Bright Mountain Media, Inc. - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019

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)

6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: 561-998-2440

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

Securities registered under Section 12(g) of the Act:

Common stock, par value $0.01 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes [X]  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

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. [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.4.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not (§229.405 of this chapter) contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [  ]

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.

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 Exchange Act) [  ] Yes [X] No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $52,008,628 on June 30, 2019.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 108,576,295 shares of common stock are issued and outstanding as of May 14, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.

TABLE OF CONTENTS

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:

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in Part I. Item 1A. Risk Factors appearing elsewhere in this report. Other sections of this report include additional factors, which could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 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,” “our,” “us,” and similar terms refers to Bright Mountain Media, Inc., a Florida corporation, and our subsidiaries. In addition, “fourth quarter of 2019” refers to the three months ended December 31, 2019, “2019” refers to the year ended December 31, 2019, “fourth quarter of 2018” refers to the three months ended December 31, 20 “2018” refers to the year ended December 31, 2018 and “2019” refers to the year ending December 31, 2019.

Unless specifically set forth to the contrary, the information which appears on our website at www.brightmountainmedia.com is not part of this report.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Historically we have operated as a digital media holding company for online for online assets primarily targeted to the military and public safety sectors. In addition to our corporate website, we own and/or manage 25 websites which are customized to provide our niche users, including active, reserve and retired military, law enforcement, first responders and other public safety employees with products, information and news that we believe may be of interest to them. We also own an ad network which was acquired in September 2017. We have placed a particular emphasis on providing quality content on our websites to drive traffic increases. Our websites feature timely, proprietary and aggregated content covering current events and a variety of additional subjects targeted to the specific demographics of the individual website. Our business strategy requires us to continue to provide this quality content to our niche markets and to grow our business, operations and revenues both organically and through acquisitions as we expand our business past the original niche markets into mainstream digital audiences.

We have invested in our infrastructure and acquisitions and placed an emphasis on providing quality content on our websites necessary to drive traffic to our websites. With the exit from our E-Commerce businesses effective December 31, 2018, we believe that we have advanced our transition to becoming a digital media company. We believe that with this action, our business, results of operations and financial condition will be positively impacted in the long term.

Our advertising network matches advertisers with publishers. It offers video, display, mobile and native ads, providing focused promotion for advertisers of products and services while helping websites monetize their visitor traffic. Our advertising exchange platform is being developed to be a trading desk for publishers and advertisers where they will be able to log-in and choose from various features. Publishers will be able to select a variety of advertising units for their video, mobile, display and native advertisements and also have the ability to create their own unique advertising formats. Advertisers will be able to choose where their advertisements will be seen using our filters or by connection directly with the publisher through our platform.

We have grown our business through sales efforts including:

Bright Mountain Media Ad Network Business

While we are currently accessing third party RTB platforms, we are currently working on the development of our own proprietary RTB platform, display and video ad serving software, and header bidding technology, as we move to vertically integrate higher margin software products into our ad network business model. The platform, which is the pre-Alpha stage, is being developed for us by AdsRemedy, a third party consulting firm that provides support services to us.

Our new platform is expected to have a significant impact on our revenues and its capabilities will include:

We believe that the exit from the E-Commerce business will have the following benefits during 2019 and beyond:

S&W Programmatic Business

In August 2019, the Company acquired S&W, a data-driven marketing company which utilizes programmatic solutions for over the top, or “OTT”, video and mobile advertising. Leveraging machine learning data, S&W provides technology for content creators to deploy, distribute, and monetize their content. The technology platform utilized by S&W automation tools consisted of a nano–service based architecture that integrates with multiple partner application program interfaces, or APIs, and automatically executes thousands of different complex and tedious tasks such as optimization, black/white listing, and bid adjustments. S&W’s tools are designed in a generic way so it can integrate new partner APIs within hours. Leveraged for a variety of different tasks, S&W’s algorithms are based on data, buying trends, and forecasts to implement into its ad stack and programmatic capabilities. Its self–service platform enables ease of use for its advertising partners to permit seamless integration into S&W’s marketplace, and its large scale video–serving system cluster downloads and indexes terabytes of video content from multiple sources and redistributes them to a plethora of client–side applications including Roku, Android, Fire–TV, Apple–TV.

MediaHouse Video Content Business

In November 2019, the Company acquired News Distribution Network, a leading data-driven technology solution for the syndication and monetization of contextually relevant, personalized premium video content. Following the acquisition, NDN changed its name to MediaHouse. MediaHouse solves the industry’s supply challenge for premium video by creating hundreds of millions of new video streams and impression opportunities across the most desirable online publishing destinations in the United States. MediaHouse’s code has been embedded in 4,700 premium newspaper, news media, magazine, television and radio sites today, allowing MediaHouse the unique insight into the intersection of how a user is consuming and engaging in a page, video content and advertising.

We plan to leverage the services offered to the existing customers of Bright Mountain Media’s legacy business, S&W, and MediaHouse across the spectrum of the combined customer base.

Our Strategy

Our business strategy focuses on two primary elements:

To implement this strategy, we intend to:

Currently, in addition to our corporate website, www.brightmountainmedia.com, we own the following website properties which we have acquired or developed:

We also partner on six additional websites, havokjournal.com, Article107News.com, 24HourCampFire.com, RetailSalute.com, ChicagoFireWire.com, and yuuut.com, under revenue sharing arrangements.

Intellectual Property

We currently rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our software documentation and other proprietary information. We own various service marks and trademarks, which are registered with the United States Patent and Trademark Office.

MediaHouse

MediaHouse’s native technology powers the developed predictive and personalized digital media platform. This technology enables content matching and automated delivery of hundreds of millions of premium video impressions daily.

MediaHouse’s multi-dimensional data allows for the increase of video consumption and engagement, thereby building the right environment for the user and advertiser with regards to placement, type and length of video content, and video provider. By delivering this personalized experience to the user, MediaHouse is able to increase the effective CPM of a user’s session, the yield to a publisher, and increase KPIs for advertisers.

With attractive audience demographics, quality content, and a brand-safe environment for advertisers, MediaHouse is able to command premium CPMs and is consistently oversold. The Company has developed, and continues to create, technology solutions to automate the process of integrating videos in articles, including suggesting relevant video based on the text of the article. These automated solutions create a highly scalable way to increase the inventory of quality video content across the web.

The Company provides the services through three distinct Players. Players are electronic vehicles which provide video advertisements to be embedded and viewed on publisher websites and OTT platforms. Players can be embedded for either a pre-video roll, mid-point video roll or as a right rail billboard platform. All of our subsidiaries utilize these players with their respective publisher base.

● In-story Video Player – Contextually relevant content added to the story by an internal or external editor. There are 2 preferred ways to get in-story video on the page: A) Perfect Pixel, and B) Digital Media Exchange. Through both Perfect Pixel and the DME, you can search and discover your own video content as well as have access to a rich video library from over 400 different local and national sources. The recommended player behavior is ‘polite autostart’ where the reader gets to decide which video experience is best for them and their preferences are remembered. This alleviates the pressure from the site having to choose (or force) a certain player behavior that may not yield the expected amount of engagement and revenue. On average, with ‘polite autostart’ we see an average increase of 6X in the inventory when compared to click-to-play.

● Promo Player – Requires no effort from the site, this is an editorial content recirculation unit that lives in-between paragraphs, ensures user engagement, monetization and page view lift. Although it looks like a video unit, the Promo Player is composed of stitched images that we dynamically create from an RSS feed of editorial content. Ads are called once the page loads and are served once the unit is in view. Ads are muted and do not float.

● RMM Player - Requires no effort from the site, this is a video advertising unit that typically lives in the rail. It ensures monetization and video exposure. Playlists that feed this player are managed by the NDN content team (or can be managed by the site.) Upon page load, the player plays a 6-second video preview as a teaser, then muted ads are served.

S&W

S&W is a data–driven marketing business which utilizes programmatic solutions for video, mobile, and over the top (“OTT”) advertising. The technology is based on machine learning data which S&W provides a technology platform for content creators to deploy, distribute, and monetize their content. S&W generates approximately 60% of its revenues from its video department, with the balance of approximately 40% from its mobile and display department.

The Video department includes:

● Video Ads Marketplace – S&W’s video platform has over 230 million monthly impressions appearing on 150 markets worldwide with over 2000 apps and web publishers as well as over 1500 ads.txt implemented publishers at any given time. Advertising agencies and brands around the world use S&W’s platform to sell and buy cross–screen video advertising to meet their key performance indicator needs. S&W provides video solutions across in–stream, out–stream, in–text and mobile video ad units and provides support for multiple other video formats with cross–device capabilities;

● Programmatic Ads – S&W’s deep neural networks predict real–time bidding patterns leveraging algorithms to choose the best monetization channels for each user segment and it has terabytes of behavioral data to optimize digital publishing assets. With a focus on high–quality programmatic video advertising for mobile and desktop platforms, S&W manages an in–house programmatic marketplace to combine the largest supply side platforms, or SSPs, demand side platforms, or DSPs, and real–time bidding trade desks, or RTBs. S&W’s data driven mobile and desktop advertisement solutions integrate into the largest inventory sources of premium mobile and display, RTB, private marketplaces, or PMP, deal identifiers, ad automation, and direct campaigns; and

● OTT/CTV – Owning over 20 CTV applications across ROKU, Apple TV, Amazon Fire, and Android TV allows S&W to organically and strategically expand its core ad business. SDK/cross platform porting allows S&W to build and deploy new apps in minutes. Since the release of its apps in August 2018, S&W has over 700,000 installs organically and a content library of over 50,000 videos. S&W’s current focus is on content, distribution and securing preinstalled deals with OTT companies. S&W’s pending release on KPN in the Netherlands is expected to expose it to over 3 million pre–installed users. In addition, S&W partners with technology providers, such as Netrange, which places S&W apps as pre–installed offerings on Sharp, Hisense, TCL, and Philips smart TVs, among other brands.

The Mobile and Display department includes software referred to as AdservME – a RTB SSP/DSP which processes over 10 billion ad requests daily. AdservME supports any ad format available via OpenRtb, such as In app, mobile web, desktop, native and video, and any ad format available via XML such as pop up, extension traffic, search and push notifications. AdservME’s self–serving advertising, or SSA, platform enables direct advertisers of any vertical to achieve their key performance indicators and return on investments.

The Technology Platform includes S&W’s automation tools consisting of a nano–service based architecture that integrates with multiple partner application program interfaces, or APIs, and automatically executes thousands of different complex and tedious tasks such as optimization, black/white listing, and bid adjustments. S&W’s tools are designed in a generic way so new partner APIs can be integrated within hours. Leveraged for a variety of different tasks, S&W’s algorithms are based on data, buying trends, and forecasts to implement into its ad stack and programmatic capabilities. Its self–service platform enables ease of use for its advertising partners to permit seamless integration into S&W’s marketplace, and its large scale video–serving system cluster downloads and indexes terabytes of video content from multiple sources and redistributes them to a plethora of client–side applications including Roku, Android, Fire–TV, Apple–TV.

Bright Mountain

We currently rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our software documentation and other proprietary information. We own various service marks and trademarks, which are registered with the United States Patent and Trademark Office including the following:

“THE BRIGHT NETWORK” Design and Service Mark;

“THEBRIGHT.COM” Logo Trade Mark and Service Mark;

“BRIGHT MOUNTAIN” Service Mark.

In addition to www.brightmountainmedia.com and www.thebright.com, we own multiple domain names that we may or may not operate in the future.

The exit from all of our E-commerce businesses at December 31, 2018 allows Bright Mountain to concentrate all of our resources to our best and fastest growing business opportunities. The Bright Mountain Media business strategy focuses on two primary elements:

To implement this strategy, we intend to:

Currently, in addition to our corporate website, www.brightmountainmedia.com, we own the following website properties which we have acquired or developed:

We also partner on six additional websites, havokjournal.com, Article107News.com, 24HourCampFire.com, Retail Salute, ChicagoFireWire.com, and yuuut.com, under revenue sharing arrangements.

Discontinued Operations

Historically we generated revenues from two segments, our advertising segment and our product sales segment. Revenues from the product sales segment included revenues from two of our websites that operate as e-commerce platforms, including Bright Watches and Black Helmet, as well as Bright Watches’ retail location. During 2018 we began to de-emphasize our product sales segment as we placed more emphasis on our advertising segment. Management, prior to December 31, 2018, with the appropriate level of authority, determined to discontinue the operations of Black Helmet and Bright Watches effective December 31, 2018.

The decision to exit all components of our product segment have resulted in these businesses being accounted for as discontinued operations. We recorded a loss, net of income taxes, of $136,734 in 2019 for the discontinued operations.

During 2019, we are aggressively marketing the remaining Bright Watches’ inventory in an effort to liquidate such inventory as quickly as possible. In addition, in March 2019 we sold the assets which were used in our Black Helmet apparel E-Commerce business to an unaffiliated third party for $175,000, of which $20,000 was paid at closing and the balance is payable under the terms of a promissory note in the principal amount of $155,000 and bearing interest at 15% per annum. The note is secured by a guarantee of the principal of the purchaser.

Technology

Our top technical priority is the fast and reliable delivery of pages and ads to our users. Our systems are designed to handle traffic and network growth. We rely on multiple tiers of redundancy/failover and third-party content delivery network to achieve our goal of 24 hours, seven-days-a-week Website uptime. Regular automated backups protect the integrity of our data. Our servers are continuously monitored by numerous third-party and open-source monitoring and alerting tools.

Competition

The internet and industries that operate through it are intensely competitive. We compete with other companies that have significantly greater financial, technical, marketing, and distribution resources. Our competitors include Verizon Media, AppNexus, The Maven, and Praetorian Digital.

Most of our competitors have significantly greater financial, technical, marketing and distribution resources as well as greater experience in the industry than we have. There are no assurances we will ever be able to effectively compete in our marketplace. Our websites, ad technology, and monetization solutions may not be competitive with other technologies and/or our websites, ad technology, and monetization solutions may be displaced by newer technology. If this happens, our sales and revenues will likely decline. In addition, our current and potential competitors may establish cooperative relationships with larger companies, to gain access to greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.

Customers

Our customers are various advertisers, advertising agencies, and advertising service organizations all seeking to have their respective advertisements placed on one of the many platforms serviced by the Company. During 2019, two customers represented approximately 21.7% of the total revenues for the company.

Government regulation

Interest-based advertising, or the use of data to draw inferences about a user’s interests and deliver relevant advertising to that user, has come under increasing scrutiny by legislative, regulatory, and self- regulatory bodies in the United States and abroad that focus on consumer protection or data privacy. In particular, this scrutiny has focused on the use of cookies and other technology to collect or aggregate information about Internet users’ online browsing activity. Because we, and our clients, rely upon large volumes of such data collected primarily through cookies, it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices, including providing consumers with notice of the types of data we collect and how we use that data to provide our services.

We provide this notice through our privacy policy, which can be found on our website at http://www.BrightMountainMedia.com. As stated in our privacy policy, our technology platform does not collect information, such as name, address, or phone number, that can be used directly to identify a real person, and we take steps not to collect and store such personally identifiable information from any source. Instead, we rely on IP addresses, geo-location information, and persistent identifiers about Internet users and do not attempt to associate this data with other data that can be used to identify real people. This type of information is considered personal data in some jurisdictions or otherwise may be the subject of future legislation or regulation. The definition of personal data varies by country, and continues to evolve in ways that may require us to adapt our practices to avoid violating laws or regulations related to the collection, storage, and use of consumer data. For example, some European countries consider IP addresses or unique device identifiers to be personal data subject to heightened legal and regulatory requirements. As a result, our technology platform and business practices must be assessed regularly in each country in which we do business.

There are also a number of specific laws and regulations governing the collection and use of certain types of consumer data relevant to our business. For example, the Children’s Online Privacy Protection Act (“COPPA”), imposes restrictions on the collection and use of data about users of child-directed websites. To comply with COPPA, we have taken various steps to implement a system that: (i) flags seller-identified child-directed sites to buyers, (ii) limits advertisers’ ability to serve interest-based advertisements, (iii) helps limit the types of information that our advertisers have access to when placing advertisements on child- directed sites, and (iv) limits the data that we collect and use on such child-directed sites.

The use and transfer of personal data in EU member states is currently governed under the EU Data Protection Directive, which generally prohibits the transfer of personal data of EU subjects outside of the EU, unless the party exporting the data from the EU implements a compliance mechanism designed to ensure that the receiving party will adequately protect such data. We have relied on alternative compliance measures, which are complex, which may be subject to legal challenge, and which directly subject us to regulatory enforcement by data protection authorities located in the European Union. By relying on these alternative compliance measures, we risk becoming the subject of regulatory investigations in any of the individual jurisdictions in which we operate. Each such investigation could cost us significant time and resources, and could potentially result in fines, criminal prosecution, or other penalties. Further, some of these alternative compliance measures are facing legal challenges, which, if successful, could invalidate the alternative compliance measures that we currently rely on. It may take us significant time, resources, and effort to restructure our business and/or rely on another legally sufficient compliance measure. In addition, the European Union has finalized the General Data Protection Regulation (“GDPR”), which will become effective in May 2018. The GDPR sets out higher potential liabilities for certain data protection violations, as well as a greater compliance burden for us in the course of delivering our solution in Europe; among other requirements, the GDPR obligates companies that process large amounts of personal data about EU residents to implement a number of formal processes and policies reviewing and documenting the privacy implications of the development, acquisition, or use of all new products, technologies, or types of data. Further, the European Union is expected to replace the EU Cookie Directive governing the use of technologies to collect consumer information with the ePrivacy Regulation. The ePrivacy Regulation propose burdensome requirements around obtaining consent, and impose fines for violations that are materially higher than those imposed under the Cookie Directive.

The UK’s decision to leave the European Union may add cost and complexity to our compliance efforts. If UK and EU privacy and data protection laws and regulations diverge, we will be required to implement alternative EU compliance measures and adapt separately to any new UK requirements.

Additionally, our compliance with our privacy policy and our general consumer privacy practices are also subject to review by the Federal Trade Commission, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations therein. Certain State Attorneys General may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. Outside of the United States, our privacy and data practices are subject to regulation by data protection authorities and other regulators in the countries in which we do business.

Beyond laws and regulations, we are also members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the Internet Advertising Bureau (“IAB”), the Digital Advertising Alliance, the Network Advertising Initiative, and the Europe Interactive Digital Advertising Alliance. Under the requirements of these self-regulatory bodies, in addition to other compliance obligations, we provide consumers with notice via our privacy policy about our use of cookies and other technologies to collect consumer data, and of our collection and use of consumer data to deliver interest-based advertisements. We also allow consumers to opt-out from the use of data we collect for purposes of interest-based advertising through a mechanism on our website, linked through our privacy policy as well as through portals maintained by some of these self-regulatory bodies. Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties, and/or public censure (which could in turn cause reputational harm). Additionally, some of these self-regulatory bodies might refer violations of their requirements to the Federal Trade Commission or other regulatory bodies.

Employees

At May 14, 2020 we had fifty-four full-time and one part-time employees. We also utilize the services of eleven independent contractors who provide content, operational and website services.

History of our company

We were organized as a Florida corporation in 2010 under the name Speyer Investment Advisors, Inc. In 2012 we changed our name to Speyer Investment Research, Inc. In 2014, as we began building our brand we changed our name to Bright Mountain Holdings, Inc. and in 2015 we changed our name to Bright Mountain Acquisition Corporation and then to Bright Mountain Media, Inc. as we began implementing our strategy to transform into a digital media company.

Additional information concerning the terms of material business combinations can be found in Note 1 and Note 4 of the notes to our audited consolidated financial statements appearing later in this report.

ITEM 1A. RISK FACTORS.

Before you invest in our securities, you should be aware that there are various risks in making any such investment. You should consider carefully these risk factors, together with all of the other information included in this report before you decide to purchase any of our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected and you could lose your entire investment in our company.

RISKS RELATED TO OUR COMPANY

WE HAVE A HISTORY OF LOSSES.

We incurred net losses of $3,402,023 and $5,224,064, respectively, for 2019 and 2018, which includes losses of $136,734 and $1,092,750, respectively, for discontinued operations. At December 31, 2019 we had an accumulated deficit of $20,444,989. While our revenues increased 303.2% for 2019 from 2018, our gross profit margin decreased from 20.6% in 2018 to 15.1% in 2019. In addition, in 2019 our selling, general and administrative expenses, or “SG&A”, increased 128.9% in 2019 from 2018. We anticipate that our SG&A will continue to increase in 2020 and beyond, and we may continue to incur losses in future periods until such time, if ever, as we are successful in significantly increasing our revenues and gross profit to a level to fund our operating expenses. There are no assurances that we will be able to significantly increase our revenues and gross profit to a level which supports profitable operations and provides sufficient funds to pay our operating expenses and other obligations as they become due.

WE ARE DEPENDENT UPON SALES OF EQUITY SECURITIES AND LOANS FROM OUR CHIEF EXECUTIVE OFFICER TO PROVIDE OPERATING CAPITAL.

We do not generate sufficient gross profit to pay our operating expenses and we reported losses from continuing operations of $6,812,563 and $4,131,314 in 2019 and 2018, respectively. Historically we have been dependent upon the purchase of equity securities or convertible notes by Mr. Kip Speyer, our Chief Executive Officer, to provide operating capital. During 2019 and 2018 he invested $588,000 and $530,000, respectively, in our company. During 2019 and 2018 we paid him $180,931 and $281,882 respectively, in dividend and interest payments on these investments. In addition, during 2019 we raised $1,644,480 through the sale of our equity securities in private placements, and $600,000 through the sale of our Series A-1 preferred stock. Between January 2020 and May 2020, we raised $ 3,001,250 through the sale of our equity securities in private placements. After payment of the cash commissions of $300,125 and non-accountable expense allowance of $150,063 to Spartan Capital, a broker dealer and member of FINRA who served as placement agent in the offerings, we used $890,188 of the gross proceeds of $3,001,250 to pay Spartan $590,063 in fees, $300,125 in commissions, and are using the balance for working capital, including to fund our operating loss. While we expect to seek to raise additional working capital through the sale of our securities in private or public transactions, we are not a party to any binding agreements and there are no assurances we will be able to raise any additional third party capital. Mr. Speyer is also under no obligation to continue to lend us money or purchase equity securities from us. If we are not able to raise sufficient additional working capital as needed, absent a significant increase in our revenues we may be unable to grow our company.

THE COMPANY’S ECONOMIC PERFORMANCE HAS RAISED SUBSTANTIAL DOUBTS AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.

Our consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced substantial and recurring losses from operations, which losses have caused an accumulated deficit of $20,444,989 at December 31, 2019. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

IF WE FAIL TO DETECT ADVERTISING FRAUD OR OTHER ACTIONS THAT IMPACT OUR ADVERTISING CAMPAIGN PERFORMANCE, WE COULD HARM OUR REPUTATION WITH ADVERTISERS OR AGENCIES, WHICH WOULD CAUSE OUR REVENUE AND BUSINESS TO SUFFER.

Once established, the Bright Mountain Media Ad Network Business will rely on our ability to deliver successful and effective advertising campaigns. Some of those campaigns may experience fraudulent and other invalid impressions, clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by machines that are designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given advertising campaign and could harm our reputation. It may be difficult for us to detect fraudulent or malicious activity on websites where we do not own content and rely in part on our customers to control such activity. If we fail to detect or prevent fraudulent or other malicious activity, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund or future credit demands or withdrawal of future business.

IF ADVERTISING ON THE INTERNET LOSES ITS APPEAL, OUR REVENUE COULD DECLINE.

Our business model may not continue to be effective in the future for a number of reasons, including:

If the number of companies who purchase online advertising and promotional services from us does not grow, we may experience difficulty in attracting publishers, and our revenue could decline.

OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO EFFECTIVELY EXPAND AND MANAGE OUR RELATIONSHIPS WITH OUR PUBLISHERS.

Outside of our owned and operated websites, we are dependent upon our publishing partners to provide the media which we sell. We depend on these publishers to make their respective media inventories available to us to use in connection with our campaigns that we manage, create or market. Our growth depends, in part, on our ability to expand and maintain our publisher relationships within our network and to have access to new sources of media inventory such as new partner websites and Facebook pages that offer attractive demographics, innovative and quality content and growing Web user traffic volume. Our ability to attract new publishers to our networks and to retain Web publishers currently in our networks will depend on various factors, some of which are beyond our control. These factors include, but are not limited to, our ability to introduce new and innovative products and services, our pricing policies, and the cost-efficiency to Web publishers of outsourcing their advertising sales. In addition, the number of competing intermediaries that purchase media inventory from Web publishers continues to increase. In the event we are not able to maintain effective relationships with our publishers, our ability to distribute our advertising campaigns will be greatly hindered which will reduce the value of our services and adversely impact our results of operations in future periods.

WE ARE DEPENDENT ON REVENUES FROM A LIMITED NUMBER OF CUSTOMERS.

For 2019 revenues from one large customer accounted for approximately 13% of our revenues. The loss of this customer could have a material adverse impact on our results of operations in future periods. During 2019, the Company acquired both S&W and MediaHouse, each with their own customer base. Historically, the average customer life for S&W and MediaHouse are 2.5 and 4.0 years, respectively.

WE ARE SUBJECT TO SEASONAL FLUCTUATIONS IN OUR REVENUES IN FUTURE PERIODS.

Typically advertising technology companies report a material portion of their revenues during the fourth calendar quarter as a result of holiday related ad spend. Because of seasonal fluctuations, there can be no assurance that the results of any particular quarter will be indicative of results for the full year or for future years.

THE ACQUISITION OF NEW BUSINESSES IS COSTLY AND THESE ACQUISITIONS MAY NOT ENHANCE OUR FINANCIAL CONDITION.

A significant element of our growth strategy has been to acquire companies which complement our business. The process to undertake a potential acquisition can be time-consuming and costly. We have and continue to expect to expend significant resources to undertake business, financial and legal due diligence on our potential acquisition targets and there is no guarantee that we will acquire the company after completing due diligence. The process of identifying and consummating an acquisition could result in the use of substantial amounts of cash and exposure to undisclosed or potential liabilities of acquired companies. In some instances, we may be required to provide historic audited financial statements for up to two years for acquisition targets in compliance with the rules and regulations of the SEC. The necessity to provide these audited financial statements will increase the costs to us of consummating an acquisition or, if it is determined that the target company cannot obtain the requisite audited financials, we may be unable to pursue an acquisition which might otherwise be accretive to our business. In addition, even if we are successful in acquiring additional companies, there are no assurances that the operations of these businesses will enhance our future financial condition. To the extent that a business we acquire does not meet the performance criteria used to establish a purchase price, some or all of the goodwill related to that acquisition could be charged against our future earnings, if any.

ONLINE SECURITY BREACHES COULD HARM OUR BUSINESS.

User confidence in our websites depends on maintaining strong security features. While we are unaware of any security breaches to date, experienced programmers or “hackers” could penetrate sectors of our systems. Because a hacker who is able to penetrate network security could misappropriate proprietary information or cause interruptions in our services, we may have to expend significant capital and resources to protect against or to alleviate problems caused by hackers. Additionally, we may not have a timely remedy against a hacker who is able to penetrate our network security. Such security breaches could materially affect our operations, damage our reputation and expose us to risk of loss or litigation. In addition, the transmission of computer viruses resulting from hackers or otherwise could expose us to significant liability. Our insurance policies may not be adequate to reimburse us for losses caused by security breaches. We also face risks associated with security breaches affecting third parties with whom we have relationships.

WE MUST PROMOTE THE BRIGHT MOUNTAIN BRAND TO ATTRACT AND RETAIN USERS, ADVERTISERS AND STRATEGIC PARTNERS.

The success of the Bright Mountain brand depends largely on our ability to provide high quality content which is of interest to our users. If our users do not perceive our existing content to be of high quality, or if we introduce new content or enter into new business ventures that are not favorably perceived by users, we may not be successful in promoting and maintaining the Bright Mountain brand. Any change in the focus of our operations creates a risk of diluting our brand, confusing users and decreasing the value of our website traffic base to advertisers. If we are unable to maintain or grow the Bright Mountain brand, our business would be severely harmed.

WE MAY EXPEND SIGNIFICANT RESOURCES TO PROTECT OUR CONTENT OR TO DEFEND CLAIMS OF INFRINGEMENT BY THIRD PARTIES, AND IF WE ARE NOT SUCCESSFUL WE MAY LOSE RIGHTS TO USE SIGNIFICANT MATERIAL OR BE REQUIRED TO PAY SIGNIFICANT FEES.

Our success and ability to compete are dependent on our proprietary content. We rely exclusively on copyright law to protect our content. While we actively take steps to protect our proprietary rights, these steps may not be adequate to prevent the infringement or misappropriation of our content, which could severely harm our business. In addition to content written by our employees, we also acquire content from various freelance providers and other third-party content providers. While we attempt to ensure that such content may be freely used by us, other parties may assert claims of infringement against us relating to such content. We may need to obtain licenses from others to refine, develop, market and deliver new content or services. We may not be able to obtain any such licenses on commercially reasonable terms or at all or rights granted pursuant to any licenses may not be valid and enforceable.

FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR CLAIMS BY OTHERS THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS COULD SUBSTANTIALLY HARM OUR BUSINESS.

Our website domain names are crucial to our business. However, as with phone numbers, we do not have and cannot acquire any property rights in an internet address. The regulation of domain names in the United States and in other countries is also subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business. We also rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated. Others may independently discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights. Therefore, in certain jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third party use, which could adversely affect our ability to compete.

DEVELOPING AND IMPLEMENTING NEW AND UPDATED APPLICATIONS, FEATURES AND SERVICES FOR OUR WEBSITES MAY BE MORE DIFFICULT THAN EXPECTED, MAY TAKE LONGER AND COST MORE THAN EXPECTED AND MAY NOT RESULT IN SUFFICIENT INCREASES IN REVENUE TO JUSTIFY THE COSTS.

Attracting and retaining users of our websites requires us to continue to provide quality, targeted content and to continue to develop new and updated applications, features and services for our websites. If we are unable to do so on a timely basis or if we are unable to implement new applications, features and services without disruption to our existing ones, our ability to continue to expand our website traffic will be in jeopardy. The costs of development of these enhancements may negatively impact our ability to achieve profitability. There can be no assurance that the revenue opportunities from expanded website content, or updated technologies, applications, features or services will justify the amounts ultimately spent by us.

OUR TECHNOLOGY DEVELOPMENT EFFORTS MAY NOT BE SUCCESSFUL IN IMPROVING THE FUNCTIONALITY OF OUR NETWORK, WHICH COULD RESULT IN REDUCED TRAFFIC ON OUR WEBSITES.

If our websites do not work as intended, or if we are unable to upgrade the functionality of our websites as needed to keep up with the rapid evolution of technology for content delivery, our websites may not operate properly, which could harm our business. Additionally, software product design, development and enhancement involve creativity, expense and the use of new development tools and learning processes.

Delays in software development processes are common, as are project failures, and either factor could harm our business.

OUR ABILITY TO DELIVER OUR CONTENT DEPENDS UPON THE QUALITY, AVAILABILITY, POLICIES AND PRICES OF CERTAIN THIRD-PARTY SERVICE PROVIDERS.

We rely on third parties to provide website hosting services. In certain instances, we rely on a single service provider for some of these services. In the event the provider were to terminate our relationship or stop providing these services, our ability to operate our websites could be impaired. Our ability to address or mitigate these risks may be limited. The failure of all or part of our website hosting services could result in a loss of access to our websites which would harm our results of operations.

WE MAY BE HELD LIABLE FOR CONTENT, BLOGS OR THIRD PARTY LINKS ON OUR WEBSITE OR CONTENT DISTRIBUTED TO THIRD PARTIES.

As a publisher and distributor of content over the internet, including blogs which appear on our websites and links to third-party websites that may be accessible through our websites, or content that includes links or references to a third-party’s website, we face potential liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature, content or ownership of the material that is published on or distributed from our websites. These types of claims have been brought, sometimes successfully, against online services, websites and print publications in the past. Other claims may be based on errors or false or misleading information provided on linked websites, including information deemed to constitute professional advice such as legal, medical, financial or investment advice. Other claims may be based on links to sexually explicit websites. Although we carry general liability insurance, our insurance may not be adequate to indemnify us for all liabilities imposed. Any liability that is not covered by our insurance or is in excess of our insurance coverage could severely harm our financial condition and business. Implementing measures to reduce our exposure to these forms of liability may require us to spend substantial resources and limit the attractiveness of our websites to users.

OUR MANAGEMENT MAY BE UNABLE TO EFFECTIVELY INTEGRATE OUR ACQUISITIONS AND TO MANAGE OUR GROWTH AND WE MAY BE UNABLE TO FULLY REALIZE ANY ANTICIPATED BENEFITS OF THESE ACQUISITIONS.

We are subject to various risks associated with our growth strategy, including the risk that we will be unable to identify and recruit suitable acquisition candidates in the future or to integrate and manage the acquired companies. Acquired companies’ histories, the geographical location, business models and business cultures will be different from ours in many respects. Successful integration of these acquisitions is subject to a number of challenges, including:

There can be no assurance that our efforts to integrate the operations of any acquired assets or companies will be successful, that we can manage our growth or that the anticipated benefits of these proposed acquisitions will be fully realized.

WE DEPEND ON THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER AND OUR CHIEF OPERATING OFFICER OF OUR BRIGHT MOUNTAIN, LLC DIVISION. THE LOSS OF EITHER OF THEIR SERVICES COULD HARM OUR ABILITY TO OPERATE OUR BUSINESS IN FUTURE PERIODS.

Our success largely depends on the efforts, reputation and abilities of W. Kip Speyer, our Chief Executive Officer, and Todd F. Speyer, Chief Operating Officer of our Bright Mountain, LLC division. While we are a party to an employment agreement with Mr. Kip Speyer and do not expect to lose his services in the foreseeable future, the loss of the services of Mr. Kip Speyer could materially harm our business and operations in future periods. We are not a party to an employment agreement with Mr. Todd Speyer, his son. While we do not expect to lose the services of Mr. Todd Speyer in the foreseeable future, if he should choose to leave our company our business and operations could be harmed until such time as we were able to engage a suitable replacement for him.

WE MUST HIRE, INTEGRATE AND/OR RETAIN QUALIFIED PERSONNEL TO SUPPORT OUR EXPECTED BUSINESS EXPANSION.

Our success also depends on our ability to attract, train and retain qualified personnel. In addition, because our users must perceive the content of our websites as having been created by credible and notable sources, our success also depends on the name recognition and reputation of our editorial staff. Competition for qualified personnel is intense and we may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. If we fail to attract and retain qualified personnel, our business will suffer, and we may be unable to timely meet our reporting obligations under Federal securities laws.

WE DELIVER ADVERTISEMENTS TO USERS FROM THIRD-PARTY AD NETWORKS WHICH EXPOSES OUR USERS TO CONTENT AND FUNCTIONALITY OVER WHICH WE DO NOT HAVE ULTIMATE CONTROL.

We display pay-per-click, banner, cost per acquisition “CPM”, direct, and other forms of advertisements to users that come from third-party ad networks. We do not control the content and functionality of such third-party advertisements and, while we provide guidelines as to what types of advertisements are acceptable, there can be no assurance that such advertisements will not contain content or functionality that is harmful to users. Our inability to monitor and control what types of advertisements get displayed to users could have a material adverse effect on our business, financial condition, and results of operations.

OUR SERVICES MAY BE INTERRUPTED IF WE EXPERIENCE PROBLEMS WITH OUR NETWORK INFRASTRUCTURE.

The performance of our network infrastructure is critical to our business and reputation. Because our services are delivered solely through the internet, our network infrastructure could be disrupted by a number of factors, including, but not limited to:

If our services were to be interrupted, it could cause loss of users, customers, and business partners, which could have a material adverse.

OUR SYSTEMS MAY FAIL DUE TO NATURAL DISASTERS, TELECOMMUNICATIONS FAILURES AND OTHER EVENTS, ANY OF WHICH WOULD LIMIT USER TRAFFIC.

Our websites are hosted by third party providers. Any disruption of the computing platform at these third party providers could result in a service outage. Fire, floods, earthquakes, power loss, telecommunications failures, break-ins, supplier failure to meet commitments, and similar events could damage these systems and cause interruptions in the hosting of our websites. Computer viruses, electronic break-ins or other similar disruptive problems could cause users to stop visiting our website and could cause advertisers to terminate any agreements with us. In addition, we could lose advertising revenues during these interruptions and user satisfaction could be negatively impacted if the service is slow or unavailable. If any of these circumstances occurred, our business could be harmed. Our insurance policies may not adequately compensate us for losses that may occur due to any failures of or interruptions in our systems. We do not presently have a formal disaster recovery plan.

Our websites must accommodate high volumes of traffic and deliver frequently updated information. While we have not experienced any systems failures to date, it is possible that we may experience systems failures in the future and that such failures could harm our business. In addition, our users depend on internet service providers, online service providers and other website operators for access to our websites. Many of these providers and operators have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems. Any of these system failures could harm our business.

WE ARE UNABLE TO PREDICT THE IMPACT OF COVID-19 ON OUR BUSINESS.

Because our company operates in the digital advertising industry, unlike a brick and mortar-based company, predicting the impact of the coronavirus pandemic on our company is difficult at this early stage in the viruses US expansion. Thus far, we have experienced a pause in marketing campaigns by a limited number of clients and a potential impact from a number of suppliers. Our office in Hertsliya, Israel is closed due to the stay at home order in place for Israeli residents. We closed our office in Boca Raton, Florida and Atlanta, Georgia and have issued a work from home policy to protect our employees and their families from potential virus transmission among co- workers. Generally, marketing budgets tend to decline in times of a recession. We have started to curtail expenses, including travel and we have issued a work from home policy to protect our employees and their families from virus transmission associated with co-workers. We are beginning to experience interruptions in our daily operations, including financial reporting process, as a result of these policies. We expect the revenue impact on our industry could vary dramatically by vertical. For example, we would expect to see less advertising demand from the travel, leisure and hospitality verticals and more advertising demand in the health, technology, insurance and pharmaceutical verticals. We also maintain long-standing relationships with Yahoo!, Google and others that provide access to hundreds of thousands of advertisers from which most of our Real Time Bidding and digital publishing revenue originates. Any adverse impact on the operations of those companies would have a correspondingly adverse impact on our revenues in future periods. We will continue to assess the impact of the COVID-19 pandemic on our company, however, at this time we are unable to predict all possible impacts on our company, our operations and our revenues. Should revenues turn downwards both quickly and dramatically, we would not be in a strong position to offset equally as quickly with expenses.

PRIVACY CONCERNS COULD IMPAIR OUR BUSINESS.

We have a policy against using personally identifiable information obtained from users of our websites without the user’s permission. In the past, the Federal Trade Commission has investigated companies that have used personally identifiable information without permission or in violation of a stated privacy policy. If we use personal information without permission or in violation of our policy, we may face potential liability for invasion of privacy for compiling and providing information to our corporate customers and electronic commerce merchants. In addition, legislative or regulatory requirements may heighten these concerns if businesses must notify internet users that the data may be used by marketing entities to direct product promotion and advertising to the user. Other countries and political entities, such as the European Union, have adopted such legislation or regulatory requirements. The United States may adopt similar legislation or regulatory requirements in the future. If consumer privacy concerns are not adequately addressed, our business, financial condition and results of operations could be materially harmed.

WE ARE SUBJECT TO A NUMBER OF REGULATORY RISKS. ANY FAILURE TO COMPLY WITH THE VARIOUS REGULATIONS COULD ADVERSELY IMPACT OUR BUSINESS.

We are subject to a number of domestic and, to the extent our operations are conducted outside the U.S., foreign laws and regulations that affect companies conducting business on the internet and through other electronic means, many of which are still evolving and could be interpreted in ways that could harm our business. U.S. and foreign regulations and laws potentially affecting our business are evolving frequently. We currently have not developed our internal compliance program nor do we have policies in place to monitor compliance. Instead, we rely on the policies of our publishing partners. If we are unable to identify all regulations to which our business is subject and implement effective means of compliance, we could be subject to enforcement actions, lawsuits and penalties, including but not limited to fines and other monetary liability or injunction that could prevent us from operating our business or certain aspects of our business. In addition, compliance with the regulations to which we are subject now or in the future may require changes to our products or services, restrict or impose additional costs upon the conduct of our business or cause users to abandon material aspects of our services. Any such action could have a material adverse effect on our business, results of operations and financial condition.

LITIGATION IS BOTH COSTLY AND TIME CONSUMING AND THERE IS NO CERTAINTY OF A FAVORABLE RESULT.

We are presently involved in litigation which is described in Item 3 of this report. This litigation is both costly and time consuming and has resulted in the diversion of management time and resources. While we believe that all or a portion of our costs are covered by insurance, there are no assurances that they are covered nor are there assurances that we will prevail in the litigation.

RISKS RELATED TO THE OWNERSHIP OF OUR SECURITIES

WE HAVE MATERIAL WEAKNESSES IN OUR DISCLOSURE CONTROLS AND OUR INTERNAL CONTROL OVER FINANCIAL REPORTING. IF WE FAIL TO REMEDIATE ANY MATERIAL WEAKNESSES OR IF WE FAIL TO ESTABLISH AND MAINTAIN EFFECTIVE CONTROL OVER FINANCIAL REPORTING, OUR ABILITY TO ACCURATELY AND TIMELY REPORT OUR FINANCIAL RESULTS COULD BE ADVERSELY AFFECTED.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Historically we have reported material weaknesses in our disclosure controls and internal control over financial reporting. These material weaknesses resulted in our failure to timely file our Quarterly Report on Form 10-Q. As required by the rules and regulations of the SEC, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. Based on this assessment, and as described later in this report, our management concluded that as of December 31, 2019, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP as a result of material weaknesses. These continuing material weaknesses in our internal control over financial reporting also resulted in a material weakness in our disclosure controls. While we have added a certified public accountant to our finance department, our failure to remediate the material weaknesses or the identification of additional material weaknesses in the future could adversely affect our ability to report financial information, including our filing of quarterly or annual reports with the SEC on a timely and accurate basis. Moreover, our failure to remediate the material weaknesses identified above or the identification of additional material weaknesses could prohibit us from producing timely and accurate financial statements, which may adversely affect the market price of shares of our common stock. Please see Item 9A. appearing later in this report.

THE AMOUNT OF WORKING CAPITAL WE HAVE AVAILABLE COULD BE ADVERSELY IMPACTED BY THE AMOUNT OF CASH DIVIDENDS WE PAY AFFILATES.

At May 14, 2020, we have outstanding two series of preferred stock which pays cash dividends which are owned by Mr. W. Kip Speyer, our CEO, and Mr. Richard Rogers, a former member of our board of directors. During 2019 we paid cash dividends of $185,931 to these affiliates. These dividend amounts are in addition to the $8,862 of interest payments we made to Mr. Speyer under the terms of convertible promissory notes which were exchanged for one of the series of outstanding preferred stock in November 2019. The payment of these cash dividends and interest payments reduces the amount of capital we have available to devote to the growth of our company. For additional information on these series of preferred stock please see Note 10 to the notes to our audited consolidated financial statements appearing later in this report.

WE HAVE OUTSTANDING PREFERRED STOCK, CONVERTIBLE NOTES, OPTIONS AND WARRANTS TO PURCHASE APPROXIMATELY 43% OF OUR CURRENTLY OUTSTANDING COMMON STOCK.

At May 14, 2020 we had 108,576,295 shares of our common stock outstanding together with outstanding preferred stock, convertible notes, options and warrants to purchase an aggregate of 33,173,464 shares of common stock. The automatic conversion of the various series of preferred stock and the possible exercise of the warrants and/or options on a cash basis will increase by approximately 30.8% the number of shares of our outstanding common stock, which will have a dilutive effect on our existing shareholders.

CERTAIN OF OUR OUTSTANDING WARRANTS CONTAIN CASHLESS EXERCISE PROVISIONS WHICH MEANS WE WILL NOT RECEIVE ANY CASH PROCEEDS UPON THEIR EXERCISE.

At May 14, 2020 we had common stock warrants outstanding to purchase an aggregate of 24,203,360 shares of our common stock with an exercise price ranging from $0.50 to $1.00 per share, of which 1,500,000 warrants exercisable at $0.65 per share which are held by Spartan Capital are exercisable on a cashless basis. This means that the holder, rather than paying the exercise price in cash, may surrender a number of warrants equal to the exercise price of the warrants being exercised. It is possible that the warrant holders will use the cashless exercise feature. In that event, it will deprive us of approximately $975,000 of additional capital which might otherwise be obtained if the warrants were exercised on a cash basis.

SOME PROVISIONS OF OUR CHARTER DOCUMENTS AND FLORIDA LAW MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD DISCOURAGE AN ACQUISITION OF US BY OTHERS, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR SHAREHOLDERS AND MAY PREVENT ATTEMPTS BY OUR SHAREHOLDERS TO REPLACE OR REMOVE OUR CURRENT MANAGEMENT.

Provisions in our amended and restated articles of incorporation and amended and restated bylaws, as well as provisions of Florida law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our shareholders, or remove our current management. These include provisions that:

These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, who are responsible for appointing the members of our management. Section 607.0902 of the Florida Business Corporation Act provides provisions which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our shareholders. As permitted under Florida law, we have elected not to be governed by this statute. Any provision of our amended and restated articles of incorporation, amended and restated bylaws or Florida law that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares of common stock or warrants, and could also affect the price that some investors are willing to pay for our shares of common stock or warrants.

OUR COMPANY HAS A CONCENTRATION OF STOCK OWNERSHIP AND CONTROL, WHICH MAY HAVE THE EFFECT OF DELAYING, PREVENTING, OR DETERRING A CHANGE OF CONTROL.

Our common stock ownership is highly concentrated. As of May 14, 2020, Mr. W. Kip Speyer, our Chief Executive Officer and Chairman of the Board, together with members of our board of directors and a principal shareholder, beneficially owns approximately 28.9% of our total outstanding shares of common stock. As a result of the concentrated ownership of the stock, Mr. Speyer and our Board may be able to control all matters requiring shareholder approval, including the election of directors and approval of mergers and other significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company. It could also deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and it may affect the market price of our common stock.

WE DO NOT KNOW WHETHER AN ACTIVE, LIQUID AND ORDERLY TRADING MARKET WILL DEVELOP FOR OUR COMMON STOCK AND AS A RESULT IT MAY BE DIFFICULT FOR YOU TO SELL YOUR SHARES OF OUR COMMON STOCK.

Our common stock is quoted on the OTCQB Tier of the OTC Markets and is thinly traded. An active trading market in our common stock may never develop or, if developed, sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into business combinations with other companies by using our shares of common stock as consideration. The market price of our common stock may be volatile, and you could lose all or part of your investment. Please see Part II Item 5 for discussion on common stock dividends.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable to a smaller reporting company.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company leases its corporate offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487 under a long-term non-cancellable lease agreement expiring on October 31, 2021. The lease terms require base rent payments of approximately $7,260 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.

ITEM 3. LEGAL PROCEEDINGS.

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.

In connection with the matters which lead to our termination for cause of former officers of our Daily Engage Media subsidiary, in July 2018 we filed a Verified Complaint for injunctive relief and damages against Messrs. Harry Pagoulatos and George Rezitis in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida (case number 502018CA008972) alleging their failure, among other things, to provide us with certain login codes and passwords as well as reporting other current information about Daily Engage Media’s business. That matter was removed to the Southern District of Florida, United States District Court and ultimately stayed and closed pending a determination of jurisdiction by the pending New Jersey action described below.

In July of 2018, Messrs. Pagoulatos and Rezitis, along with a third party who had been a minority owner in Daily Engage Media 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. This Motion to Dismiss has been pending and ripe for a decision since October 2018. At the appropriate juncture, we also intend to serve a Rule 11 Motion for Sanctions based upon the fact that the Complaint contains frivolous arguments or arguments with no evidentiary support.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable to our company.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is quoted on the OTCQB Tier of the OTC Markets under the symbol “BMTM.” The last sale price of our common stock as reported on the OTCQB on May 14, 2019 was $1.70 per share. As of May 14, 2020, there were approximately 389 record owners of our common stock.

Dividend Policy

We have never paid cash dividends on our common stock. Payment of dividends will be within the sole discretion of our board of directors and will depend, among other factors, upon our earnings, capital requirements and our operating and financial condition. In addition, under Florida law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Florida statutes, or if there is no such surplus, out of our net profits for the year in which the dividend is declared and/or the preceding year. If, however, the capital of our company computed in accordance with the relevant Florida statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits any dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired.

Recent sales of unregistered securities

In November 2018 we borrowed an aggregate of $80,000 from Mr. Kip Speyer under the terms of five year convertible promissory notes. The notes, which bear interest at 10% per annum, are convertible at his option into shares of our common stock at a conversion price of $0.40 per share. If the notes have not previously been converted, the principal and any accrued but unpaid interest automatically converts into shares of our common stock on the maturity date of the notes. We did not pay any commissions or finders fees and Mr. Speyer is an accredited investor. The issuance of the notes were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption provided by Section 4(a)(2) of that act. We used the proceeds for working capital.

Effective December 30, 2018 we issued 100,000 shares of our common stock to an accredited investor upon the automatic conversation of 100,000 shares of our 10% Series A convertible preferred stock together with accrued but unpaid dividends on those shares. In accordance with the designations, rights and preferences of the 10% Series A convertible preferred stock, those shares automatically converted into shares of our common stock on a one for one basis on the fifth anniversary of the date of issuance of such shares. The issuance of the shares of our common stock upon the conversion were exempt from registration under Securities Act in reliance on an exemption provide by Section 3(a)(9) of such act, and the issuance of the shares of our common stock as dividends on such shares were exempt from registration in reliance on an exemption provided by Section 4(a)(2) of the Securities Act.

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 $1,285,430. 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 $165,180. 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. We did not pay any commissions or finder’s fees in this offering. We are using the proceeds for general working capital.

During 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.

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.

In the foregoing unit sales, we granted purchasers of the units 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 warrants. In addition, we are obligated to file a resale registration statement within 120 days following the closing of these offerings covering the shares of our common stock issuable upon the exercise of the warrants. We failed 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. We 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 or the date which is six months after the expiration of the warrants. We are obligated to pay all costs associated with this registration statement, other than selling expenses of the holders.

Additional terms of the warrants include:

Purchases of equity securities by the issuer and affiliated purchasers

None.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable to a smaller reporting company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our consolidated financial condition and results of operations for the years ended December 31, 2019 and 2018 should be read in conjunction with the audited 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 under Item 1A. Risk Factors appearing elsewhere in this report. 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.

Overview

Historically we have operated as a digital media holding company for online assets primarily targeted to the military and public safety sectors. In addition to our corporate website, we own and/or manage 24 websites which are customized to provide our niche users, including active, reserve and retired military, law enforcement, first responders and other public safety employees with products, information and news that we believe may be of interest to them. We also own an ad network which was acquired in September 2017.

We have placed a particular emphasis on providing quality content on our websites to drive traffic increases. Our websites feature timely, proprietary and aggregated content covering current events and a variety of additional subjects targeted to the specific demographics of the individual website. Our business strategy requires us to continue to provide this quality content to our niche markets and to grow our business, operations and revenues both organically and through acquisitions as we expand our business past the original niche markets into mainstream digital audiences.

A key component of our growth is through the acquisition of certain strategic assets to complete a fully integrated platform which reduces the product-to-market process for digital ad delivery to one step. Currently, the digital ad delivery market is very fragmented and inefficient for brands, agencies, and publishers. Inefficiencies have impacted the return on ad spend, the ability to reach the target markets, and the profitability of digital publishers who are responsible for the aggregation of the target demographic. Point solutions exist in various “single-product” companies which can be incorporated into a one integrated platform for all participants in the process to deploy. We are in a very unique position to deploy this strategy successful since our business unit currently span the entire process. With the addition of key strategic assets, we will benefit from scaled solutions, build trust and confidence with ad buyers and publishers, and retain a higher percentage of the ad buy.

In addition, the expansion in our ad network business is a key focus. Our ad network creates revenue from other publisher’s content, as well as our own, in the form of a revenue share based on ad impressions we deliver. For this reason, the managerial focus will be in increasing our total impressions delivered to grow our total advertising revenue. Last year, we delivered approximately 12.4 billion advertising impressions. These impressions include both our targeted demographics and the larger general demographics from our ad network.

During 2019 we have grown our business through sales efforts including:

We believe that the exit from all of our E-commerce businesses at December 31, 2018 will allow us to concentrate all of our resources to our best and fastest growing business opportunities. While we are presently accessing third party RTB platforms, we are currently working on the development of our own proprietary RTB platform, display and video ad serving software, and header bidding technology, as we move to vertically integrate higher margin software products into our ad network business model. The platform, is being developed for us by AdsRemedy, a third party consulting firm that provides support services to us. During 2019 we completed two acquisitions of complementary companies within our industry resulting in expansion of our RTB platform efforts and direct advertisement placements on various websites.

Going Concern

For the year ended December 31, 2019, we reported a loss from continuing operations of $3,265,289, a loss of $136,734 related to discontinued operations, net cash used in operating activities of $2,669,726 and we had an accumulated deficit of $20,444,798 at December 31, 2019. 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 audited consolidated financial statements appearing elsewhere in this report do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to significantly increase our revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

Results of Operations

Revenue

Advertising revenues increased approximately $5,263,000 or 303% in 2019 over 2018. $1,780,000 or 33% of the increase is attributable to organic growth with the remaining $2,841,000 due to the acquisition of S&W on August 15, 2019 and $642,000 due to the acquisition of MediaHouse on November 18, 2019. The organic growth is due to the increased activity with our existing customers and the acquisition of significant key customers during the fourth quarter of 2019. With our operational focus on expanding the advertising impression business we expect that our revenues will increase in 2020, although there can be no assurances.

Cost of Sales

Cost of sales as a percentage of revenues increased approximately 4%, from approximately 79% in 2018 to approximately 83% in 2019. During 2019 we offered publishers favorable payouts in an effort to attract more publishers to our ad network as we expanded its operations, which resulted in the decrease in our gross profit margins. As we continue to expand our direct ad placement platform operations during 2020 we will seek to increase our gross margins. However, as we operate in a highly competitive industry, there are no assurances our efforts will be successful.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses increased by approximately $4,563,000 for 2019 compared to 2018. Our selling, general and administrative expenses were 114% of our total revenues for 2019 as compared to 201% for 2018. The increase in our SG&A expenses reflects increases in both cash and non-cash expenses in the 2019 period. During 2019, the increases in our cash SG&A expenses were primarily attributable to acquisition consulting expenses of $3,307,078 associated with both the acquisitions of S&W and MediaHouse. Additionally increases in payroll expense, research and development, and professional fees contributed to the remaining increase in expenses. We experienced approximately $580,000 of additional payroll costs in 2019 resulting from the acquisitions during the year. We incurred approximately $299,000 in research and development costs related to development of new advertising platforms such as CTV and OTT. We incurred additional professional fees of approximately $120,000 in 2019 associated with the acquisitions for legal and accounting services.

SG&A expenses are expected to continue to increase in a controlled manner as we execute our planned growth strategy of increasing website visits both organically and through targeted acquisitions and providing the needed administrative support We are unable at this time, however, to predict the amount of the expected increase.

Total other income (expense)

During 2019, the Company loaned $1,156,887 to Inform, Inc. The loan had a 6% interest rate, resulting in the Company recognizing interest income of approximately $47,000. The Company settled a disputed liability with a vendor resulting in a gain on the settlement of $123,739. The Company incurred approximately $20,000 of interest charges related to an invoice factoring agreement for the S&W subsidiary acquired in August 2019. In 2017, the Company’s Chief Executive Officer, Mr. Speyer, loaned the company $1,460,000 via convertible notes. During 2018, the Company incurred interest expense for these notes of approximately $370,000 including the amortization of the beneficial conversion feature. During 2018, $1,380,000 of the notes were converted into the company’s common stock, resulting in $80,000 of remaining notes payable to Mr. Speyer. In 2019 the company recognized approximately $19,000 of interest expense associated with the debt and the amortization of the beneficial conversion feature.

Discontinued Operations

During the years ended December 31, 2019 and 2018 we recorded a loss from discontinued operations $136,734 and $1,092,750, respectively. The loss is attributable to our product sales segment which was discontinued effective December 31, 2018. As described earlier in this report, the discontinuation of this segment was a strategic decision which we believe permits us to focus our operational efforts on the advertising segment. During 2019 we recognized $0 of impairment losses compared to $326,000 for the 2018 period.

Income Tax Benefit

As of December 31, 2019, the Company has an income tax benefit of $3,547,274 and a deferred tax liability of $581,440 as a result of deferred tax liabilities associated with acquisitions during the year. The deferred tax liability associated with the S&W, a foreign entity, acquisition is $744,960. The deferred tax liability associated with the NDN acquisition is $3,383,754. The Company’s net operating loss carry forwards may be subject to annual limitations if the Company experiences a change of ownership as defined in Section 382 of the Internal Revenue Code. The Company has not conducted a study to determine if a change of ownership has occurred.

Preferred stock dividends

We paid stock dividends on one series of our preferred stock which was held by an unrelated third party, and cash dividends on two additional series of our preferred stock which are held by affiliates. The increase in preferred stock dividends in 2019 from 2018 primarily reflects the exchange of the convertible notes payable to equity by Mr. Speyer as described elsewhere herein. Under the series of preferred issued to him in the exchange we pay him cash dividends which are identical to the interest rate he previously received on the convertible notes, and the shares of preferred will automatically convert into shares of our common stock on the dates and at the same conversion rates as the convertible notes.

Liquidity and capital resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of December 31, 2019, we had a balance of cash and cash equivalents of $957,013 and negative working capital of $6,384,412 as compared to cash and cash equivalents of $1,042,457 and working capital of $881,949 at December 31, 2018. The Company is in discussions with various vendors to settle balances due for common stock and/or common stock warrants as opposed to cash.

Our current assets increased approximately $3,299,000 or 233% at December 31, 2019 from December 31, 2018 which reflects the substantial increase in our accounts receivable, current portion of notes receivable, and increases in our prepaid expenses primarily attributable to the two acquisitions during 2019, offset by a decrease in assets of discontinued operations. Our current liabilities increased approximately $10,566,000 or 664% at December 31, 2019 from December 31, 2018 which primarily reflects an increase of approximately $7,703,000 or 1,173% in accounts payable and a $2,763,000 or 577% increase in accrued expenses, and approximately $212,000 of the new right of use lease liability, offset by a decrease of liabilities associated with discontinued operations of approximately $143,000.

During 2019 we raised net proceeds of $1,644,480 through the sale of our securities in private placements, as well as an additional $600,000 through the sale of preferred stock to our Chief Executive Officer. During 2020 we have raised an additional $3,001,250 in net proceeds through the sale of our securities via a private placement memorandum which includes one share and one stock warrant. We issued 6,002,500 shares and 6,002,500 warrants in the transactions. $1,156,187 of the net proceeds raised in 2019 were loaned to Inform, Inc. under the terms of a 6% promissory note in advance of the MediaHouse acquisition. We used the remaining net proceeds to fund our operating losses during 2019.

Our operations do not provide sufficient cash to pay our cash operating expenses and we have historically been dependent upon loans and equity purchases from Mr. Speyer and third-party investors to provide sufficient funds for our operations. During 2019, we were also materially dependent upon the capital raised in the private placements. If we are unable to increase our revenues to a level which provides sufficient funds to pay our operating expenses without relying upon loans and equity purchases from related parties or third party investment capital, our ability to continue to as a going concern are in jeopardy. We expect that we will need to raise an additional $ 5,000,000 in capital during 2020 for use in our operations and acquisitions. We are discussing capital raise options with various investment firms to achieve this objective. Any delay in raising sufficient funds will delay the continued implementation of our business strategy and could adversely impact our ability to significantly increase our revenues in future periods. In addition, if we are unable to raise the necessary additional working capital, absent a significant increase in our revenues, of which there is no assurance, we will be unable to continue to grow our company and may be forced to reduce certain operating expenses in an effort to conserve our working capital.

Cash flows

Net cash used in operating activities totaled $2,669,726 and $3,970,013 for 2019 and 2018, respectively. During 2019, we used cash primarily to fund our net loss of $3,402,023 for the period as well as increases in prepaid expenses and expansion plans. Cash used during 2018 was used primarily to fund our net loss of $5,224,064 during the period.

Net cash provided by investing activities totaled $697,546 in 2019 as compared to net cash provided by investing activities of $13,970 for 2018. During 2019, cash was acquired in the acquisitions of S&W and MediaHouse of $716,989. Cash used included the purchase of fixed assets in 2019 and 2018 of $0 and $15,183.

Net cash provided by financing activities totaled $1,902,692 and $4,919,312 during 2019 and 2018, respectively. In both periods, cash was provided from the sale of our securities, net of repayments of debt obligations and the payable of cash dividends on our Series E and F convertible preferred stock to related parties.

Non-GAAP Measures

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:

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) from continuing operations to adjusted EBITDA for the periods presented:

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, valuation of inventory, intangible assets, and equity-based transactions. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results.

Principles of Consolidation and Basis of Presentation

The 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 consolidated financial statements. The accompanying audited financial statements for the years ended December 31, 2019 and 2018 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

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.

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 users click on the published website advertisements. Specific revenue recognition criteria for the advertising revenue stream is as follows:

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 $588,000, of which approximately $235,000 is associated with the S&W subsidiary on the consolidated balance sheet.

Use of Estimates

Our consolidated financial statements are prepared in accordance with GAAP. These accounting principles require management to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of our consolidated financial statements as well as reported amounts of revenue and expenses during the periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. Significant estimates included in the accompanying consolidated financial statements include revenue recognition, the fair value of acquired assets for purchase price allocation in business combinations, valuation of intangible assets, estimates of amortization period for intangible assets, estimates of depreciation period for fixed assets, the valuation of equity-based transactions, and the valuation allowance on deferred tax assets.

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.

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:

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: as of December 31, 2019 and December 31, 2018, using significant unobservable inputs (Level 3):

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 Company is also subject to adjustments from traffic settlements that are deducted from open invoices.

The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made. As of December 31, 2019 and 2018, the Company has recorded an allowance for doubtful accounts of $505,401 and $228,779, respectively.

Stock-Based Compensation

The Company accounts for stock-based instruments issued to employees for services in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC Topic 505-50, “Equity-Based Payments to Non-Employees”. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model. Non-cash stock-based stock option compensation is expensed over the requisite service period and are included in selling, general and administrative expenses on the accompanying statement of operations. For the year ended December 31, 2019 and 2018, non-cash stock-based stock option compensation expense was $45,674 and $24,128, respectively.

Foreign currency translation

Assets and liabilities of the Company’s Israeli subsidiary are translated from Israeli shekels to United States dollars at exchange rates in effect at the balance sheet date. Income and expenses are translated at the exchange rates for the weighted average rates for the period. The translation adjustments for the reporting period will be included in our statements of comprehensive income. Based on the timing of the acquisition of the Israeli subsidiary, see Note 4, the impact of the currency exchange is immaterial for the year ended December 31, 2019.

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 December 31, 2019, tax years 2018, 2017, and 2016 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.

Basic and Diluted Net Earnings (Loss) Per Common Share

In accordance with ASC 260-10, “Earnings Per Share”, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. As of December 31, 2019, and 2018 there were 2,017,727 and 1,797,000 common stock equivalent shares outstanding as stock options, respectively; 22,151,720 and 16,319,875 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 200,000 and 200,000 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. The services segment is focused on producing advertising revenue generated by users “clicking” on website advertisements utilizing several ad network partners, and direct advertisers and subscription revenue generated by the sale of access to career postings on one of our websites.

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. Although early adoption is permitted as of January 1, 2019, the Company has not elected to early adopt this pronouncement. The Company is currently evaluating the impact the adoption of this new standard will have on its 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. Although early adoption is permitted as of January 1, 2019, the Company has not elected to early adopt this pronouncement. The Company is currently evaluating the impact of this ASU on its 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. We do not expect the adoption of this guidance to have a material impact on our consolidated Financial Statements.

Reclassification

Certain reclassifications have been made to the December 31, 2018 consolidated balance sheet to conform to the December 31, 2019 consolidated balance sheet presentation.

Off balance sheet arrangements

Due to uncertainties associated with certain notes payable resulting from the acquisition of S&W, the Company has not included the value of these notes payable within the purchase price and/or related assets acquired in the acquisition. These off-balance sheet arrangements are reasonably likely to have a future or current effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Included in the acquisition price is contingent consideration of $750,000 paid through the delivery of unsecured, interest-free one and two year promissory notes. As of the date of this report, we are unable to quantify the likelihood of achieving the sales objectives required for payment of the promissory notes.

We do not have any other off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable for a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Please see our Financial Statements beginning on page F-1 of this annual report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. 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 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 their 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 (i) our failure to timely file our Quarterly Report on Form 10-Q for the period ended September 30, 2019, and (ii) continuing material weaknesses in our internal control over financial reporting described below. 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.

Our management, including our Chief Financial Officer has evaluated the effectiveness of the design and operations of our disclosure controls and procedures (defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) as of the end of the periods covered by this report. Based upon the evaluation, our Chief Financial Officer who also serves as our principal financial and accounting officer has concluded that the disclosure controls and procedures as of December 31, 2019 were not effective due to the material weaknesses identified below.

To address these material weaknesses, management performed additional procedures to ensure the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. The framework used by management in making that assessment was the criteria set forth in the documents entitled “2013 Internal Controls – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were not effective as of December 31, 2019 and the material weaknesses in internal controls over financial reporting (‘ICFR”) existed as more fully described below.

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCOAB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses, which have caused management to conclude that as of December 31, 2019 our ICFR were not effective at the reasonable assurance level:

Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, management believes that the consolidated financial statements included in this Form 10-K present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Internal Control Remediation Efforts. Management expects to remediate the material weaknesses identified above as follows:

We will continue to monitor and evaluate the effectiveness of 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. There have been no 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.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers and Directors

W. Kip Speyer has been our CEO, President and Chairman of the Board since May 2010 and has been serving as our principal financial and accounting officer on an interim basis. From 2005 to 2009 Mr. Speyer served as a director, the president and chief executive officer of Speyer Door and Window, LLC, which was sold to Haddon Windows, LLC (SecuraSeal, LLC, AccuWeld Corporation) in December 2009. From October 2002 to May 2005 Mr. Speyer had been a private investor. Mr. Speyer was president and chief executive officer of Intelligent Systems Software, Inc. from October 2000 through June 2002, whereby Mr. Speyer became chief executive officer of ICAD, Inc. (ICAD: NASDAQ) which was a combination of ISSI and Howtek, Inc. (HOWT:NASDAQ). Mr. Speyer was the president and chief executive officer of Galileo Corporation (GAEO: NASDAQ) from 1998 to 1999. Galileo Corporation changed its name to NetOptix (OPTX: NASDAQ) and was merged with Corning Corporation (GLW: NYSE) in a stock purchase in May 2000. From 1996 to 1998 Mr. Speyer was the president of Leisegang Medical Group, three medical device companies owned by Galileo Corporation. Prior to joining Galileo Corporation, Mr. Speyer founded Leisegang Medical, Inc. and served as its president and chief executive officer from 1986 to 1996. Leisegang Medical, Inc. was a company specializing in medical devices for women’s health. Mr. Speyer is a graduate of Northeastern University, Boston, Massachusetts, where he earned a Bachelor of Science Degree in Business Administration in 1972. Mr. W. Kip Speyer is active in many local charities and is the father of Mr. Todd F. Speyer, our Chief Operating Officer – Bright Mountain, LLC and a director. Mr. Speyer’s experience as the Chief Executive Officer and/or Chairman of the Board of Directors of other public companies were factors considered by our board of directors in concluding that he should be serving as a director of our company.

Greg Peters is a founder, Chairman and Chief Executive Officer of Inform, Inc. Upon the acquisition of NDN in November 2019 by the Company, Mr. Peters became the President and Chief Operating Officer of the Bright Mountain Media, Inc. Mr. Peters has served as the President, CEO, and Board Member of Internap Network Services Corporation (NASDAQ: INAP) and in the 1990s, Mr. Peters was Vice President of International Operations for Advanced Fibre Communications (NASDAQ: TLAB) and Adtran (NASDAQ: ADTN), where he led global expansion to over 40 countries. For nearly a decade, he held increasingly senior positions at AT&T Network Systems, the last being Managing Director of the Middle East and Africa, headquartered in Cairo, Egypt. Mr. Peters conducted business for AT&T in over 60 countries and was responsible for directing the telecommunications recovery and reconstruction efforts in the Persian Gulf Region during and after the Gulf War. Mr. Peters holds multiple issued patents (No. 8,364,693, No. 8,849,814 and No. 8,849,815) focused on methods of searching, sorting and displaying video clips and sound files by relevance. Since November 2011, Mr. Peters led a partnership with the National Center of Missing and Exploited Children (www.missingkids.com). Through this relationship, NDN has assisted the Center in finding over 100 children. Mr. Peters serves on the Board of Reggie Jackson’s Mr. October Foundation. Mr. Peters has served on the alumni board of the Terry School of Business at the University of Georgia, the Technology Association of Georgia Board, the Georgia Chamber of Commerce Board, and the Advisory Board of the Metro Atlanta Chamber. Mr. Peters earned a Bachelor of Business Administration in Finance & Accounting from the University of Georgia and an MBA from Thunderbird. Mr. Peters has continued his educational efforts in executive programs at Harvard, Stanford and Columbia Universities.

Alan B. Bergman has served as our Chief Financial Officer since July 2019. Prior to his appointment, from June 24, 2019 until July 1, 2019 he provided financial and accounting services to our company on a consulting basis. From December 2018 until May 2019, Mr. Bergman served as Vice President Finance of Greenlane Holdings, Inc. (Nasdaq: GNLN) where he oversaw the finance and accounting department for a company in the wholesale and distribution industry. From February 2018 until December 2018 he served as Controller for Boston Proper LLC, a women’s online and catalog retailer, where he oversaw the finance and accounting department. From 2013 until January 2018 Mr. Bergman served as Controller for Woodfield Distribution, LLC, known as WDSrx, a leading logistics services provider within the pharmaceutical industry specializing in prescription and over-the-counter medications and related categories. From 2011 until 2013 he served as Vice President of Finance for Latitude Solutions, Inc. (OTCQB: LATI), a company in the water remediation industry, transitioning into Director of Finance for Walking Tree Farms, a privately-held family office owned by select board members of Latitude Solutions, Inc. From 2009 until 2011 Mr. Bergman was an Audit Manager with Mallah Furman & Co., a PCAOB-registered accounting firm which was acquired by EisnerAmper LLP in 2015, where he planned, performed and supervised financial statement audits in accordance with GAAP, GAAS and the Sarbanes Oxley Act of 2002. From 2005 until 2009 he was a Senior Auditor with Weinberg & Company, P.A., a PCAOB-registered accounting firm, where he planned and performed financial statement audits in accordance with GAAP, GAAS and the Sarbanes Oxley Act of 2002. Mr. Bergman began his accounting career in 2000 with Deloitte & Touche LLP, a national accounting firm, serving as a Staff Associate until 2002 and a Senior Associate from 2002 until 2005. Since 2004 Mr. Bergman, a certified public accountant, has served as an Adjunct Professor at Florida Atlantic University and Millennia Atlantic University, teaching courses in Accounting Theory I, II and III, Managerial Accounting, Advanced Accounting Information Systems and Accounting Capstone. From 2003 to 2005 he was also a facilitator for Deloitte & Touche LLP’s national and local training seminars. Mr. Bergman received a B.S. in Finance from the University of Tampa and a Master of Accounting from the University of Miami.

Todd F. Speyer has been a member of the board of directors and an employee of our company since January 2011, currently serving as our Chief Operating Officer – Bright Mountain, LLC. Mr. Speyer is responsible for the content and operations of our owned websites. For over the previous five and one-half years, he has been responsible for the integration of all website organic growth and acquisitions, including content, design and visitor traffic. Previously, Mr. Speyer was our Director of Business Development, helping locate acquisitions and shaping the website portfolio. Mr. Speyer graduated from Florida State University in 2004 with a Bachelor of Arts Degree in English Literature. Mr. Todd F. Speyer is the son of Mr. W. Kip Speyer, our CEO, President and Chairman. Mr. Speyer’s website development experience as well as his marketing experience were factors considered by our board of directors in concluding that he should be serving as a director of our company.

Joey Winshman has been a member of our Board of Directors since August 2019. Mr. Winshman has served as Chief Marketing Officer of S&W since co-founding the company in February 2015. Since June 2018 he has also served as Chief Marketing Officer of Lumynox, a subsidiary of S&W. Prior to co-founding S&W, from June 2013 until January 2015 Mr. Winshman was Media Manager for Taptica International Ltd., now known as Tremor International Ltd. (AIM: TRMR), a leader in advertising technologies with operations in more than 60 countries. Mr. Winshman, who is a citizen of both Israel and the U.S., received a B.S. in Business Administration, Management Information Systems, from the University of Vermont.

Charles H. Lichtman has been a member of our board of directors since October 2014. Mr. Lichtman is an attorney practicing law since 1980, licensed in Illinois and Florida. He is a founding partner of Berger Singerman LLP since 2001. Mr. Lichtman has been honored as a two time Lawyer of the Year by Best Lawyers in America, and noted by them for his excellence every year since 2009 in the categories of Complex Business Litigation, Securities Litigation, Bankruptcy Litigation and Commercial Litigation. He has also been recognized by Chambers International and received other legal awards from various entities and periodicals. Mr. Lichtman’s professional experience as an attorney was the factor considered by our board of directors in concluding that he should be serving as a director of our company.

Harry D. Schulman has been a member of our Board of Directors since November 2019. For more than 20 years he has served on multiple boards including Baird Capital, a private equity firm managing over $3 billion, Hancock Fabrics, Inc., O2 Media, Inc., QEP and HeZhong International Holdings. He holds a Master’s degree in International Business from the University of Miami and a Bachelor’s degree in Business from the University of Dayton.

Jack Dunleavy has been a member of our Board of Directors since March 2020. Mr. Dunleavy is an inactive Certified Public Accountant spending is career with PricewaterhouseCoopers (PWC). During his tenure with PWC, he was Chairman of the Finance Committee for the PWC Global Firm, a Board member of the PWC US Firm, Partner In-Charge of the Consulting Strategic Accounts, Thought Leader of the Finance and Accounting Practice and Partner In-Charge of the AT&T and Lucent accounts, the largest client engagements of the Firm. Mr. Dunleavy has authored five books on Financial Management and Systems Implementation. Mr. Dunleavy served on the board of directors of NDN, Inc, prior to the inversion which spun-off MediaHouse. He has served as a visiting professor at Tuck School Dartmouth and New York College of Insurance MBA program. Mr. Dunleavy holds a Master’s degree in Business Administration – Accounting from Columbia University, a Bachelor’s degree in English from Forham University, and completed the Executive Program and Tuck School, Dartmouth.

There are no family relationships between any of the executive officers and directors other than as set forth above. Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his successor is elected and qualified. If any director resigns, dies or is otherwise unable to serve out his or her term, or if the board increases the number of directors, the board may fill any vacancy by a vote of a majority of the directors then in office, although less than a quorum exists. A director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor. Vacancies occurring by reason of the removal of directors without cause may only be filled by vote of the shareholders.

Board departure subsequent to December 31, 2019

On March 25, 2020 Richard Rogers and Todd Davenport resigned from our board of directors. Mr. Rogers had been a member of the Board since July 2013. Mr. Davenport had been a member of the Board since February 2012.

Leadership structure, independence of directors and risk oversight

Mr. W. Kip Speyer serves as both our Chief Executive Officer and Chairman of our board of directors. Messrs. Lichtman, Schulman, and Dunleavy are considered independent directors within the meaning of Rule 5605 of the NASDAQ Marketplace Rules, but none are considered a “lead” independent director.

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of risks we face, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management process designed and implemented by management are adequate and functioning as designed. To do this, the chairman of the board meets regularly with management to discuss strategy and the risks facing our company. Senior management attends the board meetings and is available to address any questions or concerns raised by the board on risk management and any other matters. The chairman of the board and independent members of the board work together to provide strong, independent oversight of our company’s management and affairs through its standing committees and, when necessary, special meetings of independent directors.

Committees of our board of directors

In May 2015 our board of directors established a standing Audit Committee and a standing Compensation Committee. In August 2016 our board of directors established a standing Corporate Governance and Nominating Committee. Each committee has a written charter. The charters are available on our website at www.brightmountainmedia.com. All committee members are required to be independent directors.

Information concerning the current membership and function of each committee is as follows:

Audit Committee

The Audit Committee assists the board in fulfilling its oversight responsibility relating to:

The Audit Committee is composed of three directors, each of whom has been determined by the board of directors to be independent within the meaning of the NYSE American Company Guide. Two of the members of the Audit Committee are qualified as an “audit committee financial expert” as defined by the SEC. The Audit Committee met four times during 2019.

Compensation Committee

The Compensation Committee assists the board in:

The Compensation Committee is charged with ensuring that our compensation programs are competitive, designed to attract and retain highly qualified directors, officers and employees, encourage high performance, promote accountability and assure that employee interests are aligned with the interests of our shareholders. The Compensation Committee is composed of two directors, both of whom have been determined by the board of directors to be independent within the meaning of the NYSE American Company Guide. The Compensation Committee did not meet in 2019.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee:

The purpose of the Corporate Governance and Nominating Committee is to assess the performance of the board and to make recommendations to the board from time to time, or whenever it shall be called upon to do so, regarding nominees for the board and to ensure our compliance with appropriate corporate governance policies and procedures. The Corporate Governance and Nominating Committee is composed of two directors, both of whom have been determined by the board of directors to be independent within the meaning of the NYSE American Company Guide. The Corporate Governance and Nominating Committee did not meet in 2019.

Shareholder nominations

Shareholders who would like to propose a candidate may do so by submitting the candidate’s name, resume and biographical information to the attention of our Corporate Secretary. All proposals for nomination received by the Corporate Secretary will be presented to the Corporate Governance and Nominating Committee for appropriate consideration. It is the policy of the Corporate Governance and Nominating Committee to consider director candidates recommended by shareholders who appear to be qualified to serve on our board of directors. The Corporate Governance and Nominating Committee may choose not to consider an unsolicited recommendation if no vacancy exists on the board of directors and the committee does not perceive a need to increase the size of the board of directors. In order to avoid the unnecessary use of the Corporate Governance and Nominating Committee’s resources, the committee will consider only those director candidates recommended in accordance with the procedures set forth below. To submit a recommendation of a director candidate to the Corporate Governance and Nominating Committee, a shareholder should submit the following information in writing, addressed to the Corporate Secretary of Bright Mountain at our main office:

Code of Ethics and Conduct

We have adopted a Code of Ethics and Conduct which applies to our board of directors, our executive officers and our employees. The Code of Ethics and Conduct outlines the broad principles of ethical business conduct we adopted, covering subject areas such as:

A copy of our Code of Ethics and Conduct is available without charge, to any person desiring a copy, by written request to us at our principal offices at 6400 Congress Avenue, Suite 2050, Boca Raton, Florida 33487.

Director compensation

In December 2017 our board of directors adopted a compensation policy for our independent directors for 2018. Under the terms of the 2018 director compensation policy, independent directors will receive $500 in cash for each board meeting attended and members of any committee of the board receive an additional $250 per committee meeting attended. In November 2019, our board of directors changed the compensation policy to compensate the directors 2,500 stock options for each meeting attended. Our non-independent directors are not compensated for their services.

The following table provides information concerning the compensation paid to our independent directors for their services as members of our board of directors for 2018. The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses which we may have paid:

Director Compensation

_____________ 

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports in a timely manner during 2018, except for Mr. Kip Speyer who failed to timely file four Form 4s, three of which each reported one acquisition and the third which reported one disposition by gift. The delinquent Form 4s have subsequently been filed.

ITEM 11. EXECUTIVE COMPENSATION.

The following table summarizes all compensation recorded by us in the past two years for:

For definitional purposes, these individuals are sometimes referred to as the “named executive officer.” The amounts included in the “Stock Awards” column represent the aggregate grant date fair value of the shares of our common stock, computed in accordance with ASC Topic 718.

Summary Compensation Table

The amount of compensation paid to Mr. W. Kip Speyer excludes $184,111 and $281,882 in interest and dividend payments for 2019 and 2018, respectively.

Employment agreement with our named executive officers

W. Kip Speyer

We have entered into an Executive Employment Agreement with W. Kip Speyer, our Chief Executive Officer, with an effective date of June 1, 2014. Under the terms of this agreement, he is serving as Chairman of the Board, Chief Executive Officer and President of our company. On April 1, 2017, we entered into an amendment to his employment agreement which extended the term for an additional three years, set his base compensation at $165,000 per annum and provided the ability to earn a performance bonus beginning for 2017 based upon annual revenues above $3,000,000 per year and the certain earnings before interest, taxes and depreciation, or “EBITDA,” goals as follows: (i) for annual revenues of $3,000,000 to $3,500,000, a bonus of 25% of his then base salary; (ii) for annual revenues of $3,500,001 to $4,000,000 and a minimum EBITDA of $100,000, a bonus of 40% of his then base salary; (iii) for annual revenues of $4,000,0001 to $4,500,000 and a minimum EBITDA of $150,000, a bonus of 65% of his then base salary; and (iv) for annual revenues of $4,500,001 or greater and a minimum EBITDA of $175,000, a bonus of 80% of this then base salary. Effective April 1, 2020, we entered into an amendment of his employment agreement to adjust his compensation to an annual rate of $325,000 and remove the performance bonus structure.

The agreement with Mr. Speyer will terminate upon his death or disability. In the event of a termination upon his death, we are obligated to pay his beneficiary or estate an amount equal to one year base salary plus any earned bonus at the time of his death. In the event the agreement is terminated as a result of his disability, as defined in the agreement, he is entitled to continue to receive his base salary for a period of one year. We are also entitled to terminate the agreement either with or without case, and he is entitled to voluntarily terminate the agreement upon one year’s notice to us. In the event of a termination by us for cause, as defined in the agreement, or voluntarily by Mr. Speyer, we are obligated to pay him the base salary through the date of termination. In the event we terminate the agreement without cause, we are obligated to give him one years’ notice of our intent to terminate and, at the end of the one-year period, pay an amount equal to two times his annual base salary together with any bonuses which may have been earned as of the date of termination. A constructive termination of the agreement will also occur if we materially breach any term of the agreement or if a successor to our company fails to assume our obligations under Mr. Speyer’s employment agreement. In that event, he will be entitled to the same compensation as if we terminated the agreement without cause. The employment agreement contains customary non-compete and confidentiality provisions. We have also agreed to indemnify Mr. Speyer pursuant to the provisions of our amended and restated articles of incorporation and amended and restated by-laws.

Greg Peters

We have entered into an Executive Employment Agreement with Greg Peters, our Chief Operating Officer and President, with an effective date of April 1, 2020. The employment contract is for a three year period and set his annual compensation at $325,000. The agreement with Mr. Peters will terminate upon his death or disability. In the event we terminate the agreement without cause, we are obligated to give him one years’ notice of our intent to terminate and, at the end of the one-year period, pay an amount equal to two times his annual base salary together with any bonuses which may have been earned as of the date of termination. A constructive termination of the agreement will also occur if we materially breach any term of the agreement. The employment agreement contains customary non-compete and confidentiality provisions. We have also agreed to indemnify Mr. Peters pursuant to the provisions of our amended and restated articles of incorporation and amended and restated by-laws.

Alan Bergman

We are not a party to an employment agreement with Mr. Alan Bergman. His compensation is determined by the board of directors, based upon industry norms.

Todd Speyer

We are not a party to an employment agreement with Mr. Todd Speyer. His compensation is determined by Mr. Kip Speyer, our Chief Executive Officer, based upon industry norms. Mr. Kip Speyer is Mr. Todd Speyer’s father. Mr. Todd Speyer’s compensation may be changed from time to time at the discretion of the compensation committee of the board of directors.

Outstanding equity awards at fiscal year-end

The following table provides information concerning unexercised stock options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2019, together with unexercised stock options, stock that has not vested and equity incentive plan awards for each of our other executive officers outstanding as of December 31, 2019:

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

At May 13, 2020, we had 108,576,295 shares of our common stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our common stock as of that date by:

Unless specified below, the business address of each shareholder is c/o 6400 Congress Avenue, Suite 2050, Boca Raton, FL 33487. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

Mr. Handwerker’s address is 4399 Pine Tree Drive, Boynton Beach, FL 33436. The number of shares beneficially owned by Mr. Handwerker excludes 750,000 shares underlying common stock purchase warrants. Under the terms of the warrants, Mr. Handwerker may not exercise the warrants to the extent such conversion or exercise would cause him, together with his affiliates, to beneficially own a number of shares of our common stock which would exceed 4.99% of our then outstanding shares of our common stock following such exercise. This limitation may be increased to 9.99% at Mr. Handwerker’s option upon 61 day’s notice to us.

Securities authorized for issuance under equity compensation plans

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our shareholders as of December 31, 2019.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related party transactions

Preferred stock purchases

During 2019, Mr. W. Kip Speyer purchased an aggregate of 1,200,000 shares of our 10% Series A-1 Convertible Preferred Stock at a purchase price of $0.50 per share. We used the proceeds from these sales for working capital.

During 2018, Mr. W. Kip Speyer purchased an aggregate of 1,125,500 shares of our 10% Series E Convertible Preferred Stock at a purchase price of $0.40 per share. We used the proceeds from these sales for working capital.

In 2019 and 2018 we paid cash dividends on these outstanding shares of our 10% Series E Convertible Preferred Stock and the three sub-series of our Series F Convertible Preferred Stock described below of $180,931 and $83,232, to Mr. Speyer, respectively.

Note Exchange Agreement

From time to time Mr. Speyer lent us funds for working capital under the terms of various convertible promissory notes. On November 7, 2018 we entered into a Note Exchange Agreement with Mr. Speyer pursuant to which we exchanged:

Convertible notes

During November 2018, we issued and sold Mr. Speyer two five year unsecured convertible notes in the aggregate principal amount of $80,000. These notes, which are convertible at the option of the holder at any time at a conversion price of $0.40 per share, will automatically convert into shares of our common stock on the fifth anniversary of the date of issuance. We used the proceeds from these notes for working capital.

Director independence

Messrs. Schulman, Dunleavy, and Lichtman are considered “independent” within the meaning of meaning of Section 803 of the NYSE American Company Guide.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following table shows the fees that were billed for the audit and other services provided by for 2019 and 2018.

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. Included in this amount for 2019 are fees charged by our prior audit in connection with the application of discontinued operations to our historic 2018 audited consolidated financial statements. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements or acquisition audits and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.

Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

All Other Fees — This category consists of fees for other miscellaneous items.

Our board of directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Audit Committee of the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Audit Committee. The audit and tax fees paid to the auditors with respect to 2019 and 2018 were pre- approved by the Audit Committee.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

ITEM 16. FORM 10-K SUMMARY.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints W. Kip Speyer his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including amendments) to this Annual Report on Form 10-K for the year ended December 31, 2017, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.