The following discussion of our unaudited condensed consolidated financial condition and results of operations for the three months ended March 31, 2020 and 2019 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth later in this report under Part II, Item 1A. in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on May 14, 2019 (the "2019 10-K") and our other filings with the SEC. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements. All information in this section for the three months ended March 31, 2020 and 2019 is unaudited and derived from the unaudited condensed consolidated financial statements appearing elsewhere in this report; unless otherwise noted, all information for the year ended December 31, 2019 is derived from our audited consolidated financial statements appearing in the 2019 10-K.

Executive Overview of First Quarter 2020 Results

Our key user metrics and financial results for the first quarter of 2020, for the three months ended March 31, 2020, which include certain charges related to our financing with Spartan Capital, are more fully discussed and described herein and should be read in context with the disclosure on this page. The first quarter results are as follows:





User metrics:



  ? Quarterly ad impressions delivered were approximately 1.5 billion in the first
    quarter of 2020 and approximately 1 billion for the three months ended March
    31, 2019;

First quarter 2020 financial results:





  ? Advertising revenue increased 109% in the three months ended March 31, 2020
    from the same period of 2019;

  ? Gross profit increased 124% in the three months ended March 31, 2020 from the
    same period of 2019;

  ? Advertising revenue was negatively impacted by the emergence of COVID-19
    during the quarter, while our operating expenses were not materially impacted;

  ? Selling, general and administrative expenses increased 334% in the three
    months ended March 31, 2020 from the same period of 2019;

  ? Included within the expenses for the three months ended March 31, 2020 are
    $952,622 of non-cash amortization of the intangible assets, $442,500 of
    non-cash expenses associated with the equity raise, and $281,618 of
    acquisition related audit and consulting fees, and $36,595 of stock based
    compensation;

  ? Net cash used in operating activities was $(1,369,272) for the first three
    months of 2020 as compared to $(629,453) for the three months of 2019.




Overview

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

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





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When fully developed Bright Mountain's full suite of advertising solutions will include:





  ? The ability for advertisers to purchase advertising space on a variety of
    digital publications;

  ? Leading targeting technology, allowing advertisers to pinpoint their marketing
    efforts to reach geo-targeted, specific demographics across desktop, tablet,
    and mobile devices;

  ? The ability to handle any ad format, including video, display, and native
    advertisements;

  ? Ad serving and self-service features for publishers and advertisers; and

  ? Server-to-server integration with other advertiser and publisher platforms for
    extremely quick transactions and ad deployments.

This Bright Mountain's platform will be a marketplace for publishers and advertisers where they will be able to choose from various features to maximize their earning potential. Advertisers have the ability to directly target desired demographics on publishers sites through our platform. Publishers will be able to select a variety of ad units for their video, mobile, display and native advertisements, and have the ability to create their own unique ad formats.

We have begun expansion with the recent acquisition of Wild Sky Media. Wild Sky Media offers massive global reach through hyper-engaging content and multicultural audiences. This is achieved through their six websites focused on the female demographic. The websites include Mom.com, Cafemom.com, LittleThings.com, mamaslatinas.com, revelist.com, and babynamewizard.com.





Key initiatives

Our growth strategy is based upon:





  ? completing and launching the Bright Mountain Media advertising solutions
    marketplace;

  ? expanding our sales revenues through organic growth;

  ? continuing to pursue acquisition candidates that are strategic our business
    plan;

  ? evaluating expenses attributed to our non-strategic business lines; and

  ? continuing to automate our processes and reduce overhead where possible
    without impacting our customer experience




Results of operations

Revenues, Cost of Revenue, and Gross Profit Margins





                                                 For the Three Months Ended March 31,
                                         2020            2019            Change        % Change

Advertising revenues                  $ 2,270,186     $ 1,085,456     $ 1,184,730           109.1 %
Total cost of revenue                 $ 1,823,082     $   885,696     $   937,386           105.8 %
Gross Profit                          $   447,104     $   199,760     $   247,344           123.8 %
Gross profit margin as a percentage
of advertising revenues                      19.7 %          18.4 %

Our advertising revenue for the first quarter of 2020 was 109.1% higher than the comparable period in 2019. Approximately $1,238,000 of the 2020 revenue is attributable to the acquisitions of Oceanside Media and approximately $373,000 of 2020 revenue is attributable to the acquisition of MediaHouse. Our legacy revenues decreased approximately $200,000 due to decreased advertising in the industry due to the emergence of the COVID-19 virus mid-quarter.

We incur costs of sales associated with the advertising revenue. These costs include revenue share payments to media providers and website publishers.

Selling, General and Administrative Expenses





                                                 For the Three Months Ended March 31,
                                         2020            2019         $ Change        % Change

Selling, general and administrative
expense                               $ 3,979,378     $  915,954     $ 3,063,424           334.5 %
Selling, general and administrative
as a percentage of total revenue            175.3 %         84.4 %

Selling, general and administrative costs increased approximately $1,786,000 due to the operating activities of Oceanside Media and MediaHouse, which are not reflected in the prior period expenses. The Company also has increased its expenses associated with amortization of intangibles of approximately $917,000 with the Oceanside Media acquisition and the acquisition of MediaHouse, which closed subsequent to the end of the third quarter of 2019.

Selling, general and administrative expenses are expected to increase as we execute our planned growth strategy of launching and operating the Bright Mountain Media ad exchange network which will include additional administrative support. Subject to the availability of additional working capital, the Company also intends to add administrative staff to its accounting department to improve controls over its accounting and reporting processes. As the Company expands the size of the accounting department, the use of consultants is expected to decrease.





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Discontinued Operations

The Company discontinued its E-commerce business in the fourth quarter of 2018. The loss on discontinued operations was $0 and $115,464 for the three months ended March 31, 2020 and 2019, respectively. Revenues from discontinued operations significantly decreased during the period, from $98,000 in 2019 to $0 for the same period in 2020, Selling, general and administrative expenses related to these operations decreased from $131,000 in 2019 to $0 for the three months ended March 31, 2020.





Non-GAAP financial measure

We report adjusted EBITDA from continuing operations as a supplemental measure to U.S. generally accepted accounting principles ("GAAP"). This measure is one of the primary metrics by which we evaluate the performance of our business, on which our internal budgets are based. We believe that investors have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. We endeavor to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and description of the reconciling items, including quantifying such items to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure.

Our adjusted EBITDA from continuing operations is defined as operating income/loss excluding:





  ? non-cash stock option compensation expense;
  ? depreciation;
  ? equity raise expenses;
  ? professional fees;
  ? acquisition-related items consisting of amortization expense and impairment
    expense;
  ? interest; and
  ? amortization on debt discount.

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

Non-GAAP financial measure (continued)

The following is an unaudited reconciliation of net (loss) to adjusted net (loss) and Adjusted EBITDA for the periods presented:





                                        For the Three Months Ended
                                                 March 31,
                                           2020               2019

Net loss from continuing operations $ (3,523,519 ) $ (594,798 ) plus: Stock compensation expense

                     36,595           3,213
Depreciation expense                            5,253           2,352
Amortization expense                          952,622          35,813
Gain on settlement of liability                     -        (122,500 )
Amortization on debt discount                   3,490           3,452
Interest expense - related party                2,023           3,658
                                      $    (2,523,536 )    $ (668,810 )




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Liquidity and capital resources





Liquidity is the ability of a company to generate sufficient cash to satisfy its
needs for cash. The following table summarized total current assets, total
current liabilities and working capital (deficit) at March 31, 2020 as compared
to December 31, 2019.



                             March 31, 2020       December 31, 2019
Total current assets        $      5,000,986     $         5,772,980
Total current liabilities          9,578,883              12,157,392
Working capital             $     (4,577,897 )   $        (6,384,412 )

The increase in cash and increase in the working capital is a result of cash proceeds from the sale of equity securities in a private placement during the three months ended March 31, 2020. The decrease in our current assets is mostly reflective of decreases in accounts receivable and prepaid expenses.

As we continue our efforts to grow our business, we expect that our monthly cash operating overhead will continue to increase as we add personnel, although at a lesser rate, and we are not able at this time to quantify the amount of this expected increase. In 2020 we implemented policies and procedures around cash collections to prevent the aging of accounts receivables that was experienced in 2019. Cash collection efforts have been successful, and we feel that we have appropriately reserved for uncollectible amounts at March 31, 2020.

Our financial performance and operating results may be materially and adversely affected by the outbreak of the novel coronavirus ("COVID-19"). The recent global outbreak of COVID-19 has had an unfavorable impact on our business operations. The COVID-19 pandemic has caused disruptions in the services we provide. In addition, the COVID-19 pandemic has resulted in many states and countries imposing orders resulting in the closure of non-essential businesses - including many companies which advertise digitally. We cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact on our business and our financial results. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations, financial condition, and liquidity may be materially and adversely affected as a result of prolonged disruptions in consumer spending, a lack of demand for our services, and other factors that we cannot foresee. The extent to which COVID-19 will impact our business and our financial results will depend on future developments which are highly uncertain and cannot be predicted.

On April 24, 2020, the Company received loan proceeds of $464,800 (the "PPP Loan") under the Paycheck Protection Program (the "PPP"). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the "Promissory Note") with Regions Bank and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains customary events of default provisions. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

Effective June 1, 2020, we entered into a membership interest purchase agreement to acquire 100% of CL Media Holdings, LLC ("Wild Sky Media"). Wild Sky Media was acquired on a debt-free, cash-free basis, free and clear of any liens and encumbrances. We issued 2,500,000 shares of our restricted common stock to the seller and the seller issued a first lien senior secured credit facility which consisted of $15,000,000 of initial indebtedness, repayment of Wild Sky's existing accounts receivable factoring facility of approximately $900,000 and $500,000 of expenses totaling $16,416,905. Per the credit facility with the seller, our loan payments begin 18 months from the time of the acquisition. There is no prepayment penalty associated with this credit facility. Certain future capital raises do require partial or full prepayments of the credit facility.

Going concern and management's liquidity plans

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss of ($3,459,020) and used net cash in operating activities of $(1,369,272) for the three months ended March 31, 2020. The Company had an accumulated deficit of ($23,904,009) at March 31, 2020.

The report of our independent registered public accounting firm on our audited consolidated financial statements at December 31, 2019 and 2018 and for the years then ended contains an explanatory paragraph regarding substantial doubt of our ability to continue as a going concern based upon our net losses, cash used in operations and accumulated deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to generate revenues or report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

Our ability to fully implement the Bright Mountain Media Ad Exchange Network and maximize the value of our assets are dependent upon our ability to raise additional capital sufficient for our short-term and long-term growth plans. Historically we have been dependent upon loans and equity purchases from Mr. W. Kip Speyer, an executive officer and member of our board of directors and sales of equity securities to accredited investors, to provide adequate funds to meet our working capital needs. During the three months ended March 31, 2020 we raised $2,558,750 through the sale of our securities in one private placement. While we estimate that we need a minimum of $3 million in additional working capital to provide sufficient funds to pay our operating expenses and fund our development over the next 12 months, we believe that if we are successful the anticipated revenues from our advertising segment will have a significant impact on our revenues and results of operations in future periods. This estimated additional working capital need is exclusive of acquisition related and debt burden expenditures. While we have engaged a placement agent to assist us in raising capital, the placement agent is acting on a best efforts basis and there are no assurances we will be successful in raising additional capital during 2020 through the sale of our securities. Any delay in raising sufficient funds will delay the implementation of our business strategy and could adversely impact our ability to significantly increase our revenues in future periods. In addition, if we are unable to raise the necessary additional working capital, absent a significant increase in our revenues, most particularly from our advertising segment, of which there is no assurance, we will be unable to continue to grow our company and may be forced to reduce certain operating expenses to conserve our working capital.

Following the emergence of COVID-19, the Company applied for and received loan proceeds of $464,800 (the "PPP Loan") under the Paycheck Protection Program (the "PPP"). The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and is administered by the U.S. Small Business Administration. The PPP Loan is evinced by a promissory note (the "Promissory Note") with Regions Bank and has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.





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Summary of cash flows



                                                               March 31,
                                                          2020            2019
Net cash (used in) operating activities               $ (1,369,272 )   $ (629,453 )

Net cash (used in) provided by investing activities $ - $ (8,000 ) Net cash provided by financing activities

$  1,682,282     $  327,464

During the three months ended March 31, 2020, we used cash primarily to fund our net loss of $3,459,020 for the period.

During the three months ended March 31, 2020 the Company raised $1,734,937 through the sale of equity securities in a private placement memorandum and $25,483 from payments on a note receivable. The Company paid dividends of $23,747 and made payments against notes payable of $54,391.





Critical accounting policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our unaudited condensed consolidated financial statements appearing elsewhere in this report.

Recent accounting pronouncements

The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies as described in Note 1 appearing earlier in this report that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Off balance sheet arrangements

As of the date of this report, we have off balance sheet debt of $750,000 due to the previous shareholders of S&W. During 2019, the company acquired S&W for a combination of common stock and notes payable. Due to uncertainties associated with the Notes Payable resulting from the acquisition of S&W, see Note 4, the Company has not included the value of the 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 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.

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