BRIGHT MOUNTAIN MEDIA, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-Q)

The following discussion of our unaudited condensed consolidated financial
condition and results of operations for the three and nine months ended
September 30, 2021 and 2020 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, 2020 as filed with the Securities and Exchange Commission on
December 23, 2021 (the "2020 Form 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, 2021 and 2020 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, 2020 is derived from our audited
consolidated financial statements appearing in the 2020 Form 10-K.



Executive Overview of Third Quarter 2021 Results



Our key user metrics and financial results for the third quarter of 2021, both
for the three and nine months ended September 30, 2021, are more fully discussed
and described herein and should be read in context with the disclosure on this
page. The third quarter results are as follows:



User metrics:


? Quarterly ad impressions delivered were approximately 1.1 billion for the

three months completed September 30, 2021 and about 3.1 billion for the

nine months ended September 30, 2021; this compares to about 2.1

billion for the three months ended September 30, 2020 and about 4.9

    billion for the nine months ended September 30, 2020.



Financial results for the third quarter of 2021:

? Ad revenue was down 22% in the three months ended September 30, 2021

compared to the same period of 2020. Ad revenue was down 8% in the nine

months ended September 30, 2021 of the same period of 2020.

? Gross profit down 25% in the three months ended September 30, 2021 from

the same period of 2020. Gross profit decreased by 8% in the nine months ended

September 30, 2021 of the same period of 2020.

? Selling, general and administrative expenses decreased by 24% in the three months

ended September 30, 2021 of the same period of 2020. Sale, general and

administrative expenses decreased by 11% in the nine months ended September 30,

2021 from the same period of 2020.

? Included in expenses for the three months ended September 30, 2021 are

$396,266 non-cash amortization of intangible assets, and $100,224 of

stock-based compensation. Included in the expenses for the nine months

ended September 30, 2021 are $1,188,799 non-cash amortization of the

intangible assets and $398,614 stock-based compensation.

? Net cash used in operating activities was ($4,367,969) for the first nine

month of 2021 compared to ($4,957,486) for the first nine months of 2020.



32






Overview



Bright Mountain Media, Inc. is an end-to-end digital media and advertising
services platform, efficiently connecting brands with targeted consumer
demographics. Through the removal of middlemen in the advertising services
process, Bright Mountain Media efficiently connects brands with targeted
consumer demographics while maximizing revenue to publishers. Bright Mountain
Media's assets include the Bright Mountain, LLC ad network, MediaHouse (f/k/a
NDN), Oceanside (f/k/a S&W Media), Wild Sky Media and 24 owned and/or managed
websites.



We generate revenue sales of advertising services which generate revenue from
advertisements (ad impressions) placed on our owned and managed sites, as well
as from advertisements we place on partner websites, for which we earn a share
of the revenue. We also generate advertising services revenue from facilitating
the real-time buying and selling of advertisements at scale between networks of
buyers, often called DSPs (Demand Side Platforms) and sellers, often called
SSPs
(Supply Side Platforms).


Once 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;

? State-of-the-art targeting technology, allowing advertisers to identify their marketing

efforts to reach specific, geographically targeted demographics on desktop, tablet,

and mobile devices;

? The ability to manage any ad format, including video, display, and native

advertisement;

? 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.




Bright Mountain's 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 focusing on
parenting and lifestyle brands. The websites include Mom.com, Cafemom.com,
LittleThings.com, mamaslatinas.com, revelist.com, and babynamewizard.com.



Key initiatives


Our growth strategy is based on:

? complete and launch Bright Mountain Media advertising solutions

    marketplace;

  ? expanding our sales revenues through organic growth;

? continue to seek acquisition candidates that are strategic to 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.




33
Results of operations



Revenues, Cost of Revenues and Gross Profit Margins



                                          For the Three Months Ended September 30,                             For the Nine Months Ended September 30,
                                   2021             2020             Change         % Change            2021             2020            Change         % Change

Advertising revenues            $ 3,805,355      $ 4,894,486      $ (1,089,131 )          (22 )%    $  8,638,490      $ 9,438,612      $ (800,122 )            (8 )%
Total cost of revenue           $ 1,697,125      $ 2,085,060      $   (387,935 )          (19 )%    $  4,540,076      $ 5,005,646      $ (465,570 )            (9 )%
Gross Profit                    $ 2,108,230      $ 2,809,426      $   (701,196 )          (25 )%    $  4,098,414      $ 4,432,966      $ (334,552 )            (8 )%
Gross profit margin as a
percentage of advertising
revenues                               55.4 %           57.4 %                                              47.4 %           47.0 %




Advertising revenue for the three months ended September 30, 2021 was 22% lower
than the comparable period in 2020. The main reason for the shortfall was a
combination of lower programmatic and direct campaign revenue at our Wild Sky
business, as well as a negative impact from our MediaHouse operation since we
restructured it at the end of 2020.



Advertising revenue for the nine months ended September 30, 2021 was 8% lower than the comparable period in 2020. The primary reason was weakness in our Oceanside display advertising business year-over-year and the effect of the Mediahouse restructuring completed at the end of December 2020.



We incur costs of sales associated with the advertising revenue. These costs
include revenue share payments to media providers and website publishers. Our
gross profit margin percentage decreased 200 basis points (55.4% versus 57.4%)
for the three months ended September 30, 2021 compared to the comparable prior
period, mainly due to lower revenue mix from the Wild Sky business as we
experienced lower direct campaign and programmatic revenues in our highest gross
margin business. Our gross profit margin percentage improved slightly, or 40
basis points (47.4% versus 47.0%) for the nine months ended September 30, 2021
compared to the comparable prior period, mainly due to the inclusion of the Wild
Sky business, improving gross margins in our other ad network businesses and
offset by the restructuring of the Mediahouse business which occurred at the end
of 2020.


Selling, general and administrative expenses


                                            For the Three Months Ended September 30,                              For the Nine Months Ended September 30,
                                     2021             2020            $ Change        % Change            2021              2020            $ Change        % Change

Selling, general and
administrative expense            $ 4,646,299      $ 6,153,561      $ (1,507,262 )          (24 )%    $ 13,670,567      $ 15,313,699      $ (1,643,132 )          (11 )%
Selling, general and
administrative expense as a
percentage of total revenue               122 %            126 %                                               158 %             162 %




Selling, general and administrative costs decreased approximately $1,507,262, or
(24%) for the three months ended September 30, 2021 compared to the same period
in 2020, mainly due to reduced selling, general and administrative costs related
to the restructuring of the Mediahouse operation which occurred at the end of
December 2020, as well as some reductions in headcount throughout our other
operations, and lower intangible amortization of intangibles which accounted for
approximately half of the decrease.



Selling, general and administrative costs decreased approximately $1,643,132, or
(11%) for the nine months ended September 30, 2021 compared to the same period
in 2020, again, mainly due to reduced selling, general and administrative costs
related to the restructuring of the Mediahouse operation which occurred at the
end of December 2020, lower intangible amortization of intangibles and offset
with the incremental five months of selling, general and administrative costs
for the Wild Sky acquisition which occurred in June 2020.



Selling, general and administrative expenses are expected to increase as we
execute our planned growth strategy of launching 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 staff to its accounting department to improve controls over
its accounting and reporting processes. As the Company expands the size of the
accounting department, its use of consultants is expected to decrease.



34





Non-GAAP Financial Measure



We report adjusted EBITDA as a supplemental measure to U.S. generally accepted
accounting principles ("GAAP"). This measure is one of the primary metrics by
which we evaluate the performance of our business, on which our internal budgets
are based. We believe that investors have access to, and we are obligated to
provide, the same set of tools that we use in analyzing our results. This
non-GAAP measure should be considered in addition to results prepared in
accordance with GAAP but should not be considered a substitute for or superior
to GAAP results. We endeavor to 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 is defined as operating profit excluding:


  ? non-cash stock option compensation expense;
  ? depreciation;
  ? equity raise expenses;
  ? professional fees;

? items related to acquisitions consisting of depreciation and impairment charges

    expense;
  ? interest; and
  ? amortization on debt discount.




We believe this measure is useful for analysts and investors as this measure
allows a more meaningful year-to-year comparison of our performance. Moreover,
our management uses this measure internally to evaluate the performance of our
business as a whole. The above items are excluded from adjusted EBITDA measure
because these items are non-cash in nature, and we believe that by excluding
these items, adjusted EBITDA corresponds more closely to the cash operating
income/loss generated from our business. Adjusted EBITDA has certain limitations
in that it does not take into account the impact to our statement of operations
of certain expenses.


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          

For the nine months ended

                                            September 30,                      September 30,
                                       2021              2020              2021             2020

Net (loss) before tax              $  (2,888,798 )   $ (62,380,619 )   $ (9,087,384 )   $ (69,992,746 )
plus:
Stock compensation expense               100,224           328,961          398,614           407,055
Depreciation expense                      11,525            19,437           46,059            29,616
Amortization expense                     396,266         1,194,112        1,188,799         3,163,255
Impairment expense                                      58,766,016                         58,766,016
Gain on forgiveness of PPP loan         (464,800 )               -       (2,171,535 )               -
Professional fees                        902,800                 -        1,063,209                 -
Amortization on debt discount            238,361             3,599          383,805            10,580
Bad debt                                 222,772           (56,615 )         81,702           226,094
Non-cash acquisition fee                       -                 -                -           275,000
Interest expense, net                        605           335,645          336,811           339,691
Interest expense - related party         760,176                 -        1,334,680                 -
Adjusted EBITDA                    $    (720,869 )   $  (1,789,464 )   $ 

(6,425,240) ($6,775,439)



35





Cash 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 (deficit) at September 30, 2021 as compared
to
December 31, 2020.



                             September 30, 2021       December 31, 2020
Total current assets        $          4,711,407     $         8,120,422
Total current liabilities             19,976,435              16,058,220
Net Working deficit         $        (15,265,028 )   $        (7,937,798 )



The increase in cash is mainly a result of receipts of $1,137,140 from the
proceeds of the 2nd tranche of PPP loans during the three months ended March 31,
2021 and the proceeds from the debt financing between May 26 and August 31, 2021
of $3,100,00. The decrease in our current assets is mostly reflective of
decreases in accounts receivable and prepaid expenses.



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 2021, we implemented policies and procedures around cash
collections to prevent the aging of accounts receivables that we experienced in
2020. Cash collection efforts have been successful, and we feel that we have
appropriately reserved for uncollectible amounts at September 31, 2021.



During February and March 2021, the Company received two loans with proceeds
totaling $1,137,140 (the "PPP Loans") under the second tranche of 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 ("SBA"). The Second Bright Mountain and
Second Wild Sky PPP Loans are evidenced by promissory notes (the "Promissory
Notes") with Regions Bank and Holcomb Bank, respectively, and have a two-year
term and bear 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 Loans 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 Second
Bright Mountain and Second Wild Sky PPP Loans in whole or in part.



During May and August 2021, the Company received $3.1 million in debt financing
from Centre Lane Partners. The use of the funds was for general working capital
needs.


Going concern and management 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 $9,087,384 and used net cash in operating activities of
$4,367,969 for the nine months ended September 30, 2021. The Company had an
accumulated deficit of $103,231,212 at September 30, 2021.



The report of our independent registered public accounting firm on our audited
consolidated financial statements at December 31, 2020 and 2019 and for the
years then ended contained 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 to manage our working capital deficit, or to
manage our cash versus liabilities, or our ability to continue obtaining
investment capital and loans from related parties and outside investors 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 debt financing and equity capital
raises to provide adequate funds to meet our working capital needs. During the
three months ended September 30, 2021, we raised $1,600,000 of debt financing
(see Note 14 Related Parties for more information). During the nine months ended
September 30, 2021, we raised $3,100,000 of debt financing. During the three
months ended September 30, 2020, we raised a gross amount of $2,128,100 through
the sale of our securities in a private placement; after fees and commissions,
we received a net of $1,409,135. During the nine months ended September 30,
2020, we raised a gross amount $5,199,350 through the sale of our securities in
a private placement; after fees and commissions, we received a net of
$3,579,198.



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 2022 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.



36






Summary of cash flows



                                                        For the nine months ended
                                                              September 30,
                                                          2021              2020
Net cash (used in) operating activities               $  (4,367,969 )   $ (4,957,486 )
Net cash (used in) provided by investing activities   $      (2,829 )   $  1,353,614
Net cash provided by financing activities             $   3,912,889     $ 
3,697,229



In the nine months ended September 30, 2021the company raised $3,100,000
debt financing which was used primarily to finance our working capital.

In 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 payments on a note receivable. The Company paid dividends of
$235,129 and made payments on notes payable from $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 statements



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, but not yet effective, accounting pronouncements have been deemed either insignificant or not applicable.

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