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:

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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 traffi c 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:

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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.

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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.

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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.

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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.

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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:

(1) Trade Marks and Service Marks are renewable for addition ten-year periods.

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

Employees

At March 6, 2014, we have 10 direct full-time employees. There are no collective bargaining agreements covering any of our employees.

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Potential implications of the JOBS Act

The Company is an “emerging growth company” under the provisions of the Jumpstart Our Business Startups Act, or the “JOBS” Act.” As part of the JOBS Act, companies with less than $1 billion in gross revenue can qualify as an “emerging growth company.” Therefore, the Company qualifies as an emerging growth company as defined in the JOBS Act, and, as such, the Company is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to:

The Company has elected to take advantage of the reduced disclosure obligations. Additionally, the Company qualifies as a “smaller reporting company” and thus has the advantage of not being required to provide the same level of disclosure as larger public companies. Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in the Securities Act of 1933, or Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can elect to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to opt in to Section 107 and, therefore, will delay adoption of certain accounting standards applicable to public companies.

The Company could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which the Company’s annual gross revenues exceed $1 billion, (ii) the date that the Company becomes a “large accelerated filer” as defined in Rule 12b-2 under the Securities Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the Company’s common units that are held by non-affiliates exceeds $700 million as of the last business day of the Company’s most recently completed second fiscal quarter, and (iii) the date on which the Company has issued more than $1 billion in non-convertible debt during the preceding three-year period. At this time the Company expects to remain both a “small reporting company” and “emerging growth company” for the foreseeable future.

Government Regulation

Aspects of the digital marketing and advertising industry and how our business operates are highly regulated. 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. In particular, we are subject to rules of the Federal Trade Commission, or FTC, the Federal Communications Commission, or FCC, and potentially other federal agencies and state laws related to our advertising content and methods, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, which establishes certain requirements for commercial electronic mail messages and specifies penalties for the transmission of commercial electronic mail messages that follow a recipient’s opt-out request or are intended to deceive the recipient as to source or content, federal and state regulations covering the treatment of member data that we collect from endorsers.

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.

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The FTC adopted Guides Concerning the Use of Endorsements and Testimonials in Advertising on October 5, 2009. These guides recommend that advertisers and publishers clearly disclose in third-party endorsements made online, such as in social media, if compensation was received in exchange for said endorsements. Because some of our marketing campaigns entail the engagement of consumers to refer other consumers in their social networks to view adds or take action, and both we and the consumer may earn cash and other incentives, any failure on our part to comply with these guides may be damaging to our business. We are currently do not take any steps to monitor compliance with these guides. In the event of a violation, the FTC could potentially identify a violation of the guides, which could subject us to a financial penalty or loss of endorsers or advertisers.

In the area of information security and data protection, many states have passed laws requiring notification to users when there is a security breach for personal data, such as the 2002 amendment to California’s Information Practices Act, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. The costs of compliance with these laws may increase in the future as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities.

We are also subject to federal, state, and foreign laws regarding privacy and protection of user data. Any failure by us to comply with these privacy-related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of data protection laws, and their application to the Internet is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner that is not consistent with our current data protection practices. Complying with these varying requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our members’ privacy and data could result in a loss of member confidence in our services and ultimately in a loss of members and customers, which could adversely affect our business.

We generally only receive user data authorized through the Facebook user API. Access to such information, in addition to being limited in scope by Facebook policies and procedures, requires the affirmative authorization of the participating user, as stipulated by Facebook. In the event of a campaign, we post a privacy policy and user agreement, which describe the practices concerning the use, transmission and disclosure of member data in connection with such campaign. Any failure by us to comply with our privacy policy and user agreement could result in proceedings against us by users, customers, governmental authorities or others, which could harm our business.

Our subsidiary, The Bright Insurance Agency, LLC., offers insurance products through the Company’s TheBright.com website. The Bright Insurance Agency, LLC., functions as an independent agent offering life insurance, disability income insurance, and long-term care insurance through our website. Variable products are not offered by The Bright Insurance Agency, LLC.

The Florida Department of Financial Services Insurance Division requires life insurance agents obtain a licensure after completing a professional course and passing the required licensing exam. In addition, insurance agencies are required to obtain a license from the state of Florida. The general agent for The Bright Insurance Agency, LLC, has passed the 02-15 examination and is licensed for life including variable annuity and health insurances. The Bright Insurance Agency, LLC has also acquired the licensure required by the State of Florida. Additional licenses are required for each state in which insurance products may be sold.

Our history

We are a development stage company formed as a Florida corporation on May 20, 2010. Activities during the development stage have been principally devoted to organizational activities, raising capital, software development, evaluating operational activities and business opportunities, and making website acquisitions.

Part of our growth strategy is to evaluate business opportunities that may potentially expand our growth and retention of user traffic, which is paramount to Bright Mountain’s success. As part of our growth strategy the Company acquired the following websites in 2013 and in 2014 through the date of this report:

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There is another publicly reporting company currently named Wall Street Media Co., Inc., formerly named “Bright Mountain Holdings, Inc.”, a Nevada corporation which is an Internet-based technology company headquartered in Fort Lauderdale. We have no association with this company.

ITEM 1.A

RISK FACTORS.

Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase 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.

RISKS RELATED TO THE EARLY STAGE OF OUR COMPANY

We are a development stage company and our success is subject to the substantial risks inherent in the establishment of a new business venture.

The implementation of our business strategy is in a very early stage. Our business and operations should be considered to be in an early stage and subject to all of the risks inherent in the establishment of a new business venture. Accordingly, our intended business and operations may not prove to be successful in the near future, if at all. Any future success that we might enjoy will depend upon many factors, several of which may be beyond our control, or which cannot be predicted at this time, and which could have a material adverse effect upon our consolidated financial condition, business prospects and operations and the value of an investment in our company.

We have a very limited operating history and our business plan is unproven and may not be successful.

Our limited operating history means that there is a high degree of uncertainty in our ability to execute our business plan, obtain customers and create new products and services, respond to competition or operate the business, as management has not previously undertaken such actions as a company. Our inability to achieve any of the foregoing, could materially and adversely affect our business.

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We have suffered losses since inception and we may not be able to achieve profitability.

Our company has generated net losses of $2,974,025 since inception through December 31, 2013 and we expect to continue to incur significant expenses in the foreseeable future related to the completion of development and commercialization of our websites and the expansion of our business. As a result, we are sustaining substantial operating and net losses, and it is possible that we will never be able to sustain or develop the revenue levels necessary to attain profitability or generate positive cash flows.

Our auditors have 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 $2,974,025 at December 31, 2013. We have been and expect to continue funding our business until, if ever, we generate sufficient cash flow to internally fund our business, with and through sales of our securities. 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. We anticipate that our operating expenses will continue to increase and we will continue to incur substantial losses in future periods until we are successful in significantly increasing our revenues and cash flow. There are no assurances that we will be able to increase our revenues and cash flow to a level which supports profitable operations and provides sufficient funds to pay our obligations. If we are unable to meet those obligations, we could be forced to cease operations in which event investors would lose their entire investment in our company.

We may have difficulty raising additional capital, which could deprive us of necessary revenues.

Our revenues are not sufficient to fund our operating expenses. In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through public or private debt or equity financing, collaborative relationships or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of the capital markets, the market price of our common stock and the development or prospects for development of competitive technology by others. Sufficient additional financing many not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock. We raised $2,101,500 of capital during 2013. We anticipate that we will need to raise additional capital of $1,000,000 during, 2014 to fund our operations plus additional capital for acquisitions but we do not have any firm commitments for funding. If we are unsuccessful in raising additional capital, or the terms of raising such capital are unacceptable, we may have to modify our business plan and/or significantly curtail our planned activities and other operations.

Failure to effectively manage our growth could place strains on our managerial, operational and financial resources and could adversely affect our business and operating results.

If our business grows, we will be required to manage multiple relationships. Any further growth by us or our subsidiaries, or an increase in the number of our strategic relationships will increase this strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to implement our business plan, and could have a material adverse effect upon our financial condition, business prospects and operations and the value of an investment in our company.

RISKS RELATED TO BRIGHT MOUNTAIN’S BUSINESS AND INDUSTRY

Claims that Bright Mountain infringes upon third parties’ intellectual property rights could be costly to defend or settle.

Bright Mountain may, from time to time, encounter disputes over rights and obligations concerning intellectual property. Such claims may be with or without merit. Any litigation to defend against claims of infringement or invalidity could result in substantial costs and diversion of resources. Furthermore, a party making such a claim could secure a judgment that requires Bright Mountain to pay substantial damages. A judgment could also include an injunction or other court order that could prevent Bright Mountain from selling its products. Bright Mountain’s business, consolidated operating results, and financial condition could be harmed if any of these events occurred.

Bright Mountain could incur substantial costs in defending itself against infringement claims. In the event of a claim of infringement, Bright Mountain might be required to obtain one or more licenses from third parties. Bright Mountain might be unable to obtain necessary licenses from third parties at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any such required licenses could harm Bright Mountain’s business, consolidated operating results and consolidated financial condition.

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Bright Mountain depends on the services of our Chief Executive Officer.

Our success largely depends on the efforts, reputation and abilities of W. Kip Speyer. Bright Mountain intends to leverage his experience and reputation to develop and launch its products and services. We are not a party to an employment agreement with Mr. Speyer. While we do not expect to lose his services, the loss of the services of Mr. Speyer could materially harm Bright Mountain’s business. In addition, we do not presently maintain a key-man life insurance policy on Mr. Speyer.

Bright Mountain’s failure to retain and attract qualified personnel could harm Bright Mountain’s business.

Bright Mountain’s success depends on Bright Mountain’s ability to attract, train and retain qualified personnel. Competition for qualified personnel is intense and Bright Mountain may not be able to hire sufficient personnel to achieve Bright Mountain’s goals or support the anticipated growth in Bright Mountain’s business. The market for the personnel Bright Mountain requires is competitive. If Bright Mountain fails to attract and retain qualified personnel, Bright Mountain’s business will suffer.

Additionally, companies whose employees accept positions with competitors often claim that such competitors have engaged in unfair hiring practices. Bright Mountain may receive such claims in the future as Bright Mountain seeks to hire qualified employees. Bright Mountain could incur substantial costs in defending against any such claims.

The acquisition of new businesses is costly and these acquisitions may not enhance our financial condition.

A significant element of our growth strategy is to acquire companies, which complement our business. The process to undertake a potential acquisition can be time-consuming and costly. We 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 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.

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.

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RISK FACTORS RELATING TO OUR COMMON STOCK

There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities.

In December 2013 we secured a quotation of our common stock on the OTC Bulletin Board, however, there has been no trading in our stock. There are no assurances a public market for our common stock will ever develop. Accordingly, an investment in our common stock should be considered an illiquid investment.

The market price of our common stock may be volatile.

The market price of our common stock will likely be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

Our common stock is considered “penny stock.”

The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock may become less than $5.00 per share and therefore a “penny stock.” Brokers and dealers effecting transactions in “penny stock” must disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect your ability to sell shares.

FINRA sales practice requirements may also limit a shareholders ability to buy and sell our stock.

In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must have reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.

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. Through ownership of shares of our common stock, one shareholder, Mr. W. Kip Speyer, our Chief Executive Officer and Chairman of the Board, beneficially owns approximately 55.7% of our total outstanding shares of common stock. As a result of the concentrated ownership of the stock, this shareholder, acting alone, will 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 would 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.

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We have not voluntarily implemented various governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements; other have been adopted by companies in response to the requirements; others have been adopted by companies in response to the requirements of national securities exchanges, such as NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ, are those that address the board of director’s independence, audit committee oversight and the adoption of a code of ethics. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees, may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

The conversion of our outstanding 10% Series A convertible preferred stock and/or 10% Series B convertible preferred stock will result in the issuance of an additional 2,600,000 shares of common stock.

We have 1,600,000 shares of 10% Series A convertible preferred stock and 1,000,000 shares of 10% Series B convertible preferred stock outstanding, including 300,000 shares of 10% Series A convertible preferred stock owned by Mr. W. Kip Speyer. Both series of these securities are convertible into shares of our common stock on a one for one basis at the option of the holder during the first five years the shares are outstanding and, on the fifth anniversary, they are automatically converted into common stock. The conversion of these shares of preferred stock will result in the issuance of an additional 2,600,000 shares of our common stock which would increase our currently issued and outstanding shares by 8.2%. The conversion of the shares of 10% Series A convertible preferred stock and/or 10% Series B convertible preferred stock into common stock will be dilutive to our existing shareholders and could adversely impact the market price of our common stock, should a market be developed of which there is no assurance. At the option of the Corporation, the Corporation has the right to redeem in cash, out of funds legally available therefore, all of the Series A Stock and the Series B Stock in the amount of capital invested.

The payment of dividends on the shares of 10% Series A convertible preferred stock and 10% Series B convertible preferred stock is dilutive to our shareholders.

The designations, rights and preferences of each class of our outstanding preferred stock provide that a 10% annual dividend is payable in shares of our common stock at a rate of one share of common stock for each 10 shares of Series A or Series B convertible preferred stock. These dividends are payable in January of each year. In January 2014 we issued an aggregate of 21,234 shares of our common stock as dividends payments, of which 3,014 shares were issued to Mr. W. Kip Speyer and 15,247 shares were issued to a principal shareholder. The payment of dividends of the shares of 10% Series A convertible preferred stock and 10% Series B convertible preferred stock will be dilutive to our existing shareholders and could adversely impact the market price of our common stock, should a market be developed of which there is no assurance.

Our board of directors has the authority, without shareholder approval, to issue preferred stock with terms that may not be beneficial to common shareholders and with the ability to affect adversely shareholder voting power and perpetuate their control over us.

Our Articles of Incorporation allows us to issue 20,000,000 shares of preferred stock without any vote or further action by our shareholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

ITEM 1B.