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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the quarterly period ended June 30, 2022
     
or
     
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the transition period from ___________ to ___________

 

Commission File Number 000-54887

 

 

Bright Mountain Media, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Florida   27-2977890

State or Other Jurisdiction of

Incorporation or Organization

 

I.R.S. Employer

Identification No.

 

6400 Congress Avenue, Suite 2050, Boca Raton, FL   33487
Address of Principal Executive Offices   Zip Code

 

561-998-2440

Registrant’s Telephone Number, Including Area Code

 

Not applicable

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None        

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

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

 

As of August 10, 2022 there were 149,159,461 shares of the issuer’s shares outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page No.
  PART I - FINANCIAL INFORMATION  
     
ITEM 1. FINANCIAL STATEMENTS. 4
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 31
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 36
     
ITEM 4. CONTROLS AND PROCEDURES. 36
     
  PART II - OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS. 37
     
ITEM 1A. RISK FACTORS. 37
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 37
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 37
     
ITEM 4. MINE SAFETY DISCLOSURES. 37
     
ITEM 5. OTHER INFORMATION. 37
     
ITEM 6. EXHIBITS. 38

 

2
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:

 

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

 

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report, including the Part II, Item 2, our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on June 13, 2022 and our other filings with the Securities and Exchange Commission in their entirety. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “Bright Mountain”, the “Company,” “we”, “us”, “our” and similar terms refer to Bright Mountain Media, Inc., a Florida corporation, and its subsidiaries. In addition, when used in this report, “second quarter of 2022” refers to the three months ended June 30, 2022, “second quarter of 2021” refers to the three months ended June 30, 2021, and “2021” refers to the year ended December 31, 2021. The information which appears on our website at www.brightmountainmedia.com is not part of this report.

 

3
 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

           
   June 30,   December 31, 
   2022   2021 
   (unaudited)     
ASSETS          
Current assets          
Cash and cash equivalents  $417,188   $781,320 
Accounts receivable, net of allowance for doubtful accounts of $718,318 and $495,396, at June 30, 2022 and December 31, 2021, respectively   3,490,699    3,550,126 
Note receivable, net   15,476    21,415 
Prepaid expenses and other current assets   766,007    904,716 
Total current assets   4,689,370    5,257,577 
           
Property and equipment, net   53,943    65,122 
Website acquisition assets, net   3,200    4,000 
Intangible assets, net   5,279,329    6,064,535 
Goodwill   19,645,468    19,645,468 
Prepaid services/consulting agreements – long term   104,939    284,825 
Right-of-use asset   687,310     
Other assets   237,181    242,686 
Total assets  $30,700,740   $31,564,213 
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable  $8,521,440   $8,459,561 
Accrued expenses   2,837,279    3,764,665 
Accrued interest to related party   1,727,262    640,255 
Premium finance loan payable   85,711    334,284 
Deferred revenues   623,629    1,162,425 
Long term debt, current portion       1,387,140 
Long term debt to related parties, current portion, net   3,632,192    7,316,402 
Other current liabilities   70,468    5,052 
           
Total current liabilities   17,497,981    23,069,784 
           
Long term debt to related parties, net   22,186,784    15,217,569 
Operating lease liability   691,340     
Total liabilities   40,376,105    38,287,353 
           
Commitments and Contingencies   -    - 
           
Shareholders’ deficit          
Convertible preferred stock, par value $0.01, 20,000,000 shares authorized:          
Series A-1, 2,000,000 shares designated, no shares issued and outstanding at June 30, 2022 and December 31, 2021        
Series B-1, 6,000,000 shares designated, no shares issued and outstanding at June 30, 2022 and December 31, 2021        
Series E, 2,500,000 shares designated, 125,000 shares issued and outstanding at June 30, 2022 and December 31, 2021; liquidation preference of $0.40 per share   1,250    1,250 
Series F, 4,344,017 shares designated, no shares issued and outstanding at June 30, 2022 and December 31, 2021        
           
Common stock, par value $0.01, 324,000,000 shares authorized, 149,984,636 and 149,810,383 issued and 149,159,461 and 148,985,208 outstanding at June 30, 2022 and December 31, 2021, respectively   1,499,846    1,498,103 
Treasury stock, at cost; 825,175 shares at June 30, 2022 and December 31, 2021   (219,837)   (219,837)
Additional paid-in capital   98,462,565    98,128,948 
Accumulated deficit   (109,448,440)   (106,144,065)
Accumulated other comprehensive income   29,251    12,461 
Total shareholders’ deficit   (9,675,365)   (6,723,140)
Total liabilities and shareholders’ deficit  $30,700,740   $31,564,213 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

4
 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

                     
   Three Months Ended   Six Months Ended 
   June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021 
                 
Revenues                    
Advertising  $5,716,779   $2,433,415   $9,175,943   $4,833,135 
                     
Cost of revenue                    
Advertising   2,899,290    1,476,108    4,589,905    2,842,951 
Gross profit   2,817,489    957,307    4,586,038    1,990,184 
                     
Selling, general and administrative expenses   3,443,199    4,749,835    7,330,558    9,024,269 
                     
Loss from operations   (625,710)   (3,792,528)   (2,744,520)   (7,034,085)
                     
Other income (expense)                    
Gain on forgiveness of PPP loan   295,600    -    1,137,140    1,706,735 
Other income (expense)   39,059    (82,357)   38,902    39,473 
Interest expense   (722)   (75,211)   (735)   (336,206)
Interest expense - related party   (895,745)   (539,215)   (1,735,162)   (574,503)
Total other income (expense)   (561,808)   (696,783)   (559,855)   835,499 
                     
Net loss before tax   (1,187,518)   (4,489,311)   (3,304,375)   (6,198,586)
                     
Income tax expense                
                     
Net loss   (1,187,518)   (4,489,311)   (3,304,375)   (6,198,586)
                     
Preferred stock dividends                    
Series A, Series E, and Series F preferred stock   (1,247)   (89,958)   (2,480)   (178,936)
                     
Net loss attributable to common shareholders  $(1,188,765)  $(4,579,269)  $(3,306,855)  $(6,377,522)
                     
Other comprehensive income (loss)  $16,709   $(82,324)  $16,790   $(113,613)
                     
Comprehensive loss  $(1,172,056)  $(4,661,593)  $(3,290,065)  $(6,491,135)
                     
Basic and diluted net loss per share  $(0.01)  $(0.04)  $(0.02)  $(0.05)
Weighted average shares outstanding - basic and diluted   149,159,461    120,353,074    149,130,579    119,652,844 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

5
 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS’ (DEFICIT) EQUITY

For the Three and Six Months Ended June 30, 2022 and 2021

(unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Deficit 
   Preferred Stock   Common Stock   Treasury Stock   Additional Paid-in   Accumulated   Accumulated Other Comprehensive   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Deficit 
Balance, December 31, 2021   125,000   $1,250    149,810,383   $1,498,103    (825,175)  $(219,837)  $98,128,948   $(106,144,065)  $12,461   $(6,723,140)
Net loss                               (2,116,857)       (2,116,857)
Series E preferred stock dividend                           (1,233)           (1,233)
Stock option vesting expense                           28,916            28,916 
Issuance of common stock:                                                  
To Oceanside personnel as part of acquisition agreement           174,253    1,743            277,062            278,805 
Adjustment from foreign currency translation, net                                   81    81 
Balance, March 31, 2022 (unaudited)   125,000   $1,250    149,984,636   $1,499,846    (825,175)  $(219,837)  $98,433,693   $(108,260,922)  $12,542   $(8,533,428)
Net loss                               (1,187,518)       (1,187,518)
Series E preferred stock dividend                           (1,247)           (1,247)
Stock option vesting expense                           30,119            30,119 
Adjustment from foreign currency translation, net                                   16,709    16,709 
Balance, June 30, 2022 (unaudited)   125,000   $1,250    149,984,636   $1,499,846    (825,175)  $(219,837)  $98,462,565   $(109,448,440)  $29,251   $(9,675,365)

 

   Preferred Stock   Common Stock   Treasury Stock   Additional Paid-in   Accumulated   Accumulated Other Comprehensive   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Equity 
Balance, December 31, 2020   8,044,017   $80,440    118,162,150   $1,181,622    (825,175)  $(219,837)  $96,427,166   $(93,932,080)  $(22,665)  $3,514,646 
Net loss                               (1,709,275)        (1,709,275)
Series A-1, E and F preferred stock dividend                           (88,978)           (88,978)
Stock option vesting expense                                 68,294              68,294 
Issuance of common stock:                                                  
Options exercise           100,000    1,000            12,900            13,900 
Warrants exercise             25,000    250              9,750              10,000 
Adjustment from foreign currency translation, net                                           (8,624)   (8,624)
To Oceanside personnel as part of acquisition agreement           379,266    3,793            603,033            606,826 
Balance, March 31, 2021 (unaudited)   8,044,017   $80,440    118,666,416   $1,186,665    (825,175)  $(219,837)  $97,032,165   $(95,641,355)  $(31,289)  $2,406,789 
Net loss                       -     -          (4,489,311)        (4,489,311)
Series A-1, E and F preferred stock dividend   -     -               -          (89,958)             (89,958)
Stock option vesting expense   -     -               -          73,214              73,214 
Issuance of common stock:                       -                           
To Centre Lane Partners as part of debt financing   -     -     3,150,000    31,500    -          2,465,556              2,497,056 
Adjustment for currency translation   -     -               -                    (82,324)   (82,324)
Balance, June 30, 2021 (unaudited)   8,044,017   $80,440    121,816,416   $1,218,165    (825,175)  $(219,837)  $99,480,977   $(100,130,666)  $(113,613)  $315,466 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

6
 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

           
   For the Six Months Ended June 30, 
   2022   2021 
Cash flows from operating activities:          
Net loss  $(3,304,375)  $(6,198,586)
Adjustments to reconcile net loss to net cash used in operations:          
Depreciation   11,853    34,534 
Amortization of debt discount   613,155    145,444 
Amortization   786,006    792,533 
Stock option compensation expense   59,035    141,507 
Stock compensation for Oceanside shares   116,744    606,826 
Gain on forgiveness of PPP loan   (1,137,140)   (1,706,735)
Write off doubtful accounts   -    (239,575)
Warrant expense for services rendered   -    10,000 
Provision for (Recovery of) bad debt   222,279    (141,070)
Changes in operating assets and liabilities:          
Accounts receivable   (146,062)   4,395,054 
Prepaid expenses and other current assets   318,595    352,384 
Other assets   5,505    (7,069)
Right of use asset and lease liability   4,030    (129)
Accounts payable   67,295    (807,053)
Accrued expenses   (765,736)   133,846 
Accrued interest – related party   1,122,007    429,059 
Deferred revenues   (538,796)   - 
Net cash used in operating activities   (2,565,605)   (2,059,030)
           
Cash flows from investing activities:          
Purchase of property and equipment   (3,824)   (5,337)
Net cash used in investing activities   (3,824)   (5,337)
           
Cash flows from financing activities:          
Payments of premium finance loan payable   (248,573)   (222,745)
Proceeds from stock option exercises   -    13,900 
Dividend payments   (2,069)   2,522 
Principal payments received (funded) for notes receivable   5,939    (6,977)
Proceeds from related party debt financing   2,700,000    1,500,000 
Repayments of debt   (250,000)   - 
Proceeds from PPP loan   -    1,137,140 
Net cash provided by financing activities   2,205,297    2,423,840 
           
Net (decrease) increase in cash and cash equivalents   (364,132)   359,473 
Cash and cash equivalents at the beginning of period   781,320    736,046 
Cash and cash equivalents at end of period  $417,188   $1,095,519 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

7
 

 

BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

June 30, 2022

(unaudited)

 

   For the Six Months Ended June 30, 
   2022   2021 
Supplemental disclosure of cash flow information          
Cash paid for Interest  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities          
Recognition of right-of-use asset and operating lease liability  $691,340   $- 
Issuance of common shares to Oceanside to settle share liability  $162,061   $- 
Issuance of common stock to Centre Lane for debt issuance  $-   $2,497,056 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

8
 

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

 

Organization and Nature of Operations

 

Bright Mountain Media, Inc. (the “Company” or “Bright Mountain” or “We”) is a Florida corporation formed on May 20, 2010. Its wholly owned subsidiary, Bright Mountain LLC, was formed as a Florida limited liability company in May 2011. Its wholly owned subsidiary, Bright Mountain, LLC (“BMLLC”) F/K/A Daily Engage Media Group, LLC (“Daily Engage”) was formed as a New Jersey limited liability company in February 2015. In August 2019, Bright Mountain Israel Acquisition, an Israeli company was formed and acquired the wholly owned subsidiary Slutzky & Winshman Ltd. (“S&W”) which then changed its name to Oceanside Media LLC (“Oceanside”). Further, on November 18, 2019, Bright Mountain, through its wholly owned subsidiary BMTM2, Inc., a Florida corporation, acquired News Distribution Network, Inc. (“NDN”), a Delaware company, which then changed its name to MediaHouse, Inc. (“MediaHouse”). On June 1, 2020, Bright Mountain acquired the wholly owned subsidiary CL Media Holdings, LLC D/B/A “Wild Sky Media” (“Wild Sky”). When used herein, the terms “BMTM, the “Company,” “we,” “us,” “our” or “Bright Mountain” refers to Bright Mountain Media, Inc. and its subsidiaries.

 

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

 

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

 

By selling advertisements on our current portfolio of 20 owned and operated websites and 13 CTV apps, coupled with acquisition or development of other niche web properties in the future, we are building depth in specific demographic verticals that allow us to package audiences into targeted consumer categories valued by advertisers.

 

Oceanside provides digital performance-based marketing services to customers which include primarily advertisers and advertising agencies that promote or sell products and/or services to consumers through digital media.

 

MediaHouse partners with content producers and online news market websites to distribute video and banner advertisements throughout the United States of America (“U.S.”).

 

Wild Sky owns and operates a collection of websites that offer significant global reach through its content and niche audiences and has become a wholly-owned subsidiary of the Company. Wild Sky is the home to parenting and lifestyle brands.

 

NOTE 2 - GOING CONCERN.

 

These condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed as of the date of the end of the period. This determination was based on the following factors: (i) The Company has sustained a net loss of $3,304,375 for the six months ended June 30, 2022; (ii) used cash from operating activities of $2,565,605 for the six months ended June 30, 2022; (iii) has an accumulated deficit of $109,448,440 at June 30, 2022; (iv) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (v) the Company will require additional financing for the fiscal year ending December 31, 2022 to continue at its expected level of operations; and (vi) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern as of the date of the end of the period and for one year from the issuance of these condensed consolidated financial statements.

 

9
 

 

The Company’s continuation as a going concern is dependent upon its ability to generate revenues, control its expenses and its ability to continue obtaining investment capital and loans from related parties and outside investors to sustain its current level of operations. Management continues raising capital through private placements and is exploring additional avenues for future fund-raising through both public and private sources. The Company is not currently involved in any binding agreements to raise private equity capital. The accompanying 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 unable to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

 

Principles of Consolidation and Basis of Presentation

 

The unaudited condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. The accompanying unaudited financial statements for the three and six months ended June 30, 2022 and 2021 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation S-X of the Securities Act of 1933. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, such unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated results of operations for periods presented are not necessarily indicative of the results to be expected for the full year or any future periods. The condensed consolidated balance sheet information as of December 31, 2021 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on June 13, 2022. The interim condensed consolidated financial statements should be read in conjunction with that report.

 

Prior Period Reclassification

 

During the June 30, 2022 quarterly financial reporting close process, the Company identified an immaterial reclassification impacting the three months ended March 31, 2022. Specifically, the Company identified a reclassification of commissions from selling, general and administrative expenses to cost of revenue on the condensed consolidated statements of operations. This reclassification had no impact on the previously reported net loss for the three months ended March 31, 2022.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenues at a point-in-time when control of services is transferred to the customer. Cash received by the Company prior to when control of services is transferred to the customer is recorded as deferred revenue.

 

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the advertising services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the advertising services promised within each contract and determines those that are performance obligations and assesses whether each promised advertising service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation based on relative fair values, when (or as) the performance obligation is satisfied.

 

10
 

 

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

 

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

 

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

 

There are no significant initial costs incurred to obtain contracts with customers, and no contract assets or recorded in our condensed consolidated financial statements.

 

Leases

 

The Company records leases in accordance with FASB ASC Topic 842, Leases (“ASC 842”).

 

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease terms. Since the Company’s lease agreements does not provide an implicit rate, the Company estimated an incremental borrowing rate based on the information available in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as operating costs and property taxes are expensed as incurred.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of our condensed consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

 

Significant estimates included in the accompanying condensed consolidated financial statements include revenue recognition, the fair value of acquired assets for purchase price allocation in business combinations, valuation of goodwill and intangible assets, estimates of amortization period for intangible assets, estimates of depreciation period for fixed assets, the valuation of equity-based transactions, and the valuation allowance on deferred tax assets.

 

11
 

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are all maintained in bank accounts in the U.S. and other foreign countries in which the Company operates. Cash maintained in bank accounts outside of the U.S. is not significant. At June 30 2022 and December 31, 2021, the Company had $417,188 and $781,320, respectively, in cash and cash equivalents.

 

Credit Risk

 

The Company maintains certain of its cash balances in various U.S. banks, which at times, may exceed federally insured limits. The Company has not incurred any losses on these accounts. In addition, the Company maintains various bank accounts in Thailand and Israel, which are not insured. During the three and six months ended June 30, 2022 and 2021, and the year ended December 31, 2021, we have not incurred material losses on these uninsured accounts. The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. The Company performs ongoing evaluations of its trade accounts receivable customers and generally does not require collateral.

 

Fair Value of Financial Instruments and Fair Value Measurements

 

FASB ASC Topic 820, Fair Value Measurement and Disclosures (“ASC 820”) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement.

 

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

 

  Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
  Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
  Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

Financial instruments recognized in the condensed consolidated balance sheets consist of cash, accounts receivable, note receivable, accounts payable, accrued expenses and premium finance loan payable. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The carrying value of long-term debt to related parties and long-term debt to others approximates the carrying value for similar debt instruments.

 

12
 

 

Financial Disclosures about Fair Value of Financial Instruments

 

The tables below set forth information related to the Company’s financial instruments (in thousands):

  

   Level in Fair  June 30, 2022   December 31, 2021 
  

Value

Hierarchy

 

Carrying

Amount

  

Fair

Value

  

Carrying

Amount

  

Fair

Value

 
                    
PPP Loan  2  $-   $-   $1,137,140   $1,137,140 
Long-term debt to related parties, gross  3  $29,616,564   $29,616,564   $26,414,064   $26,414,064 
Non-interest bearing BMLLC acquisition debt  2  $-   $-   $250,000   $250,000 

 

The following are the major categories of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2022 and 2021:

 

Fair Value measurement using Level 3

 

Balance at December 31, 2020  $16,916,705 
Reclassification (1)   (464,800)
Balance at March 31, 2021  $16,451,905 
Extinguishment (2)   (16,451,905)
Acquisition debt, Wild Sky, related party   17,376,834 
Addition: Related party debt (3)   2,285,000 
Addition: Related part debt (4)   80,000 
Decrease: Related party debt amortization   328,922 
Total Debt   19,741,834 
Less: debt discount, related party(5)   (3,163,451)
Less: current portion of long-term debt, related party   (2,729,200)
Balance at June 30, 2021  $13,849,183 

 

Total long term debt to related parties at December 31, 2021  $22,533,971 
Addition: Related party debt (6)   1,400,000 
Decrease: Related party debt amortization (7)   256,083 
Total long term debt to related parties at March 31, 2022  $24,190,054 
Addition: Related party debt (6)   1,300,000 
Decrease: Related party debt amortization (7)   328,922 
Less: current portion of long-term debt, related party   (3,632,192)
Total long term debt to related parties at June 30, 2022  $22,186,784 

 

  (1) Related to reclassification of Bright Mountain PPP loan
  (2) Centre Lane determined to be related party (See note 14) and applying FASB ASC Topic 470, Debt guidance
  (3) Centre Lane debt financing on May 26, 2021
  (4) Note payable to the Company’s Chairman of the Board
  (5) Debt discount for Centre Lane debt and Note payable to the Company’s Chairman of the Board
  (6) Centre Lane debt financing from January 1, 2022 through June 30, 2022
  (7) Debt discount additions and debt discount amortization on related party financings for the three and six months ended June 30, 2022

 

Off-balance sheet arrangements

 

There are no off-balance sheet arrangements as of June 30, 2022 and December 31, 2021.

 

13
 

 

Accounts Receivable

 

Accounts receivable represent receivables from customers in the ordinary course of business. These are recorded at invoice amount on the date revenue is recognized. Receivables are recorded net of the allowance for doubtful accounts in the accompanying condensed consolidated balance sheets. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense. The Company is also subject to adjustments from traffic settlements that are deducted from open invoices.

 

The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made. As of June 30, 2022 and December 31, 2021, the Company has recorded an allowance for doubtful accounts of $718,318 and $495,396, respectively.

 

Property and Equipment

 

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life of the improvements.

 

Website Development Costs

 

The Company accounts for its website development costs in accordance with FASB ASC Topic 350-50, Website Development Costs. These costs, if any, are included in intangible assets in the accompanying condensed consolidated balance sheets. Upgrades or enhancements that add functionality are capitalized while other costs during the operating stage are expensed as incurred. The Company amortizes the capitalized website development costs over an estimated life of five years.

 

As of June 30, 2022 and December 31, 2021, all website development costs have been expensed. 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.

 

Amortization and Impairment of Long-Lived Assets

 

The Company evaluates long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets.

 

Stock-Based Compensation

 

The Company accounts for share-based compensation related to instruments issued to employees and non-employees under GAAP, which requires the measurement and recognition compensation costs for all equity-based payment awards based on estimated fair values. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Share-based compensation expense is included in selling, general and administrative expenses on the accompanying condensed consolidated statements of operations and comprehensive loss. We have elected to account for forfeitures as they occur.

 

14
 

 

Advertising, Marketing and Promotion Costs

 

Advertising and marketing expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. For the three months ended June 30, 2022 and 2021, advertising, marketing and promotion expense was $12,400 and $16,087, respectively. For the six months ended June 30, 2022 and 2021, advertising, marketing and promotion expense was $18,109 and $28,702, respectively.

 

Foreign currency translation

 

Assets and liabilities of the Company’s Israeli subsidiary are translated from Israeli shekels to United States dollars at exchange rates in effect at the balance sheet date. Income and expenses are translated at the exchange rates for the weighted average rates for the period. The translation adjustments for the reporting period will be included in our statements of comprehensive income. Based on the foreign subsidiaries’ activities the impact of the currency exchange is immaterial for the three and six months ended June 30, 2022 and 2021.

 

Income Taxes

 

The Company follows the provisions of FASB ASC Topic 740-10, Income Taxes – Overall (“ASC 740-10”). When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying condensed consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax expenses are recognized as tax expenses in the Statement of Operations and comprehensive loss.

 

As of June 30, 2022, tax years 2018 through 2021 remain open for Internal Revenue Service (“IRS”) audit. The Company has not received any notice of audit or notifications from the IRS for any of the open tax years.

 

Concentrations

 

The Company generates revenues from through Ad Exchange Networks and through our Owned and Operated Ad Exchange Network. There was one customer who accounted for approximately 41.7% of the revenues for the three months ended June 30, 2022. There was one customer who accounted for approximately 34.9% of the revenues for the six months ended June 30, 2022. There was one customer who accounted for approximately 12% of the revenues for the three months ended June 30, 2021. There was one customer who accounted for approximately 12% of revenues for the six months ended June 30, 2021. No other customer was over 10% of revenues for the three and six months ended June 30, 2022 and 2021.

 

As of June 30, 2022, one customer accounted for more than 10% of the accounts receivable balance, at 30.9%. As of December 31, 2021, two customers accounted for more than 10% of the accounts receivable balance, at 13.1% and 12.0%. As of June 30, 2022, one vendor accounted for more than 10% of the accounts payable, at 10.9%. As of December 31, 2021, one vendor accounted for more than 10% of the accounts payable balance, at 11.2%.

 

Basic and Diluted Net Earnings (Loss) Per Common Share

 

Earnings (loss) per share is calculated and reported under the “two-class” method. The “two-class” method is an earnings allocation method under which earnings per share is calculated for each class of common stock and participating security considering both dividends declared or accumulated and participation rights in undistributed earnings as if all such earnings had been distributed during the period. The Company has convertible preferred stock which have a right to participate in dividends; these are deemed to be participating securities. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.

 

15
 

 

When applicable, basic earnings (loss) per share is calculated by dividing net income, after deducting dividends on convertible preferred stock and participating securities as well as undistributed earnings allocated to participating securities, by the average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated in a similar manner after consideration of the potential dilutive effect of common stock equivalents on the average number of common shares outstanding during the period. Common stock equivalents include warrants and stock options. Common stock equivalents are calculated based upon the treasury stock method using an average market price of common shares during the period. Dilution is not considered when a net loss is reported. Common stock equivalents that have an antidilutive effect are excluded from the computation of diluted earnings per share.

 

Segment Information

 

The Company currently operates in one reporting segment. The services segment is focused on producing advertising revenue generated by users “clicking” on website advertisements utilizing several ad network partners, and direct advertisers and subscription revenue generated by the sale of access to career postings on one of our websites; however, the latter is insignificant.

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13 (amended by ASU 2019-10), “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments.” which replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is required to adopt the new guidance on January 1, 2023. The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04 (amended by ASU 2019-10), “Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment.” Which simplifies the test for goodwill impairment by removing the second step of the test. There is a one-step qualitative test and does not amend the optional qualitative assessment of goodwill impairment. The new standard is effective January 1, 2023 and is not expected to have a material impact on the Company’s consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)”. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. The new standard is effective January 1, 2024 (early adoption is permitted, but not earlier than January 1, 2021). The Company is currently evaluating the impact on the Company’s consolidated financial statements.

 

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This new guidance may be adopted by the Company no later than December 1, 2022, with early adoption permitted. The potential adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

16
 

 

NOTE 4 – PREPAID COSTS AND EXPENSES.

 

At June 30, 2022 and December 31, 2021, respectively, prepaid expenses and other current assets consisted of the following:

  

   June 30, 2022   December 31, 2021 
Prepaid insurance  $177,286   $427,461 
Prepaid consulting service agreements – Spartan (1)   404,076    379,775 
Prepaid software   153,509    - 
Prepaid expenses – other   31,136    97,480 
Prepaid expenses and other current assets  $766,007   $904,716 

 

(1) Spartan Capital is a broker-dealer that has assisted the Company with a range of services including capital raising activities, M&A advisory, and consulting services. The Company has a five-year agreement with Spartan Capital for the provision of such services and any prepayments made under the terms of this agreement starting October 2018 were capitalized and amortized over the remaining life of the agreement.

 

NOTE 5 – PROPERTY AND EQUIPMENT.

 

At June 30, 2022 and December 31, 2021, respectively, property and equipment consisted of the following:

  

  

Estimated

Useful Life (Years)

  June 30, 2022   December 31, 2021 
Furniture and fixtures  3-5  $40,541   $38,728 
Computer equipment  3   116,948    176,624 
Total property and equipment      157,489    215,352 
Less: accumulated depreciation      (103,546)   (150,230)
Total property and equipment, net     $53,943   $65,122 

 

Depreciation expense for the three months ended June 30, 2022 and 2021, was $8,468 and $16,487, respectively.

 

Depreciation expense for the six months ended June 30, 2022 and 2021, was $11,853 and $34,534, respectively.

 

NOTE 6 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS.

 

At June 30, 2022 and December 31, 2021, respectively, website acquisitions, net consisted of the following:

 

   June 30, 2022   December 31, 2021 
Website acquisition assets  $1,124,846   $1,124,846 
Less: accumulated amortization   (921,250)   (920,450)
Less: cumulative impairment loss   (200,396)   (200,396)
Website Acquisition Assets, net  $3,200   $4,000 

 

17
 

 

At June 30, 2022 and December 31, 2021, respectively, intangible assets, net consisted of the following:

  

   Useful Lives  June 30, 2022   December 31, 2021 
Trade name  5 years  $3,749,600   $3,749,600 
Customer relationships  5 years   16,184,000    16,184,000 
IP/Technology  5 years   7,223,000    7,223,000 
Non-compete agreements  3-5 years   1,154,500    1,154,500 
Total Intangible Assets     $28,311,100   $28,311,100 
Less: accumulated amortization      (6,544,842)   (5,759,636)
Less: accumulated impairment loss      (16,486,929)   (16,486,929)
Intangible assets, net     $5,279,329   $6,064,535 

 

Amortization expense for the three months ended June 30, 2022 and 2021 was $389,739 and $395,868, respectively, related to both the website acquisition costs and the intangible assets. Amortization expense for the six months ended June 30, 2022 and 2021 was $786,006 and $792,533, respectively, related to both the website acquisition costs and the intangible assets.

 

NOTE 7 – GOODWILL

 

The following table represents the allocation of Goodwill as of December 31, 2021 and June 30, 2022:

 

  

Owned &

Operated

 

Ad

Network

  Total 
December 31, 2021  $9,725,559  $9,919,909  $19,645,468 
June 30, 2022  $9,725,559  $9,919,909  $19,645,468 

 

Goodwill is tested for impairment at least annually and if triggering events are noted prior to the annual assessment. Impairment is deemed to occur when the carrying value of the Goodwill associated with the reporting unit exceeds the implied value of the Goodwill associated with the reporting unit. No triggering events were identified in the current period.

 

NOTE 8 – ACCRUED EXPENSES.

 

At June 30, 2022 and December 31, 2021, respectively, accrued expenses consisted of the following:

  

   June 30, 2022   December 31, 2021 
Accrued salaries and benefits  $986,103   $1,459,299 
Accrued dividends   691,861    691,861 
Accrued traffic settlement(1)   10,254    10,254 
Accrued legal settlement(2)   216,101    81,101 
Accrued legal fees   139,786    182,537 
Accrued other professional fees   219,136    592,421 
Share issuance liability(4)   27,012    189,067 
Accrued warrant penalty(3)   366,899    366,899 
Accrued Value-Added Tax payable   47,545    - 
Other accrued expenses   132,582    191,226 
Total accrued expenses  $2,837,279   $3,764,665 

 

(1) The Company negotiates with its publishing partners regarding questionable traffic to arrive at traffic settlements.
(2) Accrued legal settlement related to the Encoding legal matter. See Note 10.
(3) The Company has sold units of its securities to various investors in several private placements. As part of each private placement, the Company agreed to file a registration statement with the SEC to register the resale of the shares by the respective holder in order to permit the public resale; such filing deadlines ranged from 120 to 270 days following the closing date of the respective placement and the Company was liable to pay a penalty fee for failure to file the resale registration statement within the allotted timeframe.
(4) Share issuance liability related to issuance of the Company’s common stock in connection with the Oceanside, MediaHouse and Wild Sky acquisitions and Oceanside employee share issuances.

 

18
 

 

NOTE 9 – NOTES PAYABLE

 

Long-term debt to related parties

 

Centre Lane Partners Master Credit Fund II, L.P. (“Center Lane Partners”), who sold the Company the Wild Sky business in June 2020 has partnered and assisted the Company from a liquidity perspective starting in April 2021. This relationship has been determined to qualify as a related party. A related party is a party that can exercise significant influence over the Company in making financial and/or operating decisions.

 

Effective June 1, 2020, the Company entered into a membership interest purchase agreement to acquire 100% of Wild Sky (the “Purchase Agreement”). The seller issued a first lien senior secured credit facility totaling $16,451,905, which consisted of $15,000,000 of initial indebtedness, repayment of Wild Sky’s existing accounts receivable factoring facility of approximately $900,000 and approximately $500,000 of expenses. The note bears interest at a rate of 6.0% per annum. Per the credit facility with the seller, our loan payments begin December 1, 2021. There is no prepayment penalty associated with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility. The membership interest purchase included a requirement that the opinion of the financial statements as of and for the year ended December 31, 2021 not include a “going concern opinion.” The Company defaulted on this requirement and on April 26, 2021, the Company obtained a waiver of this requirement from the lender. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023.

 

On April 26, 2021, the Company and certain of its subsidiaries entered into a First Amendment to Amended and Restated Senior Secured Credit Agreement (the “First Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020 (the “Credit Agreement”). The Credit Agreement was amended to permit the Company to raise up to $6,000,000 of total cash proceeds from the sale of its preferred stock prior to December 31, 2021 without having to make a mandatory prepayment of the loans (the “Loans”) under the Credit Agreement. The interest rate on the Loans after April 26, 2021 was increased to 10.00% per annum from 6.00%, which can continue to be paid in-kind in lieu of cash payment. In addition, the Company may issue up to $800,000 in dividends from the previous limit of $500,000 per annum. In addition, the Company has issued 150,000 common shares to Centre Lane Partners as part of this transaction. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023.

 

On May 26, 2021, the Company and certain of its subsidiaries entered into a Second amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Second Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $1.5 million, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee (“the Exit Fee”) totaling $0.750 million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In addition, the Company has issued 3.0 million common shares to Centre Lane Partners as part of this transaction.

 

On August 12, 2021, the Company and certain of its subsidiaries entered into a Third amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Third Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $0.5 million, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $0.250 million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. In addition, the Company has issued 2.0 million common shares to Centre Lane Partners as part of this transaction.

 

19
 

 

On August 31, 2021, the Company and certain of its subsidiaries entered into a Fourth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Fourth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $1.1 million, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $0.550 million which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On October 8, 2021, the Company and certain of its subsidiaries entered into a Fifth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Fifth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $725,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $800,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On November 5, 2021, the Company and certain of its subsidiaries entered into a Sixth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Sixth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $800,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $800,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. This amendment required the Company to issue 7,500,000 shares of the Company’s common stock to Centre Lane Partners prior to November 30, 2021.

 

On December 23, 2021, the Company and certain of its subsidiaries entered into a Seventh amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Seventh Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $500,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $500,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On January 26, 2022, the Company and certain of its subsidiaries entered into a Eighth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Eighth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $350,000, in the aggregate. This term loan shall be repaid by June 30, 2025, with payments of 2.5% of outstanding principal beginning on June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $350,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On February 11, 2022, the Company and certain of its subsidiaries entered into a Ninth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Ninth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $250,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $12,500 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment. Per the tenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners, the interest rate on this term loan was increased to 12% from 10%

 

20
 

 

On March 11, 2022, the Company and certain of its subsidiaries entered into a Tenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Tenth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $300,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $15,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment. Additionally, per the Tenth Amendment, original loan and amendments one through eight now have maturity dates of June 30, 2025, with quarterly payments of 2.5% of outstanding principal beginning on June 30, 2023. Amendments nine through fourteen have a maturity date of June 30, 2023.

 

On March 25, 2022, the Company and certain of its subsidiaries entered into an Eleventh amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Eleventh Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $500,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $25,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On April 15, 2022, the Company and certain of its subsidiaries entered into a Twelfth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Twelfth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $450,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $22,500 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On May 10, 2022, the Company and certain of its subsidiaries entered into a Thirteenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Thirteenth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $500,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $25,000 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment.

 

On June 10, 2022, the Company and certain of its subsidiaries entered into a Fourteenth amendment to the Amended and Restated Senior Secured Credit Agreement between itself and Centre Lane Partners (“the Fourteenth Amendment”). The Company and its subsidiaries are parties to a credit agreement between itself and Centre Lane Partners as Administrative Agent and Collateral Agent dated June 5, 2020, as amended the Credit Agreement. The Credit Agreement was amended to provide for an additional loan amount of $350,000, in the aggregate. This term loan shall be repaid by June 30, 2023. In addition, and as part of the transaction, there is an Exit Fee totaling $17,500 which will be added and capitalized to the principal amount of the original loan and the original loan terms apply. There was no issuance of common shares as part of this amendment. See Note 15 for amendments to the Amended and Restated Senior Secured Credit Agreement subsequent to June 30, 2022.

 

21
 

 

As part of these transactions and given that Centre Lane was determined to be a related party, an independent fair value analysis was performed by the Company and all related transactions were recorded accordingly. As of the First Amendment dated April 26, 2021, the Company evaluated the debt for extinguishment or debt modification under FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, and determined extinguishment was applicable. Under the rules, the Company extinguished the debt, which included the capitalized interest through April 26, 2021, and recorded it net of the debt discount, including all applicable fees and stock issuances. The debt discount determined for the First Amendment totaled $2,363,986 and is amortized over the remaining life of the loan and is included in interest expense – related party on the accompanying consolidated statement of operations and comprehensive loss or until the next debt modification or extinguishment is determined. For the Second Amendment, which occurred on May 26, 2021, the Company determined it was a debt modification. The Second Amendment provided the Company with debt financing of $1,500,000, an Exit fee of $750,000, and issuance of 3,000,000 shares of common stock issued to Centre Lane. The debt discount determined for the Second Amendment totaled $904,637. For the Third Amendment, which occurred on August 12, 2021, the Company determined it was a debt modification. The Third Amendment provided the Company with debt financing of $500,000, an Exit fee of $250,000, and issuance of 2,000,000 shares of common stock issued to Centre Lane. The debt discount determined for the Third Amendment totaled $322,529. For the Fourth Amendment, which occurred on August 31, 2021, the Company determined it was a debt modification. The Fourth Amendment provided the Company with debt financing of $1,100,000, an Exit fee of $550,000, and no common share issuance. The debt discount determined for the Fourth Amendment totaled $560,783. For the Fifth Amendment, which occurred on October 8, 2021, the Company determined it was a debt extinguishment. The Fifth Amendment provided the Company with debt financing of $725,000, an Exit fee of $362,500, and no common share issuance. The debt discount determined for the Fifth Amendment totaled $2,635,013. For the Sixth Amendment, which occurred on November 5, 2021, the Company determined it was a debt modification. The Sixth Amendment provided the Company with debt financing of $800,000, an Exit fee of $800,000, and no common share issuance. The debt discount determined for the Sixth Amendment totaled $902,745. For the Seventh Amendment, which occurred on December 23, 2021, the Company determined it was a debt modification. The Seventh Amendment provided the Company with debt financing of $500,000, an Exit fee of $500,000, and no common share issuance. The debt discount determined for the Seventh Amendment totaled $510,783. For the Eight Amendment, which occurred on January 26, 2022, the Company determined it was a debt modification. The Eighth Amendment provided the Company with debt financing of $350,000, an Exit fee of $350,000, and no common share issuance. The debt discount determined for the Eighth Amendment totaled $352,520. For the Ninth Amendment, which occurred on February 11, 2022, the Company determined it was a debt modification. The Ninth Amendment provided the Company with debt financing of $250,000, an Exit fee of $12,500, and no common share issuance. The debt discount determined for the Ninth Amendment totaled $19,700. For the Tenth Amendment, which occurred on March 11, 2022, the Company determined it was a debt modification. The Tenth Amendment provided the Company with debt financing of $300,000, an Exit fee of $15,000, and no common share issuance. The debt discount determined for the Tenth Amendment totaled $25,125. For the Eleventh Amendment, which occurred on March 25, 2022, the Company determined it was a debt modification. The Eleventh Amendment provided the Company with debt financing of $500,000, an Exit fee of $25,000, and no common share issuance. The debt discount determined for the Eleventh Amendment totaled $29,050. For the Twelfth Amendment, which occurred on April 15, 2022, the Company determined it was a debt modification. The Twelfth Amendment provided the Company with debt financing of $450,000, an Exit fee of $22,500, and no common share issuance. The debt discount determined for the Twelfth Amendment totaled $36,002. For the Thirteenth Amendment, which occurred on May 10, 2022, the Company determined it was a debt modification. The Thirteenth Amendment provided the Company with debt financing of $500,000, an Exit fee of $25,000, and no common share issuance. The debt discount determined for the Thirteenth Amendment totaled $38,502. For the Fourteenth Amendment, which occurred on June 10, 2022, the Company determined it was a debt modification. The Fourteenth Amendment provided the Company with debt financing of $350,000, an Exit fee of $17,500, and no common share issuance. The debt discount determined for the Fourteenth Amendment totaled $31,002.

 

The accumulated gross debt discount as of June 30, 2022 and December 31, 2021 totaled $8,732,377 and $8,200,476, respectively and will be amortized into the condensed consolidated statement of operations and comprehensive loss and included in the interest expense – related party over the remaining life of the loan or until the next debt modification or extinguishment is determined. Interest expense for note payable to related party for the three months ended June 30, 2022 and 2021 was $856,574 and $360,903, respectively. Interest expense for note payable to related party for the six months ended June 30, 2022 and 2021 was $1,657,251 and $360,903, respectively.

 

22
 

 

On July 31, 2019, the Company executed a Share Exchange Agreement and Plan of Merger (the “Oceanside Merger Agreement”) with Slutzky & Winshman Ltd., an Israeli company (“Oceanside”) and the shareholders of Oceanside (the “Oceanside Shareholders”). The merger closed on August 15, 2019, and the Company acquired all of the outstanding shares of S&W. Pursuant to the terms of the Merger Agreement, the Company issued 12,513,227 shares valued at $20,021,163 to owners and employees of Oceanside and contingent consideration of $750,000 paid through the delivery of unsecured, interest free, one and two-year promissory notes (the “Closing Notes”). At the time of the acquisition and under FASB ASC Topic 805, Business Combinations (“ASC 805”), these Closing Notes were recorded ratably as compensation expense into the statement of operations and comprehensive loss over the 24-month term and an accrued payable is being recognized over the same period. As of August 15, 2020, the Company did not make payment on the one year closing note and thereby defaulted on its obligation and the two-year closing note accelerated to become payable as of August 15, 2020. Upon default, the closing notes accrue interest at a 1.5% per month rate, or 18% annual rate. As a result, there was a total charge of $300,672 recorded during the third quarter of 2020 which was $250,000 of compensation expense and $50,672 of interest expense-related party. The total $750,000 liability is recorded in accrued expenses. Interest expense for note payable to related party for the three months ended June 30, 2022 and 2021 was $33,657 and $33,567, respectively. Interest expense for note payable to related party for the six months ended June 30, 2022 and 2021 was $66,945.

 

During November 2018, the Company issued 10% convertible promissory notes in the amount of $80,000 to a related party, the Chairman of the Board. The notes mature five years from issuance and is convertible at the option of the holder into shares of common stock at any time prior to maturity at a conversion price of $0.40 per share. A beneficial conversion feature exists on the date the convertible notes were issued whereby the fair value of the underlying common stock to which the notes are convertible into is in excess of the face value of the note of $70,000.

 

The principal balance of these notes payable was $80,000 at June 30, 2022 and December 31, 2021, and discounts recognized upon respective origination dates as a result of the beneficial conversion feature total $19,328 and $26,271, respectively. At June 30, 2022 and December 31, 2021, the total convertible notes payable to related party net of discounts was $60,672 and $53,729, respectively. Interest expense for note payable to related party was $2,023 and discount amortization was $3,491 for the three months ended June 30, 2022 and 2021. Interest expense for note payable to related party for the six months ended June 30, 2022 and 2021 was $4,023 and discount amortization was $6,943.

 

Long-term debt

 

On February 17, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company entered into a promissory note of $295,600 with Regions Bank (the “Second Bright Mountain PPP Loan”) and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The Second Bright Mountain PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. This was the second tranche available under the PPP program and was forgiven as of June 15, 2022 and the Company recorded a non-cash gain on the PPP forgiveness during the three months ended June 30, 2022.

 

On March 23, 2021, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company’s Wild Sky subsidiary entered into a promissory note of $841,540 with Holcomb Bank (the “Second Wild Sky PPP Loan”) and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The Second Wild Sky PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. This was the second tranche available under the PPP program and was forgiven as of March 23, 2022 and the Company recorded a non-cash gain on the PPP forgiveness during the three months ended March 31, 2022.

 

On April 24, 2020, under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, administered by the Small Business Administration (“SBA”), the Company entered into a promissory note of $464,800 with Regions Bank (the “Bright Mountain PPP Loan”) and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. On January 28, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part and on July 16, 2021, the Company obtained the forgiveness of the Bright Mountain PPP Loan in whole and recorded a non-cash gain on the PPP forgiveness during the year ended December 31, 2021.

 

23
 

 

Effective June 1, 2020, the Company acquired Wild Sky and assumed the $1,706,735 promissory note (the “Wild Sky PPP Loan”) with Holcomb Bank received under the PPP. The Wild Sky PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The Wild Sky PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Wild Sky PPP Loan contains customary events of default provisions. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. On January 22, 2021, the Company applied for the promissory note to be forgiven by the SBA in whole or in part and on March 29, 2021, the Company obtained the forgiveness of the Wild Sky PPP Loan in whole and recorded a non-cash gain on the PPP forgiveness during the three months ended March 31, 2021.

 

At June 30, 2022 and December 31, 2021, a summary of the Company’s debt is as follows:

 

   June 30, 2022   December 31, 2021 
Non-interest bearing BMLLC acquisition debt  $-   $250,000 
PPP loans   -    1,137,140 
Wild Sky acquisition debt   18,181,564    18,146,564 
Centre Lane debt   11,355,000    8,187,500 
Note payable debt to the Company’s Chairman of the Board   80,000    80,000 
Total Debt   29,616,564    27,801,204 
Less: debt discount, related party