertible note.
During the six months ended June 30, 2016, the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party director and founder. The note issued was for an amount of $50,000 with a maturity date of June 23, 2021 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on July 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During the six months ended June 3 2016, the Company recognized a discount of $35,000 and amortized $136 related to this convertible note. During the six months ended June 30, 2016, the Company recognized interest expense of $117 related to this convertible note.
During the six months ended June 30, 2016, a related party founder purchased 1,000,000 shares of the Company’s common stock for $500,000.
NOTE 9 – SHAREHOLDERS’ EQUITY
Preferred Stock
PREFERRED STOCK
At a meeting$0.01 (the "Preferred Stock"), issuable in such series and with such designations, rights and preferences as the board of the Boarddirectors may determine. The Company's board of Directors, held on November 1, 2013, the directors approved the designationhas previously designated five series of two million (2,000,000) sharespreferred stock, consisting of the Preferred Stock as 10% Series A Convertible Preferred Stock (“("Series A Stock”Stock") and authorized the issuance of the Series A Stock. Holders of the Series A Stock shall be entitled to the payment of a 10% dividend payable on preferred shares outstanding in shares of the Corporation’s common stock at a rate of one share of Common Stock for each ten shares of Series A Stock. Dividends shall be payable annually the tenth business day of January. Each holder of Series A Stock may convert all or part of the Series A Stock into shares of common stock on a share for share basis. Series A Stock shall rank superior to all other classes of stock upon liquidation. Each share of Series A Stock shall automatically convert to common shares five years from the date of issuance or upon a change in control. On the tenth business day of January 2016 there were 181,699 shares of common stock dividends owed and payable to the Series A Stockholders of record as dividends on the Series A Stock. On January 10, 2016, the Company issued 181,699 shares of common stock due Series A Stockholders. As of June 30, 2016, there were 89,275 shares of common stock dividends accrued but not earned until the tenth business day of January 2017 to the Series A Stockholders as dividends on the Series A Stock.
F-19
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
At a meeting of the Board of Directors, held on December 23, 2013, the directors approved the designation of one million (1,000,000) shares of the Preferred Stock as 10% Series B Convertible Preferred Stock (“("Series B Stock”Stock") and authorized the issuance of the Series B Stock. Holders of the Series B Stock shall be entitled to the payment of a 10% dividend payable on preferred shares outstanding in shares of the Corporation’s common stock at a rate of one share of common stock for each ten shares of Series B Stock. Dividends shall be payable annually the tenth business day of January. Each holder of Series B Stock may convert all or part of the Series B Stock into shares of common stock on a share for share basis. Series B Stock shall rank superior to all common stock upon liquidation. Each share of Series B Stock shall automatically convert to common shares five years from the date of issuance or upon a change in control. On the tenth business day of January 2016 there were 100,000 shares of common stock owed and payable to the Series B Stockholders as dividends on the Series B Stock. On January 10, 2016, the Company issued 100,000 shares of common stock due Series B Stockholder. As of June 30, 2016, there were 46,987 shares of common stock accrued but not earned until the tenth business day of January 2017 to the Series B Stockholder as dividends on the Series B Stock.
At a meeting of the Board of Directors, held on September 22, 2014, the directors approved the designation of two million (2,000,000) shares of the Preferred Stock as, 10% Series C Convertible Preferred Stock (“("Series C Stock”Stock") and authorized the issuance of the Series C Stock. Holders of the Series C Stock shall be entitled to the payment of a 10% dividend payable on preferred shares outstanding in shares of the Corporation’s common stock at a rate of one share of common stock for each ten shares of Series C Stock. Dividends shall be payable annually the tenth business day of January. Each holder of Series C Stock may convert all or part of the Series C Stock into shares of common stock on a share for share basis. Series C Stock shall rank superior to all common stock upon liquidation. Each share of Series C Stock shall automatically convert to common shares five years from the date of issuance or upon a change in control. On the tenth business day of January 2016 there were 180,000 shares of common stock owed and payable to the Series C Stockholders as dividends on the Series C Stock. On January 10, 2016, the Company issued 180,000 shares of common stock due Series C Stockholder. As of June 30, 2016, there were 84,576 shares of common stock accrued but not earned until the tenth business day of January 2017 to the Series C Stockholders as dividends on the Series C Stock.
At a meeting of the Board of Directors, held on March 20, 2015, the directors approved the designation of two million (2,000,000) shares of the Preferred Stock as, 10% Series D Convertible Preferred Stock (“("Series D Stock”Stock") and 10% Series E Convertible Preferred Stock ("Series E Stock").
Series A B, C and D Stock are also subject to adjustment of the conversion terms due to future mergers, sales and stock splits, if any.
Common Stock
|
|
On January 15, 2016, the Company issued to a consultant 7,000 shares of its common stock at $0.695 per share, or $4,865, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On February 15, 2016, the Company issued to a consultant 7,000 shares of its common stock at $0.695 per share, or $4,865, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On March 22, 2016, the Company issued to a law firm 50,000 shares of its common stock at $0.695 per share, or $34,750, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
F-20
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
On April 15, 2016, the Company issued to a consultant 7,000 shares of its common stock at $0.67 per share, or $4,690, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On May 16, 2016, the Company issued to a consultant 3,600 shares of its common stock at $0.75 per share, or $2,700, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On June 20, 2016, the Company issued to a consultant 3,600 shares of its common stock at $0.85 per share, or $3,060, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
B)
Stock issued for dividends
During the six months ended June 30, 2016, the Company issued 501,562 shares of its common stock as dividends to the holders of its Series A, Series B, Series C, and Series D Stock only. Holders of the Series A, Series B, Series C, and Series D Stock are entitled to the payment of a 10% dividend payable in shares of the Company’s common stock at a rate of one share of common stock for each ten10 shares of Series A Series B, Series C, or Series D Stock, payable onannually the tenth10th business day of January. The shares of Series A Stock are redeemable at the Company's option upon 20 days’ notice for an amount equal to the amount of capital invested. On the 10th business day of January commencing in 2017.
C)
Stock issued for cash
During the six months ended June 30, 2016, the Company raised additional capital through issuance of common stock pursuant to a private placement whereby $500,000 in capital was raised through the sale of 1,000,0002018 there were 10,000 shares of common stock dividends owed and payable to the Series A Stockholder of record as dividends on the Series A Stock. These preferred shares automatically converted into common shares on December 30, 2018 as defined above.
common
stockbased on the fair value at the date of grant, or $0.75 a sharevalued at$750,000 (the"ConsultingShares") in accordance with the consulting agreement. See Commitments and Contingencies Note 11.Compensation
Stock Option Plans
The Company has adopted three stock option plans, the terms of which are substantially identical. The purpose of each plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under each plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Compensation Committee of the Company's board of directors administers each plan. The material terms of each option which may be granted under each plan will contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted, and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the plan, as may be determined by the Committee and specified in the grant instrument.
F-21
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
On April 1, 2013, the Company's board of directors and majority stockholder adopted the 2013 Stock Option Plan (the “2013 Plan”"2013 Plan"), to be effective on April 1, 2013. The Company has reserved for issuance an aggregate of 900,000 shares of common stock under the 2013 Plan. The maximum aggregate number of shares of Company stock that shall be subject to grants made under the 2013 Plan to any individual during any calendar year shall be 180,000 shares. As of June 30, 2016, 0December 31, 2018, 132,000 shares were remaining under the 2013 Plan for future issuance.
On March 22, 2016 the Company granted 100,000 ten-year stock options, which have an exercise price of $0.695 per share to an executive officer and director. The aggregate fair value of these options was computed at $39,901 or $0.3990 per option.
On March 22, 2016 the Company granted 46,000 ten-year stock options, which have an exercise price of $0.695 per share to a director. The aggregate fair value of these options was computed at $18,354 or $0.3990 per option.
The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates.
The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors, which is subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted during the six months ended June 30, 2016 and 2015:
| June 30, |
| June 30, | ||
Assumptions: | 2016 |
| 2015 | ||
Expected term (years) | 6.8 |
|
| 6.25 |
|
Expected volatility | 66 | % |
| 63 | % |
Risk-free interest rate | .01% - 2.07 | % |
| .38 | % |
Dividend yield | 0 | % |
| 0 | % |
Expected forfeiture rate | 0 | % |
| 0 | % |
The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on an average of similar public companies historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.
F-22
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
The Company recorded $59,551 and $15,390 stock option expense for the three months ended June 30, 2016 and June 30, 2015, respectively. The Company recorded $77,124 and $29,124 stock option expense for the six months ended June 30, 2016 and June 30, 2015, respectively. The $77,124 non-cash stock option expense for the six months ended June 30, 2016 has been recognized as a component of general and administrative expenses in the accompanying unaudited condensed consolidated financial statements.
As of June 30, 2016 there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $82,731 to be recognized through June 2020.
The grant date weighted average for fair values of options granted in 2016 is $ 0.695 per option. The intrinsic value as of June 30, 2016 was $22,630.
A summary of the Company's stock option activity during the six months ended June 30, 2016 is presented below:
|
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
Balance Outstanding, December 31, 2015 |
|
| 1,701,000 |
|
| $ | 0.34 |
|
|
| 6.6 |
|
| $ | 867,510 |
|
Granted |
|
| 146,000 |
|
|
| 0.70 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Expired |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance Outstanding, June 30, 2016 |
|
| 1,847,000 |
|
| $ | 0.37 |
|
|
| 6.6 |
|
|
| 867,510 |
|
Exercisable at June 30, 2016 |
|
| 1,327,000 |
|
| $ | 0.28 |
|
|
| 5.4 |
|
| $ | 756,390 |
|
Summarized information with respect to options outstanding under the three option plans at June 30, 2016 is as follows:
|
| Options Outstanding |
| Options Exercisable | ||||||||
Range or Exercise Price |
| Number Outstanding |
| Remaining Average Contractual Life (In Years) |
| Weighted Average Exercise Price |
| Number Exercisable |
| Weighted Average Exercise Price | ||
0.14 - 0.24 |
| 720,000 |
| 1.7 |
| $ | 0.05 |
| 720,000 |
| $ | 0.08 |
0.25 - 0.49 |
| 351,000 |
| 1.1 |
| $ | 0.05 |
| 297,000 |
| $ | 0.06 |
0.50 - 0.78 |
| 776,000 |
| 3.5 |
| $ | 0.27 |
| 310,000 |
| $ | 0.14 |
|
| 1,847,000 |
| 2.3 |
| $ | 0.37 |
| 1,327,000 |
| $ | 0.09 |
NOTE 10 – CONCENTRATIONS
The Company has historically purchases a substantial amount of its products from two vendors; Citizens Watch Company of America, Inc., and Bulova Corporation. During the three months ended June 30, 2016, purchases from Citizens accounted for 44% and purchases from Bulova accounted for 15%, of the total products purchased as compared to 39% and 22%, respectively for the three months ended June 30, 2015. During the six months ended June 30, 2016, purchases from Citizens accounted for 39% and purchases from Bulova accounted for 17% of the total products purchases as compared to 39% and 29%, respectively for the six months ended June 30, 2015. Although we continue to add additional product vendors and we continue to expand our product line and vendor relationships, due to continued high concentration and reliance on these two vendors, the loss of one of these two vendors could adversely affect the Company's operations.
F-23
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
The Company sells many of its products through various e-commerce distribution portals, which include Amazon and eBay. During the three months ended June 30, 2016, these two distributor portals accounted for 91% and 5%, respectively of our total revenue as compared to 78% and 2% respectively for the three months ended June 30, 2015. During the six months ended June 30, 2016, these two distributor portals accounted for 91% and 5%, respectively of our total revenue. Although our direct product sales have increased to 4% of total product revenue for the three months ended June 30, 2016 as compared to 1% for the three months ended June 30, 2015, due to the high concentration and reliance on these two e-commerce distributor portals, the loss of a working relationship with either of these two distributor portals could adversely affect the Company's operations.
A substantial amount of payments for our products sold are processed through PayPal. A disruption in PayPal payment processing could have an adverse effect on the Company's operations and cash flow.
The Company obtained approximately 23% of its advertising revenue for the three months ended June 30, 2016 from Google AdSense, a third-party provider, as compared to 57% for the three months ended June 30, 2015. Paid listings are priced on a price per click basis and when a user submits a search query and then clicks on a Google AdSense paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with the Company. The Company's remaining 77% of advertising revenue for the three months ended June 30, 2016 was from direct advertising and subscriptions as compared to 43% for the three months ended June 30, 2015.
Credit Risk
The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. At June 30, 2016 and December 31, 2015, respectively, the Company had cash balances above the FDIC insured limit of approximately $0 and $0 respectively. At June 30, 2016, our accounts receivable included amounts due from Google AdSense, INFORM and Medium Corporation representing 19%, 19% and 12%, respectively, of total accounts receivable. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral.
Concentration of Funding
During the six months ended June 30, 2016, the Company's funding was provided by the sale of shares of the Company's common stock to a related party officer and director.
NOTE 11 – SUBSEQUENT EVENTS
On July 7, 2016 and July 25, 2016, the Company issued two convertible notes in the amounts of $50,000 and $50,000, respectively. The notes were issued to a related party director and founder. The notes are convertible at $0.50 per share, bear interest at 12% per annum payable monthly in cash. The notes are convertible at a conversion price that creates a beneficial conversion, which will be recorded as a debt discount, which will be amortized to interest expense over the life of the notes.
On July 12, 2016, the Board of Directors granted 340,000 ten-year stock options under the 2015 Plan to five employees. The options vest over four years and are executable at $0.85 per share, the fair value on the date of grant.
On July 20, 2016, the Company issued a consulting firm 3,600 shares of our common stock for services provided. The shares were valued at $0.85 per share, the fair value on date of grant.
On August 10, 2016, the Company raised capital of $60,000 through the sale of 120,000 shares of common stock to chief executive officer in a private transaction.
On July 18, 2016, the Company entered into a five year lease agreement for retail space of 2,720 square feet. The lease has a five year term at an initial base rental of $43,438 per year, increasing 3% per year over the lease term. The facility will be used primarily for the increased storage and display space for the Company’s watch product lines.
![[bmtm_s1014.gif]](https://capedge.com/proxy/S-1/0001553350-16-002428/bmtm_s1014.gif)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Director of:
Bright Mountain Media, Inc.
We have audited the accompanying consolidated balance sheets of Bright Mountain Media, Inc. and Subsidiaries (the “Company”) as of December 31, 2015 and 2014 and the relatedconsolidated statements of operations, changes in shareholders’ equity, and cash flows for the years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, theconsolidated financial statements referred to above present fairly in all material respects, the financial position of Bright Mountain Media, Inc. and Subsidiaries as of December 31, 2015 and 2014 and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a net loss of $1,673,094 and used cash in operations of $1,591,611 and an accumulated deficit of $6,157,755 at December 31, 2015. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liggett & Webb, P.A.
LIGGETT & WEBB, P.A.
Certified Public Accountants
Boynton Beach, Florida
March 24, 2016
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONSOLIDATED BALANCE SHEETS
|
| December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
|
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 416,187 |
|
| $ | 590,236 |
|
Accounts Receivable |
|
| 42,449 |
|
|
| 4,110 |
|
Prepaid Expenses and Other Current Assets |
|
| 109,927 |
|
|
| 86,298 |
|
Inventories |
|
| 1,053,890 |
|
|
| 776,448 |
|
Total Current Assets |
|
| 1,622,453 |
|
|
| 1,457,092 |
|
Fixed Assets, net |
|
| 51,305 |
|
|
| 38,074 |
|
Website Acquisition Assets, net |
|
| 630,286 |
|
|
| 443,222 |
|
Other Assets |
|
| 15,547 |
|
|
| 12,580 |
|
Total Assets |
| $ | 2,319,591 |
|
| $ | 1,950,968 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 323,782 |
|
| $ | 270,323 |
|
Premium Finance Loan Payable |
|
| 52,406 |
|
|
| 47,866 |
|
Total Current Liabilities |
|
| 376,188 |
|
|
| 318,189 |
|
|
|
|
|
|
|
|
|
|
Long Term Debt to Related Parties, net |
|
| 122,260 |
|
|
| — |
|
Total Liabilities |
|
| 498,448 |
|
|
| 318,189 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.01, 20,000,000 shares authorized, 5,200,000 and 4,400,000 issued and outstanding respectively: |
|
|
|
|
|
|
|
|
Series A, 2,000,000 shares designated, 1,900,000 and 1,600,000 shares issued and outstanding |
|
| 19,000 |
|
|
| 16,000 |
|
Series B, 1,000,000 shares designated, 1,000,000 and 1,000,000 shares issued and outstanding |
|
| 10,000 |
|
|
| 10,000 |
|
Series C, 2,000,000 shares designated, 1,800,000 and 1,800,000 shares issued and outstanding |
|
| 18,000 |
|
|
| 18,000 |
|
Series D, 2,000,000 shares designated, 500,000 and 0 shares issued and outstanding |
|
| 5,000 |
|
|
| — |
|
Common stock, par value $.01, 324,000,000 shares authorized, 35,885,059 issued and outstanding, and 33,483,234 issued 33,123,234 outstanding, respectively |
|
| 358,850 |
|
|
| 334,832 |
|
Treasury Stock (0 and 360,000 shares) |
|
| — |
|
|
| (2,501 | ) |
Additional paid-in-capital |
|
| 7,568,048 |
|
|
| 5,741,109 |
|
Accumulated Deficit |
|
| (6,157,755 | ) |
|
| (4,484,661 | ) |
Total shareholders’ equity |
|
| 1,821,143 |
|
|
| 1,632,779 |
|
Total shareholders’ liabilities and shareholders’ equity |
| $ | 2,319,591 |
|
| $ | 1,950,968 |
|
See accompanying notes to consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the Year Ended December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Product Sales |
| $ | 1,408,481 |
|
| $ | 1,050,394 |
|
Revenues from Services |
|
| 283,598 |
|
|
| 118,792 |
|
Total Revenue |
|
| 1,692,079 |
|
|
| 1,169,186 |
|
Cost of sales |
|
| 1,148,338 |
|
|
| 820,979 |
|
Gross profit |
|
| 543,741 |
|
|
| 348,207 |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 2,214,238 |
|
|
| 1,858,634 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (1,670,497 | ) |
|
| (1,510,427 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest income |
|
| 30 |
|
|
| 62 |
|
Interest expense |
|
| (2,627 | ) |
|
| (271 | ) |
Total other income (expense), net |
|
| (2,597 | ) |
|
| (209 | ) |
Net Loss |
|
| (1,673,094 | ) |
|
| (1,510,636 | ) |
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
Series A, Series B, Series C and Series D preferred |
|
| 338,684 |
|
|
| 208,831 |
|
Total preferred stock dividends |
|
| 338,684 |
|
|
| 208,831 |
|
Net loss attributable to common shareholders |
| $ | (2,011,778 | ) |
| $ | (1,719,467 | ) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
| $ | (0.06 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Basic and diluted |
|
| 34,587,695 |
|
|
| 32,612,378 |
|
See accompanying notes to consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS' EQUITY
For the years ended December 31, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Treasury |
|
| Accumulated |
|
| Shareholders' |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance -December 31, 2013 |
|
| 2,500,000 |
|
| $ | 25,000 |
|
|
| 31,647,000 |
|
| $ | 320,070 |
|
|
| 4,022,481 |
|
| $ | (2,501 | ) |
| $ | (2,974,025 | ) |
| $ | 1,391,025 |
|
Common stock issued for cash ($.50/share) pursuant to exercised stock option grant |
|
|
|
|
|
|
|
|
|
| 50,000 |
|
|
| 500 |
|
|
| 24,500 |
|
|
|
|
|
|
|
|
|
|
| 25,000 |
|
Common stock issued for services ($.50/share) |
|
|
|
|
|
|
|
|
|
| 45,000 |
|
|
| 450 |
|
|
| 27,050 |
|
|
|
|
|
|
|
|
|
|
| 27,500 |
|
Sale of common stock for cash ($.50/share) pursuant to Subscription Agreement |
|
|
|
|
|
|
|
|
|
| 1,360,000 |
|
|
| 13,600 |
|
|
| 666,400 |
|
|
|
|
|
|
|
|
|
|
| 680,000 |
|
Sale of 10% Series A Preferred Stock for cash ($.50/share) pursuant to Subscription Agreement |
|
| 100,000 |
|
|
| 1,000 |
|
|
|
|
|
|
|
|
|
|
| 49,000 |
|
|
|
|
|
|
|
|
|
|
| 50,000 |
|
Sale of 10% Series C Preferred Stock for cash ($.50/share) pursuant to Subscription Agreement |
|
| 1,800,000 |
|
|
| 18,000 |
|
|
|
|
|
|
|
|
|
|
| 882,000 |
|
|
|
|
|
|
|
|
|
|
| 900,000 |
|
Common stock issued for 10% dividend payment pursuant to 10% Series A and 10% Series B Preferred Stock designations |
|
|
|
|
|
|
|
|
|
| 21,234 |
|
|
| 212 |
|
|
| (212 | ) |
|
|
|
|
|
|
|
|
|
| — |
|
Stock option compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 69,890 |
|
|
|
|
|
|
|
|
|
|
| 69,890 |
|
Net loss for the year ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,510,636 | ) |
|
| (1,510,636 | ) |
Balance - December 31, 2014 |
|
| 4,400,000 |
|
| $ | 44,000 |
|
|
| 33,123,234 |
|
| $ | 334,832 |
|
| $ | 5,741,109 |
|
| $ | (2,501 | ) |
| $ | (4,484,661 | ) |
| $ | 1,632,779 |
|
(Continued)
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS' EQUITY (CONTINUED)
For the years ended December 31, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Treasury |
|
| Accumulated |
|
| Shareholders' |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Deficit |
|
| Equity |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance - December 31, 2014 |
|
| 4,400,000 |
|
| $ | 44,000 |
|
|
| 33,123,234 |
|
| $ | 334,832 |
|
| $ | 5,741,109 |
|
| $ | (2,501 | ) |
| $ | (4,484,661 | ) |
| $ | 1,632,779 |
|
Common stock issued for cash (.2778/share) pursuant to exercised stock option grant |
|
|
|
|
|
|
|
|
|
| 54,000 |
|
|
| 540 |
|
|
| 14,461 |
|
|
|
|
|
|
|
|
|
|
| 15,001 |
|
Common stock issued for cash ($.50/share) pursuant to exercised stock option grant |
|
|
|
|
|
|
|
|
|
| 10,000 |
|
|
| 100 |
|
|
| 4,900 |
|
|
|
|
|
|
|
|
|
|
| 5,000 |
|
Common Stock issued for services ($.60/share) |
|
|
|
|
|
|
|
|
|
| 7,000 |
|
|
| 70 |
|
|
| 4,130 |
|
|
|
|
|
|
|
|
|
|
| 4,200 |
|
Common stock issued for services ($.65/share) |
|
|
|
|
|
|
|
|
|
| 57,000 |
|
|
| 570 |
|
|
| 36,480 |
|
|
|
|
|
|
|
|
|
|
| 37,050 |
|
Common stock issued for services ($.69/share) |
|
|
|
|
|
|
|
|
|
| 7,000 |
|
|
| 70 |
|
|
| 4,760 |
|
|
|
|
|
|
|
|
|
|
| 4,830 |
|
Common stock issued for services ($.75/share) |
|
|
|
|
|
|
|
|
|
| 7,400 |
|
|
| 74 |
|
|
| 5,476 |
|
|
|
|
|
|
|
|
|
|
| 5,550 |
|
Retired Treasury shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,600 | ) |
|
| 1,099 |
|
|
| 2,501 |
|
|
|
|
|
|
| — |
|
Sale of common stock for cash ($.50/share) pursuant to Subscription Agreement |
|
|
|
|
|
|
|
|
|
| 1,980,000 |
|
|
| 19,800 |
|
|
| 970,200 |
|
|
|
|
|
|
|
|
|
|
| 990,000 |
|
Sale of 10% Series A Preferred Stock for cash ($.50/share) pursuant to Subscription Agreement |
|
| 300,000 |
|
|
| 3,000 |
|
|
|
|
|
|
|
|
|
|
| 147,000 |
|
|
|
|
|
|
|
|
|
|
| 150,000 |
|
Sale of 10% Series D Preferred Stock for cash ($.50/share) pursuant to Subscription Agreement |
|
| 500,000 |
|
|
| 5,000 |
|
|
|
|
|
|
|
|
|
|
| 245,000 |
|
|
|
|
|
|
|
|
|
|
| 250,000 |
|
Common stock issued for 10% dividend payment pursuant to 10% Series A Preferred Stock designations |
|
|
|
|
|
|
|
|
|
| 160,000 |
|
|
| 1,600 |
|
|
| (1,600 | ) |
|
|
|
|
|
|
|
|
|
| — |
|
Common stock issued for 10% dividend payment pursuant to 10% Series B Preferred Stock designations |
|
|
|
|
|
|
|
|
|
| 100,000 |
|
|
| 1,000 |
|
|
| (1,000 | ) |
|
|
|
|
|
|
|
|
|
| — |
|
Common stock issued for 10% dividend payment pursuant to 10% Series C Preferred Stock designations |
|
|
|
|
|
|
|
|
|
| 29,425 |
|
|
| 294 |
|
|
| (294 | ) |
|
|
|
|
|
|
|
|
|
| — |
|
Stock option compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 59,327 |
|
|
|
|
|
|
|
|
|
|
| 59,327 |
|
Common Stock issued for acquisitions ($.75.share) |
|
|
|
|
|
|
|
|
|
| 350,000 |
|
|
| 3,500 |
|
|
| 259,000 |
|
|
|
|
|
|
|
|
|
|
| 262,500 |
|
Beneficial Conversion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 78,000 |
|
|
|
|
|
|
|
|
|
|
| 78,000 |
|
Net loss for the year ended December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,673,094 | ) |
|
| (1,673,094 | ) |
Balance - December 31, 2015 |
|
| 5,200,000 |
|
| $ | 52,000 |
|
|
| 35,885,059 |
|
| $ | 358,850 |
|
| $ | 7,568,048 |
|
| $ | — |
|
| $ | (6,157,755 | ) |
| $ | 1,821,143 |
|
See accompanying notes to consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| For the Years Ended |
| |||||
|
| December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net Loss |
| $ | (1,673,094 | ) |
| $ | (1,510,636 | ) |
Adjustments to reconcile net loss to net cash used in operations: |
|
|
|
|
|
|
|
|
Bad Debt Expense |
|
| 798 |
|
|
| 500 |
|
Depreciation |
|
| 14,248 |
|
|
| 11,335 |
|
Amortization of Debt Discount |
|
| 260 |
|
|
| — |
|
Amortization |
|
| 181,905 |
|
|
| 147,006 |
|
Stock option compensation expense |
|
| 59,327 |
|
|
| 69,890 |
|
Impairment of Website Assets |
|
| 70,531 |
|
|
| 24,716 |
|
Common stock issued for services |
|
| 51,630 |
|
|
| 27,500 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
| (39,137 | ) |
|
| (11,038 | ) |
Inventory |
|
| (277,442 | ) |
|
| (473,130 | ) |
Prepaid expenses and other current assets |
|
| (23,629 | ) |
|
| (44,097 | ) |
Other assets |
|
| (2,967 | ) |
|
| 2,120 |
|
Accounts payable |
|
| 45,959 |
|
|
| 87,456 |
|
Net cash used in operating activities |
|
| (1,591,611 | ) |
|
| (1,668,378 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
| (27,479 | ) |
|
| (14,910 | ) |
Purchase of websites |
|
| (169,500 | ) |
|
| (572,000 | ) |
Net cash used in investing activities |
|
| (196,979 | ) |
|
| (586,910 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Sale of common stock |
|
| 1,010,001 |
|
|
| 705,000 |
|
Sale of Preferred stock |
|
| 400,000 |
|
|
| 950,000 |
|
Repurchase of common stock |
|
| — |
|
|
| — |
|
Proceeds from premium finance loan, net of repayment |
|
| 4,540 |
|
|
| 20,892 |
|
Long term Debt – Loan from related parties |
|
| 200,000 |
|
|
| — |
|
Net cash provided by financing activities |
|
| 1,614,541 |
|
|
| 1,675,892 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| (174,049 | ) |
|
| (579,396 | ) |
Cash at beginning of period |
|
| 590,236 |
|
|
| 1,162,632 |
|
Cash at end of period |
| $ | 416,187 |
|
| $ | 590,236 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 2,367 |
|
| $ | 271 |
|
Income Taxes |
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and financing activities |
|
|
|
|
|
|
|
|
Premium finance loan payable recorded as prepaid |
| $ | 87,212 |
|
| $ | 20,892 |
|
Conversion of related party notes to common stock |
| $ | — |
|
| $ | — |
|
During 2015, the Company recorded a beneficial conversion debt discount to additional paid-in-capital of $78,000.
During 2015, the Company issued 350,000 shares of common stock with a fair value of $262,500 for the acquisition of two websites.
During 2015, the Company retired 360,000 shares of common stock with a cost of $2,501.
During 2015, the Company issued 289,425 shares of common stock due Series A, Series B, and Series C stockholders with a fair market value of $217,069.
See accompanying notes to consolidated financial statements
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Bright Mountain Media, Inc., formerly known as Bright Mountain Acquisition Corporation is a Florida corporation formed on May 20, 2010. Its wholly owned subsidiaries, Bright Mountain LLC, and The Bright Insurance Agency, LLC, were formed as Florida limited liability companies in May 2011. Its wholly owned subsidiary, Bright Watches, LLC was formed as Florida limited liability company in December 2015. On September 25, 2013 Five Peaks, LLC filed Articles of Amendment to the Articles of Organization with the State of Florida to amend its entity name to The Bright Insurance Agency, LLC. Its wholly owned subsidiary, Bright Watches, LLC was formed as a Florida limited liability company in December 2015. When used herein, the terms "BMTM," the "Company," "we," "us," "our" or "Bright Mountain" refers to Bright Mountain Media, Inc. and its subsidiaries.
The Company is a media holding company of online assets. We sell various products through our proprietary websites and retail location, and through third party e-commerce distributor portals. Our websites provide content designed to attract and retain targeted Internet audiences. We generate revenues from two segments, product sales and services. Services consists of advertising revenue and subscription revenue. Our advertising revenue is generated primarily through the display of paid listings as well as display advertisements appearing on our websites.
The Company obtained approximately 36% of its 2015 revenues from services from a third-party provider, namely Google AdSence. Paid listings are priced on a price per click basis and when a user submits a search query and then clicks on a Google AdSence paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with the Company. The Company's remaining 42% of revenues from services was from other third-party providers, direct advertising, and subscriptions.
Bright Mountain plans to grow its business through organic growth and acquisitions. The Bright Mountain strategy is to concentrate its marketing and development primarily to military and public safety audiences and associated demographic.
Our websites contain a number of sections with demographically oriented information including originally written news content, blogs, forums, career information, and video.
Principles of Consolidation
The consolidated financial statements include the accounts of BMTM and its wholly owned subsidiaries, Bright Mountain LLC, The Bright Insurance Agency, LLC and Bright Watches, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue on our products in accordance with ASC 605-10, "Revenue Recognition in Financial Statements". Under these guidelines, revenue is recognized on sales transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of product has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has several revenue streams generated directly from its website and specific revenue recognition criteria for each revenue stream is as follows:
·
Sale of merchandise directly to consumers: The Company's product sales are recognized either FOB shipping point or FOB destination, dependent on the customer. Revenues are therefore recognized at point of ownership transfer, accordingly.
·
Advertising revenue is received directly form companies who pay the Company a monthly fee for advertising space.
·
Advertising revenues are generated by users "clicking" on website advertisements utilizing several ad network partners: Revenues are recognized, on a net basis, upon receipt of payment by the ad network partner since the revenue is not determinable until it is received.
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
·
Subscription revenues are generated by the sale of access to career postings on one of our websites. The term of the subscriptions range from one month to twelve months. Revenues are recognized, on a net basis, over the term of the subscription period. All sales are final per the subscription Terms of Use.
The Company follows the guidance of ASC 605-50-25, "Revenue Recognition, Customer Payments". Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products included in inventories. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold. Cash incentives provided to our customers are recognized as a reduction of the related sale price, and, therefore, are a reduction in sales.
Use of Estimates
Our consolidated financial statements are prepared in accordance with Accounting Principles Generally Accepted in the United States ("GAAP"). These accounting principles require management to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of our consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result. Significant estimates included in the accompanying consolidated financial statements include revenue recognition, the fair value of acquired assets for purchase price allocation in business combinations, valuation of inventory, valuation of intangible assets, estimates of amortization period for intangible assets, estimates of depreciation period for fixed assets, valuation of equity based transactions, and the valuation allowance on deferred tax assets.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Fair Value of Financial Instruments and Fair Value Measurements
The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, accrued expenses, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
Accounts Receivable
Accounts receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense.
The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made.
Inventories
Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
Cost of Sales
Components of costs of sales include product costs, shipping costs to customers and any inventory adjustments.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sales Return Reserve Policy
Our return policy generally allows our end users to return purchased products for refund or in exchange for new products. We estimate a reserve for sales returns, if any, and record that reserve amount as a reduction of sales and as a sales return reserve liability. Sales to consumers on our web site generally may be returned within a reasonable period of time.
Product Warranty Reserve Policy
The Company is a retail distributor of products and warranties are the responsibility of the manufacturer. Therefore, the Company does not record a reserve for product warranty.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of seven years for office furniture and equipment, and five years for computer equipment. Leasehold improvements, if any, would be amortized over the lesser of the lease term or the useful life of the improvements. Expenditures for maintenance and repairs along with fixed assets below our capitalization threshold of $500 are expensed as incurred.
Website Development Costs
The Company accounts for its website development costs in accordance with Accounting Standards Codification ("ASC") ASC 350-50, "Website Development Costs" ("ASC 350-50"). These costs, if any, are included in intangible assets in the accompanying consolidated financial statements or expensed immediately if the Company cannot support recovery of these costs from positive future cash flows.
ASC 350-50 requires the expensing of all costs of the preliminary project stage and the training and application maintenance stage and the capitalization of all internal or external direct costs incurred during the application and infrastructure development stage. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated life of five years.
As of December 31, 2015 and 2014, all website development costs have been expensed.
Amortization and Impairment of Long-Lived Assets
Amortization and Impairment of long-lived assets are non-cash expenses relating primarily to website acquisitions. The Company accounts for long-lived assets in accordance with the provisions of FASB ASC 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Website acquisition costs are amortized over five (5) years. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. While it is likely that we will have significant amortization expense as we continue to acquire websites, we believe that intangible assets represent costs incurred by the acquired website to build value prior to acquisition and the related amortization and impairment charges of assets, if applicable, are not ongoing costs of doing business. Non-cash impairment expense is included in selling, general and administrative expenses on the accompanying statement of operations. For the year ended December 31, 2015 and the year ended December 31, 2014, non-cash impairment expense was $70,531 and $24,716 respectively. For the year ended December 31, 2015 and the year ended December 31, 2014, non-cash amortization expense was $181,905 and $147,006 respectively.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company accounts for stock-based instruments issued to employees for services in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC Topic 505-50, "Equity-Based Payments to Non-Employees". The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Non-cash stock-based stock option compensation is expensed over the requisite service period and are included in selling, general and administrative expenses on the accompanying statement of operations. For the year ended December 31, 2015 and the year ended December 31, 2014, non-cash stock-based stock option compensation expense was $59,327 and $69,890, respectively.
Advertising, Marketing and Promotion Costs
Advertising, marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying statement of operations. For the years ended December 31, 2015 and 2014, advertising, marketing and promotion expense was $29,563 and $91,824, respectively.
Income Taxes
We use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.
The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that wouldbe payable to the taxing authorities upon examination.
As of December 31, 2015, tax years 2015, 2014, and 2013 remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations
The company purchases a substantial amount of its products from two vendors; Citizens Watch Company of America, Inc., and Bulova Corporation. During 2015, these two vendors accounted for 34% and 26%, respectively of total products purchased as compared to 51% and 28% in 2014. Although in the year ended December 31, 2015 we added additional product vendors, and we continue to expand our product line and vendor relationships, due to the high concentration and reliance on these two vendors, the loss of one of these two vendors could adversely affect the Company's operations.
The Company generates revenues from two segments: product sales and services. We sell many products through various distribution portals, which include Amazon and eBay. During 2015, these two portals accounted for 88% and 6%, respectively of our total product sales as compared to 86% and 13% in 2015. Due to high concentration and reliance on these portals, the loss of a working relationship with either of these two portals could adversely affect the Company's operations.
A substantial amount of payments for our products sold are processed through PayPal. A disruption in PayPal payment processing could have an adverse effect on the Company's operations and cash flow.
Credit Risk
The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. At December 31, 2015 and December 31, 2014, respectively, the Company had cash balances above the FDIC insured limit of approximately $0 and $173,933 respectively. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral.
Concentration of Funding
During the twelve months ended December 31, 2015 a large portion of the Company's funding was provided by the sale of shares of the Company's common stock and preferred stock to a related party officer and director, as well as to a principal shareholder.
Basic and Diluted Net Earnings (Loss) Per Common Share
In accordance with ASC 260-10, "Earnings Per Share", basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. As of December 31, 2015 and 2014 there were 1,701,000 and 1,565,000 common stock equivalent shares outstanding as stock options, respectively; 5,200,000 and 4,400,000 common stock equivalents from the conversion of preferred stock, respectively; and 400,000 and 0 common stock equivalents from the conversion of notes payable, respectively. Equivalent shares were not utilized as the effect is anti-dilutive.
Segment Information
In accordance with the provisions of ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two identifiable operating segments based on the activities of the company in accordance with the ASC 28-10. The Company's two segments are product sales and services as of December 31, 2015. The product sales segment sells merchandise directly to customers thorough e-commerce distributor portals such as Amazon and eBay and through our proprietary websites and retail location. The services segment is focused on producing advertising revenue generated by users "clicking" on website advertisements utilizing several ad network partners and direct advertisers and subscription revenue generated by the sale of access to career postings on one of our websites.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.”The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605 "Revenue Recognition," and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35 "Revenue Recognition – Construction-Type and Production-Type Contracts." The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09.We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In June 2014, the FASB issued ASU 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period." This ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2015. We do not expect the adoption of this guidance to have a material impact on the consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern,” which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the condensed consolidated financial statements.
In July 2015, FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 – GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss of $1,673,094 and used cash in operating activities of $1,591,611 for the year ended December 31, 2015. The Company had an accumulated deficit of $6,157,755 at December 31, 2015. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company's continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from related parties to sustain its current level of operations.
Management plans to continue raising additional capital through private placements and is exploring additional avenues for future fund-raising through both public and private sources.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – ACQUISITIONS
On January 2, 2015, the Company entered into a Website Asset Purchase Agreement with an unrelated third party. As consideration for the purchase, the Company paid $50,000 in cash and issued 250,000 shares of its common stock with a fair value of $187,500. In conjunction with the Website Asset Purchase Agreement, the Company also entered into a Website Management Agreement. Under the terms of the Website Management Agreement, which expires on December 31, 2017, the Company agreed to pay $30,000 per year for full-time services in managing the website. The acquisition was accounted following ASC 805 “Business Combinations.” The operations of the website prior to the Company’s acquisition were immaterial; therefore, pro forma information was not presented. There were no costs of acquisition incurred as a result of this purchase.
On February 17, 2015, the Company entered into a Website Asset Purchase Agreement with an unrelated third party for an aggregate purchase price of $102,000. The purchase price consisted of a cash payment of $27,000, payable at a rate of $1,500 per month beginning on the closing date, and 100,000 shares of the Company’s common stock with a fair value of $75,000. The asset acquisition was accounted for as a purchase of assets in accordance with Rule 11-01 (d) of Regulation S-X and ASC 805-10-55-4. There were no costs of acquisition incurred as a result of the asset purchase.
On April 14, 2015, the Company entered into a Website Asset Purchase Agreement with an unrelated third party for a purchase price of $50,000 in cash. The acquisition was accounted for following ASC 805 "Business Combinations." The operations of the website prior to the Company's acquisition were immaterial; therefore, pro forma information was not presented. There were no costs of acquisition incurred as a result of this purchase.
On June 1, 2015, the Company entered into a Website Asset Purchase Agreement with an unrelated third party for a purchase price of $50,000 in cash. The asset acquisition was accounted for as a purchase of assets in accordance with Rule 11-01 (d) of Regulation S-X and ASC 805-10-55-4. There were no costs of acquisition incurred as a result of the asset purchase.
On December 4, 2015, the Company entered into a Website Asset Purchase Agreement with an unrelated third party for an aggregate purchase price of $250,000. This transaction closed on January 2, 2016. See note 16.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 3 – ACQUISITIONS (CONTINUED)
At December 31, 2015 and December 31, 2014, website acquisition assets consisted of the following:
|
| December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Website Acquisition Assets |
| $ | 1,054,444 |
|
| $ | 614,944 |
|
Less: Accumulated Amortization |
|
| (328,911 | ) |
|
| (147,006 | ) |
Less: Impairment Loss |
|
| (95,247 | ) |
|
| (24,716 | ) |
Website Acquisition Assets, net |
| $ | 630,286 |
|
| $ | 443,222 |
|
Non-cash amortization expense for the years ending December 31, 2015 and 2014 was $181,905 and $147,006 respectively.
Non-cash impairment expense for the years ending December 31, 2015 and 2014 was $70,531 and $24,716 respectively.
NOTE 4 – INVENTORIES
At December 31, 2015 and December 31, 2014 inventories consisted of the following:
|
| 2015 |
|
| 2014 |
| ||
Product Inventory: Clocks & Watches |
| $ | 1,017,220 |
|
| $ | 769,960 |
|
Product Inventory: Other Inventory |
|
| 36,670 |
|
|
| 6,488 |
|
Total Inventory Balance |
| $ | 1,053,890 |
|
| $ | 776,448 |
|
NOTE 5 – PREPAID COSTS AND EXPENSES
At December 31, 2015 and December 31, 2014, prepaid expenses and other current assets consisted of the following:
|
| 2015 |
|
| 2014 |
| ||
Other Current Assets |
| $ | 14,500 |
|
|
| 585 |
|
Prepaid Insurance |
|
| 87,212 |
|
|
| 85,713 |
|
Prepaid Inventory |
|
| 8,215 |
|
|
| — |
|
Prepaid Expenses and Other Current Assets |
| $ | 109,927 |
|
| $ | 86,298 |
|
NOTE 6 – PROPERTY AND EQUIPMENT
At December 31, 2015 and December 31, 2014, property and equipment consisted of the following:
|
| December 31, |
|
| Depreciable Life |
| ||||||
|
| 2015 |
|
| 2014 |
|
| (Years) |
| |||
Furniture & Fixtures |
| $ | 49,088 |
|
| $ | 32,107 |
|
|
| 7 |
|
Computer Equipment |
|
| 50,522 |
|
|
| 40,024 |
|
|
| 5 |
|
Total Fixed Assets |
|
| 99,610 |
|
|
| 72,131 |
|
|
|
|
|
Less: Accumulated Depreciation |
|
| (48,305 | ) |
|
| (34,057 | ) |
|
|
|
|
Total Fixed Assets, net |
| $ | 51,305 |
|
| $ | 38,074 |
|
|
|
|
|
Non-cash depreciation expense for the years ending December 31, 2015 and 2014 was $14,248 and $11,335 respectively.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 7 – SEGMENT INFORMATION
The Company has two identifiable segments as of December 31, 2015; products and services. The products segment sells merchandise directly to customers thorough e-commerce distributor portals such as Amazon and eBay and through our proprietary websites and retail location. The services segment is focused on producing advertising revenue generated by users "clicking" on website advertisements utilizing several ad network partners and direct advertisers and subscription revenue generated by the sale of access to career postings on one of our websites.
The following information represents segment activity for the year ended December 31, 2015:
|
| For the year ended December 31, 2015 |
| |||||||||
|
| Products |
|
| Services |
|
| Total |
| |||
Revenues |
| $ | 1,408,481 |
|
| $ | 283,598 |
|
| $ | 1,692,079 |
|
Website Amortization |
| $ | — |
|
| $ | 181,905 |
|
| $ | 181,905 |
|
Depreciation |
| $ | 11,860 |
|
| $ | 2,388 |
|
| $ | 14,248 |
|
Impairment |
| $ | — |
|
| $ | 70,531 |
|
| $ | 70,531 |
|
Loss from operations |
| $ | (1,181,233 | ) |
| $ | (491,861 | ) |
| $ | (1,673,094) |
|
Segment Assets |
| $ | 1,582,563 |
|
| $ | 737,028 |
|
| $ | 2,319,591 |
|
The following information represents segment activity for the year ended December 31, 2014:
|
| For the year ended December 31, 2014 |
| |||||||||
|
| Products |
|
| Services |
|
| Total |
| |||
Revenues |
| $ | 1,050,394 |
|
| $ | 118,792 |
|
| $ | 1,169,186 |
|
Website Amortization |
| $ | — |
|
| $ | 147,006 |
|
| $ | 147,006 |
|
Depreciation |
| $ | 10,183 |
|
| $ | 1,152 |
|
| $ | 11,335 |
|
Impairment |
| $ | — |
|
| $ | 24,716 |
|
| $ | 24,716 |
|
Loss from operations |
| $ | (1,102,922 | ) |
| $ | (407,505 | ) |
| $ | (1,510,427) |
|
Segment Assets |
| $ | 1,483,022 |
|
| $ | 467,946 |
|
| $ | 1,950,968 |
|
NOTE 8 –LONG TERM DEBT TO RELATED PARTIES
Beneficial Conversion Feature
On December 22 and 29, 2015, the Company issued 12% convertible notes that have conversion prices that create a beneficial conversion. The notes mature on December 22 and 29, 2020 respectively. These notes are convertible at the option of the holders into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the notes using the effective interest method. During 2015, the Company recognized a debt discount of $78,000 and amortized $260 during 2015.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 8 –LONG TERM DEBT TO RELATED PARTIES (CONTINUED)
Maturities of Long-Term Obligations for Five Years and Beyond
The minimum annual principal payments of notes payable at December 31, 2015 were:
2016 |
| $ | — |
|
2017 |
|
| — |
|
2018 |
|
| — |
|
2019 and thereafter |
|
| 200,000 |
|
Total minimum principal payments |
| $ | 200,000 |
|
NOTE 9 –PREMIUM LOAN PAYABLE
Premium Finance Loan Payable
Premium finance loans payable related to the financing of the Company’s Error & Omission (E&O) insurance coverage for the period September 6, 2015 through September 6, 2016. The Company financed $18,604 of the total policy premium of $25,396 (including interest and fees of $643) from Pro Premium Finance Company, Inc. The term of the loan are nine equal payments of $ 2,131 per month beginning October 6, 2015. The principal balance due was $12,210 at December 31, 2015.
Premium finance loan payable related to the financing of the Company's Director's & Officer's (D&O) insurance coverage and Employment Practices Liability insurance coverage for the period October 31, 2015 through October 30, 2016. The Company financed $47,222 of the total policy premium of $62,382 (including interest of $1,583) from Flat Iron Capital. The terms of the loan are 9 equal payments of $5,247 per month beginning November 30, 2015. The balance due was $36,728 at December 31, 2015.
Premium finance loan payable related to the financing of the Company's Commercial General Liability (CGL insurance for the period December 28, 2015 through December 27, 2016. The Company financed $3,467 of the total policy premium of $4,561 (including interest of $172) from Pro Premium Finance Company, Inc. The terms of the loan are 10 equal payments of $347 per month beginning January 28, 2016. The balance due was $3,468 at December 31, 2015.
Total Premium Finance Loan Payable balance for all of the Company's policies was $52,406 at December 31, 2015 and $47,866 at December 31, 2014.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its corporate offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487 under a long-term non-cancellable lease agreement, which contains renewal options. The lease, which was entered into on August 25, 2014 was amended on July 30, 2015 to increase the original approximate 2,014 square feet to approximately 4,450 square feet. The term of the lease was extended and will terminate on March 14, 2019 at a current base rent of for a term of approximately $8,978 per month for the first twelve months with a 3% escalation each year. An additional security deposit of $2,500 was required. Rent is all-inclusive and includes electricity, heat, air-conditioning, and water. The original rent commencement date is October 11, 2014 and will expire on March 14, 2019.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 10 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company leases retail space for its product sales division at 4900 Linton Boulevard, Bay 17A, Delray Beach, FL 33445 under a long-term, non-cancellable lease agreement, which contains renewal options. The lease, which was entered into on August 25, 2014, is for approximately 2,150 square feet for a term of 36 months in Delray Beach, Florida at a base rent of approximately $2,329 per month for the first twelve months with a 3% escalation each year. A security deposit of $3,865, first month's prepaid rent of $3,865, and last month's prepaid rent of $4,015 was paid upon lease execution. The lease is a triple net lease. Common area maintenance is approximately $1,317 per month for the first twelve months with annual escalations not to exceed 4%. The rent commencement date is October 1, 2014 and will expire on September 30, 2017.
Future minimum lease commitments due for facilities under non-cancellable operating leases at December 31, 2015 are as follows:
|
| Operating Leases |
| |
2016 |
| $ | 163,685 |
|
2017 |
|
| 168,781 |
|
2018 |
|
| 122,390 |
|
2019 and thereafter |
|
| 25,499 |
|
Total minimum lease payments |
| $ | 480,355 |
|
Rent expense for the years ended December 31, 2015 and 2014 was $120,162 and $77,543 respectively.
Legal
From time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2015, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
Other Commitments
The Company entered into various contracts or agreements in the normal course of business, which may contain commitments. During the years ended December 31, 2015 and 2014, the Company entered into agreements with third party vendors to supply website content and data, website software development, advertising, public relations, and legal services. All of these commitments contain provisions whereby either party may terminate the agreement with specified notice, normally 30 days, and with no further obligation on the part of either party.
During the years ended December 31, 2015 and 2014, the Company entered into agreements with third parties related to websites acquired during the respective periods as further discussed in note 3. Future anticipated contractual minimum payments under these agreements total approximately $106,000 for 2016, and $33,000 for 2017. Future contingent milestone payments under these agreements total approximately $40,000 for 2016.
Total payments for the years ended December 31, 2015 and 2014 was $164,550 and $84,060 respectively.
On December 4, 2015, the Company entered into an agreement with a third party related to the purchase of a website the Company acquired in January 2016 as further discussed in note 16. Total payments for the year ended December 31, 2015 was $5,000.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 10 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company entered into an Executive Employment Agreement with our Chief Executive Officer, with an effective date of June 1, 2014. Under the terms of this agreement, the Company will compensate the Chief Executive Officer with a base salary of $75,000 annually, and he is entitled to receive discretionary bonuses as may be awarded by the Company's Board of Directors from time to time. The initial term of the agreement is three years, and the Company may extend it for an additional one-year period upon written notice at least 180 days prior to the expiration of the term.
The Chief Executive Officer's base annual salary was increased to $77,500 in January, 2015, $96,000 in July 2015, and to $125,000 effective October 1, 2015 upon recommendation of the Compensation Committee of the board of directors.
The agreement will terminate upon the Chief Executive Officer's death or disability. In the event of a termination upon his death, the Company is obligated to pay his beneficiary or estate an amount equal to one year base salary plus any earned bonus at the time of his death. In the event the agreement is terminated as a result of his disability, as defined in the agreement, he is entitled to continue to receive his base salary for a period of one year. The Company is also entitled to terminate the agreement either with or without case, and the Chief Executive Officer is entitled to voluntarily terminate the agreement upon one year's notice to the Company. In the event of a termination by the Company for cause, as defined in the agreement, or voluntarily by the Chief Executive Officer, the Company is obligated to pay him the base salary through the date of termination. In the event the Company terminates the agreement without cause, the Company is obligated to give him one years' notice of the Company's intent to terminate and, at the end of the one year period, pay an amount equal to two times his annual base salary together with any bonuses which may have been earned as of the date of termination. A constructive termination of the agreement will also occur if the Company materially breaches any term of the agreement or if a successor company to Bright Mountain Acquisition Corporation fails to assume the Company's obligations under the employment agreement. In that event, the Chief Executive Officer will be entitled to the same compensation as if the Company terminated the agreement without cause.
The employment agreement contains customary non-compete and confidentiality provisions. The Company also agreed to indemnify the Chief Executive Officer pursuant to the provisions of the Company's Amended and Restated Articles of Incorporation and Restated By-laws.
NOTE 11 – STOCK COMPENSATION
The Company accounts for stock option compensation issued to employees for services in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC Topic 505-50,Equity-Based Payments to Non-Employees. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model.
Stock options issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, Compensation-Stock Compensation, including related amendments and interpretations. The related expense is recognized over the period the services are provided.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 11 – STOCK COMPENSATION (CONTINUED)
On April 20, 2011, the Company's board of directors and majority stockholder adopted the 2011 Stock Option Plan (the "2011 Plan"), to be effective on January 3, 2011. The purpose of the 2011 Plan, is2013 Plan, and 2015 Plan (the “Plans” are to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 20112015 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Company has reserved for issuance an aggregate of 900,000 shares of common stock under the 2011 Plan. The maximum aggregate number of shares of Company stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 180,000 shares. The Company's board of directors will administer the 2011 Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option granted pursuant to the 2011 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument. As of December 31, 2015, 02018, 9,000 shares were remaining under the 2011 Plan for future issuance.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 11 – STOCK COMPENSATION (CONTINUED)
On May 22, 2015, the Company's board of directors and majority stockholder adopted the 2015 Stock Option Plan (the "2015 Plan"), to be effective on May 22, 2015. The purpose of the 2015 Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2015 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Company has reserved for issuance an aggregate of 1,000,000 shares of common stock under the 2015 Plan. The maximum aggregate number of shares of Company stock that shall be subject to grants made under the 2015 Plan to any individual during any calendar year shall be 100,000 shares. The Company's board of directors will administer the 2015 Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option granted pursuant to the 2015 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the 2015 Plan, as may be determined by the Committee and specified in the grant instrument. As of December 31, 2015, 965,000 shares were remaining under the 2015 Plan for future issuance.
On January 2, 20142017 the Company granted 50,00010,000 ten-year stock options, which have an exercise price of $0.50 per share to a consultant. All 50,000 stock options vested on January 2, 2014.share. The aggregate fair value of these options was computed at $8,167$1,840 or $0.1633$0.184 per option.
On January 2, 2014 the Company granted 50,000 ten-year stock options, which have an exercise price of $0.50 per share and cliff vest annually over four years starting in January 2015 to an employee. The aggregate fair value of these options was computed at $8,167 or $0.1633 per option.
On August 22, 2014 the Company granted 25,000 ten-year stock options, which have an exercise price of $0.50 per share to a consultant. All 25,000 stock options vested on August 22, 2014. The aggregate fair value on these options was computed at $8,580 or $0.3432 per option.
On September 3, 2014 the Company granted 40,000 ten-year stock options, which have an exercise price of $0.50 per share and cliff vest annually over four years starting in September 2015 to a director. The aggregate fair value of these options was computed at $13,728 or $0.3432 per option.
On September 17, 2014 the Company granted 100,000 ten-year stock options, which have an exercise price of $0.50 per share and cliff vest annually over four years starting in October 2014 to an employee. The aggregate fair value of these options was computed at $34,320 or $0.3432 per option.
On October 15, 2014 the Company granted 40,000 ten-year stock options, which have an exercise price of $0.78 per share and cliff vest annually over four years starting in October 2015 to a director. The aggregate fair value of these options was computed at $12,256 or $0.3064 per option.
On November 26, 2014 the Company granted 100,000 ten-year stock options, which have an exercise price of $0.78 per share and cliff vest annually over four years starting in November 2015 to an employee. The aggregate fair value of these options was computed at $30,640 or $0.3064 per option.
On March 23, 2015 the Company granted 40,000 ten-year stock options, which have an exercise price of $0.75 per share and cliff vest annually over four years starting in March 2016 to a director. The aggregate fair value of these options was computed at $17,224 or $0.4306 per option.
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 11 – STOCK COMPENSATION (CONTINUED)
On October 27, 2015 the Company granted 60,000 ten-year stock options, which have an exercise price of $0.65 per share and cliff vest annually over four years starting October 2016 to a director. The aggregate fair value of these options was computed at $22,392 or $0.3732 per option.
On October 27, 2015 the Company granted 100,000 ten-year stock options, which have an exercise price of $0.65 per share and cliff vest annually over four years starting October 2016 to an executive officer and director. The aggregate fair value of these options was computed at $37,318 or $0.3732 per option.
Assumptions: | 2015 |
| 2014 | ||
Expected term (years) | 6.8 |
|
| 6.25 |
|
Expected volatility | 63 | % |
| 63 | % |
Risk-free interest rate | 0.01% - 2.07 | % |
| 0.01% - 2.07 | % |
Dividend yield | 0 | % |
| 0 | % |
Expected forfeiture rate | 0 | % |
| 0 | % |
2017:
| Assumptions: | 2017 |
| Expected term (years) | 6.25 |
| Expected volatility | 52% |
| Risk-free interest rate | 1.99% |
| Dividend yield | 0% |
| Expected forfeiture rate | 0% |
consolidated financial statements.
2020.
The grant date weighted average for fair values of options granted in 2015 is $ 0.38 per option.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 11 – STOCK COMPENSATION (CONTINUED)
|
| Number of Options |
|
| Weighted Exercise Price |
|
| Weighted Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
Balance Outstanding, December 31, 2013 |
|
| 1,420,000 |
|
| $ | 0.23 |
|
|
| 8.2 |
|
|
| 495,200 |
|
Granted |
|
| 405,000 |
|
|
| 0.60 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| (50,000 | ) |
|
| 0.50 |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| (210,000 | ) |
|
| 0.50 |
|
|
| — |
|
|
| — |
|
Expired |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance Outstanding, December 31, 2014 |
|
| 1,565,000 |
|
| $ | 0.30 |
|
|
| 7.5 |
|
| $ | 349,983 |
|
Granted |
|
| 200,000 |
|
|
| 0.67 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| (64,000 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Expired |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance Outstanding, December 31, 2015 |
|
| 1,701,000 |
|
| $ | 0.34 |
|
|
| 6.8 |
|
| $ | 337,984 |
|
Exercisable at December 31, 2015 |
|
| 1,114,500 |
|
| $ | 0.23 |
|
|
| 5.9 |
|
| $ | 305,987 |
|
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |
| Balance Outstanding, December 31, 2016 | 2,281,000 | 0.47 | 6.8 | 795,185 |
| Granted | 10,000 | 0.50 | — | — |
| Exercised | — | — | — | — |
| Forfeited | (264,000) | 0.80 | — | (92,034) |
| Expired | — | — | — | — |
| Balance Outstanding, December 31, 2017 | 2,027,000 | $0.42 | 5.5 | $73,770 |
| Granted | — | — | — | — |
| Exercised | — | — | — | — |
| Forfeited | (230,000) | 0.22 | 2.58 | 122,496 |
| Expired | — | — | — | — |
| Balance Outstanding, December 31, 2018 | 1,797,000 | $0.44 | 5.1 | $4,584,340 |
| Exercisable at December 31, 2018 | 1,681,500 | $0.44 | 5.2 | $4,322,980 |
Options Outstanding | Options Exercisable | ||||
Range or Exercise Price | Number Outstanding | Remaining Average Contractual Life (In Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price |
0.14 - 0.24 | 540,000 | 2.7 | $0.14 | 540,000 | $0.14 |
0.25 - 0.49 | 351,000 | 4.7 | $0.28 | 351,000 | $0.28 |
0.50 - 0.85 | 906,000 | 6.7 | $0.68 | 790,500 | $0.67 |
1,797,000 | 5.1 | $0.44 | 1,681,500 | $0.44 | |
|
| Options Outstanding |
| Options Exercisable | ||||||||
Range or Exercise Price |
| Number Outstanding |
| Remaining Average Contractual Life (In Years) |
| Weighted Average Exercise Price |
| Number Exercisable |
| Weighted Average Exercise Price | ||
0.14 - 0.24 |
| 720,000 |
| 2.1 |
| $ | 0.06 |
| 720,000 |
| $ | 0.09 |
0.25 - 0.49 |
| 351,000 |
| 1.5 |
| $ | 0.05 |
| 207,000 |
| $ | 0.05 |
0.50 - 0.78 |
| 630,000 |
| 3.2 |
| $ | 0.23 |
| 187,500 |
| $ | 0.09 |
|
| 1,701,000 |
| 6.8 |
| $ | 0.34 |
| 1,114,500 |
| $ | 0.23 |
Summarized information with respect
Options Outstanding | Options Exercisable | ||||
Range or Exercise Price | Number Outstanding | Remaining Average Contractual Life (In Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price |
0.14 - 0.24 | 720,000 | 3.0 | $0.14 | 720,000 | $0.14 |
| 0.25 - 0.49 | 351,000 | 5.2 | $0.28 | 351,000 | $0.29 |
0.50 - 0.85 | 956,000 | 7.4 | $0.68 | 706,500 | $0.67 |
2,027,000 | 5.5 | $0.42 | 1,777,500 | $0.38 | |
|
| Options Outstanding |
| Options Exercisable | ||||||||
Range or Exercise Price |
| Number Outstanding |
| Remaining Average Contractual Life (In Years) |
| Weighted Average Exercise Price |
| Number Exercisable |
| Weighted Average Exercise Price | ||
0.14 - 0.24 |
| 720,000 |
| 2.8 |
| $ | 0.06 |
| 585,000 |
| $ | 0.10 |
0.25 - 0.49 |
| 405,000 |
| 2.1 |
| $ | 0.07 |
| 165,600 |
| $ | 0.05 |
0.50 - 0.78 |
| 440,000 |
| 2.6 |
| $ | 0.17 |
| 95,000 |
| $ | 0.06 |
|
| 1,565,000 |
| 7.5 |
| $ | 0.30 |
| 845,600 |
| $ | 0.21 |
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 12 – PREFERRED STOCK
The Company authorized 20,000,000 shares of preferred stock with a par value of $0.01.
At a meeting of the Board of Directors, held on
During the year ended December 31, 2014, the Company raised additional capital of $50,000 through issuance of 100,000 shares of its Series A Stock pursuant to the same private placement.
During the year ended December 31, 2015, the Company raised additional capital of $150,000 through issuance of 300,000 shares of its Series A Stock pursuant to the same private placement. Of the 300,000 Series A shares issued, 200,000 were issued to the Company’s related founder and CEO for $100,000. The additional 100,000 shares of the 300,000 Series A issued, were issued to a related party for $50,000.
At a meeting of the Board of Directors, held on December 23, 2013, the directors approved the designation of one million (1,000,000) shares of the Preferred Stock as 10% Series B Convertible Preferred Stock ("Series B Stock") and authorized the issuance of the Series B Stock. Holders of the Series B Stock shall be entitled to the payment of a 10% dividend payable in shares of the Corporation's common stock at a rate of one share of common stock for each ten shares of Series B Stock. Dividends shall be payable annually the tenth business day of January. Each holder of Series B Stock may convert all or part of the Series B Stock into shares of common stock on a share for share basis. Series B Stock shall rank superior to all common stock upon liquidation. Each share of Series B Stock shall automatically convert to common shares five years from the date of issuance or upon change in control. On the tenth business day of January 2015 there were 100,000 shares of common stock dividends owed and due to the Series B Stockholders of record as dividends on the Series B Stock. On January 10, 2015, the Company issued 100,000 shares of common stock due Series B Stockholders. As of December 31, 2015, there were 97,260 shares of common stock dividends owed but not due until the tenth business day of January 2016 to the Series B Stockholders as dividends on the Series B Stock.
At a meeting of the Board of Directors, held on September 22, 2014, the directors approved the designation of two million (2,000,000) shares of the Preferred Stock as 10% Series C Convertible Preferred Stock ("Series C Stock") and authorized the issuance of the Series C Stock. Holders of the Series C Stock shall be entitled to the payment of a 10% dividend payable in shares of the Corporation's common stock at a rate of one share of common stock for each ten shares of Series C Stock. Dividends shall be payable annually the tenth business day of January. Each holder of Series C Stock may convert all or part of the Series C Stock into shares of common stock on a share for share basis. Series C Stock shall rank superior to all common stock upon liquidation. Each share of Series C Stock shall automatically convert to common shares five years from the date of issuance or upon change in control. On the tenth business day of January 2015 there were 29,425 shares of common stock dividends owed and due to the Series C Stockholders of record as dividends on the Series C Stock. On January 10, 2015, the Company issued 29,425 shares of common stock due Series C Stockholders. As of December 31, 2015, there were 175,068 shares of common stock dividends owed but not due until the tenth business day of January 2016 to the Series C Stockholders as dividends on the Series C Stock.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 12 – PREFERRED STOCK (CONTINUED)
During the year ended December 31, 2014, the Company raised capital of $900,000 through issuance of 1,800,000 shares of its Series C Stock pursuant to the same private placement. Of the 1,800,000 Series C shares issued, 800,000 were issued to the Company's related party founder for $400,000. An additional 500,000 shares of the 1,800,000 Series C shares issued, were issued to a related party for $250,000.
At a meeting of the Board of Directors, held on March 20, 2015, the directors approved the designation of two million (2,000,000) shares of the Preferred Stock as 10% Series D Convertible Preferred Stock ("Series D Stock") and authorized the issuance of the Series D Stock. Holders of the Series D Stock shall be entitled to the payment of a 10% dividend payable of preferred shares outstanding in shares of the Corporation’s common stock at a rate of one share of common stock for each ten shares of Series D Stock. Dividends shall be payable annually the tenth business day of January. Each holder of Series D Stock may convert all or part of the Series D Stock into shares of common stock on a share for share basis. Series D Stock shall rank superior to all common stock upon liquidation. Each share of Series D Stock shall automatically convert to common shares five years from the date of issuance or upon a change in control. As of December 31, 2015, there were 38,493 shares of common stock dividends owed but not due until the tenth business day of January 2016 to the Series D Stockholders as dividends on the Series D Stock.
During the year ended December 31, 2015, the Company raised additional capital of $250,000 through issuance of 500,000 shares of its Series D Stock pursuant to the same private placement. The shares were issued to a related party.
Series A, B, C and D Stock are also subject to adjustment of the conversion terms due to future mergers, sales and stock splits, if any.
NOTE 13 – COMMON STOCK
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|
The Company has authorized 324,000,000 shares of common stock with a par value of $0.01.
During the year ended December 31, 2014, the Company issued 50,000 shares of its common stock in connection with the exercise of a stock option granted to an outside consultant and received $25,000 based on the exercise price of $0.50 per common share.
During the year ended December 31, 2014, the Company raised additional capital through issuance of common stock pursuant to a private placement whereby $680,000 in capital was raised through the issuance of 1,360,000 shares of common stock at $0.50 per share.
During the year ended December 31, 2015, the Company issued 54,000 shares of its common stock in connection with the exercise of a stock option granted to a related party Director and received $15,001 based on the exercise price of $0.2778 per common share.
During the year ended December 31, 2015 the Company issued 10,000 shares of its common stock in connection with the exercise of a stock option granted to a related party Director and received $5,000 based on the exercise price of $0.50 per share.
During the year ended December 31, 2015, the Company raised additional capital through issuance of common stock pursuant to a private placement whereby $990,000 in capital was raised through the issuance of 1,980,000 shares of common stock at $0.50 per share.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 13 – COMMON STOCK (CONTINUED)
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|
On April 21, 2014, the Company issued to an attorney 25,000 shares of the Company’s common stock at $0.50 per share, or $12,500, for services rendered. The Company valued these common shares based on the price recent investors paid for common shares pursuant to a private placement.
On September 23, 2014, the Company issued to a consultant 10,000 shares of the Company’s common stock at $0.75 per share, or $7,500, for services rendered. The Company valued these common shares based on the price recent investors paid for common shares in the OTCQB market.
On October 10, 2014, the Company issued to a consultant 10,000 shares of the Company’s common stock at $0.75 per share, or $7,500, for services rendered. The Company valued these common shares based on the price recent investors paid for common shares in the OTCQB market.
On October 15, 2014, the Company issued to a consultant 37,500 shares of the Company’s common stock at $0.75 per share, or $28,125, for services to be rendered. The Company valued these common shares based on the price recent investors paid for common shares in the OTCQB.
On December 8, 2014, the Consultant who was issued 37,500 shares of the Company’s common stock on October 15, 2015 agreed to return the 37,500 shares to the Company to be cancelled.
On January 19, 2015,7, 2018 the Company entered into an agreementa Note Exchange Agreement with an employee, wherein the employee elected to receive 400 sharesMr. W. Kip Speyer, our CEO and member of the Company common stock at a fair value of $0.75 per share, or $300, in lieu of a bonus.
On May 1, 2015, the Company entered into an agreement with an employee, wherein the employee elected to receive 2,000 shares of the Company common stock at a fair value of $0.65 per share, or $1,300, in lieu of a bonus.
On May 22, 2015, the Company issued to a law firm 50,000 shares of its common stock at $0.65 per share, or $32,500, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On May 28, 2015, the Company issued to a consultant 5,000 shares of its common stock at $0.65 per share, or $3,250, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On October 15, 2015, the Company issued to a consultant 7,000 shares of its common stock at $0.60 per share, or $4,200, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On November 15, 2015, the Company issued to a consultant 7,000 shares of its common stock at $0.75 per share, or $5,250, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
On December 15, 2015, the Company issued to a consultant 7,000 shares of its common stock at $0.69 per share, or $4,830, for services rendered. The Company valued these common shares based on the fair value at the date of grant.
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On December 21, 2015 the Company’sour Board of Directors, approvedpursuant to retire 360,000 Treasury Shareswhich we exchanged our convertible notes for three new series of preferred stock. See further discussion in Note 8 Notes Payable for more details regarding the Note Exchange Agreement and Exchange Transaction.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known$0.40 per share and resulted in the recognition of a beneficial conversion feature recorded as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 13 – COMMON STOCK (CONTINUED)
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During the year endeda debt discount. These notes payable total $11,688 at December 31, 2015, the Company issued 350,000 shares2018. The notes are reported net of its common stock for the acquisitiontheir unamortized debt discount of two websites. The Company valued these common shares at $262,500 or $0.75 per share, based on the fair value on the date$68,312 as of the acquisitions.
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During the year ended December 31, 2014, the Company issued 21,234 shares of its common stock as dividends to the holders of its Series A Stock and Series B Stock only. Holders of the Series A, Series B, and Series C Stock are entitled to the payment of a 10% dividend payable in shares of the Company's common stock at a rate of one share of common stock for each ten shares of Series A, Series B, or Series C Stock. Dividends shall be payable annually the tenth business day of January. Holders of Series C Stock are entitled to payment of 10% dividend payable in shares of the Company's common stock on the tenth business day of January commencing in 2015.
2018.
NOTE 14 – RELATED PARTIES
During the year ended December 31, 2014 a related party founder purchased 460,000 shares of2018, Mr. W. Kip Speyer, the Company’s common shares for $230,000.
During the year ended December 31, 2014, a related partyChairman and Chief Executive Officer, purchased 500,000 sharesan aggregate of the Company’s common shares for $250,000.
During the year ended December 31, 2014, a related party founder purchased 800,0001,125,500 shares of the Company’s Series C shares for $400,000.
E Convertible Preferred Stock at a purchase price of $0.40 per share. The designations, rights and preferences of Series E Stock are described in Note 12.
E Convertible Preferred Stock at a purchase price of $0.40 per share. The designations, rights and preferences of Series E Stock are described in Note 12.
During the year ended December 31, 2015, a related party founderCompany, purchased 200,000an aggregate of 125,000 shares of the Company’s Series A shares for $100,000.
During the year ended December 31, 2015,E Convertible Preferred Stock at a related party purchased 100,000purchase price of $0.40 per share. The designations, rights and preferences of Series E Stock are described in Note 12.
DuringW Kip Speyer and Rich Rogers, respectively.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 14 – RELATED PARTIES (CONTINUED)
During the year ended December 31, 2015 related party Directors purchased 440,000 shares of the Company’s common shares for $220,000.
During the year ended December 31, 2015 a related party Director purchased 54,000 shares of the Company’s common shares for $15,001 in connection with the exercise of a stock option granted based on the exercise price of $0.2778 per common share.
During the year ended December 31, 2015 a related party Director purchased 10,000 shares of the Company’s common shares for $5,000 in connection with the exercise of a stock option granted based on the exercise price of $0.50 per common share.
During the year ended December 31, 2015 the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party director and founder. The note issued was for an amount of $100,000 with a maturity date of December 22, 2020 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on January 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During 2015, the Company recognized a discount of $39,000 and amortized $195 during 2015 related to this convertible note. During 2015, the Company recognized interest expense of $300 related to this convertible note.
During the year ended December 31, 2015 the Company issued a convertible note that has a conversion price that creates a beneficial conversion to a related party. The note issued was for an amount of $100,000 with a maturity date of December 28, 2020 and bears an interest rate of 12% paid monthly in cash on the first day of each month, commencing on January 1, 2016. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the face value of the note. In accordance with this guidance, the intrinsic value of the beneficial conversion feature was recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the five-year life of the note using the effective interest method. During 2015, the Company recognized a discount of $39,000 and amortized $65 during 2015 related to this convertible note. During 2015, the Company recognized interest expense of $100 related to this convertible note.
NOTE 15 – INCOME TAXES
The Company has not conducted a study to determine if a change of ownership has occurred.
BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES
(formerly known as Bright Mountain Acquisition Corporation and subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 15 – INCOME TAXES (CONTINUED)
The Company's tax expense differs from the "expected" tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 34% to loss before taxes), as follows:
The tax effects of the temporary differences between reportable financial statement income (loss) and taxable income (loss) are recognized as deferred tax assets and liabilities.
|
| Year Ended |
| |||||
|
| December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Tax expense (benefit) at the statutory rate |
| $ | (568,852 | ) |
| $ | (513,616 | ) |
State income taxes, net of federal income tax benefit |
|
| (60,733 | ) |
|
| (54,837 | ) |
Non-deductible expenses |
|
| 2,135 |
|
|
| 2,178 |
|
Change in valuation allowance |
|
| 627,450 |
|
|
| 566,275 |
|
Total |
| $ | — |
|
| $ | — |
|
Year ended December 31, | ||
2018 | 2017 | |
| Deferred tax assets: | ||
| Net operating loss carryforward | $3,158,471 | $2,473,817 |
| Book to tax difference – intangible assets | (45,206) | 22,779 |
| Stock option expense | — | 88,553 |
| Accounts receivable | 67,512 | — |
| Total gross deferred tax assets | 3,180,777 | 2,585,149 |
| Less: Deferred tax asset valuation allowance | (3,180,777) | (2,585,149) |
| Total net deferred tax assets | $— | $— |
|
| Year Ended |
| |||||
|
| December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforward |
| $ | 2,042,006 |
|
| $ | 1,623,458 |
|
Amortization |
|
| 27,348 |
|
|
| 51,944 |
|
Stock option expense |
|
| 373,456 |
|
|
| 68,477 |
|
Total gross deferred tax assets |
|
| 2,442,810 |
|
|
| 1,743,879 |
|
Less: Deferred tax asset valuation allowance |
|
| (2,442,810 | ) |
|
| (1,743,879 | ) |
Total net deferred tax assets |
| $ | — |
|
| $ | — |
|
The change in the valuation allowance was an increase of approximately $596,000 and a decrease of approximately $528,000 for the years December 31, 2018 and 2017, respectively. The Company recorded a tax benefit for discontinued operations of $241,412 and $159,138 offset by a similar valuation allowance for the years December 31, 2018 and 2017, respectively.
2018 | 2017 | |||
Amount | Rate | Amount | Rate | |
| Federal tax expense (benefit) at the statutory rate from continuing operations | $(867,576) | -21.00% | (873,700) | -34.00% |
| State tax benefit, net of federal income tax benefit | (33,819) | -0.82% | (86,193) | -3.35% |
| Federal deferred tax expense | (2,640) | -0.06% | (27,427) | -1.07% |
State deferred tax expense | 2,791 | 0.07% | (25,000) | -0.97% |
Effect of true up | 16,906 | 0.41% | — | — |
| Effect of tax rate change | 341,358 | 8.26% | 1,305,477 | 50.80% |
| Non-deductible expenses | 189,274 | 4.58% | 242,434 | 9.43% |
Change in valuation allowance | 353,706 | 8.56% | (535,592) | -20.84% |
Total - continuing operations | — | — | — | — |
| Federal tax expense (benefit) at the statutory rate from discontinued operations | (229,478) | -21.00% | (144,293) | -34.00% |
| State tax benefit, net of federal income tax benefit | (11,934) | -1.09% | (14,845) | -3.50% |
Change in valuation allowance | 241,412 | 22.09% | 159,138 | 37.50% |
Total - discontinued operations | — | — | — | — |
| Total | $— | — | — | — |
Year ended December 31, | ||
2018 | 2017 | |
| Current | ||
| Federal | $(678,302) | $(654,652) |
| State | (36,459) | (70,454) |
(714,761) | (725,106) | |
| Deferred | ||
| Federal | 358,264 | (66,437) |
| State | 2,791 | (7,093) |
361,055 | (73,530) | |
| Total | $(353,706) | $(798,636) |
| Income taxes from continuing operations before valuation | ||
| Allowance | $(353,706) | $($798,636) |
| Change in valuation allowance | 353,706 | 798,636 |
| Total | $— | $— |
| Discontinued Operations | ||
| Current | ||
| Federal | $(229,478) | $(144,293) |
| State | (11,953) | (14,845) |
(241,412) | (159,138) | |
| Deferred | ||
| Federal | — | — |
| State | — | — |
— | — | |
| Total | $(241,412) | $(159,138) |
| Income tax benefit from continuing operations before valuation allowance | (241,412) | - |
| Allowance | — | |
| Change in valuation allowance | 241,412 | 159,138 |
| Total | $— | $— |
On January 10, 2016, the Company issued 501,562 shares of its common stock as dividends on its Series A Stock, Series B Stock, Series C Stock, and Series D Stock in accordance with the designations, rights and preferences of those series of Preferred Stock.
On January 15, 2016 the Company issued 7,000 sharesone share of our common stock valuedand one five-year common stock purchase warrant to purchase one share of our common stock at $4,865 to a consultant for services rendered.
an exercise price of $0.65 per share (the “Private Placement Warrants”).
BRIGHT MOUNTAIN MEDIA, INC., AND SUBSIDIARIES
(formerly known as
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 16 – SUBSEQUENT EVENTS (CONTINUED)
Rule 506(b) of Regulation D and Regulation S of the Securities Act. The units (the “Units”) were sold at a purchase price of $0.40 per Unit resulting in gross proceeds to us of $300,000. Each unit consisted of one share of our common stock and one five-year common stock purchase warrant to purchase one share of our common stock at an exercise price of $0.65 per share (the “Private Placement Warrants”).
On February 12, 2015,13, 2019, the Company entered into a Website Asset Purchase Agreementnot-binding letter of intent to purchaseacquire a websitecompany which operates in our industry, subject to due diligence. During February and March, 2019 we lent that company an aggregate of $337,500 under the terms of a 6% promissory note which matures on April 30, 2019. As collateral for a purchase pricethe repayment of $15,000. The payment terms was $15,000 payable at the February 12, 2016 closing.
note, the chief executive officer of the target has pledged his shares in the target.
On February 23, 2016sold under the Private Placement Memorandum with Placement Agent. Under the Agreement the Company raised capital of $100,000 through sale of 200,000 shares of its Common Stockwas required to a principal shareholder in a private transaction.
Onfile the Registration Statement on March 11, 201629, 2019. Since the Company raised capital of $100,000 through sale of 200,000 shares of its Common Stock to a principal shareholder in a private transaction.
On March 22, 2016has not filed the Registration Statement timely, the Company granted 100,000 ten-year stock options, which havewill incur an exercise priceobligation of $0.695$3,260 per share to an executive officer and director. The aggregate fair value of these options was computed at $39,901 or $0.3990 per option.
On March 22, 2016 the Company granted 46,000 ten-year stock options, which have an exercise price of $0.695 per share to a director. The aggregate fair value of these options was computed at $18,354 or $0.3990 per option.
On March 22, 2016 the Company issued to a law firm, 50,000 shares of its common stock at $0.695 per share, or $34,750 for services rendered.day that it is delinquent. The Company valued these common shares based onintends to file the fair value atRegistration Statement as soon as practicable, subsequent to filing our Form 10-K.
[________] Shares of Common Stock
Warrants to Purchase [_______] Shares of Common Stock
![[bmtm_s1015.jpg]](https://capedge.com/proxy/S-1/0001553350-16-002428/bmtm_s1015.jpg)
| TABLE OF CONTENTS | |
| Page | |
| About this Prospectus | 2 |
| Cautionary Statement Regarding Forward Looking Information | 2 |
| Prospectus Summary | 3 |
| Selected Financial Data | 5 |
| Risk Factors | 5 |
| Use of Proceeds | 13 |
Selling Security Holders | 13 |
| Plan of Distribution | 21 |
| Market for Common Equity and Related Stockholder Matters | 22 |
| Managements Discussion and Analysis of Financial Statements and Results of Operations | 24 |
| Business | 29 |
| Management, Executive Compensation and Director Compensation | 34 |
| Security Ownership of Beneficial Owners and Management | 40 |
| Certain Relationships and Related Transactions | 41 |
| Description of Securities | 41 |
| Shares Available for Future Sale | 43 |
| Legal Matters | 44 |
| Experts | 44 |
| Where You Can Find Additional Information | 44 |
| Index to Financial Statements | F-1 |
—
Joseph Gunnar & Co.
[_____________], 2016
—
SEC registration fee |
| $ | 1,680.05 |
|
FINRA filing fee |
|
| [_____] |
|
NASDAQ listing fee |
|
| [_____] |
|
Accounting fees and expenses |
|
| 30,000.00 |
|
Legal fees and expenses |
|
| [_____] |
|
Printing fees and expenses |
|
| [_____] |
|
Transfer agent and registrar fees and expenses |
|
| [_____] |
|
Blue sky fees and expenses |
|
| [_____] |
|
Miscellaneous |
|
| [_____] |
|
Total |
| $ | [_____] |
|
as follows:
| SEC registration and filing fee | $6,890.22 |
| Legal fees and expenses* | 30,000.00 |
| Accounting fees and expenses* | 20,000.00 |
| EDGAR and financial printing costs* | 3,000.00 |
| Transfer agent fees* | 1,000.00 |
| Blue sky fees and expenses* | 0.00 |
| Miscellaneous* | 1,109.78 |
| TOTAL | $62,000.00 |
|
| |
|
| |
|
| |
|
|
II-1
Between November 2013 and June 2015 we issued and sold an aggregate of 1,900,000 shares of our 10% Series A convertible preferred stock to six individuals and entities, including our Chief Executive Officer, a member of our board of directors and a principal shareholder, in private transactions. We received proceeds of $950,000 in this offering. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In January 2014 we issued an aggregate of 21,234 shares of our common stock to five individuals and entities, including our Chief Executive Officer and a principal shareholder, as dividends on outstanding shares of our preferred stock. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In January 2014March 2016 we issued 50,000 shares of our common stock valued at $34,750 to an individual upon the exercise of a previously granted stock option with an exercise price of $0.50 per share. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 3(a)(9) of that act.
In January 2014 we issued and sold 1,000,000 shares of our 10% Series B convertible preferred stock to a principal shareholder in a private transaction. We received proceeds of $500,000 in this offering. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
In April 2014 we issued 25,000 shares of our common stock valued at $12,500 to an individualentity as compensation for legal services. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
Between April 2014 and April 2015 we issued and sold an aggregate of 1,500,000 shares of our common stock to five individuals, including our Chief Executive Officer and a principal shareholder, in private transactions. We received proceeds of $750,000 in this offering. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In September 2014 we issued 10,000 shares of our common stock to an entity as consideration for consulting services rendered to us valued at $7,500. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
Between September 2014 and January 2015 we issued and sold an aggregate of 1,800,000 shares of our 10% Series C convertible preferred stock to four individuals, including our Chief Executive Officer and a principal shareholder, in private transactions. We received proceeds of $900,000 in this offering. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In October 2014 we issued 10,000 shares of our common stock to an entity as consideration for consulting services rendered to us valued at $7,500. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
In January 2015 we issued 250,000 shares of our common stock valued at $187,500 to an entity as partial consideration in an acquisition. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
In January 2015 we issued an aggregate of 298,425 shares of our common stock to eight individuals and entities, including our Chief Executive Officer and a principal shareholder, as dividends on outstanding shares of our preferred stock. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In January 2015 we issued 400 shares of our common stock to an individual as consideration for consulting services rendered to us valued at $300. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
II-2
In February 2015 we issued 100,000 shares of our common stock valued at $75,000 to an individual as partial consideration in an acquisition. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
In April 2015 we issued and sold an aggregate of 500,000 shares of our 10% Series D convertible preferred stock to a principal shareholder in a private transaction. We received proceeds of $250,000 in this offering. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
In May 2015 we issued an aggregate of 57,000 shares of our common stock to two entities and an individual as consideration for consulting and legal services rendered to us valued at $41,300. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In June 2015 we issued and sold 200,000 shares of our common stock to our Chief Executive Officer and received proceeds of $100,000. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
Between June 2015 and April 2016 we issued and sold an aggregate of 2,440,000 shares of our common stock to six individuals, including our Chief Executive Officer, two members of our board of directors, and a principal shareholder, in a private placement. We received proceeds of $1,220,000 in this offering. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D.
Between November 2015 and April 2016 we issued an aggregate of 49,000 shares of our common stock valued at $33,390 to an entity as compensation for consulting services rendered to us. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In December 2015 we issued an aggregate of 64,000 shares of our common stock to a member of our board of directors upon the exercise of previously granted stock options with exercise prices ranging from $0.28 to $0.50 per share. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 3(a)(9) of that act.
In January 2016 we issued an aggregate of 501,562 shares of our common stock to eight individuals and entities, including our Chief Executive Officer and a principal shareholder, as dividends on outstanding shares of our preferred stock. The issuances were exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) of that act.
In March 2016 we issued 50,000 shares of our common stock valued at $34,750 to an entity a compensation for legal services. The issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Section 4(a)(2) of that act.
II-3
(a)
Exhibits. The list of exhibits following
(b)
Financial Statements. See page F-1 for an index(or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
ITEM 17.UNDERTAKINGS.
The undersignedstatement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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II-4
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pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
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II-6
Bright Mountain Media, Inc. | ||||
By: | /s/ W. Kip Speyer | |||
W. Kip Speyer | ||||
Chief Executive Officer | ||||
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints W. Kip Speyer and Dennis W. Healey, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
| Name | Positions | Date | ||||
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/s/ W. Kip Speyer W. Kip Speyer | Chairman of the Board of Directors, Chief Executive Officer, President, principal executive officer, principal financial and accounting officer |
May 14, 2019 | ||||
/s/ Todd F. Speyer Todd F. Speyer | Vice President, Digital Media, director |
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/s/
Richard Rogers |
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/s/
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Todd F. Davenport
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/s/ *__________________ Charles H. Lichtman
| Director |
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II-7
| Incorporated by Reference | ||||||||||
| No. | Exhibit Description | Form | Date Filed | Number | Filed or Furnished Herewith | |||||
| 3.1 | Amended and Restated Articles of Incorporation | Form 10 | 1/31/13 | 3.3 | ||||||
| 3.2 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 8-K | 7/9/13 | 3.3 | ||||||
| 3.3 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 8-K | 11/16/13 | 3.4 | ||||||
| 3.4 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 8-K | 12/30/13 | 3.4 | ||||||
| 3.5 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 10-K | 3/31/14 | 3.5 | ||||||
| 3.6 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 8-K | 7/28/14 | 3.6 | ||||||
| 3.7 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 10-K/A | 4/1/15 | 3.5 | ||||||
| 3.8 | Articles of Amendment to the Amended and Restated Articles of Incorporation | 8-K | 12/4/15 | 3.7 | ||||||
| 3.9 | Articles Amendment to the Amended and Restated Articles of Incorporation | 8-K | 11/13/18 | 3.10 | ||||||
| 3.10 | Amended and Restated Bylaws | Form 10 | 1/31/13 | 3.2 | ||||||
| 4.1 | Form of unit warrant 2018 private placement | 10-K | 4/2/18 | 4.1 | ||||||
| 4.2 | Form of placement agent warrant 2018 private placement | 10-K | 4/2/18 | 4.2 | ||||||
| Specimen common stock certificate | Filed | |||||||||
| 4.4 | Form of unit warrant 2019 private placement | 8-K | 1/14/19 | 4.1 | ||||||
| 4.5 | Form of placement agent warrant 2019 private placement | 8-K | 1/14/19 | 4.2 | ||||||
| Opinion of Pearlman Law Group LLP | Filed | |||||||||
| 10.1 | 2011 Stock Option Plan | Form 10 | 1/31/13 | 10.1 | ||||||
| 10.2 | 2013 Stock Option Plan | 10-Q | 11/13/13 | 10.18 | ||||||
| 10.3 | 2015 Stock Option Plan | 8-K | 5/27/15 | 10.36 | ||||||
| Asset Purchase Agreement dated December 16, 2016 effective December 15, 2016 by and among Bright Mountain Media, Inc., Bright Mountain, LLC, Sostre Enterprises, Inc., Pedro Sostre III and James Love | 8-K | 12/21/16 | 10.28 | |||||||
| Membership Interest Purchase Agreement dated March 3, 2017, by and between Bright Mountain Media, Inc., Daily Engage Media Group LLC, Harry G. Pagoulatos, George G. Rezitis and Angelos Triantafillou | 8-K | 3/9/17 | 10.31 | |||||||
| Amended and Restated Membership Interest Purchase Agreement dated September 19, 2017 by and among Bright Mountain Media, Inc., Daily Engage Media Group LLC and Harry G. Pagoulatos, George G. Rezitis and Angelos Triantafillou | 8-K | 9/25/17 | 10.1 | |||||||
| Letter agreement dated September 19, 2017 with Vinay Belani | 8-K | 9/25/17 | 10.2 | |||||||
| Escrow Agreement dated September 19, 2017 by and among Bright Mountain Media, Inc., Harry G. Pagoulatos, George G. Rezitis, Angelos Triantafillou, Vinay Belani and Pearlman Law Group LLP, as escrow agent | 8-K | 9/25/17 | 1.3 | |||||||
| Employment Agreement by and between Bright Mountain Media, Inc. and Harry G. Pagoulatos | 8-K | 9/25/17 | 10.4 | |||||||
| Employment Agreement by and between Bright Mountain Media, Inc. and George G. Rezitis | 8-K | 9/25/17 | 10.5 | |||||||
| Promissory Note in the principal amount of $100,000 dated September 19, 2017 payable to Harry G. Pagoulatos | 8-K | 9/25/17 | 10.6 | |||||||
| Promissory Note in the principal amount of $100,000 dated September 19, 2017 payable to George G. Rezitis | 8-K | 9/25/17 | 10.7 | |||||||
| Promissory Note in the principal amount of $100,000 dated September 19, 2017 payable to Angelos Triantafillou | 8-K | 9/25/17 | 10.8 | |||||||
| Promissory Note in the principal amount of $80,000 dated September 19, 2017 payable to Vinay Belani | 8-K | 9/25/17 | 10.9 | |||||||
| Amendment to Amended and Restated Membership Interest Purchase Agreement dated November 14, 2017 by and among Bright Mountain Media, Inc., Daily Engage Media Group LLC, Harry g. Pagoulatos, George G. Rezitis and Angelos Triantafillou | 10-Q | 11/20/17 | 10.11 | |||||||
| Amended and Restated Escrow Agreement dated November 14, 2017 by and among Bright Mountain Media, Inc., Harry G. Pagoulatos, George G. Rezitis, Angelos Triantafillou, Vinay Belani and Pearlman Law Group LLP, as escrow agent | 10-Q | 11/20/17 | 10.12 | |||||||
| 10.17 | Consulting Agreement dated September 6, 2017 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. | 8-K | 10/4/18 | 10.45 | ||||||
| 10.18 | M&A Advisory Agreement dated September 6, 2017 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. | 8-K | 10/4/18 | 10.46 | ||||||
| 10.19 | Finder’s Agreement dated October 31, 2018 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. | 10-Q | 11/20/18 | 10.2 | ||||||
| 10.20 | Uplisting Advisory and Consulting Agreement dated December 11, 2018 by and between Spartan Capital Securities, LLC and Bright Mountain Media, Inc. | 8-K | 1/14/19 | 10.1 | ||||||
| 10.21 | Note Exchange Agreement dated November 7, 2018 by and between Bright Mountain Media, Inc. and W. Kip Speyer | 8-K | 11/13/18 | 10.1 | ||||||
| 10.22 | Lease Agreement dated August 24, 2014 for registrant’s principal executive offices | 10-Q | 11/12/14 | 10.26 | ||||||
| 10.23 | Addendum to Lease dated August 5, 2015 for registrant’s principal executive offices | 10-Q | 8/11/15 | 10.37 | ||||||
| 10.24 | Amendment to Lease Agreement dated August 8, 2018 for registrant’s principal executive offices | 10-Q | 11/20/18 | 10.1 | ||||||
| 10.25 | Executive Employment Agreement dated June 1, 2014 by and between W. Kip Speyer and Bright Mountain Media, Inc. | 8-K | 6/3/14 | 10.21 | ||||||
| 10.26 | First Amendment to Executive Employment Agreement dated April 1, 2017 by and between W. Kip Speyer and Bright Mountain Media, Inc. | 8-K | 4/6/17 | 10.32 | ||||||
| 10.27 | Services Agreement dated August 23, 2018 by and among Bright Mountain Media, Inc., AdsRemedy Media, LLP and Vinay Belani | 10-K | 4/12/19 | 10.27 | ||||||
| Code Conduct and Ethics | 10-K | 3/31/14 | 14.1 |
| 10.28 | Asset Purchase Contract dated March 8, 2019 by and between Rescuetees.com LLC and Bright Mountain LLC | 10-K | 4/1219 | 10.28 | ||||||
| 10.29 | Promissory Note in the principal amount of $155,000 dated March 8, 2019 from Rescuetees.com to Bright Mountain LLC | 10-K | 4/12/19 | 10.29 | ||||||
| 10.30 | 10% convertible promissory note in the principal amount of $30,000 dated November 12, 2018 issued to W. Kip Speyer | 10-K | 4/12/19 | 10.30 | ||||||
| 10.31 | Promissory note in the principal amount of $75,000 dated October 3, 2018 from Kubient, Inc. | 10-K | 4/12/19 | 10.31 | ||||||
| 10.32 | 10% convertible promissory note in the principal amount of $50,000 dated November 20, 2018 issued to W. Kip Speyer | 10-K | 4/12/19 | 10.32 | ||||||
| 21.1 | List of subsidiaries | 10-K | 4/12/19 | 21.1 | ||||||
| Consent of EisnerAmper LLP | Filed | |||||||||
| Consent of Liggett & Webb, P.A. | Filed | |||||||||
| Consent of Pearlman Law Group LLP (included in Exhibit 5.1) | Filed | |||||||||
| 24.1 | Power of Attorney (included on signature page) | Filed |
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![[bmtm_s1002.jpg]](https://capedge.com/proxy/S-1/0001553350-16-002428/bmtm_s1002.jpg)