NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations Bright Mountain Media, Inc. is a Florida corporation formed on May 20, 2010. Its wholly owned subsidiaries, Bright Mountain LLC, and The Bright Insurance Agency, LLC, were formed as Florida limited liability companies in May 2011. Its wholly owned subsidiary, Bright Watches, LLC was formed as Florida limited liability company in December 2015 and its wholly-owned subsidiary Daily Engage Media Group LLC (“Daily Engage Media”) was formed as a New Jersey limited liability company in February 2015. When used herein, the terms "BMTM," the "Company," "we," "us," "our" or "Bright Mountain" refers to Bright Mountain Media, Inc. and its subsidiaries. The Company is a digital media holding company for online assets targeting and servicing the military and public safety markets. The Company owns and manages 24 websites which are customized to provide our niche users, including active, reserve and retired military, law enforcement, first responders and other public safety employees with information and news that we believe may be of interest to them. Coupled with its recently acquired wholly owned subsidiary, Daily Engage Media, the Company has evolved to place its emphasis on providing quality content on its websites to drive traffic increases so that it can monetize these visits through advertising revenue. We generate revenues from two segments, product sales and advertising. The advertising segment consists primarily of advertising revenue and a small amount of subscription and service revenue. On December 16, 2016, with an effective date of December 15, 2016, under the terms of an Asset Purchase Agreement, the Company acquired the assets, constituting the Black Helmet Apparel business (“Black Helmet”), from Sostre Enterprises, Inc. Assets acquired included various website properties and content, social media content, inventory and other intellectual property rights. The Black Helmet line of apparel features clothing and accessories focused on firefighters. Consideration for the acquisition of Black Helmet consisted of $250,000 in cash, 200,000 shares of common stock valued at $170,000, the forgiveness of working capital advances of $200,000 and assumption of $40,000 in liabilities. On September 19, 2017, under the terms of an Amended and Restated Membership Interest Purchase Agreement with Daily Engage Media, and its members, the Company acquired 100% of the membership interests of Daily Engage Media. Launched in 2015, Daily Engage Media is an ad network that connects advertisers with approximately 200 digital publications worldwide. Principles of Consolidation The consolidated financial statements include the accounts of BMTM and its wholly owned subsidiaries, Bright Mountain LLC, Daily Engage Media (from September 19, 2017), 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 the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 605-10 , "Revenue Recognition in Financial Statements" · 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; · 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; and · Subscription revenues are generated by the sale of access to career postings or period subscription 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 Use of Estimates Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles 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. 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; and Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. Accounts Receivable Accounts receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense. The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made. As of December 31, 2017 and 2016, the company has recorded an allowance for doubtful accounts of $40,000 and $15,500, respectively. December 31, 2017 2016 Accounts Receivable $ 940,770 $ 205,093 Less: Allowance for doubtful accounts (40,000 ) (15,500 ) Less: Product refund reserve (21,000 ) (32,580 ) $ 879,770 $ 157,013 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. 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 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. 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 are 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 ASC 350-50, "Website Development Costs" 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, 2017, and 2016, 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 ASC 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets" 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". 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 years ended December 31, 2017 and 2016, advertising, marketing and promotion expense was $307,621 and $35,387, 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. As of December 31, 2017, tax years 2017, 2016, and 2015 remain open for Internal Revenue Service ("IRS") audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years. Concentrations During 2017, the Company reduced the concentration of vendors purchases in their products segment. Purchases of Bulova Corporation, Botta-Design and Citizens Watch Company of America, Inc. totaled 18%, 12% and 11%, respectively, for the year ended December 31, 2017. The Company generates revenues from two segments: product sales and advertising. We sell many products through various distribution portals, which include Amazon and eBay. During 2017, these two portals accounted for 51% and 48%, respectively of our total product sales as compared to 65% and 10% in 2016. 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, 2017 and December 31, 2016, the Company did not have cash balances above the FDIC insured limit. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral. Concentration of Funding During the years ended December 31, 2017 and 2016 a large portion of the Company's funding was provided through the issuance of 12% convertible notes and 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", Segment Information In accordance with the provisions of ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", Recent Accounting Pronouncements In August 2014, the FASB issued ASU No. 2014-15, “ Presentation of Financial Statements - Going Concern In July 2015, FASB issued ASU No. 2015-11 , “Inventory (Topic 330): Simplifying the Measurement of Inventory” . . 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 February 2016, the FASB issued ASU 2016-02 “ Leases In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting In April 2016, the FASB issued ASU 2016–10 “Revenue from Contract with Customers (Topic 606): Identifying Performance Obligations and Licensing.” In April 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” In January 2017, the FASB issued 2017-04, Intangibles - Goodwill and Other |