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 Holdings, Inc., a Florida corporation and our subsidiaries. In addition, “2013” refers to the year ended December 31, 2013, “2012” refers to the year ended December 31, 2012 and “2014” refers to the year ending December 31, 2014.
Unless specifically set forth to the contrary, the information which appears on our website at www.thebright.com is not part of this report.
All share and per share information in this report gives effect to the 1:1.8 forward stock split of our common stock on June 27, 2013.
PART I
ITEM 1.
DESCRIPTION OF BUSINESS.
Overview
We own and manage websites which are customized to provide our niche users, including military, law enforcement and first responders with information and news that is of interest to them. We have developed a website portal at www.thebright.com which we designed to attract and retain Internet audiences whose main purpose is to be a starting point when connecting to or searching the web with a special emphasis on homogeneous niche markets including:
We have also acquired and manage additional related websites including:
Over the past four quarters we have experienced sequential growth, including acquisitions, quarter-to-quarter, in the number of visitors of over 50%.
Website Design and Content
Our websites are designed with our own unique styling characteristics including colors, shapes, layout and typeface, as well as interactive elements, such as boxes, buttons and menus. We seek to present websites with a “look and feel” which can be described in terms such as “colorful”, “quality”, “fun” “user friendly” and “trustworthy”. The content, which is demographically oriented, is directed to our various niche market users and includes, among other things, the following:
Growth and Retention of User Traffic Model
We intend to continue to grow both organically and by acquisitions, including the following:
Revenue Model
To date, substantially all of our revenues have been generated from product sales. As the number of our visitors continues to increase, we believe that our revenue growth will come from:
Business Strategy
Growth and retention of user traffic is paramount to Bright Mountain’s success and specific efforts to develop this user traffic will include:
Strategic acquisitions of websites that are related to the Company’s core mission and niche demographic are an instrumental part of the Company’s growth and business plan. Management believes that all of the programs and efforts to develop organic website traffic and bring users and consumers to Bright Mountain websites would be enhanced through potential strategic acquisition of other Internet companies. Bright Mountain management is committed to adding to its website platform or bringing under its umbrella, a number of Internet properties that will fit strategically into the Company’s business objectives, subject to the availability of sufficient capital.
Revenue Sources
For 2013, the Company earned revenues of approximately $641,000 from the sale of a number of products on the TheBright.com. A nominal amount of revenue (less than $7,000) has been earned from advertisements on TheBright.com and the Company’s various acquired websites, while the other potential sources of revenue below (exclusive of shopping and advertising) have yet to earn any revenues. As additional capital is raised and our business plan implemented, management projects that it will generate revenues from the categories listed below over the next 12 to 24 months as traffic to the Company’s various websites increases:
Advertising. The Company continues to grow its website traffic organically and through its strategic acquisition program. From inception advertising revenue has been approximately $850 through December 31, 2012. Revenue for advertising for 2013 was approximately $6,852. Advertising revenue in the first quarter 2014 is expected to be approximately $7,400. Advertising revenue generally lags behind traffic growth.
Shopping. TheBright.com shopping section is a fully active web based “store” whereby shoppers can purchase a variety of products including watches, books, electronics, house and home goods, outdoor gear, sporting goods, and many other products. The Company maintains inventory on books and watches, which at December 31, 2013, was approximately $303,318. Inventory at December 31, 2012 was approximately $40,000. Customers that purchase products from TheBright.com “store” pay the Company directly in a fully enabled payment and checkout process that permits payments for purchases using credit cards or utilization of the Internet-based payment processing service PayPal. Our products are also available for purchase through Ebay and Amazon. There are fees associated with products sold through Ebay and Amazon, all of which are accounted for as part of our cost of sales and reflected on the accompanying financial statements. Shopping revenue increased in 2013 by 897% over 2012.
Insurance. TheBright.com insurance is an entire section of the website developed in the third quarter of 2013, wherein customers can obtain quotes on long-term care, disability, and life policies. This segment of our website has the potential to earn commissions from policies quoted through our website.
Private email. The Bright Network is in Beta testing. We have developed a secure, private email service. Like many services, our private email network, Bright Network’s mission is to provide a secure email service without compromising its users privacy. All emails are encrypted during transmission to protect user’s information. The Bright Network has the potential to earn revenue through yearly subscription fees and increasing traffic to TheBright.com.
Key Relationships
The Company purchases a substantial amount of its products from two vendors; Citizens Watch Company of America, Inc., and Bulova Corporation. These two vendors accounted for 68.4% and 21.4%, respectively of total products purchased in 2013. Although we continue to expand our product line and vendor relationships, due to the high concentration and reliance on these two vendors, the loss of one of these two vendors could adversely affect the Company’s operations.
The Company sells many of its products through various distribution portals, which include Amazon and Ebay. During 2013, these two portals accounted for 67.2% and 31.6%, respectively of our total sales. The Company did not establish a distribution portal relationship with Ebay until 2013, however; Amazon accounted for 54.3% of our total sales for 2012. Due to high concentration and reliance on these portals, the loss of a working relationship with either of these two portals could adversely affect the Company’s operations.
A substantial amount of payments for our products sold are processed through Paypal. A disruption in Paypal payment processing could have an adverse effect on the Company’s operations and cash flow.
Technology Platforms
Our Company has two websites that are hosted on a standard GoDaddy hosting platform. Three of the Company’s other websites are hosted on a dedicated server provided by SoftLayer, an IBM Company. The remaining Company owned websites are hosted with RackSpace.
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 Yahoo and AOL for our homepage; Huffington Post and Foxnews.com for our news pages; and Amazon.com for shopping.
We believe that we can effectively compete in the market place for the following reasons:
Most of our competitors have significantly greater financial, technical, marketing and distributions resources as well as greater experience in the industry than we have. Our websites may not be competitive with other technologies. 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. Our websites may be displaced by newer technology.
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. Below is a descriptive table of the various service and trademarks owned by the Company: