Bright Mountain Media, Inc. 10-Q

10-Q 1 form10q.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 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 [X] 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 [X] 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 [X] Smaller reporting company [X] Emerging growth company [X] 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 [X] 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 November 24, 2020 there were 114,564,060 shares of the issuer’s common stock issued and 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. 45 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 54 ITEM 4. CONTROLS AND PROCEDURES. 55 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 56 ITEM 1A. RISK FACTORS. 56 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 56 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 56 ITEM 4. MINE SAFETY DISCLOSURES. 56 ITEM 5. OTHER INFORMATION. 56 ITEM 6. EXHIBITS. 57 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 history of losses, our varying gross profit margins, our ability to raise additional capital and continue as a going concern; ● our ability to fully develop the Bright Mountain digital media services platform; ● the impact of COVID-19 on internet advertising; ● our ability to manage and expand our relationships with publishers; ● 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; ● provisions of our charter and Florida law which may have anti-takeover effects; and 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, 2019, as filed with the Securities and Exchange Commission on May 14, 2020 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, “third quarter of 2020” refers to the three months ended September 30, 2020, “period ended 9 months” refers to the nine months ended September 30, 2020 “third quarter of 2019” refers to the three months ended September 30, 2019, “2020” refers to the year ending December 31, 2020 and “2019” refers to the year ended December 31, 2019. 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 September 30, 2020 December 31, 2019 (unaudited) ASSETS Current Assets Cash and cash equivalents $ 1,050,370 $ 957,013 Accounts receivable, net 5,409,605 3,997,475 Note receivable, net 13,646 63,812 Prepaid expenses and other current assets 702,054 752,975 Current assets - discontinued operations - 1,705 Total Current Assets 7,175,675 5,772,980 Property and equipment, net 119,912 30,666 Website acquisition assets, net 12,789 48,928 Intangible assets, net 12,052,337 19,610,801 Goodwill 22,150,047 53,646,856 Prepaid services/consulting agreements - long term 620,000 913,182 Right of use asset 243,549 397,912 Other assets 396,969 35,823 Total Assets $ 42,771,278 $ 80,457,148 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 7,605,873 $ 8,358,442 Accrued expenses 1,933,476 3,228,328 Accrued interest to related party 12,720 6,629 Premium finance loan payable 16,671 179,844 Deferred revenues 65,512 6,651 Long term debt, current portion 1,135,000 165,163 Operating lease liability, current portion 221,763 211,744 Current liabilities - discontinued operations - 591 Total Current Liabilities 10,991,015 12,157,392 Long term debt to related parties, net 36,199 25,689 Long term debt 18,588,440 - Deferred tax liability 283,213 581,440 Operating lease liability, net of current portion 21,915 198,232 Total Liabilities 29,920,782 12,962,753 Commitments and Contingencies Shareholders’ Equity Convertible preferred stock, par value $0.01, 20,000,000 shares authorized, Series A-1, 2,000,000 shares designated, 1,200,000 and 1,200,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 12,000 12,000 Series B-1, 6,000,000 shares designated, 0 and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively - - Series E, 2,500,000 shares designated, issued and outstanding at September 30, 2020 and December 31, 2019, respectively 25,000 25,000 Series F, 4,344,017 shares designated, issued and outstanding at September 30, 2020 and December 31, 2019, respectively 43,440 43,440 Common stock, par value $0.01, 324,000,000 shares authorized, 114,564,060 and 100,244,312 issued and 114,013,943 and 78,063,531 outstanding at September 30, 2020 and December 31, 2019, respectively 1,145,642 1,002,444 Additional paid-in capital 96,360,804 86,856,500 Accumulated deficit (83,581,144 ) (20,444,989 ) Treasury Stock at cost 550,117 shares at September 30, 2020 (1,155,246 ) - Total shareholders’ equity 12,850,496 67,494,395 Total Liabilities and Shareholders’ Equity $ 42,771,278 $ 80,457,148 See accompanying notes to unaudited condensed consolidated financial statements 4 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended For the Nine Months Ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Revenues Advertising $ 4,894,486 $ 2,113,276 $ 9,438,612 $ 3,915,326 Cost of revenue Advertising 2,085,060 1,432,922 5,005,646 2,874,076 Gross profit 2,809,426 680,354 4,432,966 1,041,250 Selling, general and administrative expenses 5,493,343 2,734,203 13,860,462 4,452,490 Loss from operations (2,683,917 ) (2,053,849 ) (9,427,496 ) (3,411,240 ) Other income (expense) Interest (expense) income, net (251,779 ) 16,234 (323,047 ) 37,281 Gain on settlement 935,408 - 935,408 122,500 Impairment of assets (53,996,544 ) - (53,996,544 ) - Settlement of contingent consideration (750,000 ) - (750,000 ) - Other income (expense) - (6,993 ) (215 ) (7,902 ) Interest expense - related party (2,045 ) (5,574 ) (6,091 ) (17,289 ) Total other (expense) income (54,064,960 ) 3,667 (54,140,489 ) 134,590 Net loss from continuing operations (56,748,877 ) (2,050,182 ) (63,567,985 ) (3,276,650 ) Income (loss) from discontinued operations - 13,649 - (174,021 ) Net loss before tax (56,748,877 ) (2,036,533 ) (63,567,985 ) (3,450,671 ) Income tax benefit 177,089 - 431,830 - Net Loss (56,571,788 ) (2,036,533 ) (63,136,155 ) (3,450,671 ) Preferred stock dividends Series A, Series E, and Series F preferred stock (180,122 ) (52,682 ) (447,369 ) (201,484 ) Net loss attributable to common shareholders $ (56,751,910 ) $ (2,089,215 ) $ (63,583,524 ) $ (3,652,155 ) Basic and diluted net loss for continuing operations per share $ (0.51 ) $ (0.03 ) $ (0.59 ) $ (0.05 ) Basic and diluted net income (loss) for discontinued operations per share $ 0.00 $ 0.00 $ 0.00 $ (0.00 ) Basic and diluted net loss per share $ (0.51 ) $ (0.03 ) $ (0.59 ) $ (0.05 ) Weighted average shares outstanding - basic and diluted 110,995,809 64,267,465 108,099,730 66,485,230 See accompanying notes to unaudited condensed consolidated financial statements 5 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS’ EQUITY For the Nine Months Ended September 30, 2020 and 2019 (Unaudited) Preferred Stock Common Stock Treasury Stock Additional Paid-in Accumulated Total Shareholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance - December 31, 2019 8,044,017 $ 80,440 100,244,312 $ 1,002,444 - $ - $ 86,856,500 $ (20,444,989 ) $ 67,494,395 Series A-1, E, and F preferred stock dividend - - - - - - (118,252 ) - (118,252 ) Stock option vesting expense - - - - - - 36,595 - 36,595 Units consisting of one share of common stock and one warrant issued for cash, net of costs - - 5,117,500 51,175 - - 2,123,762 - 2,174,937 Stock issued to Spartan Capital for acquisitions completed - - 1,310,000 13,100 - - 2,109,300 - 2,122,400 Common stock issued for services rendered - - 61,048 611 - - 91,108 - 91,719 Net loss for the three months ended March 31, 2020 - - - - - - - (3,459,020 ) (3,459,020 ) Balance - March 31, 2020 8,044,017 $ 80,440 106,732,860 $ 1,067,330 - $ - $ 91,099,013 $ (23,904,009 ) $ 68,342,774 Series A-1, E, and F preferred stock dividend - - - - - - (148,995 ) - (148,995 ) Stock option vesting expense - - - - - - 41,499 - 41,499 Units consisting of one share of common stock and one warrant issued for cash - - 1,025,000 10,250 - - 425,375 - 435,625 Stock issued for acquisition - - 2,500,000 25,000 - - 3,700,000 - 3,725,000 Net loss for the three months ended June 30, 2020 - - - - - - - (3,105,347 ) (3,105,347 ) Balance – June 30, 2020 8,044,017 $ 80,440 110,257,860 $ 1,102,580 - $ - $ 95,116,892 $ (27,009,356 ) $ 69,290,556 Series A-1, E and F preferred stock dividend - - - - - - (180,122 ) - (180,122 ) Stock option vesting expense - - - - - - 51,011 - 51,011 Stock option exercise - - 50,000 500 - - 6,450 - 6,950 Units consisting of one share of common stock and one warrant issued for cash - - 4,256,200 42,562 - - 1,366,573 - 1,409,135 Treasury stock - - - - 550,117 (1,155,246 ) - - (1,155,246 ) Net loss for the three months ended September 30, 2020 - - - - - - - (56,571,788 ) (56,571,788 ) Balance – September 30, 2020 8,044,017 $ 80,440 114,564,060 $ 1,145,642 550,117 $ (1,155,246 ) $ 96,360,804 $ (83,581,144 ) $ 12,850,496 Preferred Stock Common Stock Additional Paid-in Accumulated Total Shareholders’ Shares Amount Shares Amount Capital Deficit Equity Balance - December 31, 2018 6,844,017 $ 68,440 62,125,114 $ 621,252 $ 19,775,753 $ (17,042,966 ) $ 3,422,479 Series E and F preferred stock dividend - - - - (74,171 ) - (74,171 ) Stock option vesting expense - - - - 3,213 - 3,213 Units consisting of one share of common stock and one warrant issued for cash, net of costs - - 1,943,750 19,437 854,513 - 873,950 Net loss for the three months ended March 31, 2019 - - - - - (710,262 ) (710,262 ) Balance - March 31, 2019 6,844,017 68,440 64,068,864 640,689 20,559,308 (17,753,228 ) 3,515,209 Series E and F preferred stock dividend - - - - (74,994 ) - (74,994 ) Stock option vesting expense - - - - 9,898 - 9,898 Common Stock issued for services-cancelled - - (3,000 ) (30 ) - - (30 ) Units consisting of one share of common stock and one warrant issued for cash, net of costs - - 240,000 2,400 117,600 - 120,000 Units consisting of one share of common stock and two warrants issued for cash, net of costs - - 1,052,500 10,525 510,755 - 521,280 Net loss for the three months ended June 30, 2019 - - - - - (703,876 ) (703,876 ) Balance – June 30, 2019 6,844,017 $ 68,440 65,358,364 $ 653,584 $ 21,122,567 $ (18,457,104 ) $ 3,387,487 Series A-1, E and F preferred stock dividend - - - - (52,682 ) - (52,682 ) Stock option vesting expense - - - - 15,963 - 15,963 Common stock issued for services - - 22,167 222 32,028 - 32,250 Issuance of Series A-1 preferred stock 500,000 5,000 - - 245,000 - 250,000 Units consisting of one share of common stock and two warrants issued for cash - - 258,360 2,584 126,596 - 129,180 Common stock issued in acquisition of Slutsky & Winshman - - 12,354,640 120,508 19,288,773 - 19,409,281 Net loss for the three months ended September 30, 2019 - - - - - (2,036,533 ) (2,036,533 ) Balance – September 30, 2019 7,344,017 $ 73,440 77,993,531 $ 776,898 $ 40,778,245 $ (20,493,637 ) $ 21,134,946 See accompanying notes to unaudited condensed consolidated financial statements 6 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS September 30, 2020 (Unaudited) For the Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net loss $ (63,136,155 ) $ (3,450,671 ) Add back: loss attributable to discontinued operations - 174,021 Adjustments to reconcile net loss to net cash used in operations: Depreciation 29,616 5,613 Amortization of debt discount 10,510 10,472 Amortization 3,289,330 120,668 Impairment of tradename - 20,800 Impairment of goodwill 42,444,971 - Impairment of intangibles 11,551,573 - Gain on settlement (935,408 ) (122,500 ) Stock option compensation expense 129,105 29,074 Stock issued for services rendered 92,218 32,250 Non-cash finance fee 275,000 - Non-cash settlement of contingent consideration 750,000 - Change in deferred taxes (431,830 ) - Provision for bad debt 287,068 29,338 Changes in operating assets and liabilities: Accounts receivable 1,193,666 (808,812 ) Prepaid expenses and other current assets 536,920 482,979 Prepaid services/consulting agreements 293,182 - Other assets 263,836 (17,369 ) Right of use asset and lease liability (11,935 ) - Accounts payable (1,674,722 ) 1,078,205 Accrued expenses 53,950 1,070,498 Accrued interest – related party 6,091 3,213 Deferred revenues 25,528 (4,163 ) Net cash (used in) continuing operations for operating activities (4,957,486 ) (1,346,384 ) Net cash (used in) discontinued operations - (155,739 ) Net cash (used in) operating activities (4,957,486 ) (1,502,123 ) Cash flows from investing activities: Purchase of property and equipment (4,055 ) (8,746 ) Cash received in acquisition - 603,744 Principal collected on notes receivable - 77,500 Notes receivable funded - (1,156,887 ) Cash acquired from Wild Sky 1,357,669 - Cash paid for website acquisition - (8,000 ) Net cash provided by (used in) investing activities 1,353,614 (492,389 ) Cash flows from financing activities: Proceeds from issuance of common stock, net 3,586,148 1,651,410 Payments of premium finance loan payable (163,173 ) (89,154 ) Dividend payments (235,129 ) (201,847 ) Principal payments received for notes receivable 44,583 - Proceeds from issuance of preferred stock - 250,000 Principal payment on notes payable 464,800 (64,681 ) Net cash provided by financing activities 3,697,229 1,545,728 Impact on foreign exchange rates on cash - 9,818 Net increase (decrease) in cash and cash equivalents including cash and cash equivalents classified within assets related to continuing operations 93,357 (438,966 ) Net (decrease) in cash related to discontinued operations - (15,971 ) Net increase (decrease) in cash and cash equivalents 93,357 (454,937 ) Cash and cash equivalents at the beginning of period 957,013 1,042,457 Cash and cash equivalents at end of period $ 1,050,370 $ 587,520 See accompanying notes to unaudited condensed consolidated financial statements 7 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS September 30, 2020 (Unaudited) For the Nine Months Ended September 30, 2020 2019 Supplemental disclosure of cash flow information Cash paid for Interest $ 6,091 $ 15,926 Non-cash investing and financing activities Non-cash acquisition of Slutsky & Winshman net liabilities $ - $ 168,244 Non-cash acquisition of intangible assets of Slutsky & Winshman $ - $ 4,169,000 Non-cash acquisition of right of use asset $ - 266,320 Non-cash acquisition of goodwill $ - $ 15,408,523 Premium finance loan payable recorded as prepaid $ - $ 28,602 Stock dividend $ - $ 100 Reduction of liability with Daily Engage Media Group, LLC $ - 197,500 Notes receivable for the sale of Black Helmet $ - $ 155,000 Stock issued for prepaid services and consulting agreements to Spartan Capital $ - 32,200 Recognition of right of use asset and lease liability for S&W $ - $ 245,540 Non-cash acquisition of assets of Wild Sky $ (4,111,956 ) $ - Non-cash acquisition of intangible assets of Wild Sky $ (7,246,300 ) $ - Non-cash acquisition of goodwill of Wild Sky $ (10,814,559 ) $ - Non-cash acquisition of liabilities of Wild Sky $ 3,388,579 $ - Common stock issued for acquisition $ 3,725,000 $ - Long term debt from acquisition $ 16,416,905 $ - Issuance of debt in accordance with legal settlement $ 219,837 $ - See accompanying notes to unaudited condensed consolidated financial statements 8 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) 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, 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 (“DEM”) 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, see Note 4. Further, on November 18, 2019, Bright Mountain Media, Inc., through its wholly owned subsidiary BMTM2, Inc., a Florida corporation, acquired News Distribution Network, Inc., a Delaware company, which then changed its name to MediaHouse, Inc. On June 1, 2020, Bright Mountain Media, Inc. acquired the wholly owned subsidiary CL Media Holdings, LLC D/B/A “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. Discontinued Operations Effective December 31, 2018 the Company discontinued the E-Commerce operations, the Products segment, as of December 31, 2018 per the determination of Management and the Board of Directors. Accordingly, the Company determined that the assets and liabilities of this reportable segment met the discontinued operations criteria in Accounting Standards Codification 205-20-45 and were classified as discontinued operations at December 31, 2018. See Discontinued Operations Note 5. Continuing Operations Bright Mountain Media, Inc. 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 involves traditional interpersonal contact between ad buyers and advertising sales representative(s). By selling advertisements on our current portfolio of 25 owned and operated websites and 20 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. On August 15, 2019, under the terms of the Share Exchange Agreement and Plan of Merger with Oceanside Media and its members, the Company acquired 100% of the membership interests of Oceanside Media. Launched in 2015, Oceanside Media provided 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. On November 18, 2019, under the terms of the Share Exchange Agreement and Plan of Merger with NDN and its shareholders, the Company acquired 100% of the ownership interests of NDN. Launched in 2019 as a spin-off from Inform, Inc. NDN which was rebranded as MediaHouse partners with content producers and online news market websites to distribute video and banner advertisements throughout the United States of America. On June 1, 2020, Bright Mountain Media, Inc. (“Bright Mountain”) entered into a membership interest purchase agreement ( the “Purchase Agreement”) with Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane”) to purchase 100% of the membership interests of CL Media Holdings, LLC (“Wild Sky Media”). Wild Sky Media 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 Media is the home to parenting and lifestyle brands. NOTE 2 - GOING CONCERN. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss of $63,136,155 and used net cash in operating activities of $4,957,486 for the nine months ended September 30, 2020. The Company had an accumulated deficit of $83,581,144 at September 30, 2020. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period. The Company’s continuation as a going concern is dependent upon its ability to generate revenues, control its expenses and its ability to continue obtaining investment capital and loans from related parties and outside investors to sustain its current level of operations. 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 public or private capital. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 9 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three and nine months ended September 30, 2020 and 2019 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 SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, such condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated results of operations for periods presented are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet information as of December 31, 2019 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, 2019, as filed with the SEC on May 14, 2020. The interim condensed consolidated financial statements should be read in conjunction with that report. Revenue Recognition On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers (Topic 606)” (“Topic 606”) using the “modified retrospective” method, meaning the standard is applied only to the most current period presented in the financial statements. Furthermore, we elected to apply the standard only to those contracts which were not completed as of the date of the adoption. Results for reporting periods beginning on the date of adoption are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with accounting standards in effect for those periods. Following the adoption of Topic 606, the Company will continue to recognize revenue at a point-in-time when control of services is transferred to the customer. This is consistent with the Company’s previous revenue recognition accounting policy. To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 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 Topic 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 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). 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. Leases In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. On January 1, 2019, the Company adopted the new lease standard using the optional transition method under which comparative financial information has not been restated and will continue to apply the provisions of the previous lease standard in its annual disclosures for the comparative periods. In addition, the new lease standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not have to reassess whether expired or existing contracts are or contain a lease and did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The new lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize right of use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (office building). The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the remaining lease terms as of January 1, 2019. Since the Company’s lease agreements does not provide an implicit rate, the Company estimated an incremental borrowing rate based on the information available at January 1, 2019 in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as operating costs and property taxes are expensed as incurred. On January 1, 2019, the Company recognized a ROU asset and a lease liability of approximately $235,000. In connection with the acquisition of S&W in August 2019 a ROU asset and lease liability of approximately $353,000 was recognized on the consolidated balance sheet. 11 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). Use of Estimates Our consolidated financial statements are prepared in accordance with US 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 US 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 intangible assets, estimates of amortization period for intangible assets, estimates of depreciation period for fixed assets and the valuation of equity-based transactions, and the valuation allowance on deferred tax assets. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Fair Value of Financial Instruments and Fair Value Measurements FASB ASC 820 “ Fair Value Measurement and Disclosures: (“ASU 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. 12 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, accrued expenses, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities. We adopted accounting guidance for fair values measurements and disclosures (ASC 820). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. 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 consolidated balance sheets consist of cash, accounts receivable, prepaid expenses and other current assets, note receivable, accounts payable, accrued expenses and premium finance loan payable. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The carrying value of long-term debt to related parties and long-term debt to others approximates the current borrowing rate for similar debt instruments. The following are the major categories of liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2020, using significant unobservable inputs (Level 3): Fair Value measurement using Level 3 Balance at December 31, 2019 $ 245,163 Long term debt additions during 2020 18,343,277 Principal reductions/payments during 2020 - Adjustment to fair value - Balance at September 30, 2020 $ 18,588,440 Off balance sheet arrangements Notes Payable and related potential liabilities are excluded from the balance sheet when there are significant uncertainties associated with the likelihood that the liabilities will be paid in full or until such time that the amount of the liability can be reasonably determined or estimated. 13 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). 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 September 30, 2020 and December 31, 2019, the Company has recorded an allowance for doubtful accounts of $906,970 and $505,401, respectively. 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 three - five years for office furniture and fixtures, and three years for computer equipment. 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 ASC 350-50, “Website Development Costs”. These costs, if any, are included in intangible assets in the accompanying consolidated financial statements. 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. For the three and nine months ended September 30, 2020 and 2019, $0 and $8,000 was capitalized for the purchase of a Facebook page, respectively. 14 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). 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, “Property, Plant and Equipment”. This requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Website acquisition costs are amortized over five years. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the nine months ended September 30, 2020, the Company recorded impairment expense of $42,444,971 related to goodwill and $11,551,573 related to intangibles. 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. Stock-Based Compensation The Company accounts for stock-based instruments issued to employees for services in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC Topic 505-50, “Equity-Based Payments to Non-Employees”. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Non-cash stock-based stock option compensation is expensed over the requisite service period and are included in selling, general and administrative expenses on the accompanying statement of operations. For the three months ended September 30, 2020 and 2019, non-cash stock-based stock option compensation expense was $51,011 and $15,963, respectively. For the nine months ended September 30, 2020 and 2019, non-cash stock-based stock option compensation expense was $129,105 and $29,074, respectively. Advertising, Marketing and Promotion Costs Advertising, marketing and promotion expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying statement of operations. For the three months ended September 30, 2020 and 2019, advertising, marketing and promotion expense was $12,527 and $110,342, respectively for continuing operations and $0 and $0 for discontinued operations, respectively. For the nine months ended September 30, 2020 and 2019, advertising, marketing and promotion expense was $36,377 and $116,342, respectively for continuing operations and $0 and $6,888 for discontinued operations, respectively. 15 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). 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. Assets and liabilities of the Company’s Thailand subsidiary are translated from Thai baht 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. 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 in the period those differences are expected to reverse. 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, “ Income Taxes – Overall”. 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 consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax expenses are recognized as tax expenses in the Statement of Operations. As of September 30, 2020, tax years 2019, 2018, and 2017 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. 16 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). Concentrations The Company generates revenues from through our owned and operated websites and CTV apps along with our ad exchange network. There was one customer which accounted for approximately 19% of the revenues for the three months ended September 30, 2020. There were no customers which represented more than 10% of revenues for the nine months ended September 30, 2020. There were two customers which accounted for accounts receivable of approximately 17% and 12%, respectively, at September 30, 2020. There was one vendor who is owed approximately 14% of the accounts payable due at September 30, 2020. 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 September 30, 2020 and December 31, 2019, the Company had approximately $133,945 and $0, respectively, in 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 three and nine months ended September 30, 2020 a large portion of the Company’s funding was provided through the sale of shares of the Company’s common stock with related warrants. Basic and Diluted Net Earnings (Loss) Per Common Share In accordance with ASC 260-10 , “Earnings Per Share”, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. As of September 30, 2020 and 2019, there were 2,142,727 and 1,897,000 common stock equivalent shares outstanding as stock options, respectively; 36,552,558 and 22,618,240 common stock equivalent shares outstanding from warrants to purchase common shares, respectively, 8,044,017 and 6,844,017 common stock equivalents from the conversion of preferred stock, respectively; and 80,000 and 0 common stock equivalents from the conversion of notes payable, respectively. Equivalent shares were not utilized as the effect is anti-dilutive. Segment Information The Company currently operates in one reporting segment. This 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. 17 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued). Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses” which replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model applies to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet exposures. Under current U.S. GAAP, an entity reflects credit losses on financial assets measured on an amortized cost basis only when losses are probable and have been incurred, generally considering only past events and current conditions in making these determinations. ASU 2016-13 prospectively replaces this approach with a forward-looking methodology that reflects the expected credit losses over the lives of financial assets, starting when such assets are first acquired. Under the revised methodology, credit losses will be measured based on past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets. ASU 2016-13 also revises the approach to recognizing credit losses for available-for-sale securities by replacing the direct write-down approach with the allowance approach and limiting the allowance to the amount at which the security’s fair value is less than the amortized cost. In addition, ASU 2016-13 provides that the initial allowance for credit losses on purchased credit impaired financial assets will be recorded as an increase to the purchase price, with subsequent changes to the allowance recorded as a credit loss expense. ASU 2016-13 also expands disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for credit losses. The amendments of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this guidance did not have an impact on the consolidated financial statements. In January 2017, the FASB issued 2017-04, “ Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this pronouncement, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognize an impairment change for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this guidance did not have an impact on the consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this guidance did not have an impact on our consolidated Financial Statements. 18 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 4 – ACQUISITIONS On July 31, 2019, the Company executed a Share Exchange Agreement and Plan of Merger (the “Merger Agreement”) with Slutzky & Winshman Ltd., an Israeli company (“S&W”) and the shareholders of S&W (the “Shareholders”). The merger closed on August 15, 2019, and we acquired all of the outstanding shares of S&W. Subsequent to the transaction, the company was renamed and rebranded as Oceanside Media. Pursuant to the terms of the Merger Agreement, we issued 12,130,799 shares valued at $19,409,278 to owners and employees of Oceanside Media, contingent consideration of $750,000 paid through the delivery of unsecured, interest free, one and two year promissory notes (the “Closing Notes”), and 223,841 restricted stock units held in escrow for future vested stock options valued at $185,722. Since the time of the acquisition until early September 2020, there were various unresolved matters related to the offsets. The parties were unable to work-out an agreement for the payment of the first tranche of the Notes. Therefore, no amount or payment was agreed upon as of August 15, 2020. Based on the unresolved differences, the fair value of the liability at the acquisition date and the 1 year anniversary remeasurement date for the purchase price determination in accordance with ASC 805 was not reasonably determined or estimated. Accordingly, the Notes associated with the acquisition of S&W have not been included within the purchase price calculation with regards to the valuation of the intangible assets and goodwill recognized in the acquisition. In late September 2020, a new agreement was reached, in principle, by the parties whereby the payment due dates of the Notes, as well as the unresolved disagreements were stricken, and the Company agreed to pay the full amounts of the notes at future dates. This agreement supersedes all prior agreements. The Company has recognized a liability of $750,000, which represents the fair value of the settlement of contingent consideration in the current period. The first payment of the notes for $375,000 will be made upon the closing of a significant capital raise. The second payment of $375,000 is scheduled for August 15, 2021. Effective upon the Closing, we agreed to pay Spartan Capital Securities (“Spartan Capital”) a broker-dealer and member of FINRA a finder’s fee equal to issue 650,000 shares of our common stock valued at $1,040,000 and $650,000 cash. The shares were issued in February 2020 and the $165,000 was paid in March 2020. The amounts due were included in the accrued expenses as of December 31, 2019. In accordance with ASC 805 “Business Combinations” the measurement period for the acquisition is for one year during which the Company may re-evaluate the assets acquired, liabilities assumed and the goodwill resulting from the transaction as well as the change in amortization as a result of changes in the provisional amounts as if the accounting had been completed at the acquisition date. The re-evaluation performed did not result in a change in the values recorded for the assets acquired, liabilities assumed or resulting goodwill. As discussed further in Note 15, the Company recognized a deferred tax liability associated with the intangible assets acquired. As discussed above, the $750,000 contingent Closing Notes, which will be paid in full have not been included in the evaluation of the acquired assets, liabilities assumed or resulting goodwill from the transaction. The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows: August 15, 2019 Tangible assets acquired $ 3,234,754 Liabilities assumed (3,402,999 ) Deferred tax liability (744,960 ) Net liabilities assumed (913,205 ) Tradename – Trademarks 1,207,400 IP/Technology 1,883,000 Customer relationships 738,000 Non-compete agreements 827,300 Goodwill 15,666,786 Total purchase price $ 19,409,281 19 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 4 – ACQUISITIONS (continued). The table below summarizes the value of the total consideration given in the transaction: Amount Shares issued to owners $ 19,185,524 Shares issued for vested options 127,757 Shares issued to employees 96,000 Preliminary purchase price 19,409,281 Restricted stock units held in escrow 185,719 Closing notes 750,000 Total consideration $ 20,345,000 On November 18, 2019, the Company executed a Merger Agreement which merged Bright Mountain Media, Inc., a Florida corporation (“Bright Mountain Media”), through its wholly-owned subsidiary BMTM2, Inc., a Florida corporation with News Distribution Network, Inc. a Delaware Company (“NDN”). The subsidiary then changed its name to MediaHouse. Bright Mountain agreed to issue 22,180,761 shares of its common stock. Each share of NDN’s outstanding Series A-1 Preferred Stock and common stock, were cancelled and extinguished and converted into the right to receive shares of Bright Mountain’s common stock based upon a paid-in capital basis, and subject to a $1.75 conversion price of our common stock. For every $1.75 of paid-in capital by an NDN stockholder, the NDN stockholder received one share of Bright Mountain common stock. Moreover, All NDN warrants and options outstanding at the Effective Time of the Merger Agreement terminated and were cancelled unless exercised prior to the Effective Time of the Merger Agreement. As it pertains to outstanding promissory notes and other obligations payable to NDN, Bridge notes in the current principal amount of $776,000 were converted into shares of Bright Mountain’s common stock at a conversion price of $0.50 per share, with one common stock warrant exercisable at $0.75 per share and one common stock warrant exercisable at $1.00 per share issued for each conversion share. The principal of the bridge notes was converted into shares of Bright Mountain’s common stock at a conversion price of $1.75 per share, and all accrued but unpaid interest were forgiven by the noteholders. Also of note is the open line of credit of approximately $660,000 due Mr. Greg Peters, NDN’s Chief Executive Officer, was converted into shares of Bright Mountain’s common stock at a conversion price of $0.50 per share, with one common stock warrant exercisable at $.75 per share and one common stock warrant exercisable at $1.00 per share issued for each conversion share. The Total Consideration Shares are subject to lock up restrictions on resale as determined by Bright Mountain and 25% percent of the Total Consideration Shares were placed in escrow to satisfy certain obligations including, but not limited to, (i) the delivery of NDN audited financial statements, (ii) NDN having accounts receivable of at least $1,100,000 and (iii) certain NDN liabilities not to exceed $4,000,000. Effective upon the Closing, we agreed to pay Spartan Capital Securities LLC (“Spartan Capital”) a broker-dealer and member of FINRA a finder’s fee equal to issue 660,000 shares of our common stock valued at $1,082,400. The shares were issued in February 2020. The value of the shares were included in the accrued expenses as of December 31, 2019. 20 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 4 – ACQUISITIONS (continued). The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows: November 18, 2019 Tangible assets acquired $ 1,193,313 Liabilities assumed (4,228,722 ) Deferred tax liability (3,383,754 ) Net liabilities assumed (6,419,163 ) Tradename – Trademarks 923,600 IP/Technology 4,930,000 Customer relationships 8,690,000 Non-compete agreements 837,100 Goodwill 36,991,147 Total purchase price $ 45,952,684 In accordance with ASC 350, the finite lived intangible assets associated with MediaHouse were tested for valuation based on indicators of impairment noted by management, including decreased revenues. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the finite lived intangible assets associated with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. During the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $11,551,573 within Impairment Expense on the Statement of Operations. The table below summarizes the value of the total consideration given in the transaction: Amount Shares issued to owners $ 36,376,448 Warrants issued 9,576,236 Total consideration $ 45,952,684 On June 1, 2020, Bright Mountain Media, Inc. (“Bright Mountain”) entered into a membership interest purchase agreement (the “Purchase Agreement”) with Centre Lane Partners Master Credit Fund II, L.P. (“Centre Lane”) to purchase 100% of the membership interests of CL Media Holdings, LLC (“Wild Sky Media”). The purchase was completed on a debt-free, cash-free basis, free and clear of any liens and encumbrances. Bright Mountain issued 2,500,000 shares of its restricted common stock to Centre Lane and Centre Lane issued a first lien senior secured credit facility of $16,416,905. Per the credit facility with Center Lane, 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. 21 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 4 – ACQUISITIONS (continued). The Agreement provides for a senior secured five-year loan in the initial principal amount of $16,416,905. Pursuant to the Credit Agreement, the loan bears interest at six percent (6%) payment–in-kind interest (“PIK Interest”) which will be added to the outstanding principal balance. The Credit Agreement provides for no amortization for the first 18 months and 10% thereafter. Amortization is payable in equal quarterly installments on the principal balance after adding the PIK Interest with a bullet payment due at maturity on June 1, 2025. The loan under the Credit Agreement may be prepaid in minimum amounts $250,000. The loan balance can be prepaid with no penalty. The loan is guaranteed by Bright Mountain and certain of its domestic subsidiaries of which became party to a Guarantee Agreement dated as of the Effective Date and each domestic subsidiary that, subsequent to the Effective Date, becomes a subsidiary. The Credit Agreement contains negative covenants that, subject to certain exceptions, limits the ability of Bright Mountain and its subsidiaries to, among other things, incur debt, engage in new lines of business, incur liens, engage in mergers, consolidations, liquidations and dissolutions, dispose of assets of Bright Mountain and its subsidiaries, make investments, loans, advances, guarantees and acquisitions. Any equity raised up to $15,000,000 in the first one-hundred eighty days from the Credit Agreement is excluded from the loan balance prepayment requirements. The allocation of the purchase price to the assets acquired and liabilities assumed based on management’s estimate of fair values at the date of acquisition as follows: June 1, 2020 Tangible assets acquired $ 5,469,625 Liabilities assumed (3,388,579 ) Deferred tax liability (133,603 ) Net assets assumed 1,947,443 Tradename – Trademarks 2,313,300 IP/Technology 1,403,000 Customer relationships 3,530,000 Goodwill 10,948,162 Total purchase price $ 20,141,905 The table below summarizes the value of the total consideration given in the transaction: Amount Debt issued $ 16,416,905 Shares issued 3,725,000 Total consideration $ 20,141,905 22 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 4 – ACQUISITIONS (continued). The following table sets forth a summary of the unaudited pro forma results of the Company as if the acquisitions of Oceanside, MediaHouse, and Wild Sky Media which was closed in August 2019, November 2019, and June 2020, respectively, had taken place on the first day of 2019 and 2020, respectively. These combined results are not necessarily indicative of the results that may have been achieved had the business been acquired as of the first day of the period presented. September 30, 2020 September 30, 2019 Total revenue $ 14,936,070 $ 26,652,346 Total expenses (83,909,439 ) (44,986,351 ) Preferred stock dividend (447,369 ) (201,484 ) Net loss attributable to common shareholders $ (69,420,738 ) $ (18,535,489 ) Basic and diluted net loss per share $ (0.64 ) $ (0.28 ) NOTE 5 – DISCONTINUED OPERATIONS. Management, prior to December 31, 2018 with the appropriate level or authority, determined to exit, effective December 31, 2018, its Black Helmet business line as a result of, among other things, the change in our strategic direction to a focus solely in our advertising segment. Historically revenues from our product sales segment including revenues from two of our websites that operate as e-commerce platforms, included Bright Watches and Black Helmet, as well as Bright Mountain Watches’ retail location. Management, prior to December 31, 2018, with the appropriate level of authority, determined to discontinue the operations of Bright Mountain Watches effective December 31, 2018. The decisions to exit all components of our product segment will result in these businesses being accounted for as discontinued operations. The Company has determined that the exit of the Bright Mountain Watches business requires the Company to liquidate the inventory and settle all obligations to wind down the business unit. The Company sold the remaining inventory during 2019. Accordingly, the Company determined that the assets and liabilities of this reportable segment met the discontinued operations criteria in Accounting Standards Codification 205-20-45, as such the results have been classified as discontinued operations. On March 8, 2019 the Black Helmet Apparel E-Commerce business was sold for $175,000. The Company received $20,000 at the closing and issued a 6% promissory note for $155,000 payable in twelve monthly payments of principal and interest. At December 31, 2018, approximately $180,000 of inventory was considered held for sale and included in discontinued operations. 23 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 5 – DISCONTINUED OPERATIONS (continued). On March 22, 2019 the Company sold the remaining Bright Watches inventory for approximately $7,000. At December 31, 2018 $7,454 of inventory, written down to fair market value, was considered held for sale and included in discontinued operations. During the nine months ended September 30, 2020, the Company settled the discontinued assets and liabilities and assumed the remaining cash. The detail of the consolidated balance sheet, the consolidated statement of operations and consolidated cash flow for the discontinued operations is as stated below: December 31, 2019 Cash $ 791 Accounts receivable 914 Total current assets 1,705 Total assets - discontinued operations 1,705 Accounts payable 591 Total current liabilities - discontinued operations 591 Net assets discontinued operations $ 1,114 September 30, 2019 Revenues $ 103,266 Cost of revenues 56,050 Gross profit 47,216 Selling, general and administrative expenses 242,395 Loss from discontinued operations (195,179 ) Other income 21,158 Loss from discontinued operations (174,021 ) Basic and fully diluted net loss per share $ 0.00 Cash (used in) operations for discontinued operations: Loss from discontinued operations $ (174,021 ) Write-off of fixed assets 49,347 Inventory 91,884 Loss on sale of business unit 11,309 Other assets 11,124 Accounts payable (133,753 ) Deferred rents (11,629 ) Cash (used in) discontinued operations $ (155,739 ) Net decrease in cash and cash equivalents from discontinued operations $ (15,971 ) 24 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 6 – PREPAID COSTS AND EXPENSES. At September 30, 2020 and December 31, 2019, prepaid expenses and other current assets consisted of the following: September 30, 2020 December 31, 2019 Prepaid insurance $ 37,996 $ 205,656 Prepaid VAT fees 3,102 199,596 Prepaid expenses – other 350,954 37,723 Current portion of prepaid service agreements 310,002 310,000 Prepaid expenses and other current assets $ 702,054 $ 752,975 NOTE 7 – PROPERTY AND EQUIPMENT. At September 30, 2020 and December 31, 2019, property and equipment consisted of the following: Useful Lives September 30, 2020 December 31, 2019 Furniture and fixtures 3-5 years $ 40,453 $ 39,696 Leasehold improvements 3 years - 1,388 Computer equipment 3 years 176,302 79,188 Total property and equipment 216,755 120,272 Less: accumulated depreciation (96,843 ) (89,606 ) Total property and equipment, net $ 119,912 $ 30,666 Depreciation expense for the three months ending September 30, 2020 and 2019, was $19,437 and $3,121, respectively. Depreciation expense for the nine months ending September 30, 2020 and 2019, was $29,616 and $5,613, respectively. NOTE 8 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS. At September 30, 2020 and December 31, 2019, respectively, website acquisitions, net consisted of the following: Useful Lives September 30, 2020 December 31, 2019 Website Acquisition Assets 3-5 years $ 1,124,846 $ 1,124,846 Less: accumulated amortization (911,661 ) (875,522 ) Less: cumulative impairment loss (200,396 ) (200,396 ) Website Acquisition Assets, net $ 12,789 $ 48,928 25 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 8 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS (continued). At September 30, 2020 and December 31, 2019, respectively, intangible assets, net consisted of the following: Useful Lives September 30, 2020 December 31, 2019 Trade name 5 years $ 3,843,933 $ 2,131,000 Customer relationships 5 years 6,587,333 9,615,000 IP/Technology 5 years 4,362,833 6,813,000 Non-compete agreements 3-5 years 1,202,028 1,742,400 Total Intangible Assets $ 15,996,127 $ 20,301,400 Less: accumulated amortization (3,943,790 ) (690,599 ) Intangible assets, net $ 12,052,337 $ 19,610,801 Goodwill $ 22,150,047 $ 53,646,856 Amortization expense for the three months ended September 30, 2020 and 2019 was $1,289,416 and $101,709, respectively, related to both the website acquisition costs and the intangible assets. Amortization expense for the nine months ended September 30, 2020 and 2019 was $3,289,330 and $131,409, respectively, related to both the website acquisition costs and the intangible assets. During 2019, the Company rebranded Daily Engage to Bright Mountain and wrote off the $32,000 tradename asset of Daily Engage. During 2019, the Company acquired Oceanside in which finite lived intangible assets of $4,655,700 and Goodwill of $15,666,783 were recognized, see Note 4. During 2019, the Company acquired MediaHouse in which finite lived intangible assets of $15,380,700 and Goodwill of $36,991,147 were recognized, see Note 4. During 2020, the Company acquired Wild Sky Media in which finite lived intangible assets of $7,246,300 and Goodwill of $10,948,162 were recognized, see Note 4. In accordance with ASC 350, the finite lived intangible assets associated with Oceanside and MediaHouse were tested for valuation based on indicators of impairment noted by management, including decreased revenues. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the carrying values of the finite lived intangible assets associated with Oceanside did not exceed the respective fair values of the assets, therefore no revaluation associated with these assets has been recognized. It was determined that the finite lived intangible assets associated with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. During the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $11,551,573 within Impairment Expense on the Statement of Operations. 26 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 8 – WEBSITE ACQUISITION AND INTANGIBLE ASSETS (continued). The Company categorizes Goodwill into two reporting units, Owned & Operated and Ad Network. In accordance with ASC 350, Goodwill is tested for impairment at least annually and based on the acquisition dates of Oceanside and MediaHouse, this test was performed as part of the current quarter. ASC 350 deems an impairment to have occurred when the carrying value of the Goodwill associated with the reporting unit exceeds the implied value of the Goodwill associated with the reporting unit. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. This caused a significant contraction of economic activity at the beginning in the first months of the year and has continued. Although there are recent signs of improvement with significant GDP gains, many companies have yet to reinstate their advertising budgets and/or have changed the way they are spending these budgets. Many advertisers have moved away from direct ad buys in favor of programmatic distribution with its lower costs. The fair value of the respective reporting units was determined based on both the Income Approach (Discount Cash Flows) and the Market Multiples Approach. As of September 30, 2020, it was determined that the carrying value of the Goodwill associated with the Owned & Operated reporting unit was not deemed impaired in accordance with ASC 350. It was determined that the recorded Goodwill associated with the Ad Network exceeded the fair value of the Goodwill and during the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $42,444,971 within Impairment Expense on the Statement of Operations. NOTE 9 – ACCRUED EXPENSES. At September 30, 2020 and December 31, 2019, respectively, accrued expenses consisted of the following: September 30, 2020 December 31, 2019 (unaudited) Accrued dividends $ 547,567 $ 158,966 Accrued professional fees 37,887 62,887 Other accrued expenses 613,366 377,075 Accrued compensation 734,656 342,000 Accrued service/consulting agreements - 2,287,400 Total accrued expenses $ 1,933,476 $ 3,228,328 The accrued consulting fees on December 31, 2019 included $2,122,400 representing cash due of $165,000 and common stock of 650,000 and 660,000 shares to be issued to Spartan Capital Securities, LLC in the acquisition of Oceanside and MediaHouse, respectively. 27 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 10 – NOTES PAYABLE. Long-term debt to related parties During November 2018, the Company issued 10% convertible promissory notes in the amount of $80,000 to a related party, to our Chief Executive Officer. 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 and $80,000 at September 30, 2020 and December 31, 2019, respectively and discounts recognized upon respective origination dates as a result of the beneficial conversion feature total $43,801 and $57,840. At September 30, 2020 and December 31, 2019, the total convertible notes payable to related party net of discounts was $36,199 and $22,160, respectively. The unsecured and interest free Closing Notes of $750,000 as identified in Note 4 had various unresolved matters related to the offsets. The parties were unable to work-out an agreement for the payment of the first tranche of the Notes. Therefore, no amount or payment was agreed upon as of August 15, 2020. Based on the unresolved differences, the fair value of the liability at the acquisition date and the 1 year anniversary remeasurement date for the purchase price determination in accordance with ASC 805 was not reasonably determined or estimated. In late September 2020, a new agreement was reached, in principle, by the parties whereby the payment due dates of the Notes, as well as the unresolved disagreements were stricken, and the Company agreed to pay the full amounts of the notes at future dates. This agreement supersedes all prior agreements. The Company has recognized the recording of the liability as a settlement of contingent consideration to be recognized in the current period. The first payment of the notes for $375,000 will be made upon the closing of a significant capital raise. The second payment of $375,000 is scheduled for August 15, 2021. Interest expense for note payable to related party was $2,045 and $2,045 for the three months ended September 30, 2020 and 2019, respectively and discount amortization was $3,529 and $3,529, respectively. Interest expense for note payable to related party for the nine months ended September 30, 2020 and 2019 was $6,091 and $6,393, respectively and discount amortization was $10,510 and $10,472, respectively. Long-term debt In connection with the acquisition of BMLLC, the Company issued promissory notes totaling $380,000. The notes had no stated interest rate and matured on September 19, 2018 and the Company was in default prior to a settlement reached on July 8, 2020. Effective July 8, 2020, the Company executed a Settlement Agreement and Release with Harry G. Pagoulatos, George Rezitis, and Angelo Triantafillou whereby they relinquish their Bright Mountain common stock shares and the Company pays them full and final settlement of $385,000 within 12 months from the date the shares are delivered to Bright Mountain Media. The Company had previously made payments against the notes resulting in a recorded liability due to the parties of $165,163. The settlement increased the liability to a final settlement amount of $385,000, requiring an additional liability of $219,837 which was recognized by the Company. The balance of the notes payable at September 30, 2020 and December 31, 2019 were $385,000 and $165,163, respectively. The notes are payable one year from the surrender of the note holders common stock of the Company, which is included in treasury stock. See further discussion in Notes 11, under Legal and Note 13, under Treasury Stock. 28 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 10 – NOTES PAYABLE (continued). On April 24, 2020, Bright Mountain Media, Inc. (the “Company”) received loan proceeds of $464,800 (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Regions Bank 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. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. Effective June 1, 2020, the Company acquired Wild Sky Media and assumed the $1,706,735 loan received under the Paycheck Protection Program (the “PPP”). The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Holbomb Bank 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. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. Effective June 1, 2020, we entered into a membership interest purchase agreement to acquire 100% of Wild Sky Media. The seller issued a first lien senior secured credit facility which consisted of $15,000,000 of initial indebtedness, repayment of Wild Sky Media’s existing accounts receivable factoring facility of approximately $900,000 and $500,000 of expenses totaling $16,416,905. 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. At September 30, 2020 and December 31, 2019 a summary of the Company’s debt is as follows: September 30, 2020 December 31, 2019 Non-interest bearing BMLLC acquisition debt $ 385,000 $ 165,163 Non-interest bearing notes issued as settlement of contingent consideration 750,000 - PPP loans 2,171,535 - Wild Sky acquisition debt 16,416,905 - Total Debt 19,723,440 165,163 Less Short Term Debt 1,135,000 165,163 Long Term Debt $ 18,588,440 $ - 29 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 10 – NOTES PAYABLE (continued). Interest expense for the three months ended September 30, 2020 and 2019 were $246,255 and $0, respectively. Interest expense for the nine months ended September 30, 2020 and 2019 were $328,340 and $0, respectively. The minimum annual principal payments of notes payable at September 30, 2020 were: 2020 $ - 2021 1,545,423 2022 3,713,153 2023 1,393,142 2024 1,258,965 2025 11,812,757 Total $ 19,723,440 Premium Finance Loan Payable The Company generally finances its annual insurance premiums through the use of short-term notes, payable in 10 equal monthly installments. Coverages financed include Directors and Officers and Errors and Omissions with premiums financed in 2020 and 2019 of $194,592 and $110,200, respectively. Total Premium Finance Loan Payable balance for the Company’s policies was $16,671 at September 30, 2020 and $179,844 at December 31, 2019. NOTE 11 – COMMITMENTS AND CONTINGENCIES. The Company leases its corporate offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487 under a long-term non-cancellable operating lease agreement expiring on October 31, 2021. The lease terms require base rent payments of approximately $7,260 plus sales tax per month for the first twelve months commencing in September 2018, with a 3% escalation each year. Included in other assets is a required security deposit of $18,100. Rent is all-inclusive and includes electricity, heat, air-conditioning, and water. The Company leases office space in Hertsliya, Israel under a long-term non-cancellable operating lease agreement expiring on December 18, 2021. The lease terms require base rent payments of approximately $10,896. Included in other assets is a required security deposit of $58,651. 30 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued). The right of use asset and lease liability is as follows as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Assets Operating lease right of use asset $ 243,549 $ 397,912 Liabilities Operating lease liability, current $ 221,763 $ 211,744 Operating lease liability, net of current portion 21,915 198,232 Total operating lease liabilities $ 243,678 $ 409,976 The Company’s non-lease components are primarily related to property maintenance and other operating services, which varies based on future outcomes and is recognized in rent expense when incurred and not included in the measurement of the lease liability. The Company did not have any variable lease payments for its operating lease for the three and nine months ended September 30, 2020. The maturity of the Company’s operating lease liability for the 12 months ended September 30: 2021 $ 221,763 2022 21,915 Total net lease liabilities $ 243,678 The following summarizes additional information related to the operating lease: September 30, 2020 Weighted-average remaining lease term 1.33 years Weighted-average discount rate 5.50 % For the three months ended September 30, 2020 and 2019, rent expense in continuing operations was $192,717 and $28,199, respectively. For the three months ended September 30, 2020 and 2019, rent expense included in discontinued operations was $0 and $0, respectively. For the nine months ended September 30, 2020 and 2019, rent expense in continuing operations was $415,271 and $81,376, respectively. For the nine months ended September 30, 2020 and 2019, rent expense included in discontinued operations was $0 and $70,424, respectively. 31 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued). Legal Effective July 18, 2018 we terminated the employment agreements with each of Messrs. Harry G. Pagoulatos and George G. Rezitis for cause. Messrs. Pagoulatos and Rezitis had been employed by us as chief operating officer and chief technology officer, respectively, of our DEM subsidiary since our acquisition of that company in September 2017. Mr. Todd Speyer, our Vice President, Digital and a member of our board of directors, assumed operating responsibilities for DEM. In July of 2018, Messrs. Pagoulatos and Rezitis, along with a third party who had been a minority owner in DEM prior to our acquisition of that company, filed a Complaint in the U.S. District Court, District of New Jersey (case number 2: l 8-cv-11357-ES-SCM) against our Company and our Chief Executive Officer, seeking compensatory and punitive damages and attorneys’ fees, among other items, and alleging, among other items, fraud and breach of contract. We vehemently deny all allegations in the complaint and believe them to be without merit. We filed a Motion to Dismiss this case for a multitude of reasons including, but not restricted to, failure to state a cause of action and jurisdictional and venue arguments as the acquisition and employment agreements provides that any dispute should be heard in either the state or local courts of Palm Beach County, Florida. The parties agreed to settle all claims through the exchange of shares from Messrs. Harry G. Pagoulatos and George G. Rezitis for payment of $165,163. On July 8, 2020, due to the shares not being exchanged and the change in the share value, the Company executed another Settlement Agreement and Release with the Harry G. Pagoulatos, George Rezitis, and Angelo Triantafillou whereby they will relinquish their Bright Mountain common stock shares and the Company will pay them a full and final settlement of $385,000 within 12 months from the date the shares are delivered to Bright Mountain Media. As with all transactions, this transaction has been recorded based on the fair value of the shares as of the transaction settlement date of July 8, 2020. As of September 30, 2020, the parties have provided the Company with 550,117 of their total 825,175 shares. Based on the price per share of $2.10 as of July 8, the value of the shares provided to the Company was $1,155,246. As the Company had previously recorded the liability due to the parties of $165,163, which increased to the final settlement amount of $385,000, an additional liability of $219,837 was recognized along with a gain on the transaction of $935,408. The shares will be held as Treasury Stock by the Company and will be resold at later dates. See Notes 10, under Long Term Debt and 13, under Treasury Stock. From time-to-time, we may be involved in litigation or be subject to claims arising out of our operations or content appearing on our websites in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management resources and other factors. Other Commitments On September 5, 2018 the Company entered into a Master Services Agreement with Kubient, Inc. pursuant to which it will provide its programmatic technology platform to us on a nonexclusive basis for the purpose of managing our programmatic business partners. The Company has not paid anything to Kubient, Inc. during nine months ended September 30, 2020 for its platform. The Company has ceased advertising services with Kubient and prior to September 30, 2020 the Company reached a settlement agreement related to accounts receivable and note receivable balances. As of September 30, 2020 the full amount due under the settlement agreement was received by the Company, and no further balances remain open. 32 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued). On September 6, 2017 Bright Mountain Media, Inc. entered into a five-year Consulting Agreement with the Spartan Capital Securities, LLC (“Spartan Capital”), a broker-dealer and member of FINRA, which under its terms would not become effective until the closing of the private placement in which Spartan Capital served as placement agent as described below. The Consulting Agreement became effective on September 28, 2018 and, accordingly, Spartan Capital was engaged to provide advisory services including, but not limited to advice and input with respect to raising capital, assisting us with strategic introductions, and assisting management with enhancing corporate and shareholder value. On September 6, 2017 we also entered into a five-year M&A Advisory Agreement with Spartan Capital which became effective on September 28, 2018 upon completion of the private placement for sixty months. Under the terms of the agreement, Spartan Capital will provide consulting services to us related to potential mergers or acquisitions, including candidates, valuations and transaction terms and structures. Consulting fees consisting of $300,000 in cash and 1,000,000 shares of common stock valued at $750,000 as well as the $500,000 M&A advisory fee are considered prepaid expenses. Total prepaid service/consulting fees, were $1,035,000, of which $310,000 is considered short-term and is included in prepaid expenses and other current assets as of September 30, 2020. These prepaid expenses are being amortized over 60 months, the term of the respective agreements. The amortization expense was $77,500 and $77,500 for the three months ended September 30, 2020 and 2019, respectively. The amortization expense was $232,500 and $232,500 for the nine months ended September 30, 2020 and 2019, respectively. For the 36 months from the final closing of this private placement, Spartan Capital has certain rights of first refusal if we decide to undertake a future private or public offering or if we decide to engage an investment banking firm. The Company granted the purchasers in the offering demand and piggy-back registration rights with respect to the shares of our common stock included in the Units and the shares of common stock issuable upon the exercise of the Private Placement Warrants. In addition, the Company agreed to file a resale registration statement within 120 days following the final closing of this offering covering the shares of common stock issuable upon the exercise of the Private Placement Warrants included in the Units. If the Company should fail to timely file this resale registration statement, then within five business days of the end of month we will pay the holders an amount in cash, as partial liquidated damages, equal to 2% of the aggregate purchase price paid by the holder for each 30 days, or portion thereof, until the earlier of the date the deficiency is cured or the expiration of six months from filing deadline. The Company will keep any such registration statement effective until the earlier of the date upon which all such securities may be sold without registration under Rule 144 promulgated under the Securities Act or the date which is six months after the expiration date of the Private Placement Warrants. We are obligated to pay all costs associated with this registration statement, other than selling expenses of the holders. 33 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued). On December 11, 2018 we entered into an Uplisting Advisory and Consulting Agreement with Spartan Capital pursuant to which Spartan Capital will provide (i) advice and input with respect to strategies to accomplish an uplisting of our common stock to the Nasdaq Capital Market or NYSE American LLC or another national securities exchange, and the implementation of such strategies and making introductions to facilitate the uplisting, (ii) advice and input with respect to special situation and restructuring services, including debtor and creditor advisory services, and (iii) sell-side advisory services with respect to the sale and disposition of non-core businesses and assets, including facilitating due diligence and identifying potential buyers and strategic partners and positioning these businesses and assets to maximize value. The Company entered into an Executive Employment Agreement with our Chief Executive Officer, with an effective date of June 1, 2014. Under the terms of this agreement, the Company will compensate the Chief Executive Officer with a base salary of $75,000 annually, and he is entitled to receive discretionary bonuses as may be awarded by the Company’s board of directors from time to time. The initial term of the agreement is three years, and the Company may extend it for an additional one-year period upon written notice at least 180 days prior to the expiration of the term. The Company amended this agreement April 1, 2017 for an additional term of three years. The Chief Executive Officer’s base annual salary was increased to $165,000 upon recommendation of the Compensation Committee of the board of directors. The employment agreement contains customary non-compete and confidentiality provisions. The Company also agreed to indemnify the Chief Executive Officer pursuant to the provisions of the Company’s Amended and Restated Articles of Incorporation and Amended and Restated By-laws. On March 25, 2020, the Board approved a new Employment Agreement with W. Kip Speyer, the Company’s Chairman and Chief Executive Officer. The Employment Agreement is to take effect on April 1, 2020. The Employment Agreement has a 3 year-term and will automatically renew for one-year periods unless either party notifies the other party, in writing, at least 90 days prior to the end of the Employment Period or the Renewal Period that the Agreement will not be renewed. The Company will pay Mr. Speyer an annual base salary of $325,000. Mr. Speyer may also receive an annual bonus in an amount to be determined by the Company’s Compensation Committee in their sole discretion. Mr. Speyer is entitled to participate in the Company benefit programs and he is entitled to reimbursement of out-of-pocket business expenses, including a monthly automobile allowance of $800. In the event that Mr. Speyer is terminated by the Company without cause, the Company will continue to pay his base salary in accordance with normal payroll practices through the end of his Employment Period, without renewal. On May 1, 2020, Mr. Speyer voluntarily agreed to temporarily suspend his compensation increase to enhance the Company’s liquidity profile as a result of the COVID-19 pandemic. On March 25, 2020, the Board approved a new Employment Agreement with Greg Peters the Company’s President and Chief Operating Officer. The Employment Agreement is to take effect on April 1, 2020. The Employment Agreement has a year-term and will automatically renew for a one-year period unless either party notifies the other party, in writing, at least 90 days prior to the end of the Employment Period or the Renewal Period that the Agreement will not be renewed. The Company will pay Mr. Peters an annual base salary of $325,000. Mr. Peters may also receive an annual bonus in an amount to be determined by the Company’s Compensation Committee in their sole discretion. Mr. Peters is entitled to participate in the Company benefit programs and he is entitled to reimbursement of out-of-pocket business expenses, including reimbursement for mileage used during Company business in the automobile he owns or leases. In the event that Mr. Peters is terminated by the Company without cause, the Company will continue to pay his base salary in accordance with normal payroll practices through the end of his Employment Period, without renewal. 34 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 11 – COMMITMENTS AND CONTINGENCIES (continued). Our financial performance and operating results may be materially and adversely affected by the outbreak of the novel coronavirus (“COVID-19”). The recent global outbreak of COVID-19 has had an unfavorable impact on our business operations. The COVID-19 pandemic has caused disruptions in the services we provide. In addition, the COVID-19 pandemic has resulted in many states and countries imposing orders resulting in the closure of non-essential businesses – including many companies which advertise digitally. We cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact on our business and our financial results. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations, financial condition, and liquidity may be materially and adversely affected as a result of prolonged disruptions in consumer spending, a lack of demand for our services, and other factors that we cannot foresee. The extent to which COVID-19 will impact our business and our financial results will depend on future developments which are highly uncertain and cannot be predicted. NOTE 12 – PREFERRED STOCK. The Company has authorized 20,000,000 shares of preferred stock with a par value of $0.01 (the “Preferred Stock”), issuable in such series and with such designations, rights and preferences as the board of directors may determine. The Company’s board of directors has previously designated five series of preferred stock, consisting of 10% Series A-1 Convertible Preferred Stock (“Series A-1 Stock”), 10% Series B Convertible Preferred Stock (“Series B Stock”), 10% Series C Convertible Preferred Stock (“Series C Stock”), 10% Series D Convertible Preferred Stock (“Series D Stock”) and 10% Series E Convertible Preferred Stock (“Series E Stock”). On November 20, 2019 we filed Articles of Amendment to our Amended and Restated Articles of Incorporation, as amended, which returned 2,000,000 shares of previously designated 10% Series B Convertible Preferred Stock, 2,000,000 shares of previously designated 10% Series C Convertible Preferred Stock and 2,000,000 shares of previously designated 10% Series D Convertible Preferred Stock to the status of authorized but undesignated and unissued shares of our blank check preferred stock as there were no shares of any of these series outstanding and no intention to issue any such shares in the future. The returned series were replaced by 6,000,000 shares of 5% Series B-1 Convertible Preferred Stock. At September 30, 2020, there were 1,200,000 shares of Series A-1 Stock and 2,500,000 shares of Series E Stock and 4,344,017 shares of Series F Stock issued and outstanding. There are no shares of Series B-1 Stock issued and outstanding. The Series A-1 Stock is senior to all other classes of the Company’s securities and has a stated value of $0.50 per share. Holders of shares of Series A-1 Stock are entitled to the payment of a 10% dividend payable in shares of the Company’s common stock at a rate of one share of common stock for each 10 shares of Series A-1 Stock, payable annually the 10th business day of January. The shares of Series A-1 Stock are redeemable at the Company’s option upon 20 days’ notice for an amount equal to the amount of capital invested. On the 10th business day of January 2018 there were 10,000 shares of common stock dividends owed and payable to the Series A-1 Stockholder of record as dividends on the Series A-1 Stock. These preferred shares automatically converted into common shares on December 30, 2018 as defined above. 35 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 12 – PREFERRED STOCK (continued). On September 6, 2017, the board of directors designated 2,500,000 shares of Preferred Stock as Series E Stock, which such designation was amended on September 29, 2017. Holders of shares of Series E Stock are entitled to 10% dividends, payable monthly as may be permitted under Florida law out of funds legally available therefor. The shares of Series E Stock rank senior to any other class of our equity securities, except for the Series A Stock, have a liquidation preference of $0.40 per share and are not redeemable. The remaining designations, rights and preferences of each of the Series A-1 Stock and Series E Stock are identical, including (i) shares do not have voting rights, except as may be permitted under Florida law, (ii) are convertible into shares of our common stock at the holder’s option on a one for one basis, (iii) are entitled to a liquidation preference equal to a return of the capital invested, and (iv) each share will automatically convert into shares of common stock five years from the date of issuance or upon a change in control. Both the voluntary and automatic conversion formulas are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events. In 2019, Mr. W. Kip Speyer, the Company’s Chairman and Chief Executive Officer, purchased an aggregate of 1,200,000 shares of Series A-1 Stock at a purchase price of $0.50 per share. In 2018, Mr. W. Kip Speyer, the Company’s Chairman and Chief Executive Officer, purchased an aggregate of 1,125,000 shares of Series E Stock at a purchase price of $0.40 per share. For the three months ended September 30, 2020 and 2019 we paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $3,760 and $27,765, respectively held by affiliates of the Company. For the nine months ended September 30, 2020 and 2019 we paid cash dividends on the outstanding shares of the Company’s Series E and F Preferred Stock of $58,767 and $224,984, respectively held by affiliates of the Company. NOTE 13 – COMMON STOCK. A) Stock issued for Cash For the nine months ended September 30, 2020, the Company sold an aggregate of 10,398,700 units of its securities to 167 accredited investors in a private placement exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D resulting in gross proceeds to the Company of $5,199,350. Each unit, which was sold at a purchase price of $0.50, consisted of one share of common stock and one five-year warrant to purchase one share of common stock at an exercise price of $0.75 per share. Spartan Capital, served as placement agent for the Company in this offering. As compensation for its services, Spartan Capital held back $779,903 for commissions, providing cash to the Company of $4,419,447. From this amount, Spartan Capital deducted $165,000 to pay the accrued finder’s fee for the Oceanside acquisition, and $275,000 in other consulting fees, and $401,750 in success and escrow fees resulting in net cash received by the Company of $3,577,698. The Company issued Spartan Capital Placement Agents Warrants to purchase an aggregate of 1,039,870 shares of our common stock, including the cash commission and Placement Agent Warrants issued pursuant to the closings included in the Company’s consolidated statement of changes in shareholders’ equity for the nine months ended September 30, 2020. 36 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 13 – COMMON STOCK (continued). During the nine months ended September 30, 2020, a former employee exercised 50,000 stock options for $6,950. During 2019, the Company sold an aggregate of 163,750 units of its securities to 1 accredited investor in a private placement exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D resulting in gross proceeds to the Company of $58,950. Each unit, which was sold at a purchase price of $0.40, consisted of one share of common stock and one five-year warrant to purchase one share of common stock at an exercise price of $0.65 per share. Spartan Capital served as placement agent for the Company in this offering. As compensation for its services, the Company paid Spartan Capital commissions and other fees totaling $6,550, and issued Spartan Capital Placement Agents Warrants to purchase an aggregate of 16,375 shares of our common stock, including the cash commission and Placement Agent Warrants issued pursuant to the final closing on January 9, 2019 included in the Company’s consolidated statement of changes in shareholders’ equity for the three months ended December 31, 2019. During 2019, the Company sold an aggregate of 2,570,860 units of its securities to 20 accredited investors in two private placements exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D resulting in gross proceeds to the Company of $1,285,530. A total of 1,270,000 units were sold under the first private placement dated February 14, 2019 at a purchase price of $0.50 per share resulting in gross proceeds of $635,000. Each unit was sold at a purchase price of $0.50, and consisted of one share of common stock and one five-year warrant to purchase one share of common stock at an exercise price of $0.75 per share. On April 22, 2019 the Company amended the private placement to include a second warrant to purchase one share of common stock at an exercise price of $1.00 per share. 970,500 units were sold at a purchase price of $0.50 per unit resulting in gross proceeds of $485,250. We used $1,008,225 of the proceeds to issue 6% promissory notes to Inform, Inc as a part of the potential acquisition. On July 15, 2019 these two offerings were terminated and replaced with a private placement offering units at a purchase price of $0.50 consisting of one share of common stock, one five-year warrant to purchase one share of common stock at an exercise price of $0.75 per share, and a second warrant to purchase one share of common stock at an exercise price of $1.00 per share. A total of 330,360 units were sold under the private placement dated July 15, 2019 units at a purchase price of $0.50 per share resulting in gross proceeds of $165,280. We used $148,662 of the proceeds to issue 6% promissory notes to Inform, Inc as a part of the potential acquisition. The investors in the first offering dated February 14, 2019 were required to subscribe for the second warrant offered in the April 22, 2019 amendment in a private placement dated July 11, 2019 which terminated on July 31, 2019 with no ability to extend. A total of 980,000 warrants were issued to eleven investors in the first private placement who subscribed for the second warrant. Three investors did not subscribe for the second warrant. During 2019, the Company sold an aggregate of 750,000 units of its securities to 3 accredited investors in a private placement exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D resulting in gross proceeds to the Company of $300,000. Each unit, which was sold at a purchase price of $0.40, consisted of one share of common stock and one five-year warrant to purchase one share of common stock at an exercise price of $0.65 per share. 37 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 13 – COMMON STOCK (continued). B) Stock issued for services In February 2019, the Company issued 7,000 shares of our common stock to consultants for services rendered based on the fair value of the date of grant, or $1.00 a share valued at $7,000. In July 2019, the Company issued 22,167 shares of our common stock to a consultant for services rendered based on the fair value of the date of grant, or $1.79 a share valued at $39,750. In November 2019, the Company issued 63,000 shares of our common stock to a consultant for services rendered based on the fair value of the date of grant, or $1.50 a share valued at $94,455. In February 2020, the Company issued 650,000 shares of our common stock to Spartan Capital for services rendered during 2019 based on the fair value of date of service, or $1.60 a share valued at $1,040,000. In February 2020, the Company issued 660,000 shares of our common stock to Spartan Capital for services rendered during 2019 based on the fair value of date of service, or $1.64 a share valued at $1,082,400. In March 2020, the Company issued 60,000 shares of our common stock to MZHCI, Inc for services rendered during 2020 based on the fair value of date of service, or $1.50 a share valued at $90,000. C) Stock issued for acquisitions On August 15, 2019, the Company issued 12,354,640 shares of its common stock in connection to the acquisition of Oceanside Media. The common shares were values at $19,409,278 or $1.57 per share. On November 18, 2019, the Company acquired MediaHouse and agreed to issue 22,180,781 shares of common stock in the transaction. Although the transaction was recorded as of November 18, 2019, due to complications associated with the identification of the shareholders to receive the shares, the shares were not issued prior to December 31, 2019 and were issued in 2020. Accordingly, the shares are included within the shares outstanding, but not as issued as of December 31, 2019. The shares are valued at $45,952,684 or $1.64 per share. On June 1, 2020, the Company issued 2,500,000 shares of its common stock in connection with the acquisition of Wild Sky Media. The common shares were valued at $3,725,000 or $1.49 per share. 38 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 13 – COMMON STOCK (continued). Treasury Stock On July 8, 2020, the Company executed a Settlement Agreement and Release with the Harry G. Pagoulatos, George Rezitis, and Angelo Triantafillou whereby they relinquish their Bright Mountain common stock shares and the Company will pay a final settlement of $385,000 within 12 months from the date the shares are delivered to Bright Mountain Media. This transaction has been recorded based on the fair value of the shares as of the transaction settlement date of July 8, 2020. As of September 30, 2020, the parties have provided the Company with 550,117 of their total 825,175 shares. Based on the price per share of $2.10 as of July 8, the value of the shares provided to the Company was 1,155,246. As the Company had previously recorded the liability due to the parties of $165,163, which increased to the final settlement amount of $385,000, an additional liability of $219,837 was recognized along with a gain on the transaction of $935,408. The shares will be held as Treasury Stock by the Company and will be resold at later dates. Stock Option Compensation The Company accounts for stock option compensation issued to employees for services in accordance with ASC Topic 718, “Compensation – Stock Compensation”. 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 ASU No. 2018- 07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.”. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Stock options issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, including related amendments and interpretations. The related expense is recognized over the period the services are provided. On April 20, 2011, the Company’s board of directors and majority stockholder adopted the 2011 Stock Option Plan (the “2011 Plan”), to be effective on January 3, 2011. The Company has reserved for issuance an aggregate of 900,000 shares of common stock under the 2011 Plan. The maximum aggregate number of shares of Company stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 180,000 shares. On April 1, 2013, the Company’s board of directors and majority stockholder adopted the 2013 Stock Option Plan (the “2013 Plan”), to be effective on April 1, 2013. The Company has reserved for issuance an aggregate of 900,000 shares of common stock under the 2013 Plan. As of September 30, 2020, 9,000 shares were remaining under the 2011 Plan for future issuance. As of September 30, 2020, 25,000 shares were remaining under the 2013 Plan for future issuance. 39 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 13 – COMMON STOCK (continued). On May 22, 2015, the Company’s board of directors and majority stockholder adopted the 2015 Stock Option Plan (the “2015 Plan”), to be effective on May 22, 2015. The Company has reserved for issuance an aggregate of 1,000,000 shares of common stock under the 2015 Plan. As of September 30, 2020, 420,000 shares were remaining under the 2015 Plan for the future issuance. On November 7, 2019, the Company’s board of directors and majority stockholder adopted the 2019 Stock Option Plan (the “2019 Plan”), to be effective on November 7, 2019. The Company has reserved for issuance an aggregate of 5,000,000 shares of common stock under the 2019 Plan. As of September 30, 2020, 4,704,273 shares were remaining under the 2019 Plan for the future issuance. The purpose of the 2011 Plan, 2013 Plan, 2015 Plan, and 2019 Plan (the “Plans” are to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2015 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Company’s board of directors will administer the 2011 Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option granted pursuant to the 2011 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument. The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors, which is subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes share-based compensation expense on a straight- line basis over the requisite service period for each award. 40 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 13 – COMMON STOCK (continued). The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on an average of similar public company’s historical volatility, as the Company’s common stock is quoted in the over the counter market on the OTCQB Tier of the OTC Markets, Inc. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. The Company recorded $51,011 and $15,963 of stock option expense for the three months ended September 30, 2020 and 2019, respectively. The Company recorded $129,105 and $29,074 of stock option expense for the nine months ended September 30, 2020 and 2019 respectively The stock option expense for the three and nine months ended September 30, 2020 and 2019, respectively has been recognized as a component of general and administrative expenses in the accompanying consolidated financial statements. As of September 30, 2020, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $405,707 to be recognized through September 2024. Included in the recognized and unrecognized compensation costs are 100,000 options issued to an employee during the nine months ended September 30, 2020. The value of these options was calculated using the Black Scholes Option Pricing Model with the following inputs: Exercise price $2.10, Stock price $2.10, Term 6.25 years, Volatility 127%, Dividends 0.00%, and Risk free rate 0.31%, resulting in a total fair value of the grant of $139,968. A summary of the Company’s stock option activity during the nine months ended September 30, 2020 is presented below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Balance Outstanding, December 31, 2019 2,017,727 $ 0.58 4.5 $ 2,764,286 Granted 175,000 1.70 9.9 — Exercised (50,000 ) 0.13 — — Forfeited — — — — Expired — — — — Balance Outstanding, September 30, 2020 2,142,727 $ 0.70 4.0 $ 5,471,180 Exercisable at September 30, 2020 1,705,500 $ 0.44 2.9 $ 4,792,427 41 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 13 – COMMON STOCK (continued). Summarized information with respect to options outstanding under the two option plans at September 30, 2020 is as follows: Options Outstanding Range or Exercise Price Number Outstanding Weighted Average Exercise Price Remaining Average Contractual Life (In Years) Number Exercisable Weighted Average Exercise Price $ 0.14 - $0.24 490,000 $ 0.14 1.0 490,000 $ 0.14 0.25 - 0.49 351,000 0.28 2.9 351,000 0.28 0.50 - 0.85 906,000 0.68 5.2 864,500 0.68 1.64 – 2.10 395,727 1.77 8.3 — — 2,142,727 $ 0.70 4.7 1,705,500 $ 0.44 NOTE 14 – RELATED PARTIES. On November 7, 2018 the Company entered into a Note Exchange Agreement with Mr. W. Kip Speyer, our CEO and member of our Board of Directors, pursuant to which we exchanged our convertible notes for three new series of preferred stock. See further discussion in Note 8 Notes Payable for more details regarding the Note Exchange Agreement and Exchange Transaction. During November 2018, Mr. W. Kip Speyer, the Company’s Chairman and Chief Executive Officer, entered into two convertible note agreements with the company totaling $80,000. These notes have a conversion price of $0.40 per share and resulted in the recognition of a beneficial conversion feature recorded as a debt discount. These notes payable total $36,199 and $25,689 at September 30, 2020 and December 31, 2019. The notes are reported net of their unamortized debt discount of $43,801 and $54,311 as of September 30, 2020 and December 31, 2019, respectively. During 2018, Mr. W. Kip Speyer, the Company’s Chairman and Chief Executive Officer, purchased an aggregate of 1,125,500 shares of the Company’s Series E Convertible Preferred Stock at a purchase price of $0.40 per share. The designations, rights and preferences of Series E Stock are described in Note 12. Dividends paid for Series A-1, E and F Convertible Preferred Stock paid to Mr. W. Kip Speyer were $2,500 and $26,504 for the three months ended September 30, 2020 and 2019, respectively. Dividends paid for Series A-1, E and F Convertible Preferred Stock paid to Mr. W. Kip Speyer were $55,000 and $126,630 for the nine months ended September 30, 2020 and 2019, respectively. The unsecured and interest free Closing Notes of $750,000 as identified in Note 4 had various unresolved matters related to the offsets. The parties were unable to work-out an agreement for the payment of the first tranche of the Notes. Therefore, no amount or payment was agreed upon as of August 15, 2020. 42 BRIGHT MOUNTAIN MEDIA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2020 (Unaudited) NOTE 14 – RELATED PARTIES (continued). In late September 2020, a new agreement was reached, in principle, by the parties whereby the payment due dates of the Notes, as well as the unresolved disagreements were stricken, and the Company agreed to pay the full amounts of the notes at future dates. This agreement supersedes all prior agreements. The Company has recognized the recording of the liability as a settlement of contingent consideration to be recognized in the current period. The first payment of the notes for $375,000 will be made upon the closing of a significant capital raise. The second payment of $375,000 is scheduled for August 15, 2021. NOTE 15 – INCOME TAXES. At September 30, 2020 and December 31, 2019, the Company had no unrecognized tax benefits, no accrued interest and penalties, and no significant uncertain tax positions. No interest and penalties were recognized during the nine months ended September 30, 2020 and 2019. At September 30, 2020 and December 31, 2019, the Company had unused net operating loss (“NOL”) carry-forwards of $6,403,181 and $4,181,797, respectively. The valuation allowance associated with the deferred tax asset increased $8,988,627 during the nine months ended September 30, 2020. The increase for both the NOL and valuation allowance for the nine months ended September 30, 2020 is primarily attributed to the acquisition of Wild Sky Media as discussed below. The Company’s remaining unused NOLs that were generated prior to the operations and acquisitions in 2019 are subject to limitations under Section 382 of the Internal Revenue Code and are limited in the amount that can be utilized in any one year. The goodwill and intangible impairments recorded during the period ending September 30, 2020 (see Note 8) are non-deductible for tax purposes. As the Company does not have any tax basis in the impaired goodwill, in accordance with ASC 740, there was historically no deferred taxes recorded for the goodwill basis difference, therefore, the goodwill impairment charge will be a permanent difference and a reconciling item for our effective tax rate for the year. The Company has maintained a deferred tax liability on the basis difference related the intangibles, therefore, the impairment will have the effect of reducing the existing deferred tax liabilities offset with a change in the Company’s valuation allowance, which results in no net change to our deferred tax liability position on the balance sheet. The deferred tax liability balance was $283,213 and $581,440 as of September 30, 2020 and December 31, 2019, respectively. The change in the balance of $298,227 represents the after-tax impact of the amortization of the international intangible assets and the benefit of the tax loss, along with the impacts stemming from the acquisition of Wild Sky Media. In connection with the acquisition of Wild Sky Media, the Company recorded an additional deferred tax asset of $5,722,857 for estimated NOLs incurred by Wild Sky Media prior to the acquisition, which was offset by a deferred tax liability of $1,851,547 related to the difference between the book and tax basis in the intangibles at Wild Sky. In addition, a valuation allowance of $3,871,310 was recorded against Wild Sky Media’s deferred tax assets due to limitations on the ability to utilize their NOLs stemming the timing of the reversals of the deferred tax liabilities from the intangibles. The net impact of the above adjustments, which totaled a net DTL of $133,603 was recorded as an adjustment to goodwill in acquisition accounting. 43 NOTE 15 – INCOME TAXES (continued). Also, in connection with the acquisition, as a result of the net deferred tax liability from Wild Sky Media, the Company was able to release a portion of its historical valuation allowance in the amount by the same amount as the Wild Sky Media net deferred tax liability. The release of the valuation allowance was recorded as a benefit in the tax provision for the nine months ending September 30, 2020. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. NOTE 16 – SUBSEQUENT EVENTS. As of the availability of these financial statements, no material transactions or events have occurred requiring disclosure. 44 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of our unaudited condensed consolidated financial condition and results of operations for the three and nine months ended September 30, 2020 and 2019 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth later in this report under Part II, Item 1A. in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on May 14, 2020 (the “2019 10-K”) and our other filings with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All information in this section for the three and nine months ended September 30, 2020 and 2019 is unaudited and derived from the unaudited condensed consolidated financial statements appearing elsewhere in this report; unless otherwise noted, all information for the year ended December 31, 2019 is derived from our audited consolidated financial statements appearing in the 2019 10-K. Overview Bright Mountain Media, Inc. 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 involves traditional interpersonal contact between ad buyers and advertising sales representative(s). By selling advertisements on our current portfolio of 25 owned and operated websites and 20 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. 45 When fully developed Bright Mountain’s full suite of advertising solutions will include: ● The ability for advertisers to purchase advertising space on a variety of digital publications; ● Leading targeting technology, allowing advertisers to pinpoint their marketing efforts to target specific demographics across TV, desktop, tablet, and mobile devices; ● The ability to handle any ad format, including video, display, and native advertisements; ● Ad serving and self-service features for publishers and advertisers; and ● Server-to-server integration with other advertiser and publisher platforms for extremely quick transactions and ad deployments. This ad exchange network platform will be a marketplace for publishers and advertisers where they will be able to choose from various features to maximize their earning potential. Advertisers have the ability to directly target desired demographics on publishers sites through our platform. Publishers will be able to select a variety of ad units for their video, mobile, display and native advertisements, and have the ability to create their own unique ad formats. We have begun expansion with the recent acquisition of Wild Sky Media. Wild Sky Media offers massive global reach through hyper-engaging content and multicultural audiences. This is achieved through their six websites focused on the female demographic. The websites include Mom.com, Cafemom.com, LittleThings.com, mamaslatinas.com, revelist.com, and babynamewizard.com. Key initiatives Our growth strategy is based upon: ● completing and launching the Bright Mountain Media advertising solutions marketplace; ● expanding our sales revenues through organic growth; ● continuing to pursue acquisition candidates that are strategic our business plan; ● evaluating expenses attributed to our non-strategic business lines; and ● continuing to automate our processes and reduce overhead where possible without impacting our customer experience 46 Results of operations Revenues, Cost of Revenue, and Gross Profit Margins For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 Change % Change 2020 2019 Change % Change Advertising revenues $ 4,894,486 $ 2,113,276 $ 2,781,210 132 % $ 9,438,612 $ 3,915,326 $ 5,523,286 141 % Total cost of revenue $ 2,085,060 $ 1,432,922 $ 652,138 46 % $ 5,005,646 $ 2,874,076 $ 2,131,570 74 % Gross Profit $ 2,809,426 $ 680,354 $ 2,129,072 313 % $ 4,432,966 $ 1,041,250 $ 3,391,716 326 % Gross profit margin as a percentage of advertising revenues 57.4 % 32.2 % 47.0 % 26.6 % Our advertising revenue for the three months ended September 30, 2020 was 132% higher than the comparable period in 2019. Approximately $3,800,000 of the 2020 revenue is attributable to the acquisition of Wild Sky and approximately $100,000 of 2020 revenue is attributable to the acquisition of MediaHouse. The revenues for Oceanside decreased by approximately $600,000 and our legacy revenues for Bright Mountain, LLC decreased approximately $540,000 due to decreased advertising in the industry, which we believe relates to the emergence of the COVID-19 virus in the first quarter of 2020. Advertising revenue for the nine months ended September 30, 2020 was 141% higher than the comparable period in 2019. Approximately $5,100,000 of the 2020 revenue is attributable to the acquisition of Wild Sky and approximately $600,000 of 2020 revenue is attributable to the acquisition of MediaHouse, and approximately $1,000,000 of 2020 revenue is attributable to Oceanside. Our legacy revenues decreased approximately $1,200,000 due to decreased advertising in the industry due to the emergence of the COVID-19 virus in the first quarter of 2020. We incur costs of sales associated with the advertising revenue. These costs include revenue share payments to media providers and website publishers. Gross profit margins increased in three and nine months of 2020 as compared to the respective periods for 2019 due to the addition of Wild Sky, which operates owned and operated websites. The gross profit margins associated with the operations of websites differs from ad network activities. Significant differences in the direct costs of the activities includes the buying of advertising demand included within the ad network activities that does not exist within the owned and operated activities. 47 Selling, General and Administrative Expenses For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 $ Change % Change 2020 2019 $ Change % Change Selling, general and administrative expense $ 5,493,343 $ 2,734,203 $ 2,759,140 101 % $ 13,860,462 $ 4,452,490 $ 9,407,972 211 % Selling, general and administrative expense as a percentage of advertising revenues 112.2 % 129.4 % 146.8 % 113.7 % Selling, general and administrative costs increased approximately $2,000,000 for the three months ended September 30, 2020, due to the operating activities of MediaHouse, and Wild Sky which are not reflected in the prior period expenses, as the subsidiaries were acquired after September 30, 2019. The Company increased its expenses associated with the amortization of intangibles of approximately $1,200,000 associated with the acquisitions of MediaHouse, and Wild Sky. Selling, general and administrative costs increased approximately $5,000,000 for the nine months ended September 30, 2020, due to the operating activities of MediaHouse, and Wild Sky which are not reflected in the prior period expenses. The Company increased its expenses associated with amortization of intangibles of approximately $3,000,000 associated with the acquisitions of Media House and Wild Sky. The Company also increased its expenses of approximately $700,000 for professional fees. Selling, general and administrative expenses are expected to increase as we execute our planned growth strategy of expanding and operating the Bright Mountain Media ad exchange network which will include additional administrative support. Subject to the availability of additional working capital, the Company also intends to add administrative staff to its accounting department to improve controls over its accounting and reporting processes. As the Company expands the size of the accounting department, the use of consultants is expected to decrease. Interest Expense In connection with the acquisition of Wild Sky effective June 1, 2020, the Company issued a first lien senior secured credit facility which consisted of $15,000,000 of initial indebtedness, repayment of Wild Sky Media’s existing accounts receivable factoring facility of approximately $900,000 and $500,000 of expenses totaling $16,416,905. The note bears interest at a rate of 6.0% per annum. Per the credit facility, our loan payments begin December 1, 2021. There is no prepayment penalty associated with this credit facility. Interest expense associated with this debt for the three months ended September 30, 2020 and 2019 were $246,255 and $0, respectively. Interest expense associated with this debt for the nine months ended September 30, 2020 and 2019 were $328,340 and $0, respectively. 48 Gain on Settlement On July 8, 2020, due to shares not exchanged under an settlement agreement reached in 2018, and the change in the share value since 2018, the Company executed another Settlement Agreement and Release with the Harry G. Pagoulatos, George Rezitis, and Angelo Triantafillou whereby they will relinquish their Bright Mountain common stock shares and the Company will pay them a full and final settlement of $385,000 within 12 months from the date the shares are delivered to Bright Mountain Media. This transaction has been recorded based on the fair value of the shares as of the transaction settlement date of July 8, 2020. As of September 30, 2020, the parties have provided the Company with 550,117 of their total 825,175 shares. Based on the price per share of $2.10 as of July 8, the value of the shares provided to the Company was $1,155,246. As the Company had previously recorded the liability due to the parties of $165,163, which increased to the final settlement amount of $385,000, an additional liability of $219,837 was recognized along with a gain on the transaction of $935,408. The shares will be held as Treasury Stock by the Company and will be resold at later dates. Settlement of Contingent Consideration In connection with the acquisition of Oceanside Media, the Company issued contingent consideration of $750,000 paid through the delivery of unsecured, interest free, one and two year promissory notes. Since the time of the acquisition until early September 2020, there were various unresolved matters related to the offsets. The parties were unable to work-out an agreement for the payment of the first tranche of the Notes. Therefore, no amount or payment was agreed upon as of August 15, 2020. Based on the unresolved differences, the fair value of the liability was not reasonably determined or estimated. In late September 2020, a new agreement was reached, in principle, by the parties whereby the payment due dates of the Notes, as well as the unresolved disagreements were stricken, and the Company agreed to pay the full amounts of the notes at future dates. This agreement supersedes all prior agreements. The Company has recognized the recording of the $750,000 liability as a settlement of contingent consideration in the current period. The first payment of the notes for $375,000 will be made upon the closing of a significant capital raise. The second payment of $375,000 is scheduled for August 15, 2021. Impairment Expense In accordance with ASC 350, the finite lived intangible assets associated with Oceanside and MediaHouse were tested for valuation based on indicators of impairment noted by management, including decreased revenues. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. The fair value of the respective assets was determined based on the projected future cash flows associated with the respective assets. These fair values were compared with the carrying values of the respective assets to determine if an impairment of the respective assets was warranted. It was determined that the carrying values of the finite lived intangible assets associated with Oceanside did not exceed the respective fair values of the assets, therefore no revaluation associated with these assets has been recognized. It was determined that the finite lived intangible assets associated with MediaHouse were deemed impaired based on an analysis of the carrying values and fair values of the assets. During the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $11,551,573 within Impairment Expense on the Statement of Operations. 49 The Company categorizes Goodwill into two reporting units, Owned & Operated and Ad Network. Goodwill is tested for impairment at least annually and based on the acquisition dates of Oceanside and MediaHouse. Impairment is deemed to occur when the carrying value of the Goodwill associated with the reporting unit exceeds the implied value of the Goodwill associated with the reporting unit. The year 2020 has been marked by the COVID-19 Global pandemic when many companies in various industries were forced to restructure their advertising budgets and spending. This caused a significant contraction of economic activity at the beginning in the first months of the year and has continued. Although there are recent signs of improvement with significant GDP gains, many companies have yet to reinstate their advertising budgets and/or have changed the way they are spending these budgets. Many advertisers have moved away from direct ad buys in favor of programmatic distribution with its lower costs. The fair value of the respective reporting units was determined based on both the Income Approach (Discount Cash Flows) and the Market Multiples Approach. As of September 30, 2020, it was determined that the carrying value of the Goodwill associated with the Owned & Operated reporting unit was not deemed impaired. It was determined that the recorded Goodwill associated with the Ad Network exceeded the fair value of the Goodwill and during the three and nine months ended September 30, 2020, the Company recorded an impairment expense of $42,444,971. Income Tax Benefit In connection with the acquisitions of Oceanside, MediaHouse and wild Sky the Company recognized deferred tax liabilities and income tax benefits associated with the intangible assets acquired in the transactions. At September 30, 2020, the Company had unused net operating loss (“NOL”) carry-forwards of $6,403,181. The valuation allowance associated with the deferred tax asset increased $8,988,627 during the nine months ended September 30, 2020. The increase for both the NOL and valuation allowance for the nine months ended September 30, 2020 is primarily attributed to the acquisition of Wild Sky Media. The Company’s remaining unused NOLs that were generated prior to the operations and acquisitions in 2019 are subject to limitations under Section 382 of the Internal Revenue Code and are limited in the amount that can be utilized in any one year. The goodwill and intangible impairments recorded during the period ending September 30, 2020 are non-deductible for tax purposes. As the Company does not have any tax basis in the impaired goodwill, there was historically no deferred taxes recorded for the goodwill basis difference, therefore, the goodwill impairment charge will be a permanent difference and a reconciling item for our effective tax rate for the year. The Company has maintained a deferred tax liability on the basis difference related the intangibles, therefore, the impairment will have the effect of reducing the existing deferred tax liabilities offset with a change in the Company’s valuation allowance, which results in no net change to our deferred tax liability position on the balance sheet. The deferred tax liability balance was $283,213 as of September 30, 2020. The change in the balance of $298,227 represents the after-tax impact of the amortization of the international intangible assets and the benefit of the tax loss, along with the impacts stemming from the acquisition of Wild Sky Media. In connection with the acquisition of Wild Sky Media, the Company recorded an additional deferred tax asset of $5,722,857 for estimated NOLs incurred by Wild Sky Media prior to the acquisition, which was offset by a deferred tax liability of $1,851,547 related to the difference between the book and tax basis in the intangibles at Wild Sky. In addition, a valuation allowance of $3,871,310 was recorded against Wild Sky Media’s deferred tax assets due to limitations on the ability to utilize their NOLs stemming the timing of the reversals of the deferred tax liabilities from the intangibles. The net impact of the above adjustments, which totaled a net DTL of $133,603 was recorded as an adjustment to goodwill in acquisition accounting. Also, in connection with the acquisition, as a result of the net deferred tax liability from Wild Sky Media, the Company was able to release a portion of its historical valuation allowance in the amount by the same amount as the Wild Sky Media net deferred tax liability. The release of the valuation allowance was recorded as a benefit in the tax provision for the nine months ending September 30, 2020. 50 Discontinued Operations The Company discontinued its E-commerce business in the fourth quarter of 2018. The loss on discontinued operations was $0 and $174,021 for the nine months ended September 30, 2020 and 2019, respectively. Revenues from discontinued operations significantly decreased during the period, from $103,266 in 2019 to $0 for the same period in 2020, Selling, general and administrative expenses related to these operations decreased from $242,395 in 2019 to $0 for the nine months ended September 30, 2020. Non-GAAP financial measure We report adjusted EBITDA from continuing operations as a supplemental measure to U.S. generally accepted accounting principles (“GAAP”). This measure is one of the primary metrics by which we evaluate the performance of our business, on which our internal budgets are based. We believe that investors have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. We endeavor to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and description of the reconciling items, including quantifying such items to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure. Our adjusted EBITDA from continuing operations is defined as operating income/loss excluding: ● non-cash stock option compensation expense; ● depreciation; ● amortization expense and impairment expense; ● gain on settlement of liability; ● Settlement of contingent consideration; ● interest; and ● amortization on debt discount. We believe this measure is useful for analysts and investors as this measure allows a more meaningful year-to-year comparison of our performance. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole. The above items are excluded from adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, adjusted EBITDA corresponds more closely to the cash operating income/loss generated from our business. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses Non-GAAP financial measure (continued) The following is an unaudited reconciliation of net (loss) to adjusted net (loss) and Adjusted EBITDA for the periods presented: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 Net loss from continuing operations $ (56,748,877 ) $ (2,050,182 ) $ (63,567,985 ) $ (3,276,650 ) plus: Stock compensation expense 51,011 15,963 129,105 29,074 Depreciation expense 19,437 3,563 29,616 5,613 Acquisition expense - 1,205,000 - 1,205,000 Amortization expense 1,289,416 53,809 3,289,330 120,668 (Gain) on settlement of liability (935,408 ) - (935,408 ) (122,500 ) Settlement of contingent consideration 750,000 - 750,000 - Asset impairment 53,996,544 - 53,996,544 - Interest expense (income), net 251,779 (16,234 ) 323,047 (37,281 ) $ (1,326,098 ) $ (788,081 ) $ (5,985,751 ) $ (2,076,076 ) Liquidity and capital resources Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarized total current assets, total current liabilities and working capital (deficit) at September 30, 2020 as compared to December 31, 2019. September 30, 2020 December 31, 2019 Total current assets $ 7,175,675 $ 5,772,980 Total current liabilities 10,991,015 12,157,392 Working capital $ (3,815,340 ) $ (6,384,412 ) The increase in cash and increase in the working capital is a result of cash proceeds from the sale of equity securities in a private placement during the three months ended September 30, 2020. The increase in our current assets is mostly reflective of increase in accounts receivable and prepaid expenses. 51 As we continue our efforts to grow our business, we expect that our monthly cash operating overhead will continue to increase as we add personnel, although at a lesser rate, and we are not able at this time to quantify the amount of this expected increase. In 2020 we implemented policies and procedures around cash collections to prevent the aging of accounts receivables that was experienced in 2019. Cash collection efforts have been successful, and we feel that we have appropriately reserved for uncollectible amounts at September 30, 2020. Our financial performance and operating results may be materially and adversely affected by the outbreak of the novel coronavirus (“COVID-19”). The recent global outbreak of COVID-19 has had an unfavorable impact on our business operations. The COVID-19 pandemic has caused disruptions in the services we provide. In addition, the COVID-19 pandemic has resulted in many states and countries imposing orders resulting in the closure of non-essential businesses – including many companies which advertise digitally. We cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact on our business and our financial results. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations, financial condition, and liquidity may be materially and adversely affected as a result of prolonged disruptions in consumer spending, a lack of demand for our services, and other factors that we cannot foresee. The extent to which COVID-19 will impact our business and our financial results will depend on future developments which are highly uncertain and cannot be predicted. On April 24, 2020, the Company received loan proceeds of $464,800 (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Regions Bank 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. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. Effective June 1, 2020, the Company acquired Wild Sky Media and assumed the $1,706,735 loan received under the Paycheck Protection Program (the “PPP”). The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Holbomb Bank 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. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. 52 Effective June 1, 2020, we entered into a membership interest purchase agreement to acquire 100% of CL Media Holdings, LLC (“Wild Sky Media”). Wild Sky Media was acquired on a debt-free, cash-free basis, free and clear of any liens and encumbrances. We issued 2,500,000 shares of our restricted common stock to the seller and the seller issued a first lien senior secured credit facility of $16,416,905. The note bears interest at a rate of 6.0% per annum. Per the credit facility with the seller, our loan payments begin 18 months from the time of the acquisition. There is no prepayment penalty associated with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility. Going concern and management’s liquidity plans The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss of $63,136,155 and used net cash in operating activities of $4,957,486 for the nine months ended September 30, 2020. The Company had an accumulated deficit of $83,581,144 at September 30, 2020. The report of our independent registered public accounting firm on our audited consolidated financial statements at December 31, 2019 and 2018 and for the years then ended contains an explanatory paragraph regarding substantial doubt of our ability to continue as a going concern based upon our net losses, cash used in operations and accumulated deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company. Our ability to fully implement the Bright Mountain Media ad exchange network and maximize the value of our assets are dependent upon our ability to raise additional capital sufficient for our short-term and long-term growth plans. Historically we have been dependent upon loans and equity purchases from Mr. W. Kip Speyer, an executive officer and member of our board of directors and sales of equity securities to accredited investors, to provide adequate funds to meet our working capital needs. During the nine months ended September 30, 2020 we raised $3,579,198 through the sale of our securities in one private placement. While we estimate that we need a minimum of $3 million in additional working capital to provide sufficient funds to pay our operating expenses and fund our development over the next 12 months, we believe that if we are successful the anticipated revenues from our advertising segment will have a significant impact on our revenues and results of operations in future periods. This estimated additional working capital need is exclusive of acquisition related and debt burden expenditures. While we have engaged a placement agent to assist us in raising capital, the placement agent is acting on a best efforts basis and there are no assurances we will be successful in raising additional capital during 2020 through the sale of our securities. Any delay in raising sufficient funds will delay the implementation of our business strategy and could adversely impact our ability to significantly increase our revenues in future periods. In addition, if we are unable to raise the necessary additional working capital, absent a significant increase in our revenues, most particularly from our advertising segment, of which there is no assurance, we will be unable to continue to grow our company and may be forced to reduce certain operating expenses to conserve our working capital. Following the emergence of COVID-19, the Company applied for and received loan proceeds of $464,800 (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the “Promissory Note”) with Regions Bank 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. 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. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. 53 Summary of cash flows September 30, 2020 2019 Net cash (used in) operating activities $ (4,957,486 ) $ (1,502,123 ) Net cash provided by (used in) investing activities $ 1,353,614 $ (492,389 ) Net cash provided by financing activities $ 3,697,229 $ 1,545,728 During the nine months ended September 30, 2020, we used cash primarily to fund our net loss of $63,136,155 for the period. During the nine months ended September 30, 2020 the Company raised $3,579,198 through the sale of equity securities in a private placement memorandum and $44,583 from payments on a note receivable. The Company paid dividends of $235,129 and made payments against notes payable of $163,173. Critical accounting policies The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our unaudited condensed consolidated financial statements appearing elsewhere in this report. Recent accounting pronouncements The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies as described in Note 1 appearing earlier in this report that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable. Off balance sheet arrangements As of the date of this report, we do not have any off balance sheet debt. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable for a smaller reporting company. 54 ITEM 4. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures . We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under Securities Exchange Act of 1934 (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this report, our Chief Financial Officer, concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2019. A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. We have implemented changes and will continue to monitor our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added to our accounting and administrative staff allowing improved internal control over financial reporting. Changes in Internal Control over Financial Reporting. We have begun implementing changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 55 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None, except as previously disclosed. ITEM 1A. RISK FACTORS. We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2019 Form 10-K subject to the new or modified risk factors appearing below that should be read in conjunction with the risk factors disclosed in such Form 10-K, including those set forth below: ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. During the period from January 1, 2020 through September 30, 2020 Bright Mountain Media, Inc. sold 5,199,350 units of our securities to 67 accredited investors in a private placement exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(a)(2) and Rule 506(b) of Regulation D resulting in gross proceeds to the Company of $3,577,698. Each unit was sold at $0.50 and consisted of one share of common stock and one five- year warrant to purchase one share of common stock at an exercise price of $0.75 per share. Spartan Capital Securities, LLC is serving as the Placement Agent for the Company in this offering. As compensation for services the Company has paid Spartan a $25,000 engagement fee, $519,935 commissions at 10% of the proceeds, $259,968 non-accountable expense at 5% of the proceeds, $250,000 for the sixty-month Amended M&A Advisory Agreement, and $165,000 for the Finder’s Agreement Amendment. A total of 10,398,700 five-year warrants were issued to the investors to purchase one share of our common stock, exercisable at a $0.75 share price. The Placement Agent was issued a total of 1,039,870 five-year warrants to purchase one share of our common stock, exercisable at a $1.00 share price. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES. None ITEM 5. OTHER INFORMATION. None. 56 ITEM 6. EXHIBITS. No. Exhibit Description Form Date Filed Number Herewith 2.1 Agreement and Plan of Merger dated June 10, 2019 by and among Bright Mountain Media, Inc., BMTM2 and Inform, Inc. f/k/a News Distribution Network 8-K 6/14/19 2.1 2.2 Share Exchange Agreement and Plan of Merger dated July 31, 2019 by and among Bright Mountain Media, Inc., Bright Mountain Israel Acquisition Ltd. (a to be formed entity), Slutzky & Winshman Ltd. and the shareholders of Slutzky & Winshman, Ltd. 8-K 8/1/19 2.1 3.1 Amended and Restated Articles of Incorporation Form 10 3/31/13 3.3 3.2 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 7/9/13 3.3 3.3 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 11/16/13 3.4 3.4 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 12/30/13 3.4 3.5 Articles of Amendment to the Amended and Restated Articles of Incorporation 10-K 3/31/14 3.5 3.6 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 7/28/14 3.6 3.7 Articles of Amendment to the Amended and Restated Articles of Incorporation 10-K/A 4/1/15 3.5 3.8 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 12/4/15 3.7 3.9 Amended and Restated Bylaws Form 10 3/31/13 3.2 3.10 Articles Amendment to the Amended and Restated Articles of Incorporation 8-K 11/13/18 3.10 3.11 Articles of Amendment to the Amended and Restated Articles of Incorporation 8-K 8/5/19 3.1 4.1 Form of Series B-1 Warrant 10-Q 6/29/20 4.1 10.1 Amended and Restated M&A Advisory Agreement dated July 31, 2019 by and between Bright Mountain Media, Inc. and Spartan Capital Securities, LLC 8-K 8/7/19 10.1 10.2 Amendment dated July 31, 2019 to Finder’s Fee Agreement by and between Bright Mountain Media, Inc. and Spartan Capital Securities, LLC 8-K 8/7/19 10.2 10.3 Promissory Note dated August 15, 2019 due to Joey Winshman 8-K 8/16/19 10.1 10.4 Promissory Note dated August 15, 2019 to Nadav Slutzky 8-K 8/16/19 10.2 10.5 Promissory Note dated August 15, 2019 to Eli Desatnik 8-K 8/16/19 10.3 57 10.6 Escrow Agreement dated August 15, 2019 by and among Bright Mountain Media, Inc., the shareholders of Slutzky & Winshman Ltd. and Pearlman Law Group LLP 8-K 8/16/19 10.4 10.7 Converted RSU Escrow Agreement dated August 15, 2019 by and among Bright Mountain Media, Inc., Slutzky & Winshman Ltd. and Pearlman Law Group LLP 8-K 8/16/19 10.5 10.8 Form of Lock Up Leak Out Agreement 8-K 8/16/19 10.6 10.9 Affiliate Lock Up Leak Out Agreement 8-K 8/16/19 10.7 10.10 Employment Agreement dated August 15, 2019 by and between Slutzky & Winshman Ltd. and Joey Winshman 8-K 8/16/19 10.8 10.11 Consulting Agreement dated August 15, 2019 by and between Bright Mountain Media, Inc., Slutzky & Winshman Ltd. and Nadav Slutzky 8-K 8/16/19 10.9 31.1 Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer Filed 31.2 Rule 13a-14(a)/15d-14(a) certification of principal financial and accounting officer Filed 32.1 Section 1350 certification of Chief Executive Officer and principal financial and accounting officer Filed 101.INS XBRL Instance Document Filed 101.SCH XBRL Taxonomy Extension Schema Document Filed 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed 101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed 101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed 58 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRIGHT MOUNTAIN MEDIA, INC. November 24, 2020 By: /s/ W. Kip Speyer W. Kip Speyer, Chief Executive Officer By: /s/ Edward Cabanas Edward Cabanas, Chief Financial Officer 59