UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
Commission file number: 000-29363
(Exact Name of Registrant as Specified in its
Charter)
Nevada |
88-0343702 |
(State or other jurisdiction
of incorporation organization) |
(I.R.S. Employer Identification No.) |
1771 E. Flamingo Road, #201-A
Las Vegas, NV 89119
(Address of principal executive offices
including zip code)
Registrant's telephone number: (702) 734-3457
Securities registered pursuant to Section 12(b)
of the Act: None
Securities registered pursuant to Section 12(g)
of the Act:
Common Stock, Par Value $.001
(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
o No x
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
o No x
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.
Yes
x No o
Indicate by check mark whether the registrant has submitted electronically
and posted on corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
o No x
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (section 229.405 of this chapter) is not 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.
o
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See the definitions of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
o |
Accelerated filer |
o |
Non-accelerated filer |
o |
Smaller reporting company |
x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
Yes
o No x
The aggregate market value of the voting and non-voting stock
held by non-affiliates of the registrant, as of June 30, 2014, was approximately $3,207,950 based on a share value of $0.0287 per
share. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation,
to be "affiliates" of the registrant.
As of April 11, 2015, there were 214,549,534 shares of the issuer's
common stock issued and outstanding.
TABLE OF CONTENTS
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Page |
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Special Note Regarding Forward-Looking Statements |
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3 |
PART I |
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Item 1. Business |
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4 |
Item 1A. Risk Factors |
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9 |
Item 1B. Unresolved Staff Comments
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21 |
Item 2. Properties |
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22 |
Item 3. Legal Proceedings |
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22 |
Item 4. Mine Safety Disclosures |
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22 |
PART II |
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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22 |
Item 6. Selected Financial Data |
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24 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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25 |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
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36 |
Item 8. Financial Statements and Supplementary Data |
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36 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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36 |
Item 9A. Controls and Procedures |
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36 |
Item 9B. Other Information |
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37 |
PART III |
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Item 10. Directors, Executive
Officers and Corporate Governance |
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38 |
Item 11. Executive Compensation |
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40 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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42 |
Item 13. Certain Relationships and Related Transactions, and Director Independence |
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43 |
Item 14. Principal Accounting Fees and Services |
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43 |
PART IV |
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Item 15. Exhibits and Financial Statement Schedules |
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44 |
SIGNATURES |
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SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Annual Report on Form 10-K contains
“forward-looking statements” about our business, financial condition and prospects based on our current expectations,
assumptions, estimates, and projections about us and our industry. All statements other than statements of historical fact are
“forward-looking statements”, including, but not limited to, any projections of earnings, revenue or other financial
items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed
new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and
any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include
the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,”
“expect” or “anticipate” or other similar words. These forward-looking statements present our estimates
and assumptions only as of the date of this report. Unless otherwise required by law, we do not intend, and undertake no obligation,
to update any forward-looking statement.
Although we believe that the expectations
reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected
or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include,
but are not limited to:
| · | increased competitive pressures from existing
competitors and new entrants; |
| · | general economic and business conditions,
and trends in the travel and entertainment industries; |
| · | trends in hotel/casino occupancy rates
and business and leisure travel patterns, including the potential impacts that wars, terrorist activities, or other geopolitical
events might have on such occupancy rates and travel patterns; |
| · | uncertainties inherent in our efforts
to renew or enter into agreements on acceptable terms with our significant hotel/casino customers; |
| · | the regulatory and competitive environment
of the industry in which we operate; |
| · | the potential impact that any negative
publicity, lawsuits, or boycotts by opponents of gaming or other gaming related activities distributed by us could have on the
willingness of hotel/casino industry participants to deliver such content to guests; |
| · | the potential for increased government
regulation and enforcement actions, and the potential for changes in laws that would restrict or otherwise inhibit our ability
to make gaming related programming content available over our network systems; |
| · | increases in interest rates or our cost
of borrowing or a default under any material debt agreements; |
| · | deterioration in general or regional economic
conditions; |
| · | loss of customers or sales weakness; |
| · | competitive threats posed by rapid technological
changes; |
| · | uncertainties inherent in our ability
to execute upgrades of video systems, including uncertainties associated with operational, economic and other factors; |
| · | the ability of vendors to deliver required
equipment, software and services; |
| · | inability to achieve future sales levels
or other operating results; |
| · | the unavailability of funds for capital
expenditures; and |
| · | operational inefficiencies in distribution
or other systems. |
For a detailed description of these and
other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please
see “Risk Factors” in this document.
In this report, references to “PLAYERS
NETWORK”, “PNTV”, “the Company”, “we,” “us,” and “our” refer
to PLAYERS NETWORK, a Nevada corporation.
PART I
ITEM 1. BUSINESS
Overview
Players Network was incorporated in the
State of Nevada in March of 1993. Players Network is a vertically integrated diversified, fully reporting public company that is
engaged in the development of digital networks, and is actively pursuing the cultivation and processing of medical marijuana in
North Las Vegas pursuant to two medical marijuana establishments (MME) licenses we were granted by the city of North Las Vegas
for cultivation and production. The Company holds an 81.4% interest in Green Leaf Farms Holdings, LLC, which is a holding company
formed to house our medical marijuana business. We distribute broadband video and other social media content over a wide variety
of internet enabled devices and cable television channels. The Company has launched its proprietary scalable NexGenTV technology
platform. The platform is designed to deliver video content and develop digital social communities, including “Vegas On Demand
TV”, “Real Vegas TV” and “Weed TV” on the media side of the business.
The Company operates a Video On Demand
(“VOD”) television channel, also named Vegas On Demand, which consists of original programming that is distributed
over its own VOD channels to approximately 23 million homes via a major cable company, and 80 million homes via the internet on
the Over The Top Television platform, with distribution partners that include Blinkx, YouTube Video and other internet and various
mobile platforms. Players Network has a seventeen-year history of providing consumers with quality ‘Gaming and Las Vegas
Lifestyle’ video content.
We have developed NexGenTV, an innovative,
proprietary Enterprise Web Platform that incorporates the best parts of Hulu, YouTube, Facebook, Zenga and Groupon. We believe
it will change how businesses approach building digital brand extensions.
NexGenTV, our scalable Digital Technology
Platform, allows Players Network to distribute content for brands, businesses and celebrities, and provide them with an unlimited
amount of lifestyle category content and the tools to launch their own “Branded Channel, Social Community and Marketplace
Destination”. NexGenTV’s scalability can create hundreds of niche digital networks that can be viewed worldwide on
any smart TV, computer, tablet or mobile device by millions of people simultaneously. The platform allows advertisers and marketing
partners the ability to capture their target market through rich content such as professionally produced, branded television segments;
user-generated videos; blogs; editorials; tweets; photos; special offers; events and custom-designed contests.
Our business model incorporates elements
of traditional proven media features such as advertising and transactional delivery methods, but also offers professional production,
marketing and distribution services to build and monetize its branded channel destination, in which we will retain a continuous
revenue stream with our partners. Channel partners have the option to manage their own Branded New Media Channel, or use our professional
services team of television producers, writers, graphic designers and technologists to keep their channel updated, and their content
fresh and relevant.
Vegas On Demand TV, Real Vegas TV and Weed
TV are the Company’s first three channel offerings that provide their audience the ability to connect to industry insiders
and businesses through unique, high-quality marketing, content production and content management system. In the Las Vegas market,
Vegas On Demand captures the excitement, sex appeal, entertainment, and the non-stop adrenaline rush of the Las Vegas gaming lifestyle.
Our content goes beyond poker, casino action, sports betting, and racing, to lifestyle programs about entertainment and fine living
that attract young and sophisticated viewers that comprise the major digital media demographic. Whenever possible, our content
will incorporate an expert, insider or celebrity within the Vegas community in order to enhance promotional merchandising to prospective
customers.
Weed TV launched on April
20, 2014, and was the Company’s third network to be launched. Weed TV is a Lifestyle Channel Destination powered by PNTV’s
NextGenTV(SM) enterprise platform. Weed TV is the ‘go to’ source for informational entertainment, products and services
for people who relate to the marijuana lifestyle and social community. Weed TV will feature daily stories sourced by weedtv.com
correspondents and contributors from around the world. It will provide a wide variety of editorial content, videos and entertainment,
including lead stories, political news, business news on the industry, financial analysis from industry experts, growing tips,
cooking tips, a “Weed101” section, medical uses, lifestyle features, entertainment specials and merchandise shopping
cart offering the latest products and services. www.weedtv.com
We plan for Weed TV to
have other features by the middle of 2015 and adapt new technology that he other networks don’t have, including a directory
of businesses that cater to the marijuana business, such as dispensaries, smoke shops, doctors, financial institutions, manufactures
and more. These businesses will have a free basic listing and the ability to upgrade for an extra fee of about $500 per month,
where they can build their own media channel using the ‘NextGenTV” Platform. We estimate this market is in excess of
approximately 70,000 businesses and will continue to grow as more states legalize MME businesses. Our goal in 2015 is to begin
to capture this market that will translate to significant revenues even if we only convert a small amount of this market into marketing
partners who use our platform.
We plan to use both, Weed TV’s platform
and original branded programming and events, as a means to develop additional revenue streams, in addition to providing marketing
and membership benefits of our social media platform. These revenue streams include branded entertainment, sponsorships for events,
media placement, third party commissions for video and banner advertisements, merchandise and production sales and services.
We have addressed the digital market in
an effort to grow as a New Media Company using “Vegas On Demand” and Real Vegas TV, our flagship branded television
channel, and to use our scalable custom enterprise web platform, which can also be replicated to launch thousands of channel destinations
in any lifestyle category for any lifestyle brand.
Our enterprise platform is highly scalable
and can efficiently deploy, manage and distribute videos with integrated revenue-generating tools that go beyond traditional advertising.
On our platform, the viewer of a video is brought into a web environment encompassing the lifestyle represented within the video
content where they are presented with membership, merchandising, couponing, subscription, loyalty programs, contest and other marketing
opportunities, including the integration of live events. The platform also integrates branded sponsorships, and a game-like virtual
economy supported by our Cost Per Action (“CPA”) advertising network.
Our next-generation media network operates
across all distribution platforms from TV screens to mobile devices, gaming consoles, computers and tablets. We have positioned
ourselves to provide companies an affordable, turnkey, integrated solution. We have not yet generated revenues from our Platform,
but plan to market our services to companies in 2015.
Through the cross-promotional integration
of sponsored live events, contests and media creation and distribution, our Platform can deliver a targeted audience that can be
monetized in multiple ways. The platform is an engine that grows as audience and page views increase. The platform also provides
a self-perpetuating aggregation juncture where Las Vegas businesses and “insiders” can connect socially with their
audience/customer.
The ability to monetize video in so many
ways, coupled with an efficient, easy-to-use technical and administrative back-end dashboard is a powerful feature of our platform.
It allows the creation of unlimited, new channel destinations using our scalable content management system (“CMS”)
framework, with cost-competitive operations. Importantly, it enables administrative and editorial level employees to manage content
without the expense of having a full-time technical engineering staff in-house.
Premium members must be industry insiders
and/or experts in their lifestyle category. For example, with regard to Vegas On Demand, insiders are designed to be the who’s-who
of Vegas: entertainers, nightclub promoters, casino hosts, famous chefs, etc. who offer our members deals on transactions connected
to their sphere of influence. Deals may include being invited to a special VIP event, line passes, two-for-one offers, pay-per-view
video discounts, etc.
Market Opportunity
The Company’s opportunity to capitalize
on its early adaptation in the market place is primarily due to the advancement in technology and digital platforms. This digital
revolution has rapidly changed the way consumers access television content. Instead of scheduled programming, video can now be
viewed “On Demand” through digital cable television and satellite networks, broadband internet, and by downloading
content to mobile and wireless devices such as MP3 players, Smart phones and PDAs.
Each new network will become an integrated
channel destination that will include VOD television and a social community to complete and compliment a vertical distribution
and marketing strategy. Each network will command a new audience and advertisement tied to the amount of monthly viewers, thus
ultimately increasing Players Network’s advertising revenues.
Social media websites have continued to
explode during the past few years, however many people have not heard of the hundreds of upcoming niche social networks. We plan
to integrate all our websites with social elements in order to create communities and increase memberships. Increased membership
will lead to increased web traffic and commerce opportunities that target the seventy billion dollar US gaming industry.
Distribution
We distribute our gaming lifestyle media
programming through a variety of media platforms including, VOD, broadband/internet, satellite television, cable television, packaged
media, and on our proprietary website. Through our dedicated channels of taped original television series, live pay per view events,
mobile and internet content downloading, information segments and interactive content, the channel’s expanded programming
will include popular poker programs, reality shows, game shows, documentaries, talk shows and special events surrounding the gaming
lifestyle.
Broadband/Internet
Broadband/internet and mobile is the future,
as consumers are tired of paying high cable and satellite bills and younger generations are spending the majority of their time
on internet and mobile devices, millions of consumer are cutting their cable and satellite services and accessing their content
through less expensive, new media devices connected to the internet.
Currently there are over 7 billion interconnected
devices that served up 485 billion videos in 2014 and are expected to grow to 13 billion devices by the end of 2016. This
shift in consumer habits is breaking down the barriers of entry in the content business and allowing producers and publishers to
distribute directly to its targeted audiences through key word searches.
The Company is continuously seeking advertiser
and sponsorship support with some premium content available to consumers for a fee. As brand awareness grows through advertising
and major industry tie-ins, the Company will seek to become an aggregating portal for other gaming sites.
We intend to heavily market and cross-promote
our website and are actively exploring additional relationships through social media networks. We also believe there is a great
opportunity to provide content to, and share content with providers of other gaming, entertainment, and educational websites. We
intend to use our website to develop gaming lifestyle communities, then offer the members of these communities live video events,
information services, discounts, travel, internet based commerce, etc., as well as instant messaging, chat, comments, reviews and
perspectives from consumers on a variety of topical subjects.
Mobile
The mobile apps market is continuing to
grow and has become a part of global culture. All of our Channel Destinations will have a mobile extension to give our members
access to features and benefits contained within each community. For example, our Vegas on Demand Channel will offer a mobile app
that allows members to access “How to Play Blackjack/Craps/Roulette” videos, and offers of VIP Vegas access for our
members.
Content/Programming
Players Network’s Real Vegas TV and
Vegas on Demand programming brands include, (1) Players Network, which focuses on Gaming lifestyle and produces programming about
horse racing, sports betting, casino games, poker and much more; (2) Vegas On Demand, which is about Las Vegas lifestyle and covers
celebrity, night clubs, poolside experiences, entertainment and more; (3) Sexy Sin City TV, which covers the adult and sexy side
of Las Vegas after dark.
The development of Players Network’s
programming is led by Michael Berk, who is one of Hollywood’s most successful television producers. Michael Berk has created
over 500 hours of network television that includes five television series. Mr. Berk is best known for his series “Baywatch”,
for which he was the Executive Producer for twelve years. Baywatch is distributed in 144 countries and is in the Guinness Book
of World Records as the most watched television show in history.
We have a library of 1,600 gambling and
gaming lifestyle videos, including several new series of both long and short form content. Some of these series include Players
Network originals; Hidden Vegas, Tattoo Tails that include 30 originally produced hours of programming from the World Series of
Poker®, which Players Network had the exclusive rights to produce and air live. Players Network produced over 50 videos at
the Hooters Hotel and Casino, 28 new gaming instructional videos aimed at slots and video poker players, a series of 23 videos
on magic entitled “Hocus Pocus”, The “Best of Vegas” series, “Neon Buzz”, an entertainment
report that covered red carpet events and many more. Our growing programming library presents long-term revenue opportunities in
advertising, sponsorship, direct sales and product integration, domestic and international program sales, broadband syndication,
subscription fees and increased home video sales.
Our Weed TV brand began developing original
content as well as acquiring the rights to other Marijuana related programming that includes documentaries, cooking shows, concerts,
travel shows, growing shows, medical shows, political shows, financial shows and more. We have produced over 100 original short
video segments that are owned by the Company.
Strategy
Our goal is to leverage our enterprise
platform to collaborate with industry experts and content producers in selected lifestyle and service fields in an effort to incubate
digital business extensions with existing and new businesses by:
| · | Continuing to look for partnerships to
build new branded lifestyle categories. |
| · | Creating a brand identity as “the
trusted name in gaming entertainment, education, information and services” that addresses the full spectrum of audience demographics
within all of our destination channels; |
| · | Building an ever-expanding, valuable library
of entertainment, instruction and information content that enables targeted audiences to connect with experts and insiders within
any specific channel destination; |
| · | Leveraging our various distribution channels
as a mechanism to bring value to our business relationships that attract consumers with the goal of building a strong customer
base and community; |
| · | Gaining a broad and diversified audience
base through our distribution arrangement with a major Cable provider, as well as other distribution channels, including linear
programming via digital cable, internet and broadband, wireless, packaged media, video games, mobile media through cell phones
and iPods, radio, publishing, and IPTV. |
| · | In our flagship Vegas On Demand TV, harnessing
the power of the media in order to provide customized media solutions and marketing services for key lifestyle category companies,
principally major Las Vegas casino properties. Players Network uses its strong relationships in the gaming industry to lock in
special trade relationships that can contribute to content, advertising, VIP services, and club amenities which will solidify Players
Network’s credibility in the category; |
| · | Grow the Company’s robust, proprietary
database of gaming enthusiasts, and create lifestyle communities by offering deals, discounts, and prizes to our customers, while
marketing our strategic partnerships and sponsors; |
| · | Offering advertisers a new content category
with creative cross-platform advertising/sponsorship packages at reasonable rates in an environment of unique sexy content surrounded
by sizzling attitude that delivers desirable demographics; |
| · | Continue to build technology to include
mobile application that complements our strategy and existing media brand and objectives. |
| · | Continuing to build a lean management
team with proven experience that can move quickly, control costs, rapidly create a broad range of high-quality content, and leverage
significant long-term relationships in the media, entertainment and gaming industries enabling the Company to accelerate its market
leadership. |
Competition
Although we are unaware of any other company
that is aimed exclusively at the gaming lifestyle market, we face intense competition from a variety of other companies that develop
and distribute gaming lifestyle content, including (i) full service in-room providers, (ii) cable television companies, (ii) direct
broadcast satellite services, (iv) television networks and programmers, such as ESPN, the Travel Channel, E!, the Food Network;
(v) Internet service providers, (vi) broadband connectivity companies, and (vi) other telecommunications companies. In addition,
our services compete for a viewer’s time and entertainment resources with other forms of entertainment.
As we expand and our users become more
acclimated to social interaction and VOD, we believe that the whole world will be competing for the same viewers. Our advantage
is that competition has driven users to our market and that the key to success will be to produce fresh content that is exclusive
to our Channel Destinations and target markets.
Intellectual Property
We have a library of over 1,050 gambling and
gaming lifestyle videos. We own the intellectual property rights in the programming and content that we produce. Moreover, the
slogans “Everybody wants to be a player” and “The only game in town” are registered trademarks of the Company
with the United States Patent and Trademark Office (the “PTO”). The Company has received from the PTO the trademark
for “Players Network” and for the service mark “Players Network”.
Governmental Approval and Regulation
Players Network does not believe that any
governmental approvals are required to sell its products or services. The Communications Act of 1934, as amended by the Cable Communications
Policy Act of 1984, the Cable Television Consumer Protection and Competition Act of 1992 and the Telecommunications Act of 1996,
governs the distribution of video programming by cable, satellite or over-the-air technology, through regulation by the Federal
Communications Commission (“FCC”). However, because Players Network’s video distribution systems do not use any
public rights of way, they are not classified as cable systems and are subject to minimal regulation. Thus, the FCC does not directly
regulate the programming provided by the Company.
Although the FCC generally does not directly
regulate the services provided by Players Network, the regulation of video distribution and communications services is subject
to the political process and has been in constant flux over the past decade. Further material changes in the law and regulatory
requirements must be anticipated and there can be no assurance that Players Network’s business will not be adversely affected
by future legislation or new regulations.
Research and Development
Players Network is constantly utilizing
the latest technology to enhance our delivery platforms and the way we communicate with our customers. Although research and development
costs are incorporated into our costs of operations on each project as it is developed, Players Network understands the importance
of utilizing the latest available technology and constantly seeks to improve their delivery methods in today’s fast changing
society. Part of the Company’s latest development efforts includes the implementation of social media marketing platforms
to build communication and retention around our customers.
Seasonality
The amount of revenue realized by the Company
each month is only affected slightly by the season for a variety of factors, that mainly include summer break, and holidays, when
internet use increases.
Employees
We currently have two full time employees:
our chief executive officer and our President of Programming. Our chief executive officer, Mark Bradley, is responsible for all
material policy-making decisions and currently supports and operates our production and post-production operations, while Michael
Berk, our President of Programming also supports and operates our production and post-production operations. Management will hire
additional employees on an as needed basis. None of our employees are subject to any collective bargaining agreement or labor union
contract, nor has the Company been subjected to any strikes or employment disruptions in its history. We are using, and intend
to continue to use the services of independent consultants and contractors to perform various professional services when and as
they are deemed necessary. We believe that the use of third-party service providers may enhance our ability to contain general
and administrative expenses.
In addition to fulltime employees, the
Company has several outside consultants to cover needed support such as business affairs, programming and technology design and
deployment supported by independent contractors on an as needed basis.
Office Locations
Our executive offices are located at 1771
E. Flamingo Road, #201-A, Las Vegas, Nevada 89119. Our office space consists of approximately 2,800 square feet leased pursuant
to a 3-year operating lease expiring August 31, 2016. The lease provides for increases in future minimum annual rental payments
based on defined annual increases beginning with monthly payments of $3,080 and culminating in a monthly payment of $3,191 in 2016.
The lease contains provisions for future rent increases and rent free periods for the first two months of the lease.
Available Information – Reports
to Security Holders
Our website address is www.playersnetworkcom.
We make available on this website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports after we electronically file those materials with, or furnish those materials to, the
SEC. These filings are also available to the public at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington,
DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Electronic filings with the SEC are also available on the SEC internet website at www.sec.gov.
We also post to our website all pertinent
company contact information.
ITEM 1A. RISK FACTORS.
An investment in our common stock involves
a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before
investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could
be seriously harmed. Please note that throughout this prospectus, the words “we”, “our” or “us”
refer to the Company and its subsidiary not to the selling stockholders.
In addition to the other information in
this Annual Report, the following risk factors, among others, should be considered carefully in evaluating the Company and its
business.
Risks Related To Our Company
We have had a history of losses, we
expect losses in the future, and there can be no assurance that we will become profitable in the future.
The Company was incorporated under the laws
of the State of Nevada on March 16, 1993. Since inception, we have experienced operating losses on an on-going basis. For our fiscal
year ended December 31, 2014, we incurred net losses of $3,280,646. As of such date, we had an accumulated deficit of $26,848,642.
We expect our losses to continue for the foreseeable future. These continuing losses may be greater than current levels. If our
revenues do not increase substantially or if our expenses exceed our expectations, we may never become profitable. Even if we do
achieve profitability, we may not sustain profitability on a quarterly or annual basis in the future.
Our auditor has given us a "going
concern" qualification, which questions our ability to continue as a going concern without additional financing.
Our independent certified public accountant
has added an emphasis paragraph to its report on our financial statements for the year ended December 31, 2014 regarding our ability
to continue as a going concern. Key to this determination is our recurring net losses, an accumulated deficit, and a working capital
deficiency. Management plans to try to increase sales and improve operating results through the expansion of the distribution channels
of our programming with a view to increasing advertising and sponsorship revenues. Management believes that funds generated from
operations will not be sufficient to cover cash needs in the foreseeable future, and we will continue to rely on expected increased
revenues and private equity to cover our cash needs, although there can be no assurance in this regard. In the event sales do not
materialize at the expected rates, management would seek additional financing or would conserve cash by further reducing expenses.
There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing our business
without either a temporary interruption or a permanent cessation.
We need additional capital in the future
to finance our planned growth, which we may not be able to raise or it may only be available on terms unfavorable to us or our
stockholders, which may result in our inability to fund our working capital requirements and harm our operational results.
We have and expect to continue to have
substantial capital expenditure and working capital needs. We do not now have funds sufficient to fund our operations at their
current level for the next 12 months. We need to raise additional cash to fund our operations and implement our business plan.
We are maintaining an on-going effort to locate sources of additional funding, without which we will not be able to remain a viable
entity. We currently have an outstanding financing agreement that enables the Company to draw additional proceeds of $320,000 at
the discretion of the lender, along with an outstanding investment agreement that permits us to “put” up to $8,500,000
in shares of common stock. There are no assurances that we will be able to draw on these funds, or obtain adequate financing. If
we are able to obtain the financing required to remain in business, eventually achieving operating profits will require substantially
increasing revenues or drastically reducing expenses from their current levels or both. If we are able to obtain the required financing
to remain in business, future operating results depend upon a number of factors that are outside of our control. The expected operating
losses, coupled with a lack of liquidity, raise a substantial doubt about our ability to continue as a going concern. If we raise
additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would
be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.
For more information about our capital needs and abilities, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- OVERVIEW AND OUTLOOK - Liquidity and Capital Resources” herein.
At this stage of our business operations,
even with our good faith efforts, potential investors have a possibility of losing their investment.
Because the nature of our business is expected
to change as a result of shifts in market conditions, competition, and the development of new and improved technology, management
forecasts are not necessarily indicative of future operations and should not be relied upon as an indication of future performance.
While management believes its estimates of projected occurrences and events are within the timetable of its business plan, our
actual results may differ substantially from those that are currently anticipated.
If we are unable to retain the services
of Messrs. Bradley or Berk, or if we are unable to successfully recruit qualified managerial and sales personnel having experience
in business, we may not be able to continue our operations.
Our success depends to a significant extent
upon the continued service of Mr. Mark Bradley, our Chief Executive Officer and Mr. Michael Berk, our President of Programming.
Loss of the services of Messrs. Bradley or Berk could have a material adverse effect on our growth, revenues, and prospective business.
In order to successfully implement and manage our business plan, we will be dependent upon (among other things) successfully recruiting
qualified managerial and sales personnel having experience in business. Competition for qualified individuals is intense. There
can be no assurance that we will be able to find, attract and retain existing employees or that we will be able to find, attract
and retain qualified personnel on acceptable terms.
Our current management resources may
not be sufficient for the future, and we have no assurance that we can attract additional qualified personnel.
There can be no assurance that the current
level of management is sufficient to perform all responsibilities necessary or beneficial for management to perform. Our success
in attracting additional qualified personnel will depend on many factors, including our ability to provide them with competitive
compensation arrangements, equity participation and other benefits. There is no assurance that (if we need to) we will be successful
in attracting highly qualified individuals in key management positions.
Limitations on claims against our officers
and directors, and our obligation to indemnify them, could prevent our recovery for losses caused by them.
The corporation law of Nevada allows a
Nevada corporation to limit the liability of its directors to the corporation and its stockholders to a certain extent, and our
Articles of Incorporation have eliminated our directors’ and officers’ personal liability for damages for breaches
of fiduciary duty but do not eliminate or limit the liability of a director officer for (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of the law, or (b) the payment of dividends in violation of applicable law. The corporation
law of Nevada allows a Nevada corporation to indemnify each director, officer, agent and/or employee to the extent that certain
standards are met. Further, we may purchase and maintain insurance on behalf of any such persons whether or not we have the power
to indemnify such person against the liability insured against. Consequently, because of the actions or omissions of officers,
directors, agents and employees, we could incur substantial losses and be prevented from recovering such losses from such persons.
Further, the Commission maintains that indemnification for liabilities arising under the Securities Act is against the public policy
expressed in the Securities Act, and is therefore unenforceable.
Officers and Directors own a large percentage
of our outstanding stock, and cumulative voting is not available to stockholders.
Our current Officers and Directors currently
own (directly or indirectly) approximately 28.7% of our outstanding common stock and 100% of our outstanding Series A Preferred
Stock. Each share of common stock is entitled to one vote on stockholder matters and each share of Series A Preferred Stock is
entitled to 25 votes on stockholder matters. Cumulative voting is not provided for in the election of directors. Accordingly, the
holder or holders of a majority of our outstanding shares of voting stock may elect all of our directors. Management's large percentage
ownership of our outstanding common stock helps enable them to maintain their positions as such and thus control of our business
and affairs.
We may experience rapid growth, and
in such case we will need to manage this growth effectively.
We believe that, given the right business
opportunities, we may expand our operations rapidly and significantly. If rapid growth were to occur, it could place a significant
strain on our management, operational and financial resources. To manage any significant growth of our operations, we will be required
to undertake the following successfully:
| · | Manage relationships with various strategic
partners and other third parties; |
| · | Hire and retain skilled personnel necessary
to support our business; |
| · | Train and manage a growing employee base;
and |
| · | Continually develop our financial and
information management systems. |
If we fail to make adequate allowances
for the costs and risks associated with this expansion or if our systems, procedures or controls are not adequate to support our
operations, our business could be harmed. Our inability to manage growth effectively could materially adversely affect our business,
results of operations and financial condition.
Risks Related To Our Cannabis Business
Our business is dependent on state laws
pertaining to the cannabis industry.
As of December 31, 2014, twenty-three states
and the District of Columbia allow its citizens to use medical cannabis. Additionally, Colorado and Washington have legalized cannabis
for adult use and, on November 4, 2014, Oregon, Washington DC, and Alaska voted to approve legalization of recreational marijuana.
Continued development of the cannabis industry is dependent upon continued legislative authorization of cannabis at the state level.
Any number of factors could slow or halt progress in this area. Further, progress in the cannabis industry, while encouraging,
is not assured. While there may be ample public support for legislative action, numerous factors impact the legislative process.
Any one of these factors could slow or halt use of cannabis, which would negatively impact our business.
Cannabis remains illegal under federal
law and a change in federal enforcement practices could significantly and negatively affect our cannabis cultivation and production
business.
Despite the development of a cannabis industry
legal under state laws, state laws legalizing medicinal and adult cannabis use are in conflict with the Federal Controlled Substances
Act, which classifies cannabis as a schedule-I controlled substance and makes cannabis use and possession illegal on a national
level. The United States Supreme Court has ruled that the Federal government has the right to regulate and criminalize cannabis,
even for medical purposes, and thus Federal law criminalizing the use of cannabis preempts state laws that legalize its use. However,
the Obama Administration has effectively stated that it is not an efficient use of resources to direct Federal law enforcement
agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical and recreational
cannabis. Yet, there is no guarantee that the Obama Administration will not change its stated policy regarding the low-priority
enforcement of Federal laws in states where cannabis has been legalized. Additionally, we face another presidential election cycle
in 2016, and a new administration could introduce a less favorable policy or decide to enforce the Federal laws strongly. Any such
change in the Federal government’s enforcement of Federal laws could cause significant financial damage to us and our shareholders.
As the possession and use of cannabis
is illegal under the federal controlled substances act, we may be deemed to be aiding and abetting illegal activities through the
services that we provide to users. As a result, we may be subject to enforcement actions by law enforcement authorities, which
would materially and adversely affect our business.
Under Federal law, and more specifically
the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis is illegal. Our new business
plan provides cultivation and production services to customers that are engaged in the business of possession, use, and/or transfer
of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring
an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal activities.
The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets,
counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). As a result
of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would
have a material negative effect on our business and operations.
Laws and regulations affecting the cannabis
and marijuana industries are constantly changing, which could detrimentally affect our business, and we cannot predict the impact
that future regulations may have on us.
Local, state and federal cannabis laws
and regulations are constantly changing and they are subject to evolving interpretations, which could require us to incur substantial
costs associated with compliance or to alter one or more of our service offerings. In addition, violations of these laws, or allegations
of such violations, could disrupt our business and result in a material adverse effect on our revenues, profitability, and financial
condition. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine
what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have
on our business. Any change in law or interpretation could have a material adverse effect on our business, financial condition,
and results of operations.
Expansion by well-established cultivation
and production companies into the cannabis industry could prevent us from realizing anticipated growth in customers and revenues.
Established dispensary companies may expand
their businesses into cannabis cultivation and production. If they decided to expand into cultivation and production, this could
hurt the growth of our business and cause our revenues to be lower than we expect.
Due to our involvement in the cannabis
industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose
us to additional risk and financial liabilities.
Insurance that is otherwise readily available,
such as workers compensation, general liability, and directors and officers insurance, is more difficult for us to find, and more
expensive, because we are service providers to companies in the cannabis industry. There are no guarantees that we will be able
to find such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances,
it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and
financial liabilities.
Participants in the cannabis industry
may have difficulty accessing the service of banks, which may make it difficult for us to operate.
Despite recent rules issued by the United
States Department of the Treasury mitigating the risk to banks that do business with cannabis companies permitted under state law,
as well as recent guidance from the United States Department of Justice, banks remain wary to accept funds from businesses in the
cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains a compelling argument that banks
may be in violation of Federal law when accepting for deposit, funds derived from the sale or distribution of cannabis. Consequently,
businesses involved in the cannabis industry continue to have trouble establishing banking relationships. An inability to open
bank accounts may make it difficult for us, or some of our customers, to do business.
Risks Related To Our Media Business
Our business is speculative (among other
reasons) because our revenues are derived from the acceptance of our programming and the timely expansion to new media distribution,
which is difficult to predict, and our failure to develop appealing programming would probably materially adversely affect us.
Our programming is the key to our success.
It represents the catalyst for generating our revenues, and is subject to a number of uncertainties. Our success depends on the
quality of our programming and the quality of other programming released into marketplace at or near the same time as ours, the
availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible
and intangible factors, all of which can change and cannot be predicted with certainty. There can be no assurance that our current
or future programming will appeal to consumer or persons who would pay to broadcast it. Any failure to develop appealing programming
would materially and adversely affect our business, results of operations and financial condition.
There are various risks associated with
our proprietary rights.
No patent protection. We have no
proprietary technology, and accordingly, have no patents. We intend to rely on a combination of copyright and trade secret protection
and nondisclosure agreements to establish and protect our proprietary rights. Despite our precautions, it may be possible for a
third party to copy or otherwise obtain and use our proprietary information, products or technology without authorization, to imitate
our programming, or to develop similar or superior programming or ideas independently. Imitation of our programming, the creation
of similar or superior programming, or the infringement of our intellectual property rights could diminish the value of our programming
or otherwise adversely affect our potential for revenue. Policing unauthorized use of our intellectual property will be difficult
and expensive. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries.
We cannot provide any assurances that the steps we take will prevent misappropriation of our technology or that our confidentiality
or other protective agreements will be enforceable.
Enforcing our proprietary rights may
require litigation. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade
secrets, to protect our copyrights, to determine the validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could
have a material adverse effect on our business, operating results or financial condition.
Others may assert infringement claims
against us. One of the risks of our business is the possibility of claims that our productions infringe on the intellectual
property rights of third parties with respect to previously developed content. In addition, our technology and software may be
subject to patent, copyright or other intellectual property claims of third parties. We could receive in the future claims of infringement
of other parties’ proprietary rights. There can be no assurance that infringement claims will not be asserted or prosecuted
against us, or that any assertions or prosecutions will not materially adversely affect our business, financial condition or results
of operations. Irrespective of the validity or the successful assertion of such claims, we would incur significant costs and diversion
of resources with respect to the defense thereof, which could have a material adverse effect on our business, financial condition
or results of operations. If any claims or actions are asserted against us, we may seek to obtain a license under a third party’s
intellectual property rights. We cannot provide any assurances, however, that under such circumstances a license would be available
on reasonable terms or at all.
We may be adversely affected by changing
consumer preferences
Gambling and new media appears to have
become more accepted by and popular with many more persons in recent years. However, the gambling industry is subject to shifting
consumer preferences and perceptions. A dramatic shift in consumer acceptance or interest in gaming could materially adversely
affect us. We are also dependent on consumers becoming acclimated to using new media by watching video over the internet and on
VOD television platforms.
We will rely on a number of third parties,
and such reliance exposes us to a number of risks.
Our operations will depend on a number
of third parties. We will have limited control over these third parties. We will probably not have many long-term agreements with
many of them. We rely upon a number of third parties to carry our programming, and we will need to expand in the future the number
of third parties doing this on our behalf. There can be no assurance that existing such agreements will not be terminated or that
they will be renewed in the future on terms acceptable to us, or that we will be able to enter into additional such agreements.
Our inability to preserve and expand the channels for distributing our programming would likely materially adversely affect our
business, results of operations and financial condition. We also will rely on a variety of technology that we will license from
third parties. Our loss of or inability to maintain or obtain upgrades to any of these technology licenses could result in delays.
These delays could materially adversely affect our business, results of operations and financial condition, until equivalent technology
could be identified, licensed or developed and integrated. Moreover, we occasionally use third parties in connection with our production
work and work on our Web site. In addition, we do not own a gateway onto the Internet. Instead, we now and presumably always will
rely on a network operating center to connect our Web site to the Internet. Overall, our inability to maintain satisfactory relationships
with the requisite third parties on acceptable commercial terms, or the failure of such third parties to maintain the quality of
services they provide at a satisfactory standard, could materially adversely affect our business, results of operations and financial
condition.
We could be materially adversely affected
by future regulatory changes applicable to our business.
We do not believe that any governmental
approvals are required to sell our products or services, and that we are not currently subject to significant regulation by any
government agency in the United States, other than regulations applicable to businesses generally. However, a number of laws and
regulations may be adopted with respect to our business in the future. Such legislation could dampen or increase the cost of our
business. Such a development could materially and adversely affect our business, results of operations and financial condition.
Competition in our industry is moderate.
We are very small and have a limited operating history although compared to the vast majority of our competitors we are more experienced.
We intend to compete with major and independent
providers of content to the Broadband and VOD television the majority of our anticipated competitors have substantially greater
financial and other resources than we do. In addition, larger competitors may be able to absorb the burden of any changes in federal,
state and local laws and regulations more easily than we can, which would adversely affect our competitive position. These competitors
may be able to pay more for technology upgrades and marketing. In addition, some of our competitors have been operating in our
core areas for a much longer time than we have and have demonstrated the ability to operate through industry cycles.
Risks Related To Our Common Stock
We have both the obligation and the
ability to issue additional shares of our common stock, and the issuance of such additional shares of common and preferred stock
may depress the price of our common stock.
We have both the ability as well as outstanding
obligations to issue additional shares of common stock in the future. These include the following:
| · | Our Amended and Restated 2004 Non-Qualified
Stock Option Plan allows us to issue up to 25,000,000 shares of common stock and options. We currently have 18,785,000 shares of
our common stock available for issuance under our Amended and Restated 2004 Non-Qualified Stock Option Plan; |
| · | There are 25,859,565 shares of common
stock issuable pursuant to common stock options and warrants outstanding as of the date of this Annual Report; |
| · | There are 6,349,339 shares of common stock
reserved for issuance upon conversion of 2,000,000 shares of outstanding Series A Preferred Stock and 4,349,339 shares of outstanding
Series B Preferred Stock |
| · | There are 10,404,883 shares of Series
B Preferred Stock reserved for issuance pursuant to an outstanding Series B Preferred Stock Warrant. These shares of Series B Preferred
Stock, if issued, will be convertible into 10,404,883 shares of common stock. |
| · | There are 80,000,000 shares of common
stock reserved for issuance upon conversion of convertible notes payable held by Asher Enterprises. |
| · | There are 57,000,000 shares of common
stock reserved for issuance upon conversion of a convertible note payable agreement with JMJ Financial that enables us to draw
total net proceeds of $400,000, of which we have drawn a total of $120,000 as of the date of this Annual Report and have an additional
$280,000 available. |
| · | There are 6,000,000 shares of common stock
reserved for issuance upon conversion of convertible notes payable held by GEL Properties, LLC. |
| · | There are 6,000,000 shares of common stock
reserved for issuance upon conversion of convertible notes payable held by LG Capital Funding, LLC. |
| · | We have an Equity Line Financing facility
that we may draw on from time to time, as and when we determine appropriate with Dutchess Opportunity Fund, II, LP. The Investment
Agreement permits us to “put” up to an aggregate of $8,500,000 in shares of Common Stock to Dutchess during a 36 month
period ending on September 26, 2016. |
The options described above will permit
the holders to purchase shares of common stock at specified prices. These purchase prices may be less than the then current market
price of our common stock. Any shares of common stock issued pursuant to these options would further dilute the percentage ownership
of existing stockholders. The terms on which we could obtain additional capital during the life of these options may be adversely
affected because of such potential dilution. Finally, we may issue additional shares in the future other than as listed above.
There are no preemptive rights in connection with our common stock. Thus, the percentage ownership of existing stockholders may
be diluted if we issue additional shares in the future. For grants of options, our Board of Directors will determine the timing
and size of the grants and the consideration or services required. Our Board of Directors intends to use its reasonable business
judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any such grant. Nonetheless,
future issuances of additional shares pursuant to options granted could cause immediate and substantial dilution to the net tangible
book value of shares of common stock issued and outstanding immediately before such transaction. Any future decrease in the net
tangible book value of such issued and outstanding shares could materially and adversely affect the market value of the shares.
We may issue additional stock without
shareholder consent.
Our board of directors has authority, without
action or vote of the shareholders, to issue all or part of our authorized but unissued shares. Additional shares may be issued
in connection with future financing, acquisitions, employee stock plans, or otherwise. Any such issuance will dilute the percentage
ownership of existing shareholders. The Board, from the authorized capital of 25,000,000 preferred shares, has authorized and designated
2,000,000 shares of Series A and 10,873,347 shares of Series B preferred stock, of which 2,000,000 shares and 4,349,339 shares
are issued and outstanding, respectively. The board of directors can issue preferred stock in one or more series and fix the terms
of such stock without shareholder approval. Preferred stock may include the right to vote as a series on particular matters, preferences
as to dividends and liquidation, conversion and redemption rights and sinking fund provisions. The issuance of preferred stock
could adversely affect the rights of the holders of common stock and reduce the value of the common stock. In addition, specific
rights granted to holders of preferred stock could discourage, delay or prevent a transaction involving a change in control of
our company, even if doing so would benefit our shareholders. Such issuance could also discourage proxy contests and make it more
difficult for you and other shareholders to elect directors of your choosing and to cause us to take other corporate actions you
desire.
Offers or availability for sale of a
substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts
of our common stock in the public market, or upon the expiration of any statutory holding period under Rule 144, or issued upon
the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang”
and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales
have occurred or are occurring, also could hinder our ability to raise additional financing through the sale of equity or equity-related
securities in the future at a time and price that we deem reasonable or appropriate.
The trading price of our common stock
may entail additional regulatory requirements, which may negatively affect such trading price.
The trading price of our common stock has
been and may continue to be below $5.00 per share. As a result of this price level, trading in our common stock is subject to the
requirements of certain rules promulgated under the Exchange Act. These rules require additional disclosure by broker-dealers in
connection with any trades generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining
the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these types
of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser's
written consent to the transaction before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in our common stock. As a consequence, the market liquidity of our common stock could
be severely affected or limited by these regulatory requirements.
Because our board of directors does
not intend to pay dividends on our common stock in the foreseeable future, stockholders may have to sell their shares of our common
stock to realize a return on their investment in the company.
Holders of our common stock are entitled
to receive dividends when, as and if declared by our Board of Directors out of funds legally available. To date, we have paid no
dividends. Our Board of Directors does not intend to declare any dividends in the foreseeable future, but instead intends to retain
all earnings, if any, for use in our business operations. Accordingly, a return on an investment in shares of our common stock
may be realized only through a sale of such shares, if at all.
We have issued convertible notes
that are convertible into shares of our common stock at a discount to market.
A total of $775,047
in convertible notes is outstanding as of March 31, 2015, and is convertible at various prices discounted to market as depicted
in the table below. As a result, any conversion of the Convertible Notes and sale of shares of common stock issuable in connection
with the conversion thereof will likely cause the value of our common stock, if any, to decline in value, as described in greater
detail under the Risk Factors below.
| |
| |
| | |
Potential issuable shares at various conversion prices | |
| |
| |
| | |
below the most recent market price of $0.012 per share | |
Lender / | |
Conversion | |
Principal | | |
100% | | |
75% | | |
50% | | |
25% | |
Origination | |
Terms | |
Borrowed | | |
$0.0120 | | |
$0.0090 | | |
$0.0060 | | |
$0.0030 | |
| |
| |
| | |
| | |
| | |
| | |
| |
JMJ Financial
(Second JMJ Note)
June 4, 2013 | |
Convertible into 65% of the average of the lowest trading price over the 25 trading days prior to the conversion request. Interest rate of 10%. | |
$ | 20,492 | | |
| 1,707,667 | | |
| 2,276,889 | | |
| 3,415,333 | | |
| 6,830,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
JMJ Financial
(Third JMJ Note)
February 20, 2014 | |
Convertible into 65% of the average of the lowest trading price over the 25 trading days prior to the conversion request. Interest rate of 10%. | |
$ | 44,000 | | |
| 3,666,667 | | |
| 4,888,889 | | |
| 7,333,333 | | |
| 14,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
JMJ Financial
(Fourth JMJ Note)
April 17, 2014 | |
Convertible into 65% of the average of the lowest trading price over the 25 trading days prior to the conversion request. Interest rate of 10%. | |
$ | 44,000 | | |
| 3,666,667 | | |
| 4,888,889 | | |
| 7,333,333 | | |
| 14,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
LG Capital Funding, LLC
(Second LG Capital Note) April 24, 2014 | |
Convertible into 55% of the average of the lowest closing bid prices over the 12 trading days prior to the conversion request. Interest rate of 8% with an 18% default rate. | |
$ | 35,000 | | |
| 2,916,667 | | |
| 3,888,889 | | |
| 5,833,333 | | |
| 11,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Typenex Co-Investment, LLC (First Typenex Note) May 20, 2014 | |
Convertible into 65% of the average of the three (3) lowest (“Trading Prices”), whereby Trading Price is defined as the volume weighted average price (“VWAP”) of the Company’s common stock over the fifteen (15) trading days prior to the conversion request date. If the arithmetic average of the three (3) lowest Trading Prices is less than $0.01, then the Conversion Factor will be reduced to 60%. Interest rate of 10%. In the event of default, the interest rate increases to 22% and the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 125% of the outstanding balance at the time of default. | |
$ | 33,000 | | |
| 2,750,000 | | |
| 3,666,667 | | |
| 5,500,000 | | |
| 11,000,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Vista Capital Investments, LLC (First Vista Note) June 2, 2014 | |
Convertible into 65% of the average of the two (2) lowest closing bid prices during the sixteen (16) trading days prior to the conversion request date. Interest rate of 12%. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 120% of the outstanding balance at the time of default. | |
$ | 26,076 | | |
| 2,173,000 | | |
| 2,897,333 | | |
| 4,346,000 | | |
| 8,692,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
WHC Capital, LLC
(First WHC Note)
June 13, 2014 | |
Convertible into 62.5% of the average of the two (2) lowest closing bid prices over the 10 trading days prior to the conversion request. Interest rate of 8% with a 22% default rate. | |
$ | 32,000 | | |
| 2,666,667 | | |
| 3,555,556 | | |
| 5,333,333 | | |
| 10,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(continued)
| |
| |
| | |
Potential issuable shares at various conversion prices | |
| |
| |
| | |
below the most recent market price of $0.012 per share | |
Lender / | |
Conversion | |
Principal | | |
100% | | |
75% | | |
50% | | |
25% | |
Origination | |
Terms | |
Borrowed | | |
$0.0120 | | |
$0.0090 | | |
$0.0060 | | |
$0.0030 | |
| |
| |
| | |
| | |
| | |
| | |
| |
WHC Capital, LLC (Second WHC Note) August 19, 2014 | |
Convertible into 57.5% of the average of the two (2) lowest closing bid prices over the 10 trading days prior to the conversion request. Interest rate of 8% with a 22% default rate. | |
$ | 45,000 | | |
| 3,750,000 | | |
| 5,000,000 | | |
| 7,500,000 | | |
| 15,000,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Vista Capital Investments, LLC (Second Vista Note) September 22, 2014 | |
Convertible into 65% of the average of the two (2) lowest closing bid prices during the sixteen (16) trading days prior to the conversion request date. Interest rate of 12%. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 120% of the outstanding balance at the time of default. | |
$ | 38,500 | | |
| 3,208,333 | | |
| 4,277,778 | | |
| 6,416,667 | | |
| 12,833,333 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Tangiers Investment Group, LLC (First Tangiers Note) October 13, 2014 | |
Convertible at a price equal to sixty percent (60%) of the average of the two lowest trading prices of the Company’s common stock for the fifteen (15) trading days prior to, and including, the conversion date. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to fifty percent (50%), rather than the sixty percent (60%) conversion rate while that “Chill” is in effect, and an additional 5% discount if the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer (“FAST”) is not eligible for a cumulative total conversion price equal to forty five percent (45%). The note carries a twenty percent (20%) interest rate and $1,000 per day of liquidated damages in the event of default. | |
$ | 75,250 | | |
| 6,270,833 | | |
| 8,361,111 | | |
| 12,541,667 | | |
| 25,083,333 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
KBM Worldwide (First KBM Note) November 5, 2014 | |
Convertible at a price equal to sixty one percent (61%) of the average of the three (3) lowest closing bid prices of the Company’s common stock over the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default. | |
$ | 104,000 | | |
| 8,666,667 | | |
| 11,555,556 | | |
| 17,333,333 | | |
| 34,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
KBM Worldwide (Second KBM Note) December 15, 2014 | |
Convertible at a price equal to sixty one percent (61%) of the average of the three (3) lowest closing bid prices of the Company’s common stock over the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default. | |
$ | 64,000 | | |
| 5,333,333 | | |
| 7,111,111 | | |
| 10,666,667 | | |
| 21,333,333 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(continued)
| |
| |
| | |
Potential issuable shares at various conversion prices | |
| |
| |
| | |
below the most recent market price of $0.012 per share | |
Lender / | |
Conversion | |
Principal | | |
100% | | |
75% | | |
50% | | |
25% | |
Origination | |
Terms | |
Borrowed | | |
$0.0120 | | |
$0.0090 | | |
$0.0060 | | |
$0.0030 | |
| |
| |
| | |
| | |
| | |
| | |
| |
Group 10 Funding, LLC (Second Group 10 Note) January 27, 2015 | |
Convertible at a price equal to the lesser of (a) fifty-eight percent (58%) multiplied by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of forty-two percent (42%)) or (b) five cents ($0.05). The conversion price is subject to the following adjustments: iii. If the market capitalization of the Borrower is less than Three Hundred Thousand Dollars ($300,000) on the day immediately prior to the date of the Notice of Conversion, then the Conversion Price shall be twenty-five percent (25%) multiplied by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of seventy-five percent (75%)); and iv. If the closing price of the Borrower’s Common Stock on the day immediately prior to the date of the Notice of Conversion is less than .001 then the Conversion Price shall be twenty-five percent (25%) multiplied by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of seventy-five percent (75%)). The note carries an eighteen percent (18%) interest rate in the event of default along with a $1,000 penalty per business day commencing the business day following the date of the event of default. | |
$ | 36,750 | | |
| 3,062,500 | | |
| 4,083,333 | | |
| 6,125,000 | | |
| 12,250,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Tangiers Investment Group, LLC (Second Tangiers Note) February 5, 2015 | |
Convertible at a price equal to sixty percent (60%) of the average of the two lowest trading prices of the Company’s common stock for the fifteen (15) trading days prior to, and including, the conversion date. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to fifty percent (50%), rather than the sixty percent (60%) conversion rate while that “Chill” is in effect, and an additional 5% discount if the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer (“FAST”) is not eligible for a cumulative total conversion price equal to forty five percent (45%). The note carries a twenty percent (20%) interest rate and $1,000 per day of liquidated damages in the event of default. | |
$ | 53,750 | | |
| 4,479,167 | | |
| 5,972,222 | | |
| 8,958,333 | | |
| 17,916,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
JSJ Investments, Inc.
(First JSJ Note) March 2, 2015 | |
Convertible at a price equal to the lesser of: (i) 58% of the average of the two (2) lowest closing prices over the 10 days prior to conversion; or (ii) 58% of the average of the two (2) lowest closing prices over the 10 days prior to the execution of the note (which was $0.008932). | |
$ | 75,000 | | |
| 6,250,000 | | |
| 8,333,333 | | |
| 12,500,000 | | |
| 25,000,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| |
$ | 726,818 | | |
| 60,568,167 | | |
| 80,757,556 | | |
| 121,136,333 | | |
| 242,272,667 | |
The issuance
and sale of common stock upon conversion of the convertible notes may depress the market price of our common stock.
As sequential
conversions of the convertible notes and sales of such converted shares take place, the price of our common stock may decline,
and as a result, the holder of the convertible notes will be entitled to receive an increasing number of shares in connection with
its conversions, which shares could then be sold in the market, triggering further price declines and conversions for even larger
numbers of shares, to the detriment of our investors. The shares of common stock which the convertible notes are convertible into
may be sold without restriction pursuant to Rule 144. As a result, the sale of these shares may adversely affect the market price,
if any, of our common stock.
In addition, the
common stock issuable upon conversion of the convertible notes may represent overhang that may also adversely affect the market
price of our common stock. Overhang occurs when there is a greater supply of a company's stock in the market than there is demand
for that stock. When this happens the price of the company's stock will decrease, and any additional shares which shareholders
attempt to sell in the market will only further decrease the share price. The various Convertible Notes will be convertible into
shares of our common stock at conversion terms as depicted in the table above, and such discounts to market provide the holders
with the ability to sell their common stock at or below market and still make a profit. In the event of such overhang, the note
holder will have an incentive to sell their common stock as quickly as possible. If the share volume of our common stock (which
to date has been very limited) cannot absorb the discounted shares, then the value of our common stock will likely decrease.
The issuance
of common stock upon conversion of the convertible notes will cause immediate and substantial dilution.
The issuance of
common stock upon conversion of the convertible notes will result in immediate and substantial dilution to the interests of other
stockholders since the holder of the convertible notes may ultimately receive and sell the full amount of shares issuable in connection
with the conversion of such convertible notes. Although the convertible notes s may not be converted if such conversion would cause
the holder thereof to own more than 4.99% of our outstanding common stock (subject to 61 days written notice of such holder’s
intent to waive such restriction), this restriction does not prevent the holder of the Convertible Notes from converting some of
its holdings, selling those shares, and then converting the rest of its holdings, while still staying below the 4.99% limit. In
this way, the holder of the Convertible Notes could sell more than this limit while never actually holding more shares than this
limit allows. If the holder of the Convertible Notes chooses to do this, it will cause substantial dilution to the then holders
of our common stock.
The continuously
adjustable conversion price feature of our convertible notes could require us to issue a substantially greater number of shares,
which may adversely affect the market price of our common stock and cause dilution to our existing stockholders.
Our existing stockholders
will experience substantial dilution of their investment upon conversion of the convertible notes. The convertible notes are convertible
into shares of common stock at conversion prices as noted in the above table. As a result, the number of shares issuable could
prove to be significantly greater in the event of a decrease in the trading price of our common stock, which decrease would cause
substantial dilution to our existing stockholders. As sequential conversions and sales take place, the price of our common stock
may decline, and if so, the holder of the convertible notes would be entitled to receive an increasing number of shares, which
could then be sold, triggering further price declines and conversions for even larger numbers of shares, which would cause additional
dilution to our existing stockholders and would likely cause the value of our common stock to decline.
The continuously
adjustable conversion price feature of our Convertible Notes may encourage the holder of the Convertible Notes to sell short our
common stock, which could have a depressive effect on the price of our common stock.
The Convertible
Notes are convertible into shares of our common stock at conversion prices as noted in the above table. The significant downward
pressure on the price of our common stock as the holder of the convertible notes converts and sells material amounts of our common
stock could encourage investors to short sell our common stock. This could place further downward pressure on the price of our
common stock. In addition, not only the sale of shares issued upon conversion of the convertible notes, but also the mere perception
that these sales could occur, may adversely affect the market price of our common stock.
Our common stock is thinly traded, so
you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to
liquidate your shares.
Our common stock has historically been
sporadically or “thinly-traded” on the OTCQB, meaning that the number of persons interested in purchasing our common
stock at or near ask prices at any given time may be relatively small or nonexistent. This situation is attributable to a number
of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional
investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention
of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend
the purchase of our shares until such time as we became more seasoned and viable.
As a consequence, there may be periods
of several days or more when trading activity in our shares is minimal or non-existent, as compared to a mature issuer which has
a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.
It is possible that a broader or more active public trading market for our common stock will not develop or be sustained, or that
current trading levels will continue.
Shares eligible for future sale by our
current stockholders may adversely affect our stock price.
To date, we have had very limited trading
volume in our common stock. As long as this condition continues, the sale of a significant number of shares of common stock at
any particular time could be difficult to achieve at the market prices prevailing immediately before such shares are offered. In
addition, sales of substantial amounts of common stock, including shares issued upon the exercise of outstanding options and warrants,
under Securities and Exchange Commission Rule 144 or otherwise could adversely affect the prevailing market price of our common
stock and could impair our ability to raise capital at that time through the sale of our securities.
If we fail to remain current on our
reporting requirements, we could be removed from the OTCQB, which would limit the ability of Broker-Dealers to sell our securities
and the ability of stockholders to sell their securities in the secondary market.
Companies trading on the OTCQB, such as
the Company, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section
13 of the Exchange Act, in order to maintain price quotation privileges on the OTCQB. If we fail to remain current on our reporting
requirements, we could be removed from the OTCQB. As a result, the market liquidity for our securities could be adversely affected
by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the
secondary market.
Risks Related to the Offering of Common
Stock to Dutchess Opportunity Fund, II, LP
Existing stockholders may experience
significant dilution from the sale of our common stock pursuant to the Dutchess Opportunity Fund, II, LP Investment Agreement.
On November 7, 2012, we entered into an
Investment Agreement and Registration Rights Agreement (the “Investment Agreement”) with Dutchess Opportunity Fund,
II, LP (“Dutchess”) in order to establish a possible source of funding for us. Under the Investment Agreement, Dutchess
has agreed to provide us with up to $8,500,000 of funding.
We can deliver a put under the Investment
Agreement by selling shares of our common stock to Dutchess and Dutchess is obligated to purchase the shares. A put transaction
must close before we can deliver another put notice to Dutchess. We may request a put by sending a put notice to Dutchess, stating
the amount of the put. During the four trading days following a notice, we will calculate the amount of shares we will sell to
Dutchess and the purchase price per share. The number of shares of our common stock that Dutchess shall purchase pursuant to each
put notice shall be determined by dividing the amount of the put by the purchase price.
The sale of our common stock to Dutchess
under the Investment Agreement may have a dilutive impact on our shareholders. As a result, our net income per share could decrease
in future periods and the market price of our common stock could decline. In addition, the lower our stock price is at the time
we exercise our put options, the more shares of our common stock we will have to issue to Dutchess in order to exercise a put under
the Investment Agreement. If our stock price decreases, then our existing shareholders would experience greater dilution for any
given dollar amount raised under the Investment Agreement.
The perceived risk of dilution may cause
our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk
of dilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our common
stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive
price declines in our common stock.
The issuance of shares pursuant to the
Dutchess Investment Agreement may have a significant dilutive effect.
Depending on the number of shares we issue
pursuant to the Dutchess Investment Agreement, it could have a significant dilutive effect upon our existing shareholders. To date,
we have not accepted any funds or delivered any Put notices under the Investment Agreement; thus, there is still eight million
five hundred thousand dollars ($8,500,000) available. If we accept additional funding under the Investment Agreement by issuing
additional puts, such action could have a significant dilutive effect upon our existing shareholders.
Dutchess Opportunity Fund, II, LP will
pay less than the then-prevailing market price of our common stock which could cause the price of our common stock to decline.
Our common stock to be issued to Dutchess
under the Investment Agreement will be purchased at a 5% discount, or 95% of the lowest Volume Weighted Average Price of our Common
Stock during the four consecutive trading days immediately following the date the notice of our election to put shares pursuant
to the Investment Agreement is delivered to Dutchess. The amount we may put will be equal to up to either 1) 200% of the average
daily volume (U.S. market only) of our Common Stock for the three Trading Days prior to the applicable put notice date, multiplied
by the average of the three daily closing prices immediately preceding the put date or 2) $50,000.
Dutchess has a financial incentive to sell
our shares immediately upon receiving the shares to realize the profit between the discounted price and the market price. If Dutchess
sells our shares, the price of our common stock may decrease. If our stock price decreases, Dutchess may have a further incentive
to sell such shares. Accordingly, the discounted sales price in the Investment Agreements may cause the price of our common stock
to decline.
Dutchess Opportunity Fund, II, LP has
entered into similar agreements with other public companies and may not have sufficient capital to meet our put notices.
Dutchess has entered into similar investment
agreements with other public companies, and some of those companies have filed registration statements with the intent of registering
shares to be sold to Dutchess pursuant to investment agreements. We do not know if management at any of the companies who have
or will have effective registration statements intend to raise funds now or in the future, what the size or frequency of each put
request would be, if floors will be used to restrict the amount of shares sold, or if the investment agreement will ultimately
be cancelled or expire before the entire amount of shares are put to Dutchess. Since we do not have any control over the requests
of these other companies, if Dutchess receives significant requests, it may not have the financial ability to meet our requests.
If so, the amount of available funds may be significantly less than we anticipate.
We have registered an aggregate of 22,750,000
shares of common stock to be issued under the Dutchess Investment Agreement. The sale of such shares could depress the market price
of our common stock.
On September 26, 2013, we registered an
aggregate of 22,750,000 shares of common stock under an S-1 registration statement. The sale of these shares into the public market
by Dutchess could depress the market price of our common stock.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
Not applicable to a smaller reporting company.
ITEM 2. PROPERTIES
The principal executive office of Players
Network is located at 1771 E. Flamingo Road, #201-A, Las Vegas, Nevada, 89119. Players Network occupies approximately 2,800 square
feet of office space at these premises pursuant to a 3-year operating lease expiring August 31, 2016. The lease provides for increases
in future minimum annual rental payments based on defined annual increases beginning with monthly payments of $2,997 and culminating
in a monthly payment of $3,191 in 2016. The lease contains provisions for future rent increases and rent free periods for the first
two months of the lease.
This property is in good condition, well maintained
and adequate for Players Network’s current and immediately foreseeable operating needs. Players Network does not have any
policies regarding investments in real estate, securities or other forms of property.
ITEM 3. LEGAL PROCEEDINGS
Players Network filed a civil suit in the
Eighth Judicial District Court in Clark County, Nevada on January 2, 2014, and served the suit on January 23, 2014, listed as case
number A-13-693908-B against Defendants, Comcast Corporation and Advanced Information Systems Inc. We are currently in the 2nd
of 3 phases of Discovery. Additional information and details will be forthcoming as permitted by public disclosure. Mr. Barney
C. Ales and his firm based in Las Vegas, Nevada have been retained as the Company's Special Counsel, for the litigation and ultimate
trial of this matter.
ITEM 4. MINE
SAFETY DISCLOSURES
Mine safety disclosures are not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information
The Company's Common Stock is currently quoted
on the National Association of Security Dealers' over-the-counter market (OTCQB) under the symbol “PNTV”. The following
table sets forth the high and low bid prices for each quarter within the last two fiscal years. The source of these quotations
is the OTCQB Trade Activity Report. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission,
and may not necessarily represent actual transactions.
| |
COMMON STOCK | |
| |
MARKET PRICE | |
| |
HIGH | | |
LOW | |
FISCAL YEAR ENDED DECEMBER 31, 2014: | |
| | | |
| | |
Fourth Quarter | |
$ | 0.0341 | | |
$ | 0.0111 | |
Third Quarter | |
$ | 0.0429 | | |
$ | 0.0125 | |
Second Quarter | |
$ | 0.0530 | | |
$ | 0.0130 | |
First Quarter | |
$ | 0.0830 | | |
$ | 0.0200 | |
FISCAL YEAR ENDED DECEMBER 31, 2013: | |
| | | |
| | |
Fourth Quarter | |
$ | 0.0330 | | |
$ | 0.0060 | |
Third Quarter | |
$ | 0.0250 | | |
$ | 0.0080 | |
Second Quarter | |
$ | 0.0550 | | |
$ | 0.0050 | |
First Quarter | |
$ | 0.0570 | | |
$ | 0.0100 | |
(b) Holders of Common Stock
As of March 31, 2015, there were approximately
335 holders of record of the Company's Common Stock. As of March 31, 2015, the closing price of the Company's shares of common
stock was $0.011 per share. Empire Stock Transfer Inc. (telephone: (702) 818-5898; facsimile: (702) 974-1444) is the registrar
and transfer agent for our common stock.
(c) Dividends
Players Network has never declared or paid
dividends on its Common Stock. Players Network intends to follow a policy of retaining earnings, if any, to finance the growth
of the business and does not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future
dividends on the Common Stock will be at sole discretion of the Board of Directors and will depend on Players Network's profitability
and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed
relevant.
(d) Securities Authorized for Issuance under Equity Compensation
Plans
The following table sets forth information
regarding our existing compensation plans and individual compensation arrangements pursuant to which our equity securities are
authorized for issuance to employees or non-employees (such as directors, consultants and advisors) in exchange for consideration
in the form of services:
| |
| | |
| | |
Number of | |
| |
| | |
| | |
securities | |
| |
| | |
| | |
remaining | |
| |
| | |
| | |
available for | |
| |
| | |
| | |
future issuance | |
| |
Number | | |
| | |
under equity | |
| |
of securities | | |
| | |
compensation | |
| |
to be issued | | |
Weighted-average | | |
plans | |
| |
upon exercise | | |
exercise price | | |
(excluding | |
| |
of outstanding | | |
of outstanding | | |
securities | |
| |
options, warrants | | |
options, warrants | | |
reflected in | |
| |
and rights | | |
and rights | | |
column (a) | |
Plan Category | |
(a) | | |
(b) | | |
(c) | |
Equity Compensation Plans approved by security holders | |
| -0- | | |
$ | -0- | | |
| -0- | |
Equity compensation plans not approved by security holders(1)(2) | |
| 25,450,000 | | |
| 0.05 | | |
| -0- | |
Total: | |
| 25,450,000 | | |
$ | 0.05 | | |
| -0- | |
(1) In 2014, the Company issued
9,700,000 options to consultants for services rendered at a weighted average exercise price of $0.05 per share. As of December
31, 2014, the Company had options outstanding exercisable for 11,300,000 shares of the Company’s common stock at a weighted
average exercise price of $0.05 per share that were issued for services rendered under the Company’s Amended and Restated
2004 Non-Qualified Stock Option Plan, which allows for the issuance of a total of 25,000,000 non-qualified stock options.
(2) In 2014, the Company issued
4,700,000 warrants at a weighted average exercise price of $0.06 per share. As of December 31, 2014, the Company had warrants outstanding
exercisable for 14,150,000 shares of the Company’s common stock at a weighted average exercise price of $0.05 per share.
(e) Recent Sales of Unregistered Securities
The following sales of equity securities
by the Company occurred during the three month period ended December 31, 2014:
Common Stock
On December 26, 2014, the Company issued
1,501,502 shares of common stock pursuant to the conversion of $10,000 of principal on the First WHC Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 18, 2014, the Company issued
400,300 shares of restricted common stock for professional services provided.
On December 18, 2014, the Company issued
500,000 shares of restricted common stock for professional services provided.
On December 9, 2014, the Company issued
767,990 shares of common stock pursuant to the conversion of $10,000 of principal on the First Typenex Note.
On December 1, 2014, the Company issued
907,441 shares of common stock pursuant to the conversion of $10,000 of principal on the First Group 10 Note.
On November 24, 2014, the Company issued
1,034,840 shares of common stock pursuant to the conversion of $15,000 of principal on the First Typenex Note.
On November 10, 2014, the Company issued
1,889,466 shares of common stock pursuant to the conversion of $20,000 of principal on the First Group 10 Note.
On November 5, 2014, the Company issued
300,000 shares of restricted common stock for video production services provided.
On November 5, 2014, the Company issued
100,000 shares of restricted common stock for video production services provided.
On November 5, 2014, the Company issued
500,000 shares of restricted common stock for professional services provided.
On October 20, 2014, the Company issued
863,594 shares of common stock pursuant to the conversion of $8,549, consisting of $7,121 of outstanding principal and $1,428 of
interest on the First GEL Note.
The foregoing securities were issued in reliance
on Section 4(a)(2) and/or Regulation D of the Securities Act of 1933, as amended. The shares were issued in private transactions
to United States residents. The shares of common stock have not been registered under the Securities Act or under any state securities
laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable
exemption from the registration requirements. The shareholders acknowledged that the securities to be issued have not been registered
under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity
to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
ITEM
6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview and Outlook
Players Network was incorporated in the
State of Nevada in March of 1993. Players Network is a vertically integrated diversified, fully reporting public company that is
engaged in the development of digital networks, and is actively pursuing the cultivation and processing of medical marijuana in
North Las Vegas pursuant to two medical marijuana establishments (MME) licenses we were granted by the city of North Las Vegas
for cultivation and production. The Company holds an 81.4% interest in Green Leaf Farms Holdings, LLC, which is a holding company
formed to house our medical marijuana business. We distribute broadband video and other social media content over a wide variety
of internet enabled devices and cable television channels. The Company has launched its proprietary scalable NexGenTV technology
platform. The platform is designed to deliver video content and develop digital social communities, including “Vegas On Demand
TV”, “Real Vegas TV” and “Weed TV” on the media side of the business.
The Company operates a Video On Demand
(“VOD”) television channel, also named Vegas On Demand, which consists of original programming that is distributed
over its own VOD channels to approximately 23 million homes via a major cable company, and 80 million homes via the internet on
the Over The Top Television platform, with distribution partners that include Blinkx, YouTube Video and other internet and various
mobile platforms. Players Network has a seventeen-year history of providing consumers with quality ‘Gaming and Las Vegas
Lifestyle’ video content.
We have developed NexGenTV, an innovative,
proprietary Enterprise Web Platform that incorporates the best parts of Hulu, YouTube, Facebook, Zenga and Groupon. We believe
it will change how businesses approach building digital brand extensions.
NexGenTV, our scalable Digital Technology
Platform, allows Players Network to distribute content for brands, businesses and celebrities, and provide them with an unlimited
amount of lifestyle category content and the tools to launch their own “Branded Channel, Social Community and Marketplace
Destination”. NexGenTV’s scalability can create hundreds of niche digital networks that can be viewed worldwide on
any smart TV, computer, tablet or mobile device by millions of people simultaneously. The platform allows advertisers and marketing
partners the ability to capture their target market through rich content such as professionally produced, branded television segments;
user-generated videos; blogs; editorials; tweets; photos; special offers; events and custom-designed contests.
Our business model incorporates elements
of traditional proven media features such as advertising and transactional delivery methods, but also offers professional production,
marketing and distribution services to build and monetize its branded channel destination, in which we will retain a continuous
revenue stream with our partners. Channel partners have the option to manage their own Branded New Media Channel, or use our professional
services team of television producers, writers, graphic designers and technologists to keep their channel updated, and their content
fresh and relevant.
Vegas On Demand TV, Real Vegas TV and Weed
TV are the Company’s first three channel offerings that provide their audience the ability to connect to industry insiders
and businesses through unique, high-quality marketing, content production and content management system. In the Las Vegas market,
Vegas On Demand captures the excitement, sex appeal, entertainment, and the non-stop adrenaline rush of the Las Vegas gaming lifestyle.
Our content goes beyond poker, casino action, sports betting, and racing, to lifestyle programs about entertainment and fine living
that attract young and sophisticated viewers that comprise the major digital media demographic. Whenever possible, our content
will incorporate an expert, insider or celebrity within the Vegas community in order to enhance promotional merchandising to prospective
customers.
Weed TV launched on April
20, 2014, and was the Company’s third network to be launched. Weed TV is a Lifestyle Channel Destination powered by PNTV’s
NextGenTV(SM) enterprise platform. Weed TV is the ‘go to’ source for informational entertainment, products and services
for people who relate to the marijuana lifestyle and social community. Weed TV will feature daily stories sourced by weedtv.com
correspondents and contributors from around the world. It will provide a wide variety of editorial content, videos and entertainment,
including lead stories, political news, business news on the industry, financial analysis from industry experts, growing tips,
cooking tips, a “Weed101” section, medical uses, lifestyle features, entertainment specials and merchandise shopping
cart offering the latest products and services. www.weedtv.com
We plan for Weed TV to
have other features by the middle of 2015 and adapt new technology that he other networks don’t have, including a directory
of businesses that cater to the marijuana business, such as dispensaries, smoke shops, doctors, financial institutions, manufactures
and more. These businesses will have a free basic listing and the ability to upgrade for an extra fee of about $500 per month,
where they can build their own media channel using the ‘NextGenTV” Platform. We estimate this market is in excess of
approximately 70,000 businesses and will continue to grow as more states legalize MME businesses. Our goal in 2015 is to begin
to capture this market that will translate to significant revenues even if we only convert a small amount of this market into marketing
partners who use our platform.
We plan to use both, Weed TV’s platform
and original branded programming and events, as a means to develop additional revenue streams, in addition to providing marketing
and membership benefits of our social media platform. These revenue streams include branded entertainment, sponsorships for events,
media placement, third party commissions for video and banner advertisements, merchandise and production sales and services.
We have addressed the digital market in
an effort to grow as a New Media Company using “Vegas On Demand” and Real Vegas TV, our flagship branded television
channel, and to use our scalable custom enterprise web platform, which can also be replicated to launch thousands of channel destinations
in any lifestyle category for any lifestyle brand.
Our enterprise platform is highly scalable
and can efficiently deploy, manage and distribute videos with integrated revenue-generating tools that go beyond traditional advertising.
On our platform, the viewer of a video is brought into a web environment encompassing the lifestyle represented within the video
content where they are presented with membership, merchandising, couponing, subscription, loyalty programs, contest and other marketing
opportunities, including the integration of live events. The platform also integrates branded sponsorships, and a game-like virtual
economy supported by our Cost Per Action (“CPA”) advertising network.
Our next-generation media network operates
across all distribution platforms from TV screens to mobile devices, gaming consoles, computers and tablets. We have positioned
ourselves to provide companies an affordable, turnkey, integrated solution. We have not yet generated revenues from our Platform,
but plan to market our services to companies in 2015.
Through the cross-promotional integration
of sponsored live events, contests and media creation and distribution, our Platform can deliver a targeted audience that can be
monetized in multiple ways. The platform is an engine that grows as audience and page views increase. The platform also provides
a self-perpetuating aggregation juncture where Las Vegas businesses and “insiders” can connect socially with their
audience/customer.
The ability to monetize video in so many
ways, coupled with an efficient, easy-to-use technical and administrative back-end dashboard is a powerful feature of our platform.
It allows the creation of unlimited, new channel destinations using our scalable content management system (“CMS”)
framework, with cost-competitive operations. Importantly, it enables administrative and editorial level employees to manage content
without the expense of having a full-time technical engineering staff in-house.
Premium members must be industry insiders
and/or experts in their lifestyle category. For example, with regard to Vegas On Demand, insiders are designed to be the who’s-who
of Vegas: entertainers, nightclub promoters, casino hosts, famous chefs, etc. who offer our members deals on transactions connected
to their sphere of influence. Deals may include being invited to a special VIP event, line passes, two-for-one offers, pay-per-view
video discounts, etc.
Critical Accounting Policies
Segment Reporting
Under FASB ASC 280-10-50, the Company operates
as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Under FASB ASC 820-10-05, the Financial
Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The
adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying
amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate
fair value primarily due to the short term nature of the instruments. In addition, the Company had debt instruments that required
fair value measurement on a recurring basis.
Cash and Cash Equivalents
PNTV maintains cash balances in non-interest-bearing
transaction accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows,
all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were
no cash equivalents on hand at December 31, 2014 and 2013.
Allowance for Doubtful Accounts
We generate the majority of our revenues
and corresponding accounts receivable from video production services on a project basis and subscriptions for video content. We
evaluate the collectability of our accounts receivable considering a combination of factors. In circumstances where we are aware
of a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against
amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other
customers, we recognize reserves for bad debts based on past write-off experience and the length of time the receivables are past
due. We had no debts expense during the years ended December 31, 2014 and 2013, respectively.
Cost Method of Accounting for Investments
Investee companies not accounted for under
the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method,
the Company’s share of the earnings or losses of such Investee companies is not included in the Balance Sheet or Statement
of Operations. However, impairment charges are recognized in the Statement of Operations. If circumstances suggest that the value
of the Investee Company has subsequently recovered, such recovery is not recorded. Our investments which are accounted for on the
cost method of accounting have been completely impaired previously, and no impairment expense was recognized during the years ended
December 31, 2014 or 2013.
Deferred Television Costs
Deferred television costs included direct
production and development costs stated at the lower of cost or net realizable value based on anticipated revenue. Production
overhead is not included as the Company outsources its production costs to third party vendors. Capitalized television production
costs for each pilot episode are to be expensed as revenues are recognized upon delivery and acceptance of the completed pilot
episodes using the individual-film-forecast-computation method for each television show produced. The Company recognized $95,000
of revenues on November 1, 2012 with the completion of the first of three pilot episodes; and accordingly, recognized $75,617
of expenses related to the development of the pilot. The remaining $135,000 of revenues, and corresponding $116,454 of deferred
television costs, were deferred and will be recognized upon completion and delivery of the remaining content. We also delivered
a series of ‘webisodes’ and miscellaneous footage in June of 2014, however, the recipient refused to accept the modification
of the terms and we had to reverse the recognition and defer the revenue and related television costs as of December 31, 2014.
Deferred television costs consist of the
following at December 31, 2014 and 2013, respectively:
| |
December 31,
2014 | | |
December 31, 2013 | |
Development and pre-production costs | |
$ | – | | |
$ | – | |
In-production | |
| 68,264
| | |
| 68,264 | |
Post production | |
| 48,190
| | |
| 48,190 | |
Total deferred television costs | |
$ | 116,454
| | |
$ | 116,454 | |
Due to practical limitations applicable
to monetizing our developed content over On-Demand networks, the Company has not considered collectability of advertising or television
license revenues to be reasonably assured, and accordingly, the Company has expensed production costs related to the development
of our On-Demand and internet-based content as incurred.
Fixed Assets
Fixed assets are stated at the lower of
cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method
based on the lesser of the estimated useful lives of the assets or the lease term based on the following life expectancy:
Software | |
| 3 years | |
Office equipment and website development costs | |
| 5 years | |
Furniture and fixtures | |
| 7 years | |
Repairs and maintenance expenditures are
charged to operations as incurred. Major improvements and replacements, which have extend the useful life of an asset, are capitalized
and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated
depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.
Impairment of Long-Lived
Assets
Long-lived assets held and used by the
Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not
be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon historical results and current
projections of earnings before interest and taxes. Impairment is measured using discounted cash flows of future operating results
based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating results to the extent that carrying
value exceeds discounted cash flows of future operations. The Company did not recognize any impairment losses on the disposal of
fixed assets during the years ended December 31, 2014 and 2013.
Debt Issuance Costs
Costs relating to obtaining certain debts
are capitalized and amortized over the term of the related debt using the straight-line method, which approximates the effective
interest method. The Company paid $21,750 and $11,000 of debt issuance costs during the years ended December 31, 2014
and 2013, respectively, of which the unamortized balance of debt issuance costs at December 31, 2014 and 2013
was $9,959 and $3,399, respectively. Amortization of debt issuance costs charged to interest expense was $15,190 and $37,556
for the years ended December 31, 2014 and 2013, respectively. When a loan is paid in full, any unamortized financing
costs are removed from the related accounts and charged to interest expense.
Deferred Rent Obligation
The Company has entered into operating
lease agreements for its corporate office which contains provisions for future rent increases. In accordance with generally accepted
accounting principles, the Company records monthly rent expense equal to the total of the payments due over the lease term, divided
by the number of months of the lease terms. The difference between rent expense recorded and the amount paid is credited or charged
to “Deferred rent obligation,” which is reflected as a separate line item in the accompanying Balance Sheets.
Revenue Recognition
The Company recognizes revenue from its
internet television platform from internally generated products and from partnered merchants when the following criteria are met:
persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability
is reasonably assured. These criteria are met when the customers purchase a product or access a web-based video, the product or
web-based video has been electronically delivered to the purchaser and payment has been received. At that time, the Company's obligations
to the customer is substantially complete. The Company records the net amount it retains from the sale of items from its internet
television platform after paying any agreed upon percentage of the purchase price to the featured advertising merchant excluding
any applicable taxes. Revenue is recorded on a net basis because the Company is acting as an agent of the partnered merchant in
the transaction. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
Network revenue consists of monthly network
broadcast subscription revenue, which is recognized over the period in which the subscription service is available. Broadcast television
advertising revenue is recognized when advertisements are aired. Video production revenue is recognized as digital video film is
completed and accepted by the customer and collection is reasonably assured.
Revenue from the distribution
of domestic television series is recognized as earned using the following criteria:
| · | Persuasive evidence of an arrangement
exists; |
| · | The show/episode is complete, and in accordance
with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery; |
| · | The license period has begun and the customer
can begin its exploitation, exhibition or sale; |
| · | The price to the customer is fixed and
determinable; and |
| · | Collectability is reasonably assured. |
Due to practical limitations applicable
to operating relationships with On-Demand networks, the Company has not considered collectability of advertising or television
license revenues to be reasonably assured, and accordingly, the Company has not recognize such revenue unless payment has been
received.
Audio/Video content licensing revenues
were recognized when the underlying royalties from the sales of the related products were earned. The Company recognized minimum
revenue guarantees, if any, ratably over the term of the license or as earned royalties based on actual sales of the related products,
if greater.
Deferred revenues consist of the following
at December 31, 2014 and December 31, 2013:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Deferred revenues on television pilot episodes | |
$ | 135,000 | | |
$ | 135,000 | |
Derivative Liability
The Company evaluates its convertible instruments,
options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives
to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment
is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event
that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income
(expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date
and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject
to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification
date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815.
The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s
own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under
the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on
whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s
own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining
whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise
provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. The Company utilized
multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash
flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the
amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing
parties, that is, other than in a forced or liquidation sale.
Advertising Costs
The Company expenses the cost of advertising
and promotions as incurred. Advertising and promotions expense was $147,145 and $11,684 for the years ended December 31, 2014
and 2013, respectively.
Website Development Costs
The Company accounts for website development
costs in accordance with ASC 350-50, “Accounting for Website Development Costs” (“ASC 350-50”), wherein
website development costs are segregated into three activities:
|
1) |
Initial stage (planning), whereby the related costs are expensed. |
|
2) |
Development (web application, infrastructure, graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. |
|
3) |
Post-implementation (after site is up and running: security, training, admin), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. |
The Company had no capitalized
website development costs during the years ended December 31, 2014 and 2013 related to its internet television
platforms pursuant to the development stage.
Basic and Diluted Loss Per
Share
The basic net loss per common share is
computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common
shares outstanding plus potential dilutive securities. For 2014 and 2013, potential dilutive securities had an anti-dilutive
effect and were not included in the calculation of diluted net loss per common share.
Stock-Based
Compensation
Under FASB ASC 718-10-30-2, all share-based
payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer an alternative. Stock and stock options issued for services and compensation totaled
$1,755,336 and $449,667 for the years ended December 31, 2014 and 2013, respectively.
Income Taxes
PNTV recognizes deferred tax assets and
liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax
rates and laws that are expected to be in effect when the differences are expected to be recovered. PNTV provides a valuation allowance
for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Uncertain Tax Positions
In accordance with ASC 740, “Income
Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical
merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance
on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities periodically
audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions,
including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures
connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable
exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and
fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax
position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Various taxing authorities periodically
audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions,
including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures
connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable
exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and
fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax
position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Recent Accounting Pronouncements
In June 2014, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation – Stock Compensation (Topic
718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after
the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target
to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes
the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in
estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable
that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which
the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of
the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining
requisite service period. The total amount of compensation cost recognized during and after the requisite service period should
reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The
requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance
target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December
15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards
granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding
as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.
The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10:
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity
associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all
incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting
by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate
an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable
interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify
U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided
to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination
of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity
that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information
and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to
Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods
beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not
expected to have a material impact on our financial position or results of operations.
Results of Operations for the Years Ended December 31, 2014
and December 31, 2013:
| |
For the Years Ended | | |
| |
| |
December 31, | | |
Increase / | |
| |
2014 | | |
2013 | | |
(Decrease) | |
Revenues | |
$ | 9,347 | | |
$ | 1,567 | | |
$ | 7,780 | |
| |
| | | |
| | | |
| | |
Direct operating costs | |
| 256,445 | | |
| 109,966 | | |
| 146,479 | |
General and administrative | |
| 1,745,417 | | |
| 320,750 | | |
| 1,424,667 | |
Salaries and wages | |
| 544,472 | | |
| 258,685 | | |
| 285,787 | |
Depreciation and amortization | |
| 27,474 | | |
| 22,945 | | |
| 4,529 | |
| |
| | | |
| | | |
| | |
Total Operating Expenses | |
| 2,573,808 | | |
| 712,346 | | |
| 1,861,462 | |
| |
| | | |
| | | |
| | |
Net Operating (Loss) | |
| (2,564,461 | ) | |
| (710,779 | ) | |
| 1,853,682 | |
| |
| | | |
| | | |
| | |
Total other income (expense) | |
| (901,414 | ) | |
| (998,323 | ) | |
| (96,909 | ) |
| |
| | | |
| | | |
| | |
Net (Loss) | |
$ | (3,465,875 | ) | |
$ | (1,709,102 | ) | |
$ | 1,756,773 | |
Revenues:
During the years ended December 31, 2014 and
2013, we received revenues from the sale of in-home media, advertising fees and the recognition of deferred revenues on content
development. Aggregate revenues for the year ended December 31, 2014 were $9,347, compared to revenues of $1,567 in the year ended
December 31, 2013, an increase in revenues of $7,780, or 496%. Our revenues increased primarily due to the recognition of a total
of $8,450 from the first sales of advertising on our new media channel, “Weed.tv” within our internet platform. We
anticipate increased market saturation of our video content through our newly revamped websites and the Company’s existing
media channels as we continue to market our internet platform into 2015.
Direct Operating Costs:
Direct operating costs were $256,445 for the
year ended December 31, 2014, compared to $109,966 for the year ended December 31, 2013, an increase of $146,479, or
133%. Our direct operating costs increased primarily due to our increased website development costs as we continued to develop
our new media channel, Weed.tv media channel, which was launched during April of 2014.
General and Administrative:
General and administrative expenses were
$1,745,417 for the year ended December 31, 2014, compared to $320,750 for the year ended December 31, 2013, an increase
of $1,424,667, or 444%. General and administrative expense increased primarily due to $960,000 of stock based compensation in our
newly formed subsidiary pursuant to the issuance common stock in our subsidiary for services performed in relation to our medical
marijuana endeavors incurred during the year ended December 31, 2014 compared to the year ended December 31, 2013.
The fair value of the stock based compensation was determined by the sale of 1% of the equity in the subsidiary to an independent
third party.
Salaries and Wages:
Salaries and wages expense totaled $544,472
for the year ended December 31, 2014, compared to $258,685 for the year ended December 31, 2013, an increase of $285,787,
or 110%. The increase in salaries and wages was primarily due to non-cash, stock based compensation bonuses issued to our CEO during
the year ended December 31, 2014, consisting of 4 million shares of common stock with a fair value of $120,000,
and 8 million common stock options valued at $217,971, that were not present during the comparative year ended December 31, 2013.
Depreciation and Amortization:
Depreciation and amortization expense was
$27,474 for the year ended December 31, 2014, compared to $22,945 for the year ended December 31, 2013, an increase of $4,529,
or 20%. The increase in depreciation and amortization was primarily due to additional depreciation on a total of $35,986 of fixed
asset additions incurred during the year ended December 31, 2014.
Net Operating Loss:
Net operating loss for the year ended December
31, 2014 was $2,564,461, or ($0.02) per share compared to a net operating loss of $710,779, or ($0.01) per share for the year ended
December 31, 2013, an increase of $1,853,682, or 261%. Net operating loss increased primarily due to $960,000 of stock based compensation
in our newly formed subsidiary pursuant to the issuance of common stock in our subsidiary for services performed in relation to
our medical marijuana endeavors, compensation bonuses issued to our CEO, increased advertising and promotional fees and professional
services, consisting primarily of non-cash, stock based compensation. During the year ended December 31, 2014, we issued
a total of 4 million shares of common stock with a fair value of $120,000, and 8 million common stock options valued
at $217,971 to our CEO as a bonus, along with 11,799,728 shares of common stock valued at $312,641 and the amortization of options
valued at $40,150 in payment of professional services in lieu of cash.
Other Income (Expense):
Other income (expense) was $(901,414) for
the year ended December 31, 2014 compared to $(998,323) for the year ended December 31, 2013, a decrease of $96,909,
or 10%. Other income (expense) decreased on a net basis primarily due to the gain of $356,835 on debt extinguishments that was
realized primarily with the settlement of $353,720 of accounts payable in exchange for total payments of $10,385 during the year
ended December 31, 2014, as diminished by an increase of $254,003 due to the change in derivative liability during the
year ended December 31, 2014, compared to the year ended December 31, 2013.
Net Loss:
The net loss for the year ended December 31,
2014 was $3,465,875, or ($0.02) per share, compared to a net loss of $1,709,102, or ($0.02) per share, for the year ended December
31, 2013, an increased net loss of $1,756,773, or 103%. Net loss increased primarily due to $960,000 of stock based compensation
in our newly formed subsidiary pursuant to the issuance common stock in our subsidiary for services performed in relation to our
medical marijuana endeavors, and to the $254,003 increase in our change in derivative liability, increased advertising and compensation,
consisting primarily of non-cash, stock based compensation, as diminished by the gain of $356,835 on debt settlements incurred
during year ended December 31, 2014, compared to the year ended December 31, 2013.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes total assets,
accumulated deficit, stockholders’ equity and working capital at December 31, 2014 compared to December 31, 2013.
| |
December 31, | | |
December 31, | | |
Increase / | |
| |
2014 | | |
2013 | | |
(Decrease) | |
Total Assets | |
$ | 408,826 | | |
$ | 195,083 | | |
$ | 213,743 | |
| |
| | | |
| | | |
| | |
Total Liabilities | |
$ | 2,196,544 | | |
$ | 1,713,126 | | |
$ | 483,418 | |
| |
| | | |
| | | |
| | |
Accumulated (Deficit) | |
$ | (26,848,642 | ) | |
$ | (23,567,996 | ) | |
$ | 3,280,646 | |
| |
| | | |
| | | |
| | |
Stockholders’ Equity (Deficit) | |
$ | (1,787,718 | ) | |
$ | (1,518,043 | ) | |
$ | 269,675 | |
| |
| | | |
| | | |
| | |
Working Capital (Deficit) | |
$ | (1,868,948 | ) | |
$ | (1,584,201 | ) | |
$ | 284,747 | |
Sources and Uses of Cash
Our principal source of operating capital has
been provided from convertible debt financing, private sales of our common stock, and revenues from operations. At December 31, 2014,
we had a negative working capital position of $(1,868,948). As we continue the shift in our business focus and attempt to expand
operational activities, we expect to continue to experience net negative cash flows from operations in amounts not now determinable,
and will be required to obtain additional financing to fund operations through debt borrowings and common stock offerings to the
extent necessary to provide working capital. We have and expect to continue to have substantial capital expenditure and working
capital needs. We do not now have funds sufficient to fund our operations at their current level for the next twelve months. We
need to raise additional cash to fund our operations and implement our business plan. We expect that the additional financing will
(if available) take the form of convertible debt financing, although we may be able to obtain additional equity financing in lieu
thereof. We are maintaining an on-going effort to locate sources of additional funding, without which we will not be able to remain
a viable entity. We currently have an Investment Agreement with Dutchess whereby they committed to purchase, in a series of purchase
transactions (“Puts”), up to eight million five hundred thousand ($8,500,000) dollars of the Company’s common
stock over a period of up to thirty-six (36) months from September 26, 2013. There are no assurances that we will be
able to draw on these funds, or obtain adequate financing. If we are able to obtain the financing required to remain in business,
eventually achieving operating profits will require substantially increasing revenues or drastically reducing expenses from their
current levels, or both. If we are able to obtain the required financing to remain in business, future operating results depend
upon a number of factors that are outside of our control.
Debt Instruments, Guarantees, and Related
Covenants
On March 11, 2015, the Company received
net proceeds of $70,000 in exchange for a 12% interest bearing, unsecured convertible promissory note dated March 2, 2015
with a face value of $75,000 (“First JSJ Note”), which matures on September 2, 2015. The principal and interest
is convertible into shares of common stock at the discretion of the note holder at a price equal to the lesser of: (i) 58% of the
average of the two (2) lowest closing prices over the 10 days prior to conversion; or (ii) 58% of the average of the two (2) lowest
closing prices over the 10 days prior to the execution of the note (which was $0.008932). The note includes prepayment cash redemption
penalties between 25% and 40% of outstanding principal and interest, and the debt holder is limited to owning 4.99% of the Company’s
issued and outstanding shares. The Company must at all times reserve at least 30 million shares of common stock for potential
conversions.
On February 5, 2015, the Company received
net proceeds of $50,000 with a face value of $53,750 that carries an 8% interest rate (“Second Tangiers Note”), which
matures on February 5, 2016. The note is part of total loan offering with a $236,500 face value and OID of 7.5% of any consideration
paid, whereby $75,250 was previously advanced with the initial execution of the note on October 13, 2014. The principal
and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent
(60%) of the average of the two lowest trading prices of the Company’s common stock for the fifteen (15) trading days prior
to, and including, the conversion date. In the event the Company experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to fifty percent (50%), rather than the sixty percent (60%) conversion rate while that “Chill”
is in effect, and an additional 5% discount if the Depository Trust Company’s (“DTC”) Fast Automated Securities
Transfer (“FAST”) is not eligible for a cumulative total conversion price equal to forty five percent (45%). The note
carries a twenty percent (20%) interest rate and $1,000 per day of liquidated damages in the event of default, and the debt holder
is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $2,500
that is being amortized on the straight line method, which approximates the effective interest method, over the life of the loan.
The Company must at all times reserve at least 5 million shares of common stock for potential conversions.
On January 27, 2015, the Company received
$35,000 in exchange for an unsecured convertible promissory note with a face value of $36,750 that carries a 12% interest rate
(“Second Group 10 Note”), which matures on January 27, 2016. The principal and interest is convertible into shares
of common stock at the discretion of the note holder at a price equal to the lesser of (a) fifty-eight percent (58%) multiplied
by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of forty-two percent
(42%)) or (b) five cents ($0.05). The conversion price is subject to the following adjustments:
| i. | If the market capitalization of the Borrower is less than Three Hundred Thousand Dollars ($300,000)
on the day immediately prior to the date of the Notice of Conversion, then the Conversion Price shall be twenty-five percent (25%)
multiplied by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of seventy-five
percent (75%)); and |
| ii. | If the closing price of the Borrower’s Common Stock on the day immediately prior to the date
of the Notice of Conversion is less than .001 then the Conversion Price shall be twenty-five percent (25%) multiplied by the Lowest
Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of seventy-five percent (75%)). |
The note carries an eighteen percent (18%)
interest rate in the event of default along with a $1,000 penalty per business day commencing the business day following the date
of the event of default. The note also includes prepayment cash redemption penalties between up to 15% of outstanding principal
and interest, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory
note carries a $1,750 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which
approximates the effective interest method. The Company must at all times reserve at least 20 million shares of common stock
for potential conversions.
On December 15, 2014, the Company received
net proceeds of $60,000 in exchange for an unsecured convertible promissory note with a face value of $64,000 that carries an 8%
interest rate (“Second KBM Note”), which matures on June 13, 2015. The principal and interest is convertible
into shares of common stock at the discretion of the note holder at a price equal to sixty one percent (61%) of the average of
the three (3) lowest closing bid prices of the Company’s common stock over the ten (10) trading days prior to the conversion
date.
On November 5, 2014, the Company received
net proceeds of $100,000 in exchange for an unsecured convertible promissory note with a face value of $104,000 that carries an
8% interest rate (“Tenth Asher Note”), which matures on July 29, 2015. The principal and interest is convertible into
shares of common stock at the discretion of the note holder at a price equal to sixty one percent (61%) of the average of the three
(3) lowest closing bid prices of the Company’s common stock over the ten (10) trading days prior to the conversion date.
On October 13, 2014, the Company received
net proceeds of $70,000 in exchange for an unsecured convertible promissory note with a face value of $75,250 that carries an 8%
interest rate (“First Tangiers Note”), which matures on October 13, 2015. The note is part of total loan offering with
a $236,500 face value and OID of 7.5% of any consideration paid. The principal and interest is convertible into shares of common
stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two lowest trading prices
of the Company’s common stock for the fifteen (15) trading days prior to, and including, the conversion date. In the event
the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to fifty percent (50%),
rather than the sixty percent (60%) conversion rate while that “Chill” is in effect, and an additional 5% discount
if the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer (“FAST”) is not eligible
for a cumulative total conversion price equal to forty five percent (45%).
On September 22, 2014, the Company received
net proceeds of $35,000 in exchange for an unsecured convertible promissory note, bearing interest at twelve percent (12%) with
a face value of $38,500 (“Second Vista Note”), which matures on June 1, 2016, as part of a larger financing
agreement that enables the Company to draw total proceeds of $225,000 at the discretion of the lender. The financing carries a
total face value of $250,000 and a $25,000 Original Issue Discount. The principal and interest is convertible into shares of common
stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the average of the two (2) lowest closing
bid prices during the sixteen (16) trading days prior to the conversion request date.
On August 19, 2014, the Company received
net proceeds of $40,000 in exchange for an unsecured convertible promissory note, bearing interest at 8% annually, with a face
value of $80,000 (“Second WHC Note”), which matures on August 19, 2015. The principal and interest is convertible
into shares of common stock at the discretion of the note holder at a price equal to fifty seven and a half percent (57.5%) of
the average of the two (2) lowest closing bid prices of the Company’s common stock over the ten (10) trading days immediately
preceding the conversion request date.
On July 15, 2014, the Company received
net proceeds of $35,000 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value
of $37,500 (“Third LG Note”), which matures on March 15, 2015. The principal and interest is convertible into shares
of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trading price of the
Company’s common stock for the twelve (12) trading days prior to, and including, the conversion date if received after 4PM
Eastern Standard Time. The note also carries an additional “Back-end Note” with the same terms as the original note
that enables the lender to lend the Company another $37,500, less $1,750 of debt issuance costs and $3,500 in due diligence fees,
with a holding period that tacks to the original note for purposes of Rule 144 of the Securities Exchange Act of 1934. In the event
the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 55% instead of 60%
while that “Chill” is in effect.
On June 13, 2014, the Company received
net proceeds of $75,000 in exchange for an unsecured convertible promissory note, bearing interest at 8% annually, with a face
value of $80,000 (“First WHC Note”), which matures on June 13, 2015. The principal and interest is convertible
into shares of common stock at the discretion of the note holder at a price equal to sixty two and a half percent (62.5%) of the
average of the two (2) lowest closing bid prices of the Company’s common stock over the ten (10) trading days immediately
preceding the conversion request date.
On June 2, 2014, the Company received net
proceeds of $50,000 in exchange for an unsecured convertible promissory note, bearing interest at twelve percent (12%) with a face
value of $55,000 (“First Vista Note”), which matures on June 1, 2016, as part of a larger financing agreement
that enables the Company to draw total proceeds of $225,000 at the discretion of the lender. The financing carries a total face
value of $250,000 and a $25,000 Original Issue Discount. The principal and interest is convertible into shares of common stock
at the discretion of the note holder at a price equal to sixty five percent (65%) of the average of the two (2) lowest closing
bid prices during the sixteen (16) trading days prior to the conversion request date.
On May 20, 2014, the Company received net
proceeds of $100,000 in exchange for an unsecured convertible promissory note, bearing interest at 10% annually, with a face value
of $113,000 (“First Typenex Note”), which matures on May 19, 2015. The principal and interest is convertible
into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the average of
the three (3) lowest (“Trading Prices”), whereby Trading Price is defined as the volume weighted average price (“VWAP”)
of the Company’s common stock over the fifteen (15) trading days prior to the conversion request date. If the arithmetic
average of the three (3) lowest Trading Prices is less than $0.01, then the Conversion Factor will be reduced to 60%.
On May 9, 2014, the Company received $50,000
in exchange for an unsecured convertible promissory note that carries a 12% interest rate (“First Group 10 Note”),
which matures on May 8, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note
holder at a price equal to the lesser of (a) fifty eight percent (58%) of the average of the two lowest closing bid prices of the
Company’s common stock for the seventeen (17) trading days prior to the conversion notice date, or (b) four and a half cents
($0.045) per share.
On April 24, 2014, the Company received
net proceeds of $33,250 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value
of $35,000 (“Second LG Note”), which matures on April 11, 2015. The principal and interest is convertible into shares
of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the lowest
closing bid prices of the Company’s common stock for the twelve (12) trading days prior to, and including, the conversion
date. The note carries an additional “Back-end Note” with the same terms as the original note that enables the lender
to lend the Company another $35,000, less $1,750 of debt issuance costs, with a holding period that tacks to the original note
for purposes of Rule 144 of the Securities Exchange Act of 1934.
On April 17, 2014, the Company received
net proceeds of $40,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $44,000
(“Fourth JMJ Note”), which matures on April 16, 2015, as part of a larger financing agreement that enables the Company
to draw total proceeds of $400,000 at the discretion of the lender. The principal and interest is convertible into shares of common
stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the lowest trading price of the Company’s
common stock over the twenty five (25) trading days prior to the conversion request date, as amended within the original promissory
note on April 10, 2014.
On February 20, 2014, the Company received
net proceeds of $40,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $44,000
(“Third JMJ Note”), which matures on February 19, 2015, as part of a larger financing agreement that enables
the Company to draw total proceeds of $400,000 at the discretion of the lender. The principal and interest is convertible into
shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the lowest trading
price of the Company’s common stock over the twenty five (25) trading days prior to the conversion request date, as amended
within the original promissory note on April 10, 2014.
On January 8, 2014, the Company received
$25,500 in exchange for an unsecured convertible promissory note that carries an 8% interest rate (“First GEL Note”),
which matures on October 8, 2014. The principal and interest is convertible into shares of common stock at the discretion of the
note holder at a price equal to sixty percent (60%) of the average of the two (2) lowest closing bid prices of the Company’s
common stock for the ten (10) trading days prior to the conversion date.
On January 8, 2014, the Company received
$25,500 in exchange for an unsecured convertible promissory note that carries an 8% interest rate (“First LG Note”),
which matures on October 8, 2014. The principal and interest is convertible into shares of common stock at the discretion of the
note holder at a price equal to sixty percent (60%) of the average of the two (2) lowest closing bid prices of the Company’s
common stock for the ten (10) trading days prior to the conversion date.
We have utilized these funds to repay $66,605
of previously issued convertible debentures, comply with our regulatory reporting requirements, and to expand our media distribution
platforms to launch Weed.tv. Although our revenues are expected to grow as we expand our operations, our revenues are not expected
to exceed our investment and operating costs in the next twelve months, and we do not have funds sufficient to fund our operations
at their current level for the next twelve months. Our prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of operations. To address these risks, we must, among other things, seek
growth opportunities through investment and acquisitions in our industry, effectively monitor and manage our claims for payments
that are owed to us, implement and successfully execute our business strategy, respond to competitive developments, and attract,
retain and motivate qualified personnel. We cannot assure that we will be successful in addressing such risks, and the failure
to do so could have a material adverse effect on our business prospects, financial condition and results of operations.
To conserve on the Company's capital requirements,
the Company has issued shares in lieu of cash payments to outside consultants, and the Company expects to continue this practice.
In the year ended December 31, 2014, the Company granted a total of 14,076,361 shares of common stock valued at $433,742
in lieu of cash payments to employees and outside consultants, compared to the issuance of 25,619,637 shares of common stock valued
at $449,667 in lieu of cash payments to employees and outside consultants during the year ended December 31, 2013. The
Company is not now in a position to determine an approximate number of shares that the Company may issue for the preceding purpose
in the remainder of 2015.
Satisfaction of Our Cash Obligations for the Next 12 Months
As of December 31, 2014, our cash on hand
was $207,167. We believe we cannot satisfy our cash requirements for the next twelve months with our current cash on hand. Our
operations are subject to attaining adequate financing. We cannot assure investors that adequate financing will be available. In
the absence of such financing, we may be unable to proceed with our operations.
We anticipate that our operational, and
general & administrative expenses for the next 12 months will total approximately $3,000,000, of which we expect a portion
will be satisfied with the issuance of stock based compensation in lieu of cash. We anticipate the purchase of a significant amount
of equipment necessary to implement our medical marijuana operations. Should we be able to commence operations pursuant to our
plans to enter into the medical marijuana business, we will also need to either, purchase or lease, a warehouse facility to produce
marijuana pursuant to the license we were awarded by the City of North Las Vegas. We also would expect a significant addition to
the number of employees. We have not yet begun to develop a facility to commence our medical marijuana operations, and are not
now in a position to determine an approximate amount that would be necessary. The foregoing represents our best estimate of our
cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in
subsequent private financings may vary significantly depending upon the exact amount of funds raised and our progress with the
execution of our planned operations. Our plan for satisfying our cash requirements for the next twelve months, in addition to our
revenues from our Enterprise Technology Platform, is through convertible debt financing, the sale of shares of our common stock,
third party financing, and/or traditional debt financing. We may continue to pay for services with shares of common stock in lieu
of cash if financing is unavailable.
In the event we are not successful in obtaining
financing, we may not be able to proceed with our business plan for the commercialization of our products and further research
and development of new products. We anticipate that we will incur operating losses in the foreseeable future. Therefore, our auditors
have raised substantial doubt about our ability to continue as a going concern.
Off- Balance Sheet Arrangements
We did not have any off-balance sheet arrangements
as of December 31, 2014.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not Required
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is
incorporated by reference to the financial statements beginning on page F-1.
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 carried out an evaluation, under the supervision
and with the participation of our management, including our principal executive officer and principal financial officer, who are
one in the same, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a – 15(e) under the
Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this annual report
on Form 10-K. Based upon that evaluation, our principal executive officer and principal financial officer, who are one in the same, concluded that,
as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information
required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the required
time periods and is accumulated and communicated to our management, including our principal executive officer, as appropriate to
allow timely decisions regarding required disclosure.
Our principal executive officer and
principal financial officer, who are one in the same, does not expect that our disclosure controls or internal controls will prevent all error and all
fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their
objectives and our principal executive officer and principal financial officer, who is one in the same, has determined that
our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and
operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can
occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a
desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.
Furthermore, smaller reporting companies may
face additional limitations. Smaller reporting companies often employ fewer individuals and find it difficult to properly segregate
duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system
of internal control. Additionally, smaller reporting companies may utilize general accounting software packages that lack a rigorous
set of software controls.
Management’s Annual Report on Internal
Control over Financial Reporting.
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rule 13a- 15(f) under the Securities Exchange
Act, as amended. Management, with the participation of the Chief Executive Officer, evaluated the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria
set forth by the committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework. 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 the company’s annual or interim financial statements
will not be prevented or detected on a timely basis. We have identified the following material weaknesses:
| 1. | As of December 31, 2014, we did not maintain effective controls over the control environment.
Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures. This has
resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director
qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs
have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. |
| 2. | As of December 31, 2014, we did not maintain effective controls over financial statement
disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed
in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness. |
Because of these material weaknesses, management
has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2014
based on the criteria established in “Internal Control-Integrated Framework” issued by the COSO.
Changes in Internal Control over Financial
Reporting
There have been no changes in the Company’s
internal control over financial reporting during the quarter ended December 31, 2014, that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Independent Registered Accountant’s Internal
Control Attestation
This annual report does not include an attestation report of the Company’s registered public accounting
firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide
only management’s report in this annual report.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names
and positions of our executive officers and directors. Directors will be elected at our annual meeting of stockholders and serve
for one year or until their successors are elected and qualify. Officers are elected by the Board and their terms of office are,
except to the extent governed by employment contract, at the discretion of the Board.
Name |
|
Age |
|
Position |
|
Director Since |
Mark Bradley |
|
52 |
|
Chief Executive Officer, Principal Financial Officer and Chairman |
|
1993 |
Michael Berk |
|
68 |
|
President of Programming and Director |
|
2000 |
Doug Miller |
|
69 |
|
Director |
|
2005 |
Mark Bradley founded the Company and
has been its Chief Executive Officer and a director since 1993, and became its principal financial officer in 2004. Mr. Bradley
was a staff producer/director at United Artists where he produced original programming and television commercials. In 1985 he created
the Real Estate Broadcast Network that was the first 24-hour real estate channel. In 1993 he founded Players Network. Mr. Bradley
is a graduate of the Producers Program at the University of California Los Angeles. Under his direction, Players Network became
the first user of a digital broadcast system for television programming and the first private label gaming network. Mr. Bradley
pioneered, developed and executive produced the production of Players Network’s unique gaming-centric programming. Mr. Bradley
graduated from the UCLA producer’s program and became a producer/director at United Artists, where he produced original programming,
television commercials, multi-camera music videos, live-to-tape sports and a variety show and was studio manager and postproduction
supervisor with United Cable Television in Los Angeles. In this capacity he engaged in the production, packaging and syndication
of television and film productions for such media venues as HBO, Nickelodeon, Prime Ticket and MTV. As an independent producer/director,
Mr. Bradley created and promoted live pay-per-view events, negotiated entertainment programming distribution deals, budgeted and
packaged TV programming. In 1985, Mr. Bradley created the Real Estate Broadcast Network, which was credited as being the first
24-hour real estate channel. As a founder and Chief Executive Officer of the Company, Mr. Bradley has extensive media production
expertise as well as deep knowledge and relationships in the Las Vegas, Nevada entertainment industry. Mr. Bradley’s experience
with the Company from its founding also offers the Board insight to the evolution of the Company, including from execution, cultural,
operational, and competitive and industry points of view.
Michael Berk has been a director
since 2000 and was appointed as the Company's president of programming on March 22, 2005. He created and Executive Produced “Baywatch,”
the most popular series in television history, and is currently producing a large-budget “Baywatch” feature film for
DreamWorks. Mr. Berk wrote and produced the first three-hour movie ever made for television, "The Incredible Journey of Dr.
Meg Laurel," the highest-rated movie of the year, averaging a 42 share over three hours, "The Ordeal of Dr. Mudd,"
another three-hour movie that received two Emmy Awards, "The Haunting Passion," winner of the Venice Film Festival Award
and "The Last Song," recipient of the Edgar Allan Poe Award for Mystery Writing. Mr. Berk is also a significant figure
in the Las Vegas community. He was a founding Board Member and President of the highly acclaimed “CineVegas” Film Festival,
now in its sixth year at the Palms Hotel, and was recognized with the prestigious Las Vegas Chamber of Commerce Community Achievement
Award in the category of Entertainment. He also received the Nevada Film Office/Las Vegas Film Critics Society Silver Spike Award
for his contributions to the film and television industry in Nevada. Mr. Berk maintains offices both in Hollywood and in Las Vegas.
Mr. Berk’s extensive experience and contacts in the media and entertainment industry provides the Company and the Board a
unique perspective on this industry and insight into the Company’s business.
Douglas R. Miller has been a member
of the Board of Directors of the Company since 2005. Mr. Miller has served as President, Chief Operating Officer, Secretary and
a director of GWIN, Inc., a publicly traded media and entertainment company focused on sports and gaming, since its reorganization
in July 2001. Mr. Miller also served as Gwin’s Chief Financial Officer from November 2001 to April 2003. From 1999 to 2001,
Mr. Miller served as President of Gwin’s subsidiary, Global Sports Edge, Inc. From 1998 to 1999, Mr. Miller was the Chief
Financial Officer of Body Code International, an apparel manufacturer. Mr. Miller holds a B.A. degree in economics from the University
of Nebraska, and an MBA degree from Stanford University. Mr. Miller serves on the compensation committee of the Company’s
Board of Directors. Mr. Miller’s experience running media companies as well as publicly traded companies provides him with
an understanding of the operation of other boards of directors that he can contribute in his role as a member of the Board.
Family Relationships
There are no family relationships among directors,
executive officers or persons nominated or chosen by Players Network to become directors or executive officers.
Limitation of Liability of Directors
Pursuant to the Nevada General Corporation
Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of
their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives
an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified
and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our
directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted
in good faith and in a manner he believed to be in our best interests.
Election of Directors and Officers
Directors are elected to serve until the
next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve
until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been
elected and qualified.
No Executive Officer or Director of the
Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency
permanently or temporarily enjoining, barring, suspending or otherwise limiting him from acting as an investment advisor, underwriter,
broker or dealer in the securities industry; or, as an affiliated person, director or employee of an investment company, bank,
savings and loan association; also, an insurance company or from engaging in, or continuing any conduct or practice in connection
with any such activity or in connection with the purchase or sale of any securities.
No Executive Officer or Director of the
Corporation has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding,
which is currently pending.
No Executive Officer or Director of the
Corporation is the subject of any pending legal proceedings.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), requires our executive officers and directors, and persons who beneficially
own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the
SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us
with copies of all Section 16(a) forms they file. To our knowledge, we believe that during 2014 our Directors and executive officers
did not comply with all Section 16(a) filing requirements. Specifically, Mr. Berk and Mr. Miller failed to file Form 4’s
with respect to the issuance of common shares for 2014. Mr. Bradley also failed to file Form 4’s with respect to the issuance
of common stock and common stock options that were granted during 2014.
To the Company’s knowledge, the following
is a list of individuals that have not filed, or filed late, a report reflecting a change in ownership as required pursuant to
Section 16(a) of the Securities Act of 1934:
Name of Individual |
|
Number of Late Reports |
|
Number of Transactions that Were Not Timely Reported |
|
|
|
|
|
Mark Bradley |
|
3 |
|
3 |
|
|
|
|
|
Michael Berk |
|
1 |
|
1 |
|
|
|
|
|
Doug Miller |
|
1 |
|
1 |
Audit Committee
We do not have an Audit Committee, our
board of directors acted as the Company's Audit Committee during fiscal 2013, recommending a firm of independent certified public
accountants to audit the annual financial statements; reviewing the independent auditors' independence, the financial statements
and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does
not currently have a written audit committee charter or similar document.
Our board of directors has determined that
if we were required to have a financial expert and/or an audit committee, Doug Miller, a Director, would be considered an “audit
committee financial expert,” as defined by applicable Commission rules and regulations. Based on the definition of “independent”
applicable to audit committee members of Nasdaq-traded companies, our board of directors has further determined that Mr. Miller
is considered to be “independent.”
Code of Ethics
A code of ethics relates to written standards
that are reasonably designed to deter wrongdoing and to promote:
| · | Honest and ethical conduct, including
the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| · | Full, fair, accurate, timely and understandable
disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made
by an issuer; |
| · | Compliance with applicable governmental
laws, rules and regulations; |
| · | The prompt internal reporting of violations
of the code to an appropriate person or persons identified in the code; and |
| · | Accountability for adherence to the code. |
On April 7, 2004, the Company adopted a
Code of Ethics that applies to the Company's principal executive officer, principal financial officer and principal accounting
officer. Anyone can obtain a copy of the Code of Ethics by contacting the Company at the following address: 1771 E. Flamingo Road,
Suite # 201-A, Las Vegas, NV 89119, attention: Chief Executive Officer, telephone: (702) 734-3457. The first such copy will
be provided without charge. The Company will post any amendments to the Code of Ethics, as well as any waivers that are required
to be disclosed by the rules of either the Securities and Exchange Commission or the National Association of Dealers.
Nominating Committee
We do not have a Nominating Committee or
Nominating Committee Charter. Our board of directors performed some of the functions associated with a Nominating Committee. We
have elected not to have a Nominating Committee in that we are continuously updating our operations and have limited resources
with which to establish additional committees of our board of directors.
We do not have a policy regarding the consideration
of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates,
nor have our officers and directors established a process for identifying and evaluating director nominees. In the event that we
receive a stockholder recommendation for a director nominee, all current members of our Board will participate in the consideration
of director nominees.
Compensation Committee
At this time, Mr. Miller is the only member
of the committee and has performed in his role by reviewing our employment agreements with Mr. Bradley and Mr. Berk. The board
of directors intends to add additional members to the compensation committee and expects it to consist of solely of independent
members. Until more members are appointed to the compensation committee, our entire board of directors will review all forms of
compensation provided to any new executive officers, directors, consultants and employees, including stock compensation and options.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain
information relating to all compensation of our named executive officers for services rendered in all capacities to the Company
during the years ended December 31, 2014, 2013 and 2012:
Summary
Compensation Table |
Name and | |
| |
| | |
| | |
| | |
| | |
| |
Principal | |
| |
| | |
Stock | | |
Option | | |
| | |
| |
Position | |
Year | |
Salary | | |
Awards | | |
Awards | | |
All Other | | |
Total | |
(a) | |
(b) | |
(c) | | |
(e)(1) | | |
(f)(1) | | |
Compensation | | |
Compensation | |
Mark Bradley, | |
2014 | |
$ | 206,501 | | |
$ | 120,000 | | |
$ | 217,971 | | |
$ | -0- | | |
$ | 544,472 | |
Chief Executive Officer | |
2013 | |
$ | 41,027 | | |
$ | 170,600 | | |
$ | -0- | | |
$ | -0- | | |
$ | 211,627 | |
| |
2012 | |
$ | 63,300 | | |
$ | 123,473 | | |
$ | -0- | | |
$ | -0- | | |
$ | 186,773 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Michael Berk, | |
2014 | |
$ | -0- | | |
$ | -0- | | |
$ | -0- | | |
$ | -0- | | |
$ | -0- | |
President of Programming | |
2013 | |
$ | 2,700 | | |
$ | 62,587 | | |
$ | -0- | | |
$ | -0- | | |
$ | 65,287 | |
| |
2012 | |
$ | 37,806 | | |
$ | 108,770 | | |
$ | -0- | | |
$ | -0- | | |
$ | 146,576 | |
| (1) | The amounts in columns (e) and (f) reflect the dollar amount recognized for financial statement
reporting purposes for the years ended December 31, 2014, 2013 and 2012, in accordance with FASB ASC 718-10 of awards of stock
and stock options. Assumptions used in the calculation of this amount are included in the footnotes to our audited financial statements
for the fiscal year ended December 31, 2014, included in Part II, Item 8, Financial Statements and Supplementary Data of this Annual
Report on Form 10-K. |
Employment Agreements
Mark Bradley, Chief Executive Officer
On January 1, 2005, we employed Mr. Bradley
under an extension of his employment agreement. This agreement provides that Mr. Bradley is entitled to receive an annual salary
of $150,000. Provided that established criteria are met, Mr. Bradley is also entitled to 10% of all royalties that we receive from
sources directly resulting from his efforts. On September 1, 2010, we extended Mr. Bradley’s employment under a replacement
employment agreement. This agreement provides that Mr. Bradley is entitled to receive an annual salary of $175,000, with an additional
monthly automobile allowance of $700. Mr. Bradley is entitled to participate in any and all employee benefit plans established
for the employees of the Company. The employment agreement confers upon Mr. Bradley a right of first refusal with respect to any
proposed sale of all or a substantial portion of the Company's assets. The employment agreement does not contain a covenant not
to compete preventing Mr. Bradley from competing with the Company after the termination of the employment agreement. The employment
agreement was renewed for a five (5) year period through August 31, 2015.
Michael Berk, President of Programming
On January 1, 2005, we entered into a five-year
employment agreement with Mr. Michael Berk, our President of Programming pursuant to which we agreed to pay Mr. Berk an annual
salary of $150,000 plus 10% of all royalties that we receive from sources directly resulting from his efforts. Mr. Berk took an
unpaid leave of absence from July 1, 2009 through October 1, 2010, at which time we replaced Mr. Berk’s expired employment
agreement. We extended Mr. Berk’s employment under a replacement employment agreement which provides that Mr. Berk is entitled
to receive an annual salary of $150,000, with an additional monthly automobile allowance of $700. On October 1, 2010, the employment
agreement was renewed for a five (5) year period through August 31, 2015, with amendments to include a monthly automobile allowance
of $700. Mr. Berk agreed to suspend the accrual of all compensation effective March 1, 2013 due to a lack of available resources.
Outstanding Equity Awards at Fiscal
Year End
The following table sets forth information
with respect to the value of all unexercised options previously awarded to the Named Executive Officers at the fiscal year ended
December 31, 2014.
Name (a) | |
Number of Securities Underlying Unexercised Options (#) Exercisable (b)(1) | |
Number of Securities Underlying Unexercised Options (#) Unexercisable (c) | |
Option Exercise Price ($) (e) | |
Option Expiration Date (f) | |
Number of Shares or Units of Stock That Have Not Vested (#) (f) | |
Market Value of Shares or Units of Stock That Have Not Vested ($) (g) |
Mark Bradley | |
8,000,000 | |
-0- | |
$0.04 | |
February 20, 2018 | |
-0- | |
-0- |
| |
| |
| |
| |
| |
| |
|
Michael Berk | |
-0- | |
-0- | |
$ -0- | |
N/A | |
-0- | |
-0- |
| (1) | All outstanding options were fully vested on the date of grant. |
Termination of Employment; Severance Agreements
Mr. Bradley and Mr. Berk are each parties
to employment agreements with the Company that provide for severance benefits in the event their employment is terminated by the
Company (other than as a result of death or for cause) or by the employee as a result of a material breach by the Company of the
employment agreement. In the event of such termination, the employee will be entitled to his base salary and all benefits for the
remainder of the term of the employment agreement plus a lump sum cash payment in an amount equal to two times his then current
base salary and annual bonus (without regard to the performance requirements associated with such bonus). In addition, all outstanding
stock options will be immediately vested. If the employee or his family is ineligible under the terms of any insurance to continue
to be covered, the Company will either provide substantially equivalent coverage or pay the employee a lump sum payment equal to
the value of the continuation of such insurance coverage.
Director Compensation
The table below summarizes the compensation
paid, or accrued to non-employee directors for the year ended December 31, 2014.
| |
Fees Earned | |
Stock | |
Option | |
All Other | |
|
| |
or Paid | |
Awards | |
Awards | |
Compensation | |
Total |
Name | |
in Cash | |
($) | |
($) | |
($) | |
($) |
(a) | |
(b) | |
(c) (1) | |
(d) (2) | |
(g) | |
(h) |
Doug Miller | |
$-0- | |
$6,755 | |
$-0- | |
-0- | |
$6,755 |
The amounts in columns (c) and (d) reflect
the fair value dollar amount recognized for financial statement reporting purposes for the year ended December 31, 2014, in accordance
with FASB ASC 718-10-30-2 of awards of stock and stock options and thus include amounts from awards granted in and prior to 2014.
Assumptions used in the calculation of this amount are included in the footnotes to our audited financial statements for the year
ended December 31, 2014 included in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on Form
10-K.
| (1) | On August 18, 2014, the Company granted Doug Miller 350,000 shares of common stock in exchange
for services rendered as a director. |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table presents information,
to the best of our knowledge, about the beneficial ownership of our common stock on March 31, 2015, held by those persons
known to beneficially own more than 5% of our capital stock and by our directors and executive officers.
Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting
or investment power. It also includes (unless footnoted) shares of common stock that the stockholder has a right to acquire within
60 days after March 31, 2015 through the exercise of any option, warrant or other right. The percentage ownership of
the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange
Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our
common stock. Unless otherwise indicated, the address of each listed stockholder is c/o Players Network, 1771 E. Flamingo Road,
#201-A, Las Vegas, NV 89119.
| |
| | |
Series A | | |
| |
| |
Common Stock | | |
Preferred Stock | | |
| |
Name of Beneficial Owner(1) | |
Number of Shares | | |
% of Class(2) | | |
Number of Shares | | |
% of Class(3) | | |
Total Voting Power(10) | |
Officers and Directors: | |
| | | |
| | | |
| | | |
| | | |
| | |
Mark Bradley, CEO and Director(4) | |
| 39,496,652 | | |
| 18.1% | | |
| 1,000,000 | | |
| 50% | | |
| 21.7% | |
Michael Berk, President of Programming and Director(5)(6) | |
| 7,380,527 | | |
| 3.5% | | |
| 1,000,000 | | |
| 50% | | |
| 12.4% | |
Doug Miller, Director(7) | |
| 2,900,000 | | |
| 1.4% | | |
| – | | |
| – | | |
| * | |
Directors and Officers as a Group (3 persons) | |
| 49,777,179 | | |
| 22.8% | | |
| 2,000,000 | | |
| 100% | | |
| 35.1% | |
5% Holders: | |
| | | |
| | | |
| | | |
| | | |
| | |
Lyle Berman(8) | |
| 17,000,000 | | |
| 7.8% | | |
| – | | |
| – | | |
| 3.3% | |
David W. Tice | |
| 11,904,107 | (9) | |
| 5.7% | | |
| – | | |
| – | | |
| 4.6% | |
* less than 1%
| (1) | Except as indicated in the footnotes to this table and pursuant to applicable community property
laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock or Series
A Preferred Stock owned by such person. |
| (2) | Percentage of beneficial ownership is based upon 210,146,167 shares of Common Stock outstanding
as of March 31, 2015. For each named person, this percentage includes Common Stock that the person has the right to acquire
either currently or within 60 days of March 31, 2015, including through the exercise of an option; however, such Common
Stock is not deemed outstanding for the purpose of computing the percentage owned by any other person. |
| (3) | Percentage of beneficial ownership is based upon 2,000,000 shares of Series A Preferred Stock outstanding
as of March 31, 2015. |
| (4) | Includes stock options and warrants to purchase 8,120,000 shares of Common Stock exercisable within
60 days of March 31, 2015 and 25,000 shares held for the benefit of Mr. Bradley’s minor daughter. |
| (5) | Includes 38,000 shares held by MJB Productions, which is 100% owned by Mr. Berk. |
| (6) | Excludes (i) 125,000 shares held by Mr. Berk’s ex-wife, and (ii) 125,000 shares by Mr. Berk’s
adult son. |
| (7) | Excludes 100,000 shares held by Mr. Miller’s adult son. |
| (8) | Includes warrants to purchase 8,500,000 shares of Common Stock exercisable within 60 days of March 31, 2015. |
| (9) | Information based on Schedule 13D filed with the SEC on October 19, 2011, Form 4 filed on October
10, 2011 and October 11, 2011 and the Company’s shareholder reports. |
| (10) | Series A Preferred Stock carries preferential voting power of 25:1. Both MR. Bradley and Mr. Berk
hold 1 million shares of Series A Preferred Stock, and carry 25 million additional votes each. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE.
Director Independence
Our Common Stock is currently quoted on the
OTCQB. As such, we are not currently subject to corporate governance standards of listed companies, which require, among other
things, that the majority of the board of directors be independent. We are not currently subject to corporate governance standards
defining the independence of our directors, and we have chosen to define an “independent” director in accordance with
the NASDAQ Global Market’s requirements for independent directors. Our Board of Directors has determined that Mr.
Miller is “independent” in accordance with the NASDAQ Global Market’s requirements.
Our Board of Directors will review at least
annually the independence of each director. During these reviews, our Board of Directors will consider transactions and relationships
between each director (and his or her immediate family and affiliates) and us and our management to determine whether any such
transactions or relationships are inconsistent with a determination that the director was independent. The Board of Directors will
conduct its annual review of director independence and to determine if any transactions or relationships exist that would disqualify
any of the individuals who then served as a director under the rules of the NASDAQ Stock Market, or require disclosure under SEC
rules.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following table shows the fees paid
or accrued for the audit and other services provided by our independent auditors for the years ended December 31, 2014 and 2013,
respectively.
| |
For the Years Ended | |
| |
December 31, | |
| |
2014 | | |
2013 | |
Audit fees: | |
$ | 33,500 | | |
$ | 34,000 | |
Audit-related fees: | |
| – | | |
| – | |
Tax fees: | |
| – | | |
| – | |
All other fees: | |
| – | | |
| – | |
Total fees paid or accrued to our principal accountant | |
$ | 33,500 | | |
$ | 34,000 | |
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. 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 and are not reported above under “Audit Fees.”
Tax Fees — This category consists
of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice.
All Other Fees — This category
consists of fees for other miscellaneous items.
We do not have an Audit Committee. Our board
of directors acted as the Company's Audit Committee during fiscal 2014, recommending a firm of independent certified public accountants
to audit the annual financial statements; reviewing the independent auditors’ independence, the financial statements and
their audit report; and reviewing management's administration of the system of internal accounting controls.
Pre-Approval Policies and Procedure for
Audit and Permitted Non-Audit Services
The Company has not adopted any written pre-approval
policies or procedures as described in paragraph (c)(7)(i) of Rule 2.01 of Regulation S-X. All audit and permissible non-audit
services in 2014 and 2013 were pre-approved by the Board of Directors.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
3.1 |
March 26, 1998 – Articles of Incorporation (incorporated by reference to Exhibit 2.(A)(1) of the Form 10-SB filed with the Securities and Exchange Commission by Players Network on February 7, 2000) |
|
|
3.2 |
March 26, 1998 – Bylaws of the Company (incorporated by reference to Exhibit 2.(A)(2) of the Form 10-SB filed with the Securities and Exchange Commission by Players Network on February 7, 2000) |
|
|
3.3 |
June 9, 1994 – Certificate of Amendment of Articles of Incorporation adopting name change to Players Network filed with the Nevada Secretary of State (incorporated by reference to Exhibit 5.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission by Players Network on September 13, 2004) |
|
|
3.4 |
June 4, 2007 – Certificate of Amendment of Articles of Incorporation Increasing the Authorized Stock filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on June 8, 2007) |
|
|
3.5 |
May 6, 2013 – Certificate of Amendment of Articles of Incorporation Increasing the Authorized Stock filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.5 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on May 13, 2013) |
|
|
3.6 |
July 8, 2014 - Articles of Incorporation for Green Leaf Farms Holdings, Inc. filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
3.7 |
July 18, 2014 - Articles of Organization for Green Leaf Medical, LLC. filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.3 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
4.1 |
August 31, 2004 – 2004 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission by Players Network on September 13, 2004) |
|
|
4.2 |
November 29, 2006 – 2006 Non-Qualified Attorneys & Accountants Stock Compensation Plan (incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission by Players Network on January 18, 2007) |
|
|
4.3 |
July 24, 2007 – Certificate of Designation for Series A Preferred Stock filed with the Nevada Secretary of State (incorporated by reference to Exhibit 4.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on July 26, 2007) |
|
|
4.4 |
July 22, 2009 – Amended and Restated 2004 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission by Players Network on July 22, 2009) |
|
|
4.5 |
December 17, 2010 – Certificate of Designation for Series B Preferred Stock filed with the Nevada Secretary of State on (incorporated by reference to Exhibit 4.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 23, 2010) |
|
|
4.6 |
December 17, 2010 – Form of Series B Stock Warrant (incorporated by reference to Exhibit 4.2 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 23, 2010) |
|
|
4.7 |
December 16, 2013 – Amended and Restated 2004 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission by Players Network on December 17, 2013) |
|
|
10.1 |
November 1, 2005 – Distribution Agreement between the Company and Comcast Programming Development, Inc. (incorporated by reference to Exhibit 10.1 of the Form 10-K/A filed with the Securities and Exchange Commission by Players Network on January 14, 2013) |
10.2*** |
January 1, 2005 – Employment Agreement for Mark Bradley Feldgreber (incorporated by reference to Exhibit 10.2 of the Form 10KSB filed with the Securities and Exchange Commission by Players Network on April 13, 2007) |
|
|
10.3*** |
January 1, 2005 – Employment Agreement for Michael Berk (incorporated by reference to Exhibit 10.3 of the Form 10KSB filed with the Securities and Exchange Commission by Players Network on April 13, 2007) |
|
|
10.4 |
October 10, 2007 – Subscription Agreement by and between the Company and Timothy Sean Shiah (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 4, 2007) |
|
|
10.5** |
June 5, 2008 – Distribution Agreement, between Players Network and MicroPlay, Inc. (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on June 12, 2008) |
|
|
10.6 |
December 17, 2010 – Series B Preferred Stock and Warrant Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 23, 2010) |
|
|
10.7 |
December 17, 2010 – Investor’s Rights Agreement (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 23, 2010) |
|
|
10.8*** |
March 1, 2011 – Employment Agreement for Peter Heumiller (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on March 10, 2011) |
|
|
10.9 |
May 3, 2012 – Promissory Note (First Asher Note) (incorporated by reference to Exhibit 10.5 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.10 |
May 3, 2012 – Securities Purchase Agreement (First Asher Note) (incorporated by reference to Exhibit 10.6 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.11 |
July 10, 2012 – Promissory Note (Second Asher Note) (incorporated by reference to Exhibit 10.3 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.12 |
July 10, 2012 – Securities Purchase Agreement (Second Asher Note) (incorporated by reference to Exhibit 10.4 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.13 |
September 6, 2012 – Promissory Note (Third Asher Note) (incorporated by reference to Exhibit 10.1 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.14 |
September 6, 2012 – Securities Purchase Agreement (Third Asher Note) (incorporated by reference to Exhibit 10.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.15 |
August 9, 2012 – Promissory Note (Continental) (incorporated by reference to Exhibit 10.7 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.16 |
August 9, 2012 – Note & Warrant Purchase Agreement (Continental) (incorporated by reference to Exhibit 10.8 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.17 |
August 9, 2012 – Amendment to Promissory Note (Continental) (incorporated by reference to Exhibit 10.9 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.18 |
November 7, 2012 – Promissory Note (Dutchess Opportunity Fund, II, LP) (incorporated by reference to Exhibit 10.11 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.19 |
November 7, 2012 – Investment Agreement (Dutchess Opportunity Fund, II, LP) (incorporated by reference to Exhibit 10.10 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.20 |
November 7, 2012 – Registration Rights Agreement (Dutchess Opportunity Fund, II, LP) (incorporated by reference to Exhibit 10.12 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2012) |
|
|
10.21 |
December 12, 2012 – Promissory Note (Fourth Asher Note) (incorporated by reference to Exhibit 10.21 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.22 |
December 12, 2012 – Securities Purchase Agreement (Fourth Asher Note) (incorporated by reference to Exhibit 10.22 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.23 |
January 11, 2013 – Promissory Note (Fifth Asher Note) (incorporated by reference to Exhibit 10.23 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.24 |
January 11, 2013 – Securities Purchase Agreement (Fifth Asher Note) (incorporated by reference to Exhibit 10.24 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.25 |
February 19, 2013 – Promissory Note (Sixth Asher Note) (incorporated by reference to Exhibit 10.25 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.26 |
February 19, 2013 – Securities Purchase Agreement (Sixth Asher Note) (incorporated by reference to Exhibit 10.26 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.27 |
March 13, 2013 – Promissory Note (JMJ Financial 1) (incorporated by reference to Exhibit 10.27 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 12, 2014) |
|
|
10.28 |
April 30, 2013 – Assignment and Assumption Agreement (Continental Equities, LLC and John David Roberts) (incorporated by reference to Exhibit 10.3 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 13, 2013) |
|
|
10.29 |
May 8, 2013 – Promissory Note (Seventh Asher Note) (incorporated by reference to Exhibit 10.1 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 13, 2013) |
|
|
10.30 |
May 8, 2013 – Securities Purchase Agreement (Seventh Asher Note) (incorporated by reference to Exhibit 10.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 13, 2013) |
|
|
10.31 |
July 1, 2013 – Subscription Agreement between the Company and the John David Roberts (incorporated by reference to Exhibit 10.4 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2013) |
|
|
10.32 |
July 1, 2013 – Warrant Agreement between the Company and the John David Roberts (incorporated by reference to Exhibit 10.5 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2013) |
|
|
10.33 |
July 8, 2013 – Amendment to Investment Agreement by and between Players Network and Dutchess Opportunity Fund II, LP (incorporated by reference to Exhibit 10.19 of the Form S-1 filed with the Securities and Exchange Commission by Players Network on July 24, 2013) |
|
|
10.34 |
July 30, 2013 – Promissory Note (Eighth Asher Note) (incorporated by reference to Exhibit 10.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2013) |
|
|
10.35 |
July 30, 2013 – Securities Purchase Agreement (Eighth Asher Note) (incorporated by reference to Exhibit 10.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2013) |
|
|
10.36 |
August 18, 2013 – Subscription Agreement between the Company and the Ralph Senesky (incorporated by reference to Exhibit 10.6 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 19, 2013) |
|
|
10.37 |
November 22, 2013 – Standstill Agreement with JMJ Financial (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 18, 2013) |
|
|
10.38 |
December 2, 2013 – Asher Enterprises confirmation of satisfaction of debt letter (Sixth Asher Note) (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 18, 2013) |
|
|
10.39 |
December 3, 2013 – Subscription Agreement between the Company and the Lyle A. Berman Irrevocable Trust (incorporated by reference to Exhibit 4.2 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 18, 2013) |
|
|
10.40 |
December 3, 2013 – Warrant Agreement between the Company and the Lyle A. Berman Irrevocable Trust (incorporated by reference to Exhibit 4.3 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 18, 2013) |
|
|
10.41 |
December 16, 2013 – Asher Enterprises confirmation of satisfaction of debt letter (Seventh Asher Note) (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on December 18, 2013) |
|
|
10.42 |
October 28, 2013 – Form of Promissory Note (Ninth Asher Note) (incorporated by reference to Exhibit 10.42 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on April 8, 2014) |
|
|
10.43 |
October 28, 2013 – Form of Securities Purchase Agreement (Ninth Asher Note) (incorporated by reference to Exhibit 10.43 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on April 8, 2014) |
|
|
10.44 |
December 16, 2013 – Asher Enterprises confirmation of satisfaction of debt letter (Fifth Asher Note) (incorporated by reference to Exhibit 10.44 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on April 8, 2014) |
|
|
10.45 |
Convertible Redeemable Note with GEL Properties, LLC (First GEL Note), January 8, 2014 (incorporated by reference to Exhibit 10.1 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.46 |
Collateralized Secured Back End Note with GEL Properties, LLC (First GEL Note), January 8, 2014 (incorporated by reference to Exhibit 10.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.47 |
Convertible Redeemable Back End Note with GEL Properties, LLC (First GEL Note), January 8, 2014 (incorporated by reference to Exhibit 10.3 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.48 |
Securities Purchase Agreement with GEL Properties, LLC (First GEL Note), January 8, 2014 (incorporated by reference to Exhibit 10.4 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.49 |
Convertible Redeemable Note with LG Capital Funding, LLC (First LG Capital Note), January 8, 2014 (incorporated by reference to Exhibit 10.5 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.50 |
Collateralized Secured Back End Note with LG Capital Funding, LLC (First LG Capital Note), January 8, 2014 (incorporated by reference to Exhibit 10.6 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.51 |
Convertible Redeemable Back End Note with LG Capital Funding, LLC (First LG Capital Note), January 8, 2014 (incorporated by reference to Exhibit 10.7 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.52 |
Securities Purchase Agreement with LG Capital Funding, LLC (First LG Capital Note), January 8, 2014 (incorporated by reference to Exhibit 10.8 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.53 |
Subscription Agreement (W. Elsaesser), January 21, 2014 (incorporated by reference to Exhibit 10.9 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.54 |
Subscription Agreement (E. Winfield), January 23, 2014 (incorporated by reference to Exhibit 10.10 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.55 |
Subscription Agreement (I. Zalcberg), January 30, 2014 (incorporated by reference to Exhibit 10.11 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.56 |
Warrant Agreement (I. Zalcberg), January 30, 2014 (incorporated by reference to Exhibit 10.12 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.57 |
Subscription Agreement (I. Zalcberg), March 28, 2014 (incorporated by reference to Exhibit 10.13 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.58 |
Warrant Agreement (I. Zalcberg), March 28, 2014 (incorporated by reference to Exhibit 10.4 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on March 31, 2014) |
|
|
10.59 |
Convertible Note with Group 10 Holdings, LLC (First Group 10 Note), May 9, 2014 (incorporated by reference to Exhibit 10.15 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.60 |
First Amendment to Convertible Note with Group 10 Holdings, LLC (First Group 10 Note), May 9, 2014 (incorporated by reference to Exhibit 10.16 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.61 |
Convertible Note with Typenex Co-Investment, LLC (First Typenex Note), May 20, 2014 (incorporated by reference to Exhibit 10.17 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.62 |
Securities Purchase Agreement with Typenex Co-Investment, LLC (First Typenex Note), May 20, 2014 (incorporated by reference to Exhibit 10.18 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.63 |
Convertible Note with Vista Capital Investments, LLC (First Vista Note), June 2, 2014 (incorporated by reference to Exhibit 10.19 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.64 |
Convertible Note with WHC Capital, LLC (First WHC Note), June 13, 2014 (incorporated by reference to Exhibit 10.20 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.65 |
Securities Purchase Agreement with WHC Capital, LLC (First WHC Note), June 13, 2014 (incorporated by reference to Exhibit 10.21 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.66 |
Warrant Agreement (WHC Capital, LLC), June 13, 2014 (incorporated by reference to Exhibit 10.22 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.67 |
Subscription Agreement (M. Leivotes), April 8, 2014 (incorporated by reference to Exhibit 10.23 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.68 |
Warrant Agreement (M. Leivotes), April 8, 2014 (incorporated by reference to Exhibit 10.24 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.69 |
Stock Option Agreement (E. Henley), April 11, 2014 (incorporated by reference to Exhibit 10.25 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.70 |
Stock Option Agreement (R. Brown), April 11, 2014 (incorporated by reference to Exhibit 10.26 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on August 19, 2014) |
|
|
10.71 |
August 14, 2014 - Subscription Agreement (R. Donald) (incorporated by reference to Exhibit 10.27 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.72 |
July 15, 2014 - Form of Convertible Redeemable Note with LG Capital Funding, LLC (Third LG Capital Note) (incorporated by reference to Exhibit 10.28 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.73 |
July 15, 2014 - Form of Convertible Redeemable Back End Note with LG Capital Funding, LLC (Third LG Capital Note) (incorporated by reference to Exhibit 10.29 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.74 |
July 15, 2014 - Form of Collateralized Secured Promissory Note with LG Capital Funding, LLC (Third LG Capital Note) (incorporated by reference to Exhibit 10.30 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.75 |
July 15, 2014 - Form of Securities Purchase Agreement with LG Capital Funding, LLC (Third LG Capital Note) (incorporated by reference to Exhibit 10.31 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.76 |
August 19, 2014 - Form of Convertible Promissory Note with WHC Capital, LLC (Second WHC Note) (incorporated by reference to Exhibit 10.32 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.77 |
August 19, 2014 - Form of Securities Purchase Agreement with WHC Capital, LLC (Second WHC Note) (incorporated by reference to Exhibit 10.33 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.78 |
August 14, 2014 - Investment Agreement with R. Donald and Green Leaf Farms Holdings (incorporated by reference to Exhibit 10.34 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014) |
|
|
10.79* |
October 13, 2014 – Form of Convertible Promissory Note with Tangiers Investment Group, LLC (First Tangiers Note) |
|
|
10.80* |
February 5, 2015 – Form of Amendment to Convertible Promissory Note with Tangiers Investment Group, LLC (First Tangiers Note) |
|
|
10.81* |
October 27, 2014 – Form of Convertible Promissory Note (First KBM Note) |
|
|
10.82* |
October 27, 2014 – Form of Securities Purchase Agreement (First KBM Note) |
|
|
10.83* |
December 3, 2014 – Form of Convertible Promissory Note (Second KBM Note) |
|
|
10.84* |
December 3, 2014 – Form of Securities Purchase Agreement (Second KBM Note) |
|
|
14.1 |
Code of Ethics (incorporated by reference to Exhibit 14 of the Form 10-K filed with the Securities and Exchange Commission by Players Network on April 7, 2010) |
|
|
21.1* |
Subsidiaries |
|
|
24.1* |
Power of Attorney (included on signature page) |
|
|
31.1* |
Certification of Mark Bradley, Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|
|
31.2* |
Certification of Mark Bradley, Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|
|
32.1* |
Certification of Mark Bradley, Principal Executive Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act |
|
|
101.INS* |
XBRL Instance Document |
|
|
101.SCH* |
XBRL Schema Document |
|
|
101.CAL* |
XBRL Calculation Linkbase Document |
|
|
101.DEF* |
XBRL Definition Linkbase Document |
|
|
101.LAB* |
XBRL Labels Linkbase Document |
|
|
101.PRE* |
XBRL Presentation Linkbase Document |
* Filed herewith
** Confidential Treatment Requested
*** Management contract or any other compensatory
plan, contract, or arrangement
XBRL (Extensible Business Reporting Language)
information is furnished and not filed or a part of this annual report on Form 10-K for purposes of Sections 11 or 12 of the Securities
Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and
otherwise is not subject to liability under these sections
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm |
|
F-1 |
|
|
|
Consolidated Balance Sheets as of December 31, 2014 and 2013 |
|
F-2 |
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013 |
|
F-3 |
|
|
|
Consolidated Statement of Stockholders' Equity (Deficit) for the years ended December 31, 2014 and 2013 |
|
F-4 |
|
|
|
Consolidated Statements of Cash Flow for the years ended December 31, 2014 and 2013 |
|
F-6 |
|
|
|
Notes to Financial Statements |
|
F-7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
Players Network
We have audited the accompanying consolidated
balance sheets of Players Network as of December 31, 2014 and 2013 and the related consolidated statements of operations, changes
in stockholders' equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Players Network as of December
31, 2014 and 2013, and the results of its operations and cash flows for the periods described above in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has recurring losses and insufficient working capital, which raises substantial doubt about its ability to continue as
a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
April 15, 2015
PLAYERS NETWORK
CONSOLIDATED BALANCE SHEETS
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 207,167 | | |
$ | 4,696 | |
Deferred television costs | |
| 116,454
| | |
| 116,454 | |
Prepaid expenses | |
| 3,975 | | |
| 7,775 | |
Total current assets | |
| 327,596
| | |
| 128,925 | |
| |
| | | |
| | |
Investments, cost method | |
| – | | |
| – | |
Fixed assets, net | |
| 71,271 | | |
| 62,759 | |
Debt issuance costs, net | |
| 9,959 | | |
| 3,399 | |
| |
| | | |
| | |
Total Assets | |
$ | 408,826
| | |
$ | 195,083 | |
| |
| | | |
| | |
Liabilities and Stockholders' (Deficit) | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 264,723 | | |
$ | 624,482 | |
Accrued expenses | |
| 180,579 | | |
| 182,351 | |
Deferred revenues | |
| 135,000 | | |
| 135,000 | |
Deferred rent obligations | |
| 4,432 | | |
| 5,574 | |
Convertible debentures, net of discounts of $537,505 and
$53,579 at December 31, 2014 and 2013, respectively |
|
|
183,998 |
|
|
|
82,421 |
|
Short term debt, currently in default | |
| 10,625 | | |
| 35,000 | |
Derivative liabilities | |
| 1,417,187 | | |
| 648,298 | |
Total current liabilities | |
| 2,196,544
| | |
| 1,713,126 | |
| |
| | | |
| | |
Total Liabilities | |
| 2,196,544
| | |
| 1,713,126 | |
| |
| | | |
| | |
Stockholders' (Deficit): | |
| | | |
| | |
Series A convertible preferred stock, $0.001 par value, 2,000,000
shares authorized; 2,000,000 shares issued and outstanding |
|
|
2,000 |
|
|
|
2,000 |
|
Series B convertible preferred stock, $0.001 par value, 10,873,347
shares authorized; 4,349,339 shares issued and outstanding |
|
|
4,349 |
|
|
|
4,349 |
|
Common stock, $0.001 par value, 600,000,000 shares
authorized; 179,271,304 and 138,011,812 shares issued and
outstanding at December 31, 2014 and 2013, respectively |
|
|
179,271 |
|
|
|
138,012 |
|
Additional paid-in capital | |
| 25,041,295 | | |
| 21,905,592 | |
Subscriptions payable, consisting of 1,534,929 shares
at December 31, 2014 and 2013, respectively |
|
|
19,238 |
|
|
|
– |
|
Accumulated (deficit) | |
| (26,848,642
| ) | |
| (23,567,996 | ) |
| |
| (1,602,489
| ) | |
| (1,518,043 | ) |
Noncontrolling Interest | |
| (185,229 | ) | |
| – | |
Total Stockholders' (Deficit) | |
| (1,787,718
| ) | |
| (1,518,043 | ) |
| |
| | | |
| | |
Total Liabilities and Stockholders' (Deficit) | |
$ | 408,826
| | |
$ | 195,083 | |
The accompanying notes are an integral part of these consolidated financial statements. |
PLAYERS NETWORK
CONSOLIDATED STATEMENTS OF OPERATIONS
| |
For the Years Ended | |
| |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Revenue: | |
$ | 9,347
| | |
$ | 1,567 | |
| |
| | | |
| | |
Expenses: | |
| | | |
| | |
Direct operating costs | |
| 256,445
| | |
| 109,966 | |
General and administrative | |
| 1,745,417 | | |
| 320,750 | |
Officer salaries | |
| 544,472 | | |
| 212,831 | |
Salaries and wages | |
| – | | |
| 45,854 | |
Depreciation and amortization | |
| 27,474 | | |
| 22,945 | |
Total operating expenses | |
| 2,573,808
| | |
| 712,346 | |
| |
| | | |
| | |
Net operating loss | |
| (2,564,461
| ) | |
| (710,779 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Loss on debt conversions | |
| – | | |
| (1,625 | ) |
Gain on debt extinguishment | |
| 356,835 | | |
| – | |
Interest expense | |
| (423,358 | ) | |
| (415,810 | ) |
Change in derivative liabilities | |
| (834,891 | ) | |
| (580,888 | ) |
Total other income (expense) | |
| (901,414 | ) | |
| (998,323 | ) |
| |
| | | |
| | |
Net loss | |
$ | (3,465,875
| ) | |
$ | (1,709,102 | ) |
Less: Net loss attributable to the noncontrolling interest | |
| 185,229 | | |
| – | |
Net loss attributable to Players Network | |
$ | (3,280,646
| ) | |
$ | (1,709,102 | ) |
| |
| | | |
| | |
Weighted average number of common
shares outstanding - basic and fully diluted |
|
|
158,927,873 |
|
|
|
97,866,637 |
|
| |
| | | |
| | |
Net (loss) per share - basic and fully diluted | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
The accompanying notes are an integral part of these consolidated financial statements. |
PLAYERS NETWORK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Total | |
| |
Series A | | |
Series B | | |
| | |
| | |
Additional | | |
| | |
| | |
Stockholders' | |
| |
Preferred Stock | | |
Preferred Stock | | |
Common Stock | | |
Paid-in | | |
Subscriptions | | |
Accumulated | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Payable | | |
(Deficit) | | |
(Deficit) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2012 | |
| 2,000,000 | | |
$ | 2,000 | | |
| 4,349,339 | | |
$ | 4,349 | | |
| 69,488,757 | | |
$ | 69,489 | | |
$ | 20,619,590 | | |
$ | – | | |
$ | (21,858,894 | ) | |
$ | (1,163,466 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for cash | |
| – | | |
| – | | |
| – | | |
| – | | |
| 9,800,000 | | |
| 9,800 | | |
| 181,200 | | |
| – | | |
| – | | |
| 191,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for services | |
| – | | |
| – | | |
| – | | |
| – | | |
| 9,517,000 | | |
| 9,517 | | |
| 146,238 | | |
| – | | |
| – | | |
| 155,755 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for services, related parties | |
| – | | |
| – | | |
| – | | |
| – | | |
| 950,000 | | |
| 950 | | |
| 15,800 | | |
| – | | |
| – | | |
| 16,750 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for compensation, related party | |
| – | | |
| – | | |
| – | | |
| – | | |
| 14,974,066 | | |
| 14,974 | | |
| 218,213 | | |
| – | | |
| – | | |
| 233,187 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options granted for services | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 18,413 | | |
| – | | |
| – | | |
| 18,413 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options granted for compensation, related party | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 23,937 | | |
| – | | |
| – | | |
| 23,937 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for conversion of debts | |
| – | | |
| – | | |
| – | | |
| – | | |
| 33,281,989 | | |
| 33,282 | | |
| 194,596 | | |
| – | | |
| – | | |
| 227,878 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Adjustments to derivative liability due to debt conversions | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 487,605 | | |
| – | | |
| – | | |
| 487,605 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net (loss) for the year ended December 31, 2013 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,709,102 | ) | |
| (1,709,102 | ) |
(continued)
PLAYERS NETWORK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Total | |
| |
Series A | | |
Series B | | |
| | |
| | |
Additional | | |
| | |
| | |
Stockholders' | |
| |
Preferred Stock | | |
Preferred Stock | | |
Common Stock | | |
Paid-in | | |
Subscriptions | | |
Accumulated | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Payable | | |
(Deficit) | | |
(Deficit) | |
Balance, December 31, 2013 | |
| 2,000,000 | | |
$ | 2,000 | | |
| 4,349,339 | | |
$ | 4,349 | | |
| 138,011,812 | | |
$ | 138,012 | | |
$ | 21,905,592 | | |
$ | – | | |
$ | (23,567,996 | ) | |
$ | (1,518,043 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for cash | |
| – | | |
| – | | |
| – | | |
| – | | |
| 7,100,000 | | |
| 7,100 | | |
| 173,900 | | |
| – | | |
| – | | |
| 181,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for services | |
| – | | |
| – | | |
| – | | |
| – | | |
| 13,603,061 | | |
| 13,603 | | |
| 365,498 | | |
| – | | |
| – | | |
| 379,101 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for services, related parties | |
| – | | |
| – | | |
| – | | |
| – | | |
| 550,000 | | |
| 550 | | |
| 10,065 | | |
| – | | |
| – | | |
| 10,615 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for compensation, related party | |
| – | | |
| – | | |
| – | | |
| – | | |
| 5,250,000 | | |
| 5,250 | | |
| 142,250 | | |
| – | | |
| – | | |
| 147,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for conversion of debts | |
| – | | |
| – | | |
| – | | |
| – | | |
| 15,656,431 | | |
| 15,656 | | |
| 164,340 | | |
| 19,238 | | |
| – | | |
| 199,234 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares cancelled | |
| – | | |
| – | | |
| – | | |
| – | | |
| (900,000 | ) | |
| (900 | ) | |
| 900 | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Minority interest in subsidiary sold for cash | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 220,000 | | |
| – | | |
| – | | |
| 220,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Minority interest in subsidiary distributed for services | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 960,000 | | |
| – | | |
| – | | |
| 960,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options granted for services | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 40,150 | | |
| – | | |
| – | | |
| 40,150 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options granted for compensation, related party | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 217,971 | | |
| – | | |
| – | | |
| 217,971 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Adjustments to derivative liability due to debt conversions | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 840,629 | | |
| – | | |
| – | | |
| 840,629 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net (loss) for the year ended December 31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (3,280,646 | ) | |
| (3,280,646 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2014 | |
| 2,000,000 | | |
$ | 2,000 | | |
| 4,349,339 | | |
$ | 4,349 | | |
| 179,271,304 | | |
$ | 179,271 | | |
$ | 25,041,295 | | |
$ | 19,238 | | |
$ | (26,848,642 | ) | |
$ | (1,602,489 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
PLAYERS NETWORK
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
For the Years Ended | |
| |
December 31, | |
| |
2014 | | |
2013 | |
Cash flows from operating activities | |
| | | |
| | |
Net (loss) | |
$ | (3,280,646 | ) | |
$ | (1,709,102 | ) |
Minority interest in net loss | |
| (185,229 | ) | |
| – | |
Adjustments to reconcile net (loss) to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense | |
| 27,474 | | |
| 22,945 | |
Gain on debt extinguishment | |
| (356,835 | ) | |
| – | |
Loss on debt conversions | |
| – | | |
| 1,625 | |
Change in fair market value of derivative liabilities | |
| 834,891 | | |
| 580,888 | |
Amortization of convertible note payable discounts | |
| 334,951 | | |
| 348,920 | |
Amortization of debt issuance costs | |
| 15,190 | | |
| 37,556 | |
Stock issued for services | |
| 1,339,100 | | |
| 155,755 | |
Stock issued for compensation, related party | |
| 158,115 | | |
| 249,937 | |
Options and warrants granted for services | |
| 40,150 | | |
| 18,413 | |
Options and warrants granted for services, related party | |
| 217,971 | | |
| 23,937 | |
Decrease (increase) in assets: | |
| | | |
| | |
Prepaid expenses | |
| 3,800 | | |
| (7,390 | ) |
Increase (decrease) in liabilities: | |
| | | |
| | |
Accounts payable | |
| (2,924 | ) | |
| 7,897 | |
Accrued expenses | |
| 10,216 | | |
| (32,335 | ) |
Deferred rent obligations | |
| (1,142 | ) | |
| 5,574 | |
Net cash used in operating activities | |
| (844,918 | ) | |
| (295,380 | ) |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Purchase of fixed assets | |
| (35,986 | ) | |
| – | |
Net cash used in investing activities | |
| (35,986 | ) | |
| – | |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from convertible debentures | |
| 792,000 | | |
| 235,500 | |
Repayment of long term debt | |
| (87,875 | ) | |
| (117,500 | ) |
Payments on debt issuance costs | |
| (21,750 | ) | |
| (11,000 | ) |
Proceeds from sale of common stock of subsidiary | |
| 220,000 | | |
| – | |
Proceeds from sale of common stock | |
| 181,000 | | |
| 191,000 | |
Net cash provided by financing activities | |
| 1,083,375 | | |
| 298,000 | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| 202,471 | | |
| 2,620 | |
Cash - beginning | |
| 4,696 | | |
| 2,076 | |
Cash - ending | |
$ | 207,167 | | |
$ | 4,696 | |
| |
| | | |
| | |
Supplemental disclosures: | |
| | | |
| | |
Interest paid | |
$ | 51,586 | | |
$ | 18,388 | |
Income taxes paid | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
Non-cash investing and financing activities: | |
| | | |
| | |
Value of debt discounts | |
$ | 774,627 | | |
$ | 206,907 | |
Value of shares issued for conversion of debt | |
$ | 199,235 | | |
$ | 226,253 | |
Value of derivative adjustment due to debt conversions | |
$ | 840,629 | | |
$ | 487,605 | |
Cancellation of shares of common stock, 900,000 shares | |
$ | 900 | | |
$ | – | |
The accompanying notes are an integral part of these consolidated financial statements. |
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of Business
and Significant Accounting Policies
Nature of Business
Players Network (Stock
Symbol: PNTV) was incorporated in the State of Nevada in March of 1993. Our business for most of our existence has been the ownership
and operation of a digital 24-hour Video On Demand and Broadband gaming and entertainment television network called “PLAYERS
NETWORK,” which specializes in producing television and multimedia programming to serve the gaming and entertainment industry.
Our programming is broadcast directly into 30 million cable and satellite homes and available worldwide through broadband internet.
The Company operates three separate channels, Players Network, which focuses on gaming lifestyle, Vegas On Demand, which involves
the Las Vegas lifestyle and entertainment experience, and Sexy Sin City TV which covers the sexy side of Las Vegas.
In addition to the PLAYERS
NETWORK, gaming and Las Vegas related content, the Company has launched its own internet television platform that incubates several
other program categories that have their own brand and appeal to new audiences. The Company’s internet television platform
includes advertising and sponsorship sales, web-based merchandise transactions, online memberships, Pay-Per-View and syndication
activities.
On July 8, 2014, we formed a subsidiary,
Green Leaf Farms Holdings, Inc. (“GLFH”), in which we retained 83% ownership, with the remaining 17% held by key experts
and advisors. An additional 1.6% was sold to an investor on December 8, 2014, giving PNTV 81.4% ownership and minority
interests ownership of 18.6% as of December 31, 2014. The subsidiary has been formed as a holding company to potentially
own additional subsidiaries that may operate medical marijuana related businesses. These additional subsidiaries have yet to be
formed, and, or, acquired, with the exception of Green Leaf Medical, LLC (“GLML”), which was formed on July 18, 2014
and has no activity to date. We had applied for a Medical Marijuana Dispensary special use permit with the City of Las Vegas, and
Cultivation and Processing special use permits in North Las Vegas and a license for all permits in the State of Nevada, and have
currently been granted the two special use permits in North Las Vegas, however there can be no assurance we will be able to conduct
these operations. As such, there is a risk that we may not be able to expand our operations into this field as intended.
Basis of Accounting
Our consolidated financial statements are
prepared using the accrual method of accounting as generally accepted in the United States of America (U.S. GAAP) and the rules
of the Securities and Exchange Commission (SEC).
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of the following entities, all of which are under common control and ownership:
|
|
State of |
|
|
|
Abbreviated |
Name of Entity(2) |
|
Incorporation |
|
Relationship |
|
Reference |
Players Network(1) |
|
Nevada |
|
Parent |
|
PNTV |
Green Leaf Farms Holdings, Inc.(2) |
|
Nevada |
|
Subsidiary |
|
GLFH |
Green Leaf Medical, LLC(3)(4) |
|
Nevada |
|
Subsidiary |
|
GLML |
_______________
(1)Players Network entity is
in the form of a Corporation.
(2)Majority-owned subsidiary
formed on July 8, 2014, in which PNTV retained 83% ownership, with the remaining 17% held by key experts and advisors.
An additional 1.6% was sold to an investor on December 8, 2014, giving PNTV 81.4% ownership and minority interests ownership
of 18.6% as of December 31, 2014.
(3)Wholly-Owned
subsidiary of GLFH formed for prospective purposes, but has not incurred any income or expenses to date.
(4)Entity formed for prospective
purposes, but has not incurred any income or expenses to date.
The consolidated financial statements herein
contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated
in the preparation of these financial statements. The parent company, PNTV and subsidiaries, GLFH and GLML will be collectively
referred to herein as the “Company”, “Players Network” or “PNTV”. The Company's headquarters
are located in Las Vegas, Nevada and substantially all of its customers are within the United States.
These statements reflect all adjustments,
consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information
contained therein.
Segment Reporting
Under FASB ASC 280-10-50, the Company operates
as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Under FASB ASC 820-10-05, the Financial
Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The
adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying
amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate
fair value primarily due to the short term nature of the instruments. In addition, the Company had debt instruments that required
fair value measurement on a recurring basis.
Cash and Cash Equivalents
PNTV maintains cash balances in non-interest-bearing
transaction accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows,
all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were
no cash equivalents on hand at December 31, 2014 and 2013.
Allowance for Doubtful Accounts
We generate the majority of our revenues
and corresponding accounts receivable from video production services on a project basis and subscriptions for video content. We
evaluate the collectability of our accounts receivable considering a combination of factors. In circumstances where we are aware
of a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against
amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other
customers, we recognize reserves for bad debts based on past write-off experience and the length of time the receivables are past
due. We had no debts expense during the years ended December 31, 2014 and 2013, respectively.
Cost Method of Accounting for Investments
Investee companies not accounted for under
the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method,
the Company’s share of the earnings or losses of such Investee companies is not included in the Balance Sheet or Statement
of Operations. However, impairment charges are recognized in the Statement of Operations. If circumstances suggest that the value
of the Investee Company has subsequently recovered, such recovery is not recorded. Our investments which are accounted for on the
cost method of accounting have been completely impaired previously, and no impairment expense was recognized during the years ended
December 31, 2014 or 2013.
Deferred Television Costs
Deferred television costs included direct
production and development costs stated at the lower of cost or net realizable value based on anticipated revenue. Production
overhead is not included as the Company outsources its production costs to third party vendors. Capitalized television production
costs for each pilot episode are to be expensed as revenues are recognized upon delivery and acceptance of the completed pilot
episodes using the individual-film-forecast-computation method for each television show produced. The Company recognized $95,000
of revenues on November 1, 2012 with the completion of the first of three pilot episodes; and accordingly, recognized $75,617
of expenses related to the development of the pilot. The remaining $135,000 of revenues, and corresponding $116,454 of deferred
television costs, were deferred and will be recognized upon completion and delivery of the remaining content. We also delivered
a series of ‘webisodes’ and miscellaneous footage in June of 2014, however, the recipient refused to accept the modification
of the terms and we had to reverse the recognition and defer the revenue and related television costs as of December 31, 2014.
Deferred television costs consist of the
following at December 31, 2014 and 2013, respectively:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Development and pre-production costs | |
$ | – | | |
$ | – | |
In-production | |
| 68,264 | | |
| 68,264 | |
Post production | |
| 48,190 | | |
| 48,190 | |
Total deferred television costs | |
$ | 116,454 | | |
$ | 116,454 | |
Due to practical limitations applicable
to monetizing our developed content over On-Demand networks, the Company has not considered collectability of advertising or television
license revenues to be reasonably assured, and accordingly, the Company has expensed production costs related to the development
of our On-Demand and internet-based content as incurred.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fixed Assets
Fixed assets are stated at the lower of
cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method
based on the lesser of the estimated useful lives of the assets or the lease term based on the following life expectancy:
Software | |
3 years |
Office equipment and website development costs | |
5 years |
Furniture and fixtures | |
7 years |
Repairs and maintenance expenditures are
charged to operations as incurred. Major improvements and replacements, which have extend the useful life of an asset, are capitalized
and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated
depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.
Impairment of Long-Lived
Assets
Long-lived assets held and used by the
Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not
be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon historical results and current
projections of earnings before interest and taxes. Impairment is measured using discounted cash flows of future operating results
based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating results to the extent that carrying
value exceeds discounted cash flows of future operations. The Company did not recognize any impairment losses on the disposal of
fixed assets during the years ended December 31, 2014 and 2013.
Debt Issuance Costs
Costs relating to obtaining certain
debts are capitalized and amortized over the term of the related debt using the straight-line method, which approximates the
effective interest method. The Company paid $21,750 and $11,000 of debt issuance costs during the years ended December 31,
2014 and 2013, respectively, of which the unamortized balance of debt issuance costs at December 31, 2014 and 2013 was $9,959
and $3,399, respectively. Amortization of debt issuance costs charged to interest expense was $15,190 and $37,556 for the
years ended December 31, 2014 and 2013, respectively. When a loan is paid in full, any unamortized financing costs
are removed from the related accounts and charged to interest expense.
Deferred Rent Obligation
The Company has entered into operating
lease agreements for its corporate office which contains provisions for future rent increases. In accordance with generally accepted
accounting principles, the Company records monthly rent expense equal to the total of the payments due over the lease term, divided
by the number of months of the lease terms. The difference between rent expense recorded and the amount paid is credited or charged
to “Deferred rent obligation,” which is reflected as a separate line item in the accompanying Balance Sheets.
Revenue Recognition
The Company recognizes revenue from its
internet television platform from internally generated products and from partnered merchants when the following criteria are met:
persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability
is reasonably assured. These criteria are met when the customers purchase a product or access a web-based video, the product or
web-based video has been electronically delivered to the purchaser and payment has been received. At that time, the Company's obligations
to the customer is substantially complete. The Company records the net amount it retains from the sale of items from its internet
television platform after paying any agreed upon percentage of the purchase price to the featured advertising merchant excluding
any applicable taxes. Revenue is recorded on a net basis because the Company is acting as an agent of the partnered merchant in
the transaction. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
Network revenue consists of monthly network
broadcast subscription revenue, which is recognized over the period in which the subscription service is available. Broadcast television
advertising revenue is recognized when advertisements are aired. Video production revenue is recognized as digital video film is
completed and accepted by the customer and collection is reasonably assured.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue from the distribution
of domestic television series is recognized as earned using the following criteria:
| · | Persuasive evidence of an arrangement
exists; |
| · | The show/episode is complete, and in accordance
with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery; |
| · | The license period has begun and the customer
can begin its exploitation, exhibition or sale; |
| · | The price to the customer is fixed and
determinable; and |
| · | Collectability is reasonably assured. |
Due to practical limitations applicable
to operating relationships with On-Demand networks, the Company has not considered collectability of advertising or television
license revenues to be reasonably assured, and accordingly, the Company has not recognize such revenue unless payment has been
received.
Audio/Video content licensing revenues
were recognized when the underlying royalties from the sales of the related products were earned. The Company recognized minimum
revenue guarantees, if any, ratably over the term of the license or as earned royalties based on actual sales of the related products,
if greater.
Deferred revenues consist of the following
at December 31, 2014 and December 31, 2013:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Deferred revenues on television pilot episodes | |
$ | 135,000 | | |
$ | 135,000 | |
Derivative Liability
The Company evaluates its convertible instruments,
options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives
to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment
is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event
that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income
(expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date
and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject
to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification
date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815.
The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s
own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under
the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on
whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s
own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining
whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise
provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. The Company utilized
multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash
flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the
amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing
parties, that is, other than in a forced or liquidation sale.
Advertising Costs
The Company expenses the cost of advertising
and promotions as incurred. Advertising and promotions expense was $147,145 and $11,684 for the years ended December 31, 2014
and 2013, respectively.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Website Development Costs
The Company accounts for website development
costs in accordance with ASC 350-50, “Accounting for Website Development Costs” (“ASC 350-50”), wherein
website development costs are segregated into three activities:
|
1) |
Initial stage (planning), whereby the related costs are expensed. |
|
2) |
Development (web application, infrastructure, graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. |
|
3) |
Post-implementation (after site is up and running: security, training, admin), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. |
The Company had no capitalized
website development costs during the years ended December 31, 2014 and 2013 related to its internet television
platforms pursuant to the development stage.
Basic and Diluted Loss Per
Share
The basic net loss per common share is
computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common
shares outstanding plus potential dilutive securities. For 2014 and 2013, potential dilutive securities had an anti-dilutive
effect and were not included in the calculation of diluted net loss per common share.
Stock-Based
Compensation
Under FASB ASC 718-10-30-2, all share-based
payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer an alternative. Stock and stock options issued for services and compensation totaled
$1,755,336 and $449,667 for the years ended December 31, 2014 and 2013, respectively.
Income Taxes
PNTV recognizes deferred tax assets and
liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax
rates and laws that are expected to be in effect when the differences are expected to be recovered. PNTV provides a valuation allowance
for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Uncertain Tax Positions
In accordance with ASC 740, “Income
Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical
merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance
on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities periodically
audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions,
including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures
connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable
exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and
fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax
position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Various taxing authorities periodically
audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions,
including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures
connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable
exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and
fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax
position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
In June 2014, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation – Stock Compensation (Topic
718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after
the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target
to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes
the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in
estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable
that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which
the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of
the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining
requisite service period. The total amount of compensation cost recognized during and after the requisite service period should
reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The
requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance
target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December
15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards
granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding
as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.
The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10:
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity
associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all
incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting
by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate
an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable
interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify
U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided
to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination
of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity
that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information
and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to
Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods
beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not
expected to have a material impact on our financial position or results of operations.
Note 2 – Going Concern
As shown in the accompanying consolidated financial
statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit of ($26,848,642), and
as of December 31, 2014, the Company’s current liabilities exceeded its current assets by $1,868,948 and its total
liabilities exceeded its total assets by $1,787,718. These factors raise substantial doubt about the Company’s ability to
continue as a going concern. Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently
seeking additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving
profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
The consolidated financial statements do
not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue
as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to
continue as a going concern.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Related Party
Officers
On August 31, 2014, the Company granted
a $50,000 bonus to the Company’s CEO, which was mutually modified down to $23,000 at year-end.
On August 18, 2014, the Company issued
200,000 shares of restricted common stock to its President of Programming as a compensation bonus. The total fair value of the
common stock was $3,860 based on the closing price of the Company’s common stock on the date of grant.
On August 14, 2014, the Company’s
subsidiary issued a total of 16% of its equity in the subsidiary in exchange for services provided related to the operations of
the subsidiary. The total fair value of the common stock was $960,000 based on the fair value of stock sold to an independent third
party. A total of 4% of these shares were issued to officers of Players Network.
On July 19, 2014, a total of 1,500,000
options held by the Company’s CEO expired.
On April 11, 2014, the Company issued 1,250,000
shares of restricted common stock to its CEO as a compensation bonus. The total fair value of the common stock was $27,500 based
on the closing price of the Company’s common stock on the date of grant.
On February 20, 2014, the Company issued
4,000,000 shares of common stock to its CEO as a compensation bonus. The total fair value of the common stock was $120,000 based
on the closing price of the Company’s common stock on the date of grant.
On February 20, 2014, the Company’s
Board of Directors granted 8,000,000 fully vested cashless common stock options to the Company’s CEO as compensation for
services provided. The options are exercisable until February 20, 2018 at an exercise price of $0.04 per share. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 248% and a call option value of $0.0272, was $217,971.
On December 3, 2013, the Company’s
Board of Directors granted the issuance of 3,000,000 shares of restricted common stock to the Company’s CEO as payment on
accrued compensation. The total fair value of the common stock was $21,300 based on the closing price of the Company’s common
stock on the date of grant.
On October 2, 2013, the Company’s
Board of Directors granted the issuance of 7,300,000 shares of restricted common stock to the Company’s CEO as payment on
accrued compensation. The total fair value of the common stock was $80,300 based on the closing price of the Company’s common
stock on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 2,000,000 shares of restricted common stock to the Company’s CEO as payment on accrued
compensation. The total fair value of the common stock was $38,000 based on the closing price of the Company’s common stock
on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 1,294,066 shares of restricted common stock to the Company’s President of Programming
as payment on accrued compensation. The total fair value of the common stock was $24,587 based on the closing price of the Company’s
common stock on the date of grant.
On January 8, 2013, the Company’s
Board of Directors granted the issuance of 620,000 shares of restricted common stock to the Company’s CEO as payment on accrued
compensation. The total fair value of the common stock was $31,000 based on the closing price of the Company’s common stock
on the date of grant.
On January 8, 2013, the Company’s
Board of Directors granted the issuance of 760,000 shares of restricted common stock to the Company’s President of Programming
as payment on accrued compensation. The total fair value of the common stock was $38,000 based on the closing price of the Company’s
common stock on the date of grant.
Officer compensation expense was $544,472
and $212,831 at December 31, 2014 and 2013, respectively. The balance owed was $228 and $4,725 at December 31, 2014
and 2013, respectively.
Board of Directors
On August 18, 2014, the Company issued
350,000 shares of restricted common stock to one of its Directors as a compensation bonus. The total fair value of the common stock
was $6,755 based on the closing price of the Company’s common stock on the date of grant.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 6, 2014, the Company cancelled
750,000 shares issued during 2013 for non-performance of services commensurate with the departure of one of the Company’s
former employees.
On December 3, 2013, the Company’s
Board of Directors granted the issuance of 500,000 shares of restricted common stock to one of the Company’s Directors as
a compensation bonus. The total fair value of the common stock was $3,550 based on the closing price of the Company’s common
stock on the date of grant.
On May 1, 2013, the Company issued 150,000
shares of restricted common stock as a bonus for board services provided to one of our Directors. The total fair value of the common
stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued another
150,000 shares of restricted common stock as a bonus for board services provided to another one of our Directors. The total fair
value of the common stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company’s
Board of Directors granted 300,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $11,048.
On January 8, 2013, the Company’s
Board of Directors granted 100,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $3,683.
On January 8, 2013, the Company’s
Board of Directors granted 250,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $9,206.
Officer and Director Changes
On January 8, 2013, Mr. Jim Bates was appointed
to the Company’s Board of Directors. He subsequently resigned on June 3, 2013.
Note 4 – Fair Value of Financial
Instruments
Under FASB ASC 820-10-5, fair value is
defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value
hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under
GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required
for items measured at fair value.
The Company has convertible notes that
must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs
from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted
quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
Level 2 - Inputs include quoted
prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield
curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means
(market corroborated inputs).
Level 3 - Unobservable inputs
that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following schedule summarizes the valuation
of financial instruments at fair value on a non-recurring basis in the balance sheets as of December 31, 2014 and 2013,
respectively:
| |
Fair Value Measurements at December 31, 2014 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | | |
| | | |
| | |
Cash | |
$ | 207,167 | | |
$ | – | | |
$ | – | |
Total assets | |
| 207,167 | | |
| – | | |
| – | |
Liabilities | |
| | | |
| | | |
| | |
Convertible debentures, net of discounts of $537,505 | |
| – | | |
| – | | |
| 183,998 | |
Short term debt | |
| – | | |
| 10,625 | | |
| – | |
Derivative liability | |
| – | | |
| – | | |
| 1,417,187 | |
Total liabilities | |
| – | | |
| 10,625 | | |
| 1,601,185 | |
| |
$ | 207,167 | | |
$ | (10,625 | ) | |
$ | (1,601,185 | ) |
| |
Fair Value Measurements at December 31, 2013 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | | |
| | | |
| | |
Cash | |
$ | 4,696 | | |
$ | – | | |
$ | – | |
Total assets | |
| 4,696 | | |
| – | | |
| – | |
Liabilities | |
| | | |
| | | |
| | |
Convertible debentures, net of discounts of $53,579 | |
| – | | |
| – | | |
| 82,421 | |
Short term debt | |
| – | | |
| 35,000 | | |
| – | |
Derivative liability | |
| – | | |
| – | | |
| 648,298 | |
Total liabilities | |
| – | | |
| 35,000 | | |
| 730,719 | |
| |
$ | 4,696 | | |
$ | (35,000 | ) | |
$ | (730,719 | ) |
There were no transfers of financial assets
or liabilities between Level 1 and Level 2 inputs for the years ended December 31, 2014 and 2013.
Level 2 liabilities consist of a short
term, unsecured, promissory note. No fair value adjustment was necessary during the years ended December 31, 2014 and 2013.
Level 3 liabilities consist of a total
of $721,503 and $136,000 of convertible debentures and the related derivative liability as of December 31, 2014 and 2013,
respectively. A discount of $537,505 and $53,579 was recognized at December 31, 2014 and 2013, respectively.
Note 5 – Subsidiary Formation
On July 8, 2014, we formed a subsidiary,
Green Leaf Farms Holdings, Inc. (“GLFH”), in which we retained 83% ownership, with the remaining 17% held by key experts
and advisors, of which 16% was distributed to individuals as compensation for their services, including 3% to Mr. Bradley, CEO
and 1% to Mr. Berk, President of Programming, and an additional 1% was sold to one of those individuals for $60,000. An additional
1.6% was sold to an investor on December 8, 2014, giving PNTV 81.4% ownership and minority interests ownership of 18.6%
as of December 31, 2014. The subsidiary has been formed as a holding company to potentially own additional subsidiaries
that may operate medical marijuana related businesses. These additional subsidiaries have yet to be formed, and, or, acquired,
with the exception of Green Leaf Medical, LLC (“GLML”), which was formed on July 18, 2014 and has no activity to date.
We had applied for a Medical Marijuana Dispensary special use permit with the City of Las Vegas, and Cultivation and Processing
special use permits in North Las Vegas and a license for all permits in the State of Nevada, and have currently been granted the
two special use permits in North Las Vegas, however there can be no assurance we will be able to conduct these operations. As such,
there is a risk that we may not be able to expand our operations into this field as intended.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 – Investments
On May 11, 2011, we acquired a 10% interest
in iCandy, Inc. (“ICI”), and a 10% interest in iCandy Burlesque, Inc. (“ICB”), Nevada entertainment companies
that develop and operate a variety of entertainment shows in the United States, primarily in casinos within Las Vegas, NV and Atlantic
City, NJ. We acquired the interests in exchange for $25,499 that was in turn spent on the development of a promotional video that
was to be distributed on our website. In addition, we agreed to pay a license fee of 20% of the adjusted gross revenues that we
were to earn from the distribution and sales related to the promotional video content. No such revenues have been earned to date.
On March 23, 2011 and April 20, 2011 we then loaned $19,000 and $1,000, respectively, to ICI on an unsecured convertible promissory
note carrying a 6% interest rate, maturing on May 11, 2012. In accordance with ASC 310-10-35-17, we applied normal loan
review procedures and determined it was probable all amounts due from our loan would not be collected due to the financial condition
of the debtor. As a result, we recognized impairment of $20,000 in 2011. On November 1, 2012, the Company elected to convert the
total note receivable of $22,477, consisting of $20,000 of principal and $2,477 of interest receivable in exchange for an additional
7.5% ownership interest in ICI, and 7.5% interest in ICB. The conversion resulted in a total ownership of 17.5% in both entities
as of November 1, 2012. Both the investments and the note receivable had been written off as impaired in 2011 due to valuation
and collectability uncertainties, as a result the 17.5% investment in both entities are no longer on the balance sheets as of December 31, 2014
and 2013.
Note 7 – Fixed Assets
Fixed assets consist of the following at
December 31, 2014 and 2013, respectively:
| |
December 31, | |
| |
2014 | | |
2013 | |
Office equipment | |
$ | 48,884 | | |
$ | 12,898 | |
Website development costs | |
| 99,880 | | |
| 99,880 | |
Furniture and fixtures | |
| 2,730 | | |
| 2,730 | |
| |
| 151,494 | | |
| 115,508 | |
Less accumulated depreciation | |
| (80,223 | ) | |
| (52,749 | ) |
| |
$ | 71,271 | | |
$ | 62,759 | |
Depreciation and amortization expense totaled
$27,474 and $22,945 for the years ended December 31, 2014 and 2013, respectively.
Note 8 – Accrued Expenses
Accrued expenses included the following
as of December 31, 2014 and 2013, respectively:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Customer Deposits | |
$ | – | | |
$ | 13,500 | |
Accrued Payroll, Officers | |
| 228 | | |
| 19,020 | |
Accrued Payroll and Payroll Taxes | |
| 135,234 | | |
| 135,234 | |
Accrued Interest | |
| 45,117 | | |
| 14,597 | |
| |
$ | 180,579 | | |
$ | 182,351 | |
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 – Convertible Debentures
Convertible debentures consist of the following
at December 31, 2014 and 2013, respectively:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
On December 15, 2014, the Company received net proceeds of $60,000 in exchange for an unsecured convertible promissory note with a face value of $64,000 that carries an 8% interest rate (“Second KBM Note”), which matures on June 13, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty one percent (61%) of the average of the three (3) lowest closing bid prices of the Company’s common stock over the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $4,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 25 million shares of common stock for potential conversions. | |
$ | 64,000 | | |
$ | – | |
| |
| | | |
| | |
On November 5, 2014, the Company received net proceeds of $100,000 in exchange for an unsecured convertible promissory note with a face value of $104,000 that carries an 8% interest rate (“First KBM Note”), which matures on July 29, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty one percent (61%) of the average of the three (3) lowest closing bid prices of the Company’s common stock over the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $4,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 43 million shares of common stock for potential conversions. | |
| 104,000 | | |
| – | |
| |
| | | |
| | |
On October 13, 2014, the Company received net proceeds of $70,000 in exchange for an unsecured convertible promissory note with a face value of $75,250 that carries an 8% interest rate (“First Tangiers Note”), which matures on October 13, 2015. The note is part of total loan offering with a $236,500 face value and OID of 7.5% of any consideration paid. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two lowest trading prices of the Company’s common stock for the fifteen (15) trading days prior to, and including, the conversion date. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to fifty percent (50%), rather than the sixty percent (60%) conversion rate while that “Chill” is in effect, and an additional 5% discount if the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer (“FAST”) is not eligible for a cumulative total conversion price equal to forty five percent (45%). The note carries a twenty percent (20%) interest rate and $1,000 per day of liquidated damages in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $2,500 that is being amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company must at all times reserve at least 5 million shares of common stock for potential conversions. | |
| 75,250 | | |
| – | |
| |
| | | |
| | |
On September 22, 2014, the Company received net proceeds of $35,000 in exchange for an unsecured convertible promissory note, bearing interest at twelve percent (12%) with a face value of $38,500 (“Second Vista Note”), which matures on June 1, 2016, as part of a larger financing agreement that enables the Company to draw total proceeds of $225,000 at the discretion of the lender. The financing carries a total face value of $250,000 and a $25,000 Original Issue Discount. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the average of the two (2) lowest closing bid prices during the sixteen (16) trading days prior to the conversion request date. The debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 120% of the outstanding balance at the time of default. The promissory note carries a $3,500 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 35 million shares of common stock for potential conversions as depicted in the First Vista Note. | |
| 38,500 | | |
| – | |
(continued)
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2014 |
|
|
|
2013 |
|
On August 19, 2014, the Company received net proceeds of $40,000 in exchange for an unsecured convertible promissory note, bearing interest at 8% annually, with a face value of $80,000 (“Second WHC Note”), which matures on August 19, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty seven and a half percent (57.5%) of the average of the two (2) lowest closing bid prices of the Company’s common stock over the ten (10) trading days immediately preceding the conversion request date. The debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 150% of the outstanding balance at the time of default, and the interest rate increases to twenty two percent (22%) per annum. The promissory note carries a $5,000 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 12 million shares of common stock for potential conversions. |
|
|
45,000 |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
On July 15, 2014, the Company received net proceeds of $35,000 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $37,500 (“Third LG Note”), which matures on March 15, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trading price of the Company’s common stock for the twelve (12) trading days prior to, and including, the conversion date if received after 4PM Eastern Standard Time. The note also carries an additional “Back-end Note” with the same terms as the original note that enables the lender to lend the Company another $37,500, less $1,750 of debt issuance costs and $3,500 in due diligence fees, with a holding period that tacks to the original note for purposes of Rule 144 of the Securities Exchange Act of 1934. The note carries an eighteen percent (18%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 55% instead of 60% while that “Chill” is in effect. The Company paid total debt issuance cost of $2,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 9,513,000 shares of common stock for potential conversions. |
|
|
37,500 |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
On June 13, 2014, the Company received net proceeds of $75,000 in exchange for an unsecured convertible promissory note, bearing interest at 8% annually, with a face value of $80,000 (“First WHC Note”), which matures on June 13, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty two and a half percent (62.5%) of the average of the two (2) lowest closing bid prices of the Company’s common stock over the ten (10) trading days immediately preceding the conversion request date. The debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 150% of the outstanding balance at the time of default, and the interest rate increases to twenty two percent (22%) per annum. The promissory note carries a $5,000 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. In addition, the Company issued warrants to purchase 1.5 million shares of the Company’s common stock at a strike price of $0.05 per share exercisable over three years from the date of issuance. On December 26, 2014, the note holder elected to convert a total of $10,000 of principal in exchange for 1,501,502 shares of common stock. The Company must at all times reserve at least 24 million shares of common stock for potential conversions. |
|
|
70,000 |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
(continued)
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
On June 2, 2014, the Company received net proceeds of $50,000 in exchange for an unsecured convertible promissory note, bearing interest at twelve percent (12%) with a face value of $55,000 (“First Vista Note”), which matures on June 1, 2016, as part of a larger financing agreement that enables the Company to draw total proceeds of $225,000 at the discretion of the lender. The financing carries a total face value of $250,000 and a $25,000 Original Issue Discount. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the average of the two (2) lowest closing bid prices during the sixteen (16) trading days prior to the conversion request date. The debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 120% of the outstanding balance at the time of default. The promissory note carries a $5,000 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. On December 10, 2014, the note holder elected to convert a total of $9,238 of principal in exchange for 1,415,571 shares of common stock, that were subsequently issued on January 5, 2015. The Company must at all times reserve at least 35 million shares of common stock for potential conversions. | |
| 45,762 | | |
| – | |
| |
| | | |
| | |
On May 20, 2014, the Company received net proceeds of $100,000 in exchange for an unsecured convertible promissory note, bearing interest at 10% annually, with a face value of $113,000 (“First Typenex Note”), which matures on May 19, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the average of the three (3) lowest (“Trading Prices”), whereby Trading Price is defined as the volume weighted average price (“VWAP”) of the Company’s common stock over the fifteen (15) trading days prior to the conversion request date. If the arithmetic average of the three (3) lowest Trading Prices is less than $0.01, then the Conversion Factor will be reduced to 60%. The debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. In the event of default, the outstanding balance immediately prior to the occurrence of the event of default shall immediately increase to 125% of the outstanding balance at the time of default, and the interest rate increases to twenty two percent (22%) per annum. The promissory note carries a $10,000 Original Issue Discount, and loan origination costs of $3,000, that are being amortized over the life of the loan on the straight line method, which approximates the effective interest method. On various dates between November 24, 2014 and December 26, 2014, the note holder elected to convert a total of $35,000 of principal in exchange for 2,587,759 shares of common stock, of which 784,929 shares, representing $10,000 of principal, was subsequently issued on January 2, 2015. The Company must at all times reserve at least three times the number of shares equal to the outstanding balance divided by the conversion price, but in any event not less than 22 million shares of common stock for potential conversions. | |
| 78,000 | | |
| – | |
| |
| | | |
| | |
On May 9, 2014, the Company received $50,000 in exchange for an unsecured convertible promissory note that carries a 12% interest rate (“First Group 10 Note”), which matures on May 8, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to the lesser of (a) fifty eight percent (58%) of the average of the two lowest closing bid prices of the Company’s common stock for the seventeen (17) trading days prior to the conversion notice date, or (b) four and a half cents ($0.045) per share. The note carries an eighteen percent (18%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory note carries a $2,500 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. On various dates between November 10, 2014 and December 1, 2014, the note holder elected to convert a total of $30,000 of principal in exchange for 2,796,907 shares of common stock. The Company must at all times reserve at least 20 million shares of common stock for potential conversions. | |
| 20,000 | | |
| – | |
| |
| | | |
| | |
(continued)
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
On April 24, 2014, the Company received net proceeds of $33,250 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $35,000 (“Second LG Note”), which matures on April 11, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the lowest closing bid prices of the Company’s common stock for the twelve (12) trading days prior to, and including, the conversion date. The note carries an eighteen percent (18%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $1,750 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares of common stock for potential conversions. On October 31, 2014, the note holder sent demand for repayment. The note is currently in default. | |
| 35,000 | | |
| – | |
| |
| | | |
| | |
On April 17, 2014, the Company received net proceeds of $40,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $44,000 (“Fourth JMJ Note”), which matures on April 16, 2015, as part of a larger financing agreement that enables the Company to draw total proceeds of $400,000 at the discretion of the lender. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the lowest trading price of the Company’s common stock over the twenty five (25) trading days prior to the conversion request date, as amended within the original promissory note on April 10, 2014. The note carries a one-time twelve percent (12%) of principal interest charge in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory note carries a $4,000 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 60 million shares of common stock for potential conversions. | |
| 44,000 | | |
| – | |
| |
| | | |
| | |
On February 20, 2014, the Company received net proceeds of $40,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $44,000 (“Third JMJ Note”), which matures on February 19, 2015, as part of a larger financing agreement that enables the Company to draw total proceeds of $400,000 at the discretion of the lender. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the lowest trading price of the Company’s common stock over the twenty five (25) trading days prior to the conversion request date, as amended within the original promissory note on April 10, 2014. An additional 5% discount applies on conversion shares that are ineligible for deposit into the DTC system and are only eligible for Xclearing deposit. The note carries a one-time twelve percent (12%) of principal interest charge if the note isn’t repaid within the first ninety (90) days, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory note carries a $4,000 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 60 million shares of common stock for potential conversions, as noted in the First JMJ Note disclosure. | |
| 44,000 | | |
| – | |
| |
| | | |
| | |
On January 8, 2014, the Company received net proceeds of $21,750 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $25,500 (“First GEL Note”), which matures on October 8, 2014. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two (2) lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries an additional “Back-end Note” with the same terms as the original note that enables the lender to lend the Company another $25,500, less $3,250 of debt issuance costs, with a holding period that tacks to the original note for purposes of Rule 144 of the Securities Exchange Act of 1934. The note carries an eighteen percent (18%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,250 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. On various dates between August 13, 2014 and September 23, 2014, the note holder elected to convert a total of $25,500 of principal and $1,428 of interest in exchange for 2,755,192 shares of common stock in complete satisfaction of the debt. The Company had to reserve at least 6 million shares of common stock for potential conversions. | |
| – | | |
| – | |
(continued)
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
On January 8, 2014, the Company received net proceeds of $21,750 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $25,500 (“First LG Note”), which matures on October 8, 2014. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two (2) lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries an additional “Back-end Note” with the same terms as the original note that enables the lender to lend the Company another $25,500, less $3,250 of debt issuance costs, with a holding period that tacks to the original note for purposes of Rule 144 of the Securities Exchange Act of 1934. The note carries an eighteen percent (18%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,250 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 6 million shares of common stock for potential conversions. On July 7, 2014, the Company repaid $34,736 on the First LG Note, consisting of $25,500 of principal and $9,236 of interest and prepayment penalties. The convertible promissory note was subsequently cancelled as paid in full. The principal and interest was subsequently repaid in full prior to maturity with a cash payment of $34,736, consisting of $25,500 of principal and $9,236 of interest and prepayment penalties, on July 2, 2014 out of the proceeds from the June 26, 2014 convertible debt financing received from WHC Capital, LLC (“First WHC Note”). | |
| – | | |
| – | |
| |
| | | |
| | |
Unsecured $12,500 convertible promissory note originated on October 28, 2013, carries an 8% interest rate (“Ninth Asher Note”), and matures on July 30, 2014. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to thirty one percent (31%) of the average of the lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $1,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The principal and interest was subsequently repaid in full prior to maturity with a cash payment of $19,240, consisting of $12,500 of principal and $6,740 of interest and prepayment penalties, on May 2, 2014 out of the proceeds from the April 24, 2014 convertible debt financing received from LG Capital Funding, LLC (“Second LG Capital Note”). | |
| – | | |
| 12,500 | |
| |
| | | |
| | |
Unsecured $25,500 convertible promissory note originated on July 30, 2013, carries an 8% interest rate (“Eighth Asher Note”), and matures on May 1, 2014. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to thirty five percent (35%) of the average of the lowest closing bid prices of the Company’s common stock for the ninety (90) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $2,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The principal and interest was repaid in full prior to maturity with a cash payment of $39,239, consisting of $25,500 of principal and $13,739 of interest and prepayment penalties, on January 31, 2014 out of the proceeds from the January 8, 2014 convertible debt financing received from GEL Properties, LLC (“First GEL Note”). | |
| – | | |
| 25,500 | |
(continued)
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
On June 4, 2013, the Company received net proceeds of $25,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $27,500 (“Second JMJ Note”), which matures on June 3, 2014, as part of a larger financing agreement that enables the Company to draw total proceeds of $400,000 at the discretion of the lender. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the lowest trading price of the Company’s common stock over the twenty five (25) trading days prior to the conversion request date. An additional 5% discount applies on conversion shares that are ineligible for deposit into the DTC system and are only eligible for Xclearing deposit. The note carries a one-time twelve percent (12%) of principal interest charge if the note isn’t repaid within the first ninety (90) days, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company amortized the $2,500 original issuance discount over the life of the loan on the straight line method, which approximated the effective interest method. On May 12, 2014, the note holder elected to convert a total of $10,308, consisting of $7,008 of principal and $3,300 of accrued interest, in exchange for 805,058 shares of common stock. The Company must at all times reserve at least 60 million shares of common stock for potential conversions, as noted in the First JMJ Note disclosure. | |
| 20,491 | | |
| 27,500 | |
| |
| | | |
| | |
On March 13, 2013, the Company received net proceeds of $55,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $60,500 (“First JMJ Note”), which matured on March 12, 2014, as part of a larger financing agreement that enables the Company to draw total proceeds of $400,000 at the discretion of the lender. On November 27, 2014, an additional $10,000 was added to the principal balance of the note as liquidated damages related to a Standstill Agreement whereby JMJ agreed to refrain from exercising any conversions until February 22, 2014. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the lowest trading price of the Company’s common stock over the twenty five (25) trading days prior to the conversion request date. An additional 5% discount applies on conversion shares that are ineligible for deposit into the DTC system and are only eligible for Xclearing deposit. The note carries a one-time twelve percent (12%) of principal interest charge if the note isn’t repaid within the first ninety (90) days, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The principal interest charge of $7,260 is being amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $1,881 and $-0- of interest expense related to these debt issuance costs during the three months ended March 31, 2014 and 2013, respectively. The Company amortized the $5,500 original issuance discount over the life of the loan on the straight line method, which approximated the effective interest method. The note holder elected to convert a total of $13,000 of principal in exchange for 1,000,000 shares of common stock on February 24, 2014, and $26,000 of principal in exchange for 2,000,000 shares of common stock on March 14, 2014. Another $27,300 of principal was subsequently converted in exchange for 2,100,000 shares on April 22, 2014, and the final conversion of $11,460 was executed on May 12, 2014, consisting of $4,200 of principal and $7,260 of accrued interest in exchange for 894,942 shares of common stock. The conversions were in accordance with the terms of the note; therefore no gain or loss has been recognized. The Company must at all times reserve at least 60 million shares of common stock for potential conversions. | |
$ | – | | |
$ | 70,500 | |
| |
| | | |
| | |
Total convertible debentures | |
| 721,503 | | |
| 136,000 | |
Less: unamortized debt discounts | |
| (537,505 | ) | |
| (53,579 | ) |
Convertible debentures | |
$ | 183,998 | | |
$ | 82,421 | |
In accordance with ASC 470-20 Debt with
Conversion and Other Options, the Company recorded total discounts of $818,877 and $206,858 for the variable conversion features
of the convertible debts incurred during the years ended December 31, 2014 and 2013, respectively. The discounts,
including Original Issue Discounts of $44,250 and $8,500 during the years ended December 31, 2014 and 2013, respectively,
are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded
$334,951 and $348,920 of interest expense pursuant to the amortization of the note discounts during the years ended December 31, 2014
and 2013, respectively.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, a total of $21,750 and $11,000
of loan origination costs were incurred pursuant to the closings of convertible debentures during the years ended December 31, 2014,
and 2013, respectively, which are being amortized to interest expense over the term of the debentures using the straight line
method, which approximates the effective interest method. The Company recorded $15,190 and $37,556 of interest expense pursuant
to the amortization of the loan origination costs during the years ended December 31, 2014 and 2013, respectively.
All of the convertible debentures carry
default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned
as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares.
In accordance with ASC 815-15, the Company
determined that the variable conversion feature and shares to be issued represented embedded derivative features, and these are
shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives
associated with the convertible debentures utilizing a lattice model.
The Company recorded interest expense pursuant
to the stated interest rates on the convertible debentures in the amount of $71,134 and $37,364 for the years ended December 31, 2014
and 2013, respectively related to convertible debts.
Note 10 – Investment Agreement
with Dutchess Opportunity Fund II, LP
On November 7, 2012, the Company entered
into an Investment Agreement (“Investment Agreement”) with Dutchess Opportunity Fund, II, LP, a Delaware limited partnership
(“Dutchess”), as amended on July 5, 2013. Pursuant to the terms of the Investment Agreement, Dutchess committed to
purchase, in a series of purchase transactions (“Puts”), up to eight million five hundred thousand ($8,500,000) dollars
of the Company’s common stock over a period of up to thirty-six (36) months from the effective date of the registration statement
covering the Equity Line Financing with Dutchess, which was September 26, 2013.
The amount that the Company is entitled
to request with each Put delivered to Dutchess is equal to, at its option, either (i) two hundred (200%) percent of the average
daily volume (U.S. market only) of its common stock for three (3) trading days prior to the applicable Put Notice Date, multiplied
by the average of the three (3) daily closing prices immediately preceding the Put Date or (ii) fifty thousand ($50,000) dollars.
The purchase price to be paid by Dutchess for the shares of the Company’s common stock covered by each Put will be equal
to ninety-five (95%) percent of the lowest daily volume weighted average price (“VWAP”) of the Company’s common
stock during the period beginning on the Put Notice Date and ending on and including the date that is five (5) trading days after
such Put Notice Date (“Pricing Period”). The “Put Notice Date” is the trading day immediately following
the day on which Dutchess receives a Put Notice from the Company.
For each Put Notice submitted to Dutchess
under the Investment Agreement, there is a Suspension Price of $0.01 for that Put. In the event the common stock falls below the
Suspension Price, the put shall be temporarily suspended. The Put shall resume at such time as the common stock is above the Suspension
Price, provided the dates for the Pricing Period for that particular put are still valid. In the event the Pricing Period has been
complete, any shares above the Suspension Price due to Dutchess shall be sold to Dutchess by us at the volume weighted average
price under the terms of the Investment Agreement.
In conjunction with the Investment Agreement,
the Company also entered into a registration rights agreement (“Registration Rights Agreement”) with Dutchess. Pursuant
to the Registration Rights Agreement, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission
(“SEC”) on September 26, 2013 covering 22,750,000 shares of the Company’s common stock underlying a portion of
the Investment Agreement. In addition, during the term of the Registration Rights Agreement, the Company is obligated to maintain
the effectiveness of this registration statement, as well as any subsequent registration statements that may be associated with
the Investment Agreement and/or Registration Rights Agreement.
As of the filing date of this report, the
Company had not sold any shares to Dutchess nor received any financing from Dutchess.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Short Term Debt
Short-term debt consists of the following
at December 31, 2014 and 2013, respectively:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
4% unsecured debenture, due June 7, 2012. Currently in
default. On June 2, 2014, the Company and the lender entered into a settlement agreement whereby the note will be considered
satisfactorily paid in full with the successful payment of four equal payments of $8,125 made in quarterly periods, of which
the first three payments were delivered on June 27, 2014, August 26, 2014 and November 17, 2014,
respectively, and one final payment was subsequently paid on February 2, 2015. | |
$ | 10,625 | | |
$ | 35,000 | |
The Company recorded interest expense pursuant
to the stated interest rate on the above promissory note in the amount of $1,090 and $1,400 at December 31, 2014
and 2013, respectively.
The following presents components of interest
expense by instrument type at December 31, 2014 and 2013, respectively:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Interest on convertible debentures | |
$ | 71,134 | | |
$ | 37,364 | |
Amortization of discount on convertible debentures | |
| 334,951 | | |
| 348,420 | |
Amortization of debt issuance costs | |
| 15,190 | | |
| 27,556 | |
Interest on short term debt | |
| 1,090 | | |
| 1,400 | |
Accounts payable related finance charges | |
| 993 | | |
| 1,070 | |
| |
$ | 423,358 | | |
$ | 415,810 | |
Note 12 – Derivative Liabilities
As discussed in Note 9 under Convertible
Debentures, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion
provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the
Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s
common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the
fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment
is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC
815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded
as derivative liabilities on the issuance date.
The fair values of the Company’s
derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice
model. The Company recognized current derivative liabilities of $1,417,187 and $648,298 at December 31, 2014 and 2013,
respectively. The change in fair value of the derivative liabilities resulted in a loss of $834,891 and $580,888 for the years
ended December 31, 2014 and 2013, respectively, which has been reported as other income (expense) in the statements
of operations. The loss of $834,891 for the year ended December 31, 2014 consisted of a loss of $660,260 due to the value
in excess of the face value of the convertible notes, a gain of $26,480 attributable to the fair value of preferred stock, a gain
of $284,388 attributable to the fair value of warrants and a net loss in market value of $485,499 on the convertible notes. The
loss of $580,888 for the year ended December 31, 2013 consisted of a loss of $153,314 due to the value in excess of the face value
of the convertible notes, a loss of $6,150 attributable to the fair value of preferred stock, a loss of $372,330 attributable to
the fair value of warrants and a net loss in market value of $49,094 on the convertible notes.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following presents the derivative liability
value by instrument type at December 31, 2014 and 2013, respectively:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Convertible debentures | |
$ | 1,301,032 | | |
$ | 221,275 | |
Common stock warrants | |
| 110,756 | | |
| 395,144 | |
Convertible preferred stock | |
| 5,399 | | |
| 31,879 | |
| |
$ | 1,417,187 | | |
$ | 648,298 | |
The following is a summary of changes in
the fair market value of the derivative liability during the years ended December 31, 2014 and 2013, respectively:
| |
Derivative | |
| |
Liability | |
| |
Total | |
Balance, December 31, 2012 | |
$ | 356,608 | |
Increase in derivative value due to issuances of convertible promissory notes | |
| 351,721 | |
Increase in derivative value attributable to tainted warrants | |
| 122,062 | |
Change in fair market value of derivative liabilities due to the mark to market adjustment | |
| 305,512 | |
Debt conversions | |
| (487,605 | ) |
Balance, December 31, 2013 | |
$ | 648,298 | |
Increase in derivative value due to issuances of convertible promissory notes | |
| 1,434,887 | |
Increase in derivative value attributable to issuance of warrants | |
| 20,633 | |
Change in fair market value of derivative liabilities due to the mark to market adjustment | |
| 153,998 | |
Debt conversions | |
| (840,629 | ) |
Balance, December 31, 2014 | |
$ | 1,417,187 | |
Key inputs and assumptions
used to value the convertible debentures and warrants issued during the year ended December 31, 2014 and the year ended
December 31, 2013:
| · | Stock prices
on all measurement dates were based on the fair market value and would fluctuate with projected volatility. |
| · | The warrant exercise prices ranged from
$0.04 to $0.41, exercisable over 2 to 10 year periods from the grant date. |
| · | The holders of the securities would convert
monthly to the ownership limit starting at 4.99% increasing by 10% per month. |
| · | The holders would automatically convert
the note at the maximum of 3 times the conversion price if the Company was not in default. |
| · | The monthly trading volume would reflect
historical averages and would increase at 1% per month. |
| · | The Company would redeem the notes based
on availability of alternative financing, increasing 2% monthly to a maximum of 10%. |
| · | The holder would automatically convert
the note at maturity if the registration was effective and the Company was not in default. |
| · | The computed volatility was projected
based on historical volatility. |
Note 13 –Stockholders’ Equity
(Deficit)
Preferred Stock Authorized
The Board, from the authorized capital
of 25,000,000 preferred shares, has authorized and designated 2,000,000 shares of Series A preferred stock (“Series A”)
and 10,873,347 shares of Series B preferred stock (“Series B”), of which 2,000,000 shares and 4,349,339 shares are
issued and outstanding, respectively. A total of 12,126,653 shares remain undesignated.
The Series A shares carry 25:1 preferential
voting rights, and are convertible into shares of common stock on a 1:1 basis.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Series B shares are convertible at
the option of the holder into shares of common stock at an initial ratio of one share of series B preferred stock into one share
of common stock (1:1), as adjusted for the dilutive effects of additional stock subsequent to the original issuance of the series
B shares on December 17, 2010. The Series B Preferred conversion ratio shall be adjusted to a price determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock Outstanding (meaning (1) outstanding
Common Stock, (2) Common Stock issuable upon conversion of outstanding Preferred Stock, (3) Common Stock issuable upon exercise
of outstanding stock options (including Common Stock issuable upon the conversion of shares or other securities issued pursuant
to the exercise of outstanding stock options) and (4) Common Stock issuable upon exercise (and, in the case of warrants to purchase
Preferred Stock or other securities, conversion) of outstanding warrants. Shares described in (1) through (4) above shall be included
whether vested or unvested, whether contingent or non-contingent and whether exercisable or not yet exercisable.) immediately prior
to such issuance plus the number of shares of Common Stock that the aggregate consideration received by this Corporation for such
issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock Outstanding
immediately prior to such issuance plus the number of shares of such Additional Stock. The maximum shares of common stock convertible
are to be reserved from the authorized shares.
On June 2, 2014, the Company and the Series
B Preferred Shareholder entered into a settlement agreement whereby an outstanding $35,000 promissory note was satisfied with the
successful payment of $32,500, consisting of four equal payments of $8,125, of which the first three payments were delivered on
June 27, 2014, August 26, 2014 and November 17, 2014, respectively, and one final payment was subsequently
paid on February 2, 2015. Upon successful payment of the settlement obligations, the shareholder had agreed to convert
his 4,349,339 shares of Convertible Series B Preferred shares into 4,349,339 shares of common stock, which subsequently occurred
on March 31, 2015. Pursuant to the settlement agreement, the shareholder’s preferential voting rights were suspended
during the payment period.
Preferred Stock
No preferred shares were issued during
the years ended December 31, 2014 and 2013.
Common Stock Authorized
The Company amended its Articles of Incorporation
on April 29, 2013 to increase the authorized shares of common stock from 150,000,000 shares to 600,000,000 shares, of which 214,549,534
shares were issued and outstanding and 185,020,315 shares were reserved as of March 31, 2015.
Common Stock Sales (2014)
On December 8, 2014, the Company’s
subsidiary sold 1.6% of its equity in the subsidiary in exchange for proceeds of $160,000.
On August 14, 2014, the Company’s
subsidiary sold 1% of its equity in the subsidiary in exchange for proceeds of $60,000.
On August 14, 2014, the Company sold 2,500,000
shares of its common stock in exchange for proceeds of $50,000. The shares were subsequently issued on October 23, 2014.
On April 18, 2014, the Company sold 200,000
shares of its common stock and an equal number of warrants, exercisable at $0.06 per share over a twenty four month period pursuant
to a unit offering in exchange for total proceeds of $6,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On March 28, 2014, the Company sold 2,000,000
shares of its common stock and an equal number of warrants, exercisable at $0.06 per share over a twenty four month period pursuant
to a unit offering in exchange for total proceeds of $50,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On January 30, 2014, the Company sold 1,000,000
shares of its common stock and an equal number of warrants, exercisable at $0.07 per share over a twenty four month period pursuant
to a unit offering in exchange for total proceeds of $40,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On January 23, 2014, the Company sold 600,000
shares of its common stock for proceeds of $15,000.
On January 21, 2014, the Company sold 800,000
shares of its common stock for proceeds of $20,000.
Common Stock Sales (2013)
On December 3, 2013, the Company sold 8,500,000
shares of its common stock and an equal number of warrants, exercisable at $0.04 per share over a ten (10) year period pursuant
to a unit offering in exchange for total proceeds of $170,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On August 18, 2013, the Company sold 1,000,000
shares of its common stock for proceeds of $15,000. The shares were subsequently issued on October 11, 2013.
On July 1, 2013, the Company sold 300,000
shares of its common stock and an equal number of warrants, exercisable at $0.08 per share over an eighteen month period pursuant
to a unit offering in exchange for total proceeds of $6,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Common Stock Issuances for Debt Conversions
(2014)
On December 30, 2014, the Company recorded
a subscriptions payable for the conversion of $10,000 of principal on the First Typenex Note. The Company subsequently issued 784,929
shares on January 2, 2015. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 26, 2014, the Company issued
1,501,502 shares of common stock pursuant to the conversion of $10,000 of principal on the First WHC Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 10, 2014, the Company recorded
a subscriptions payable for the conversion of $9,238 of principal on the First Vista Note. The Company subsequently issued 750,000
shares on January 5, 2015. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 9, 2014, the Company issued
767,990 shares of common stock pursuant to the conversion of $10,000 of principal on the First Typenex Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 1, 2014, the Company issued
907,441 shares of common stock pursuant to the conversion of $10,000 of principal on the First Group 10 Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 24, 2014, the Company issued
1,034,840 shares of common stock pursuant to the conversion of $15,000 of principal on the First Typenex Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 10, 2014, the Company issued
1,889,466 shares of common stock pursuant to the conversion of $20,000 of principal on the First Group 10 Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 20, 2014, the Company issued
863,594 shares of common stock pursuant to the conversion of $8,549, consisting of $7,121 of outstanding principal and $1,428 of
interest on the First GEL Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On September 23, 2014, the Company issued
662,879 shares of common stock pursuant to the conversion of $7,000 of principal on the First GEL Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On September 9, 2014, the Company issued
719,424 shares of common stock pursuant to the conversion of $6,000 of principal on the First GEL Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On August 13, 2014, the Company issued
509,295 shares of common stock pursuant to the conversion of $5,379 of principal on the First GEL Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On May 12, 2014, the Company issued 1,700,000
shares of common stock pursuant to the conversion of $21,769, consisting of $11,460 of outstanding principal and interest on the
First JMJ Note and $10,309 of outstanding principal and interest on the Second JMJ Note. The note was converted in accordance with
the conversion terms; therefore no gain or loss has been recognized.
On April 22, 2014, the Company issued 2,100,000
shares of common stock pursuant to the conversion of $27,300 of outstanding principal on the First JMJ Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 14, 2014, the Company issued 2,000,000
shares of common stock pursuant to the conversion of $26,000 of outstanding principal on the First JMJ Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On February 24, 2014, the Company issued
1,000,000 shares of common stock pursuant to the conversion of $13,000 of outstanding principal on the First JMJ Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances for Debt Conversions
(2013)
On December 9, 2013, the Company issued
5,350,000 shares of common stock pursuant to the conversion of $21,400, consisting of $20,000 of outstanding principal and $1,400
of accrued interest, on the Fifth Asher Note. The note was converted in accordance with the conversion terms; therefore no gain
or loss has been recognized.
On November 19, 2013, the Company issued
3,658,537 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Fifth Asher Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On August 8, 2013, the Company issued 2,937,500
shares of common stock pursuant to the conversion of $18,800, consisting of $17,500 of outstanding principal and $1,300 of accrued
interest, on the Fourth Asher Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On June 19, 2013, the Company issued 738,916
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Fourth Asher Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On May 15, 2013, the Company issued 6,933,250
shares of common stock pursuant to the conversion of $27,733, consisting of $25,000 of outstanding principal and $2,733 of accrued
interest, on the Roberts Note (formerly the Continental Equities Note). The note was converted in accordance with the conversion
terms; therefore no gain or loss has been recognized.
On April 12, 2013, the Company issued 2,400,000
shares of common stock pursuant to the conversion of $12,000, consisting of $10,500 of outstanding principal and $1,500 of accrued
interest on the Third Asher Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On April 3, 2013, the Company issued 1,428,571
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the Continental Equities Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized, other than 178,571 of the
shares that were issued in excess of the terms of conversion. As a result, a loss on conversion of $1,625 was recognized.
On March 25, 2013, the Company issued 657,894
shares of common stock pursuant to the conversion of $5,000 of outstanding principal on the Continental Equities Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 25, 2013, the Company issued 1,973,684
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Third Asher Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 13, 2013, the Company issued 1,967,213
shares of common stock pursuant to the conversion of $12,000 of outstanding principal on the Third Asher Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 1, 2013, the Company issued 925,925
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the Continental Equities Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 19, 2013, the Company issued
2,162,162 shares of common stock pursuant to the conversion of $24,000 of convertible debt, consisting of $22,500 of principal
and $1,500 of accrued and unpaid interest, on the Second Asher Note. The note was converted in accordance with the conversion terms;
therefore no gain or loss has been recognized.
On February 5, 2013, the Company issued
914,634 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Second Asher Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 16, 2013, the Company issued
516,000 shares of common stock pursuant to the conversion of $10,320 of convertible debt, consisting of $8,000 of principal and
$2,320 of accrued and unpaid interest, on the First Asher Note. The note was converted in accordance with the conversion terms;
therefore no gain or loss has been recognized.
On January 2, 2013, the Company issued
717,703 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Asher Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances for Services
(2014)
On December 18, 2014, the Company issued
400,300 shares of restricted common stock for professional services provided. The total fair value of the common stock was $9,687
based on the closing price of the Company’s common stock on the date of grant.
On December 18, 2014, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $12,100
based on the closing price of the Company’s common stock on the date of grant.
On December 18, 2014, the Company issued
350,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $8,470 based
on the closing price of the Company’s common stock on the date of grant.
On November 5, 2014, the Company issued
350,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $11,550 based
on the closing price of the Company’s common stock on the date of grant.
On November 5, 2014, the Company issued
300,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $9,900 based
on the closing price of the Company’s common stock on the date of grant.
On November 5, 2014, the Company issued
300,000 shares of restricted common stock for video production services provided. The total fair value of the common stock was
$9,900 based on the closing price of the Company’s common stock on the date of grant.
On November 5, 2014, the Company issued
100,000 shares of restricted common stock for video production services provided. The total fair value of the common stock was
$3,300 based on the closing price of the Company’s common stock on the date of grant.
On November 5, 2014, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $16,500
based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
377,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $7,276
based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
100,000 shares of restricted common stock for services provided. The total fair value of the common stock was $1,930 based on the
closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
another 100,000 shares of restricted common stock for services provided. The total fair value of the common stock was $1,930 based
on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
300,000 shares of restricted common stock for services provided. The total fair value of the common stock was $5,790 based on the
closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
200,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $3,860
based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
350,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $6,755
based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
300,000 shares of restricted common stock for video production services provided. The total fair value of the common stock was
$5,790 based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
200,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $3,860
based on the closing price of the Company’s common stock on the date of grant.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On August 18, 2014, the Company issued
2,000,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $38,600
based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
350,000 shares of restricted common stock to one of its Directors as a compensation bonus. The total fair value of the common stock
was $6,755 based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
200,000 shares of restricted common stock to its President of Programming as a compensation bonus. The total fair value of the
common stock was $3,860 based on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
550,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $10,615 based
on the closing price of the Company’s common stock on the date of grant.
On August 18, 2014, the Company issued
200,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $3,860 based
on the closing price of the Company’s common stock on the date of grant.
On August 14, 2014, the Company’s
subsidiary issued a total of 16% of its equity in the subsidiary in exchange for services provided related to the operations of
the subsidiary. The total fair value of the common stock was $960,000 based on the fair value of stock sold to an independent third
party. A total of 4% of these shares were issued to officers of Players Network.
On June 27, 2014, the Company issued 700,000
shares of restricted common stock for video production services provided. The total fair value of the common stock was $20,650
based on the closing price of the Company’s common stock on the date of grant.
On June 27, 2014, the Company issued 300,000
shares of restricted common stock for professional services provided. The total fair value of the common stock was $8,850 based
on the closing price of the Company’s common stock on the date of grant.
On June 27, 2014, the Company issued 500,000
shares of restricted common stock for video production services provided. The total fair value of the common stock was $14,750
based on the closing price of the Company’s common stock on the date of grant.
On June 27, 2014, the Company issued 300,000
shares of restricted common stock for professional services provided. The total fair value of the common stock was 8,850 based
on the closing price of the Company’s common stock on the date of grant.
On June 15, 2014, the Company issued 198,864
shares of S-8 common stock for professional services provided. The total fair value of the common stock was $4,693 based on the
closing price of the Company’s common stock on the date of grant.
On June 15, 2014, the Company issued 198,864
shares of S-8 common stock for professional services provided. The total fair value of the common stock was $4,693 based on the
closing price of the Company’s common stock on the date of grant.
On April 15, 2014, the Company granted
99,700 shares of restricted common stock for professional services provided. The total fair value of the common stock was $2,952
based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on December 18, 2014.
On April 14, 2014, the Company issued 350,000
shares of restricted common stock for video production services provided. The total fair value of the common stock was $10,150
based on the closing price of the Company’s common stock on the date of grant.
On April 11, 2014, the Company issued 200,000
shares of restricted common stock for business development services provided. The total fair value of the common stock was $4,400
based on the closing price of the Company’s common stock on the date of grant.
On April 11, 2014, the Company issued 170,000
shares of restricted common stock for video production services provided. The total fair value of the common stock was $3,740 based
on the closing price of the Company’s common stock on the date of grant.
On April 11, 2014, the Company issued 200,000
shares of restricted common stock for video production services provided. The total fair value of the common stock was $4,400 based
on the closing price of the Company’s common stock on the date of grant.
On April 11, 2014, the Company issued 1,250,000
shares of restricted common stock to its CEO as a compensation bonus. The total fair value of the common stock was $27,500 based
on the closing price of the Company’s common stock on the date of grant.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On April 11, 2014, the Company issued 200,000
shares of S-8 common stock for professional services provided. The total fair value of the common stock was $4,400 based on the
closing price of the Company’s common stock on the date of grant.
On March 24, 2014, the Company issued 733,333
shares of restricted common stock for video production services provided. The total fair value of the common stock was $33,734
based on the closing price of the Company’s common stock on the date of grant.
On March 3, 2014, the Company issued 500,000
shares of restricted common stock for professional services provided. The total fair value of the common stock was $14,950 based
on the closing price of the Company’s common stock on the date of grant.
On February 20, 2014, the Company issued
300,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $9,000
based on the closing price of the Company’s common stock on the date of grant.
On February 20, 2014, the Company issued
4,000,000 shares of common stock to its CEO as a compensation bonus. The total fair value of the common stock was $120,000 based
on the closing price of the Company’s common stock on the date of grant.
On January 13, 2014, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $24,500
based on the closing price of the Company’s common stock on the date of grant.
On January 13, 2014, the Company issued
75,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $3,675 based
on the closing price of the Company’s common stock on the date of grant.
On January 13, 2014, the Company issued
50,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $2,450 based
on the closing price of the Company’s common stock on the date of grant.
On January 13, 2014, the Company issued
50,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $2,450 based
on the closing price of the Company’s common stock on the date of grant.
On January 13, 2014, the Company issued
500,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $24,500 based
on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Services
(2013)
On December 16, 2013, the Company issued
750,000 S-8 shares of common stock for professional services provided. The total fair value of the common stock was $5,250 based
on the closing price of the Company’s common stock on the date of grant.
On December 16, 2013, the Company granted
1,500,000 S-8 shares of common stock to a consultant for website development services provided. The total fair value of the common
stock was $10,500 based on the closing price of the Company’s common stock on the date of grant.
On December 16, 2013, the Company issued
250,000 S-8 shares of common stock for professional services provided. The total fair value of the common stock was $1,750 based
on the closing price of the Company’s common stock on the date of grant.
On December 3, 2013, the Company’s
Board of Directors granted the issuance of 3,000,000 shares of restricted common stock to the Company’s CEO as payment on
accrued compensation. The total fair value of the common stock was $21,300 based on the closing price of the Company’s common
stock on the date of grant.
On December 3, 2013, the Company issued
250,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $1,775
based on the closing price of the Company’s common stock on the date of grant.
On December 3, 2013, the Company’s
Board of Directors granted the issuance of 500,000 shares of restricted common stock to one of the Company’s Directors as
a compensation bonus. The total fair value of the common stock was $3,550 based on the closing price of the Company’s common
stock on the date of grant.
On October 2, 2013, the Company’s
Board of Directors granted the issuance of 7,300,000 shares of restricted common stock to the Company’s CEO as payment on
accrued compensation. The total fair value of the common stock was $80,300 based on the closing price of the Company’s common
stock on the date of grant.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On October 2, 2013, the Company issued
750,000 shares of restricted common stock for administrative services provided by one of our employees. The total fair value of
the common stock was $8,250 based on the closing price of the Company’s common stock on the date of grant.
On October 2, 2013, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $5,500
based on the closing price of the Company’s common stock on the date of grant.
On October 2, 2013, the Company issued
1,100,000 shares of restricted common stock for video production services provided by one of our vendors. The total fair value
of the common stock was $12,100 based on the closing price of the Company’s common stock on the date of grant.
On October 2, 2013, the Company issued
250,000 shares of restricted common stock for consulting services provided. The total fair value of the common stock was $2,750
based on the closing price of the Company’s common stock on the date of grant.
On October 2, 2013, the Company issued
250,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $2,750
based on the closing price of the Company’s common stock on the date of grant.
On June 3, 2013, the Company issued 175,000
shares of restricted common stock for administrative services provided by one of our employees. The total fair value of the common
stock was $5,250 based on the closing price of the Company’s common stock on the date of grant.
On June 3, 2013, the Company issued 1,000,000
shares of restricted common stock for video production services provided by one of our vendors. The total fair value of the common
stock was $30,000 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 2,000,000 shares of restricted common stock to the Company’s CEO as payment on accrued
compensation. The total fair value of the common stock was $38,000 based on the closing price of the Company’s common stock
on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 1,294,066 shares of restricted common stock to the Company’s President of Programming
as payment on accrued compensation. The total fair value of the common stock was $24,587 based on the closing price of the Company’s
common stock on the date of grant.
On May 1, 2013, the Company issued 150,000
shares of restricted common stock as a bonus for board services provided by one of our Directors. The total fair value of the common
stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued another
150,000 shares of restricted common stock as a bonus for board services provided by another one of our Directors. The total fair
value of the common stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued 675,000
S-8 shares of common stock for professional services provided. The total fair value of the common stock was $12,825 based on the
closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company granted 150,000
shares of restricted common stock to a consultant for website development services provided. The total fair value of the common
stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company granted 300,000
shares of restricted common stock to a consultant for website development services provided. The total fair value of the common
stock was $5,700 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company granted 100,000
shares of restricted common stock to a consultant for business development services provided. The total fair value of the common
stock was $1,900 based on the closing price of the Company’s common stock on the date of grant.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 1, 2013, the Company issued 50,000
shares of restricted common stock for consulting services provided by one of our Directors. The total fair value of the common
stock was $950 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued 125,000
shares of restricted common stock for consulting services provided by one of our Directors. The total fair value of the common
stock was $2,375 based on the closing price of the Company’s common stock on the date of grant.
On March 13, 2013, the Company issued 600,000
S-8 shares of common stock for professional services provided. The total fair value of the common stock was $13,200 based on the
closing price of the Company’s common stock on the date of grant.
On February 19, 2013, the Company granted
200,000 shares of restricted common stock to a consultant for website development services provided. The total fair value of the
common stock was $4,400 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
300,000 S-8 shares of common stock for professional services provided. The total fair value of the common stock was $15,000 based
on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company granted
50,000 shares of restricted common stock to a consultant for video production services provided. The total fair value of the common
stock was $2,500 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company granted
50,000 shares of restricted common stock to a consultant for Information Technology services provided. The total fair value of
the common stock was $2,500 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
150,000 shares of restricted common stock for consulting services provided by one of our Directors. The total fair value of the
common stock was $7,500 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
620,000 shares of common stock to its CEO for unpaid compensation. The total fair value of the common stock was $31,000 based on
the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
760,000 shares of common stock to its President of Programming for unpaid compensation. The total fair value of the common stock
was $38,000 based on the closing price of the Company’s common stock on the date of grant.
On January 7, 2013, the Company issued
142,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $5,680
based on the closing price of the Company’s common stock on the date of grant.
Common Stock Cancellations (2014)
On March 6, 2014, the Company cancelled
750,000 shares issued during 2013 for non-performance of services commensurate with the departure of one of the Company’s
former employees.
On March 6, 2014, the Company cancelled
150,000 shares issued during 2013 for non-performance of services commensurate with the departure of one of the Company’s
Directors.
Common Stock Cancellations (2013)
There were no cancellations of common stock
during the year ended December 31, 2013.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 – Common Stock Options
Common Stock Options Granted (2014)
On April 11, 2014, the Company’s
Board of Directors granted 250,000 fully vested common stock options to a consultant as compensation for services provided. The
options are exercisable until April 10, 2016 at an exercise price of $0.05 per share. The estimated value using the Black-Scholes
Pricing Model, based on a volatility rate of 244% and a call option value of $0.0148, was $3,710.
On April 11, 2014, the Company’s
Board of Directors granted another 250,000 fully vested common stock options to a consultant as compensation for services provided.
The options are exercisable until April 10, 2016 at an exercise price of $0.05 per share. The estimated value using the Black-Scholes
Pricing Model, based on a volatility rate of 244% and a call option value of $0.0148, was $3,710.
On March 1, 2014, the Company’s Board
of Directors granted 600,000 common stock options as compensation for services to a consultant. The options vest ratably in monthly
increments over six (6) months beginning April 1, 2014. The options are exercisable until March 1, 2017 at an exercise price of
$0.08 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 247% and a call option
value of $0.0273, was $16,365. The options are being re-measured and expensed over the vesting period. The Company recognized $16,365
of stock based compensation expense during the year ended December 31, 2014.
On March 1, 2014, the Company’s Board
of Directors granted 600,000 common stock options as compensation for services to another consultant. The options vest ratably
in monthly increments over six (6) months beginning April 1, 2014. The options are exercisable until March 1, 2017 at an exercise
price of $0.08 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 247% and a call
option value of $0.0273, was $16,365. The options are being re-measured and expensed over the vesting period. The Company recognized
$16,365 of stock based compensation expense during the year ended December 31, 2014.
On February 20, 2014, the Company’s
Board of Directors granted 8,000,000 fully vested cashless common stock options to the Company’s CEO as compensation for
services provided. The options are exercisable until February 20, 2018 at an exercise price of $0.04 per share. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 248% and a call option value of $0.0272, was $217,971.
Common Stock Options Granted (2013)
On January 8, 2013, the Company’s
Board of Directors granted 300,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $11,048.
On January 8, 2013, the Company’s
Board of Directors granted 100,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $3,683.
On January 8, 2013, the Company’s
Board of Directors granted 250,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $9,206.
On January 8, 2013, the Company’s
Board of Directors granted 500,000 fully vested common stock options as compensation for services to a consultant. The options
are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated value using the Black-Scholes Pricing
Model, based on a volatility rate of 177% and a call option value of $0.0368, was $18,413.
Common Stock Options Cancelled (2014
and 2013)
No options or were cancelled during the
years ended December 31, 2014 and 2013.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Common Stock Options Expired (2014)
On August 26, 2014, a total of 240,000
options held by an independent contractor expired.
On July 19, 2014, a total of 1,500,000
options held by the Company’s CEO expired.
On February 8, 2014, a total of 400,000
options amongst four option holders expired.
Common Stock Options Expired (2013)
During the year ended December 31, 2013,
a total of 3,825,000 options that were outstanding as of December 31, 2012 expired. The expiration of the options and warrants
had no impact on the current period operations.
Common Stock Options Exercised (2014
and 2013)
No options were exercised during the years
ended December 31, 2014 and 2013.
The following is a summary of information
about the Common Stock Options outstanding at December 31, 2014.
| |
Shares Underlying | |
Shares Underlying Options Outstanding | |
Options Exercisable | |
| |
| | |
| | |
| | |
| | |
| |
| |
| | |
Weighted | | |
| | |
| | |
| |
| |
| Shares | | |
| Average | | |
| Weighted | | |
| Shares | | |
| Weighted | |
Range of | |
| Underlying | | |
| Remaining | | |
| Average | | |
| Underlying | | |
| Average | |
Exercise | |
| Options | | |
| Contractual | | |
| Exercise | | |
| Options | | |
| Exercise | |
Prices | |
| Outstanding | | |
| Life | | |
| Price | | |
| Exercisable | | |
| Price | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
$0.04 – $0.08 | |
| 11,300,000 | | |
| 2.72 years | | |
$ | 0.05 | | |
| 11,300,000 | | |
$ | 0.05 | |
The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used
for grants under the fixed option plan:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Average risk-free interest rates | |
| 0.33% | | |
| 0.25% | |
Average expected life (in years) | |
| 2.92 | | |
| 2.00 | |
Volatility | |
| 248% | | |
| 177% | |
The Black-Scholes option pricing model
was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock
price volatility. Because the Company’s common stock options have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s
opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock options.
During 2014 and 2013, there were no options granted with an exercise price below the fair value of the underlying stock at the
grant date.
The weighted average fair value of options
granted with exercise prices at the current fair value of the underlying stock during the years ended December 31, 2014 and 2013
was approximately $0.05 and $0.08 per option, respectively.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of activity
of outstanding common stock options:
| |
| | |
Weighted | |
| |
| | |
Average | |
| |
Number | | |
Exercise | |
| |
of Shares | | |
Price | |
| |
| | |
| |
Balance, December 31, 2012 | |
| 6,415,000 | | |
$ | 0.18 | |
Options expired | |
| (3,825,000 | ) | |
| (0.17 | ) |
Options cancelled | |
| – | | |
| – | |
Options granted | |
| 1,150,000 | | |
| 0.08 | |
Options exercised | |
| – | | |
| – | |
| |
| | | |
| | |
Balance, December 31, 2013 | |
| 3,740,000 | | |
| 0.17 | |
Options expired | |
| (2,140,000 | ) | |
| (0.23 | ) |
Options cancelled | |
| – | | |
| – | |
Options granted | |
| 9,700,000 | | |
| 0.05 | |
Options exercised | |
| – | | |
| – | |
| |
| | | |
| | |
Balance, December 31, 2014 | |
| 11,300,000 | | |
$ | 0.05 | |
| |
| | | |
| | |
Exercisable, December 31, 2014 | |
| 11,300,000 | | |
$ | 0.05 | |
The Company expensed $258,122 and $42,350
from the amortization of common stock options during the years ended December 31, 2014 and 2013, respectively.
Note 15 – Series B Preferred Stock
Warrants
The Series B preferred stock warrants are
exercisable into shares of Series B preferred stock, which in turn is convertible at the option of the holder into shares of common
stock at an initial ratio of one share of series B preferred stock into one share of common stock (1:1), as adjusted for the dilutive
effects of additional stock subsequent to the original issuance of the series B shares on December 17, 2010 as disclosed
in more detail within Note 12.
Series B Preferred Stock Warrants Granted
No series B preferred stock warrants were
granted during the years ended December 31, 2014 and 2013.
Series B Preferred Stock Warrants Cancelled
No series B preferred stock warrants were
cancelled during the years ended December 31, 2014 and 2013.
Series B Preferred Stock Warrants Expired
All outstanding series B preferred stock
warrants, representing 4,349,339 series B preferred stock warrants, expired during the year ended December 31, 2013.
Series B Preferred Stock Warrants Exercised
No series B preferred stock warrants were
exercised during the years ended December 31, 2014 and 2013.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of information
about the Series B Preferred Stock Warrants outstanding at December 31, 2014.
| |
Shares Underlying | |
Shares Underlying Warrants Outstanding | |
Warrants Exercisable | |
| |
| | |
| | |
| | |
| | |
| |
| |
| | |
Weighted | | |
| | |
| | |
| |
| |
Shares | | |
Average | | |
Weighted | | |
Shares | | |
Weighted | |
Range of | |
Underlying | | |
Remaining | | |
Average | | |
Underlying | | |
Average | |
Exercise | |
Warrants | | |
Contractual | | |
Exercise | | |
Warrants | | |
Exercise | |
Prices | |
| Outstanding | | |
| Life | | |
| Price | | |
| Exercisable | | |
| Price | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
$ |
-0- | |
| -0- | | |
| -0- | | |
$ | -0- | | |
| -0- | | |
$ | -0- | |
The Black-Scholes option pricing model
was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock
price volatility. Because the Company’s series B preferred stock warrants have characteristics significantly different from
those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate,
in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its
series B preferred stock warrants. During 2014 and 2013, there were no warrants granted with an exercise price below the fair value
of the underlying stock at the grant date.
The following is a summary of activity
of outstanding series B preferred stock warrants:
| |
| | |
Weighted | |
| |
| | |
Average | |
| |
Number | | |
Exercise | |
| |
of Shares | | |
Price | |
| |
| | |
| |
Balance, December 31, 2012 | |
| 4,349,339 | | |
$ | 0.41 | |
Options expired | |
| (4,349,339 | ) | |
| (0.41 | ) |
Options cancelled | |
| – | | |
| – | |
Options granted | |
| – | | |
| – | |
Options exercised | |
| – | | |
| – | |
| |
| | | |
| | |
Balance, December 31, 2013 | |
| – | | |
| – | |
Options expired | |
| – | | |
| – | |
Options cancelled | |
| – | | |
| – | |
Options granted | |
| – | | |
| – | |
Options exercised | |
| – | | |
| – | |
| |
| | | |
| | |
Balance, December 31, 2014 | |
| – | | |
$ | – | |
| |
| | | |
| | |
Exercisable, December 31, 2014 | |
| – | | |
$ | – | |
Note 16 – Common Stock Warrants
Common Stock Warrants Granted (2014)
On June 13, 2014, the Company issued warrants
to purchase 1,500,000 shares of common stock, exercisable at $0.05 per share over a thirty six month period pursuant to a convertible
debenture offering in exchange for net proceeds of $75,000 with an $80,000 face value. The proceeds received were allocated between
the debt and warrants on a relative fair value basis.
On April 18, 2014, the Company sold 200,000
shares of its common stock and an equal number of warrants, exercisable at $0.06 per share over a twenty four month period pursuant
to a unit offering in exchange for total proceeds of $6,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 28, 2014, the Company sold 2,000,000
shares of its common stock and an equal number of warrants, exercisable at $0.06 per share over a twenty four month period pursuant
to a unit offering in exchange for total proceeds of $50,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On January 30, 2014, the Company sold 1,000,000
shares of its common stock and an equal number of warrants, exercisable at $0.07 per share over a twenty four month period pursuant
to a unit offering in exchange for total proceeds of $40,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Common Stock Warrants Granted (2013)
On December 3, 2013, the Company sold 8,500,000
shares of its common stock and an equal number of warrants, exercisable at $0.04 per share over a ten (10) year period pursuant
to a unit offering in exchange for total proceeds of $170,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
On July 1, 2013, the Company sold 300,000
shares of its common stock and an equal number of warrants, exercisable at $0.08 per share over an eighteen month period pursuant
to a unit offering in exchange for total proceeds of $6,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Common Stock Warrants Cancelled
No warrants were cancelled during the years
ended December 31, 2014 and 2013.
Common Stock Warrants Expired (2014)
On
April 18, 2014, a total of 869,565 warrants held by the Company’s CEO expired. The expiration of the warrants had no impact
on the current period operations.
Common Stock Warrants Expired (2013)
During
the year ended December 31, 2013, a total of 3,275,000 warrants expired. The expiration of the warrants had no impact on the current
period operations.
Common Stock Warrants Exercised
No warrants were exercised during the years
ended December 31, 2014 and 2013.
The following is a summary of information
about the Common Stock Warrants outstanding at December 31, 2014.
| |
Shares Underlying | |
Shares Underlying Warrants Outstanding | |
Warrants Exercisable | |
| |
| | |
Weighted | |
| | |
| | |
| |
| |
Shares | | |
Average | |
Weighted | | |
Shares | | |
Weighted | |
Range of | |
Underlying | | |
Remaining | |
Average | | |
Underlying | | |
Average | |
Exercise | |
Warrants | | |
Contractual | |
Exercise | | |
Warrants | | |
Exercise | |
Prices | |
Outstanding | | |
Life | |
Price | | |
Exercisable | | |
Price | |
| |
| | | |
| |
| | | |
| | | |
| | |
$0.04 - $0.18 | |
| 14,150,000 | | |
5.93 years | |
$ | 0.05 | | |
| 14,150,000 | | |
$ | 0.05 | |
The fair value of each warrant grant is
estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used
for grants under the fixed option plan:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Average risk-free interest rates | |
| 0.33% | | |
| 0.32% | |
Average expected life (in years) | |
| 1.59 | | |
| 9.71 | |
Volatility | |
| 248% | | |
| 190% | |
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Black-Scholes option pricing model
was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock
price volatility. Because the Company’s common stock warrants have characteristics significantly different from those of
traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s
opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock warrants.
During 2014 and 2013, there were no warrants granted with an exercise price below the fair value of the underlying stock at the
grant date.
The weighted average fair value of warrants
granted with exercise prices at the current fair value of the underlying stock during the years ended December 31, 2014 and 2013
was approximately $0.06 and $0.04 per warrant, respectively.
The following is a summary of activity
of outstanding common stock warrants:
| |
| | |
Weighted | |
| |
| | |
Average | |
| |
Number | | |
Exercise | |
| |
of Shares | | |
Price | |
| |
| | |
| |
Balance, December 31, 2012 | |
| 4,794,565 | | |
$ | 0.33 | |
Warrants expired | |
| (3,275,000 | ) | |
| (0.34 | ) |
Warrants cancelled | |
| – | | |
| – | |
Warrants granted | |
| 8,800,000 | | |
| 0.04 | |
Warrants exercised | |
| – | | |
| – | |
| |
| | | |
| | |
Balance, December 31, 2013 | |
| 10,319,565 | | |
| 0.08 | |
Warrants expired | |
| (869,565 | ) | |
| (0.41 | ) |
Warrants cancelled | |
| – | | |
| – | |
Warrants granted | |
| 4,700,000 | | |
| 0.06 | |
Warrants exercised | |
| – | | |
| – | |
| |
| | | |
| | |
Balance, December 31, 2013 | |
| 14,150,000 | | |
$ | 0.05 | |
| |
| | | |
| | |
Exercisable, December 31, 2013 | |
| 14,150,000 | | |
$ | 0.05 | |
Note 17 – Gain on Debt Extinguishment
The Company recognized debt forgiveness
in the total amount of $356,835 and $-0- during the years ended December 31, 2014 and 2013, respectively, as presented
in other income within the Statements of Operations.
On January 6, 2014, we settled outstanding
trade accounts payable in the total amount of $349,670 with a payment of $10,000. The creditor forgave the remaining $339,670.
An additional $1,540 of trade accounts payable was forgiven from another creditor on February 24, 2014, with the payment
of $385, resulting in a $1,155 gain on settlement, along with another debt forgiveness of $2,510 on June 12, 2014, as forgiven
by our former transfer agent, and $13,500 of customer deposits. All of these debt settlements were included in the $356,835 gain
on debt settlements amount as presented in other income at December 31, 2014.
Note 18 – Income Taxes
The Company accounts for income taxes under
FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities
are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences.
For the years ended December 31, 2014 and
2013, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition,
no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2014,
the Company had approximately $18,400,000 of federal net operating losses. The net operating loss carry forwards, if not utilized,
will begin to expire in 2025.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the Company’s deferred
tax asset are as follows:
| |
December 31, | |
| |
2014 | | |
2013 | |
Deferred tax assets: | |
| | | |
| | |
Net operating loss carry forwards | |
$ | 6,440,000 | | |
$ | 5,348,700 | |
| |
| | | |
| | |
Net deferred tax assets before valuation allowance | |
$ | 6,440,000 | | |
$ | 5,348,700 | |
Less: Valuation allowance | |
| (6,440,000 | ) | |
| (5,348,700 | ) |
Net deferred tax assets | |
$ | – | | |
$ | – | |
Based on the available objective evidence,
including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets
will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets
at December 31, 2014 and 2013, respectively.
A reconciliation between the amounts of
income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
| |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Federal and state statutory rate | |
| 35% | | |
| 35% | |
Change in valuation allowance on deferred tax assets | |
| (35% | ) | |
| (35% | ) |
In accordance with FASB ASC 740, the Company
has evaluated its tax positions and determined there are no uncertain tax positions.
Note 19 – Future Minimum Lease
Payments
Effective July 1, 2013, we leased our office
space in Las Vegas, Nevada under a 3-year operating lease expiring August 31, 2016. The lease provides for increases in future
minimum annual rental payments based on defined annual increases beginning with monthly payments of $2,997 and culminating in a
monthly payment of $3,191 in 2016. The lease contains provisions for future rent increases and rent free periods for the first
two months of the lease. The total amount of rental payments due over the lease term is being charged to rent expense according
to the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is credited
or charged to “Deferred rent obligation,” in the accompanying Balance Sheets.
Future minimum lease payments required under operating leases
according to our fiscal year-end are as follows:
Year Ending | |
| |
December 31, | |
Amount | |
2015 | |
$ | 37,407 | |
2016 | |
| 25,530 | |
Thereafter | |
| – | |
| |
$ | 62,937 | |
Rent expense was $35,123 and $39,636 for
the years ended December 31, 2014 and 2013, respectively.
Note 20 – Commitments
On October 10, 2005 the Company entered
into a ten-year distribution agreement with Comcast Programming Development, Inc. (“Comcast”), an affiliated entity
of Comcast Corporation. Pursuant to the terms of the agreement, Comcast carries PNTV’s Gaming Channel on its Digital VOD
Cable Platform, which provides programming directly related to the gaming industry and targeting the existing approximately $70
billion market. The Company owns and operates 100% of the channel. Pursuant to the agreement, the Company formed a wholly owned
subsidiary, Players Network on Demand. Comcast has the option to purchase up to 40% of the common stock in the subsidiary for fair
market value beginning on April 10, 2007.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 21 – Concentrations in Sales
to Few Customers
The largest two customers accounted for 69%
and 82% of revenues for the year ended December 31, 2014 and 2013, respectively. An adverse change in the Company’s relationship
with these customers could negatively affect the Company’s revenues and their results of operations.
Note 22 – Company is Dependent on
Few Major Suppliers
The Company is dependent on third-party vendors
for all of its video content production and services. In 2014 and 2013, purchases from the Company’s two largest vendors
accounted for approximately 77% and 71% of direct operating costs, respectively. The Company is dependent on the ability of its
vendors to provide services and content on a timely basis and on favorable pricing terms. The loss of certain suppliers could have
a material adverse effect on the Company. The Company believes that its relationships with its suppliers are satisfactory.
Note 23 – Non-Controlling Interest
Non-controlling interest represented the
17% interest in the subsidiary held amongst eleven individuals, of whom the Company’s CEO, Mark Bradley and the Company’s
President of Programming, Michael Berk own 3% and 1%, respectively, through December 8, 2014. On December 9, 2014,
one of the non-officer, minority investors exercised an option to purchase an additional 1.6% interest in the Company’s subsidiary
from the parent in exchange for proceeds of $160,000, thereby increasing the minority interest in the subsidiary to 18.6% amongst
the same individuals. The net loss attributable to the non-controlling interest totaled $185,229 during the year ended December 31, 2014.
Effects of changes in Players Network’s ownership interest
in its subsidiary during the year ended December 31, 2014 are as follows:
| |
December 31, | |
| |
2014 | |
| |
| |
Net loss attributable to parent | |
$ | (904,306 | ) |
Transfers to the non-controlling interest: | |
| | |
Increase in parent’s paid-in capital for sale of 1% interest in subsidiary | |
| 60,000 | |
Increase in parent’s paid-in capital for exchange of 16% interest in subsidiary for services | |
| 960,000 | |
Increase in parent’s paid-in capital for sale of 1.6% interest in subsidiary | |
| 160,000 | |
Net transfers to the non-controlling interest | |
| 1,180,000 | |
Change from net loss attributable to the parent and transfers to the non-controlling interest | |
$ | 275,694 | |
Note 24 – Subsequent Events
Convertible Debenture Proceeds
On March 11, 2015, the Company received
net proceeds of $70,000 in exchange for a 12% interest bearing, unsecured convertible promissory note dated March 2, 2015
with a face value of $75,000 (“First JSJ Note”), which matures on September 2, 2015. The principal and interest
is convertible into shares of common stock at the discretion of the note holder at a price equal to the lesser of: (i) 58% of the
average of the two (2) lowest closing prices over the 10 days prior to conversion; or (ii) 58% of the average of the two (2) lowest
closing prices over the 10 days prior to the execution of the note (which was $0.008932). The note includes prepayment cash redemption
penalties between 25% and 40% of outstanding principal and interest, and the debt holder is limited to owning 4.99% of the Company’s
issued and outstanding shares. The Company must at all times reserve at least 30 million shares of common stock for potential
conversions.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On February 5, 2015, the Company received
net proceeds of $50,000 with a face value of $53,750 that carries an 8% interest rate (“Second Tangiers Note”), which
matures on February 5, 2016. The note is part of total loan offering with a $236,500 face value and OID of 7.5% of any consideration
paid, whereby $75,250 was previously advanced with the initial execution of the note on October 13, 2014. The principal
and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent
(60%) of the average of the two lowest trading prices of the Company’s common stock for the fifteen (15) trading days prior
to, and including, the conversion date. In the event the Company experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to fifty percent (50%), rather than the sixty percent (60%) conversion rate while that “Chill”
is in effect, and an additional 5% discount if the Depository Trust Company’s (“DTC”) Fast Automated Securities
Transfer (“FAST”) is not eligible for a cumulative total conversion price equal to forty five percent (45%). The note
carries a twenty percent (20%) interest rate and $1,000 per day of liquidated damages in the event of default, and the debt holder
is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $2,500
that is being amortized on the straight line method, which approximates the effective interest method, over the life of the loan.
The Company must at all times reserve at least 5 million shares of common stock for potential conversions.
On January 27, 2015, the Company received
$35,000 in exchange for an unsecured convertible promissory note with a face value of $36,750 that carries a 12% interest rate
(“Second Group 10 Note”), which matures on January 27, 2016. The principal and interest is convertible into shares
of common stock at the discretion of the note holder at a price equal to the lesser of (a) fifty-eight percent (58%) multiplied
by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of forty-two percent
(42%)) or (b) five cents ($0.05). The conversion price is subject to the following adjustments:
| iii. | If the market capitalization of the Borrower is less than Three Hundred Thousand Dollars ($300,000)
on the day immediately prior to the date of the Notice of Conversion, then the Conversion Price shall be twenty-five percent (25%)
multiplied by the Lowest Closing Price as of the date a Notice of Conversion is given (which represents a discount rate of seventy-five
percent (75%)); and |
| iv. | If the closing price of the Borrower’s Common Stock on the day immediately prior to the date of the Notice of Conversion
is less than .001 then the Conversion Price shall be twenty-five percent (25%) multiplied by the Lowest Closing Price as of the
date a Notice of Conversion is given (which represents a discount rate of seventy-five percent (75%)). |
The note carries an eighteen percent (18%)
interest rate in the event of default along with a $1,000 penalty per business day commencing the business day following the date
of the event of default. The note also includes prepayment cash redemption penalties between up to 15% of outstanding principal
and interest, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory
note carries a $1,750 Original Issue Discount that is being amortized over the life of the loan on the straight line method, which
approximates the effective interest method. The Company must at all times reserve at least 20 million shares of common stock
for potential conversions.
Convertible Debenture Repayments
On March 12, 2015, the Company repaid $50,542
on the Third LG Capital Note, consisting of $37,500 of principal and $13,042 of interest and prepayment penalties. The convertible
promissory note was subsequently cancelled as paid in full.
On February 2, 2015, the Company repaid
the final payment of $8,125 on the David Tice promissory note pursuant to the April 10, 2014 Settlement Agreement, resulting
in a gain on debt extinguishment of $6,482. The promissory note was subsequently cancelled as paid in full.
Common Stock Issuances for Debt Conversions
On April 2, 2015, the Company issued 1,975,309
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the First WHC Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On April 1, 2015, the Company issued 2,428,058
shares of common stock pursuant to the conversion of $13,500 of outstanding principal on the First Typenex Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 23, 2015, the Company issued 1,777,778
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the First WHC Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 10, 2015, the Company issued 2,000,000
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the First Vista Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 10, 2015, the Company issued 1,861,042
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Typenex Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 24, 2015, the Company issued
2,068,966 shares of common stock pursuant to the conversion of $18,000 of outstanding principal on the First WHC Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 20, 2015, the Company issued
1,463,557 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Typenex Note. The
note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 10, 2015, the Company issued
1,000,000 shares of common stock pursuant to the conversion of $9,685 of outstanding principal on the First Vista Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 5, 2015, the Company issued
1,479,290 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Typenex Note. The
note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 2, 2015, the Company issued
1,133,914 shares of common stock pursuant to the conversion of $9,536 of outstanding debt, consisting of $6,000 of principal and
$3,536 of interest, on the First Group 10 Note. The note was converted in accordance with the conversion terms; therefore no gain
or loss has been recognized.
On January 27, 2015, the Company issued
1,190,477 shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the First WHC Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On January 2, 2015, the Company issued
1,415,571 shares of common stock pursuant to the conversion of $14,000 of outstanding principal on the First Group 10 Note. The
note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances on Subscriptions
Payable
On January 5, 2015, the Company issued
750,000 shares of common stock in satisfaction of a subscriptions payable pursuant to the December 10, 2014 conversion
of $9,238 of outstanding principal on the First Vista Note.
On January 2, 2015, the Company issued
784,929 shares of common stock in satisfaction of a subscriptions payable pursuant to the December 30, 2014 conversion
of $10,000 of outstanding principal on the First Typenex Note.
Common Stock Issuances for Services
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $8,200
based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $8,200
based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $8,200
based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $8,200
based on the closing price of the Company’s common stock on the date of grant.
PLAYERS NETWORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for platform development services provided. The total fair value of the common stock
was $8,200 based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
1,600,000 shares of restricted common stock for video production services provided. The total fair value of the common stock was
$26,240 based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
1,500,000 shares of common stock to its CEO as compensation for services as a Director. The total fair value of the common stock
was $24,600 based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
1,500,000 shares of common stock to its President of Programming as compensation for services as a Director. The total fair value
of the common stock was $24,600 based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
1,500,000 shares of common stock to one of its Directors as compensation for services as a Director. The total fair value of the
common stock was $24,600 based on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
500,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $8,200 based
on the closing price of the Company’s common stock on the date of grant.
On January 25, 2015, the Company issued
500,000 shares of S-8 common stock for professional services provided. The total fair value of the common stock was $8,200 based
on the closing price of the Company’s common stock on the date of grant.
Common Stock Issued in Settlement for
Series Preferred Stock Cancellation
On March 31, 2015, the Company cancelled
4,349,339 shares of Series B Preferred Stock pursuant to a settlement agreement entered into on April 10, 2014 with Tice Capital,
LLC, and issued 4,349,339 shares of common stock in exchange. No additional Series B Preferred shares are outstanding.
Common Stock Options Expired
On February 29, 2015, a total of 450,000
options amongst two option holders with a strike price of $0.08 per share expired.
Common Stock Warrants Expired
On February 14, 2015, a total of 80,000
warrants held by our CEO with a strike price of $0.15 per share expired.
On January 15, 2015, a total of 250,000
warrants with a strike price of $0.15 per share expired.
On January 1, 2015, a total of 300,000
warrants with a strike price of $0.08 per share expired.
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.
|
PLAYERS NETWORK |
|
|
|
|
By: |
/s/ Mark Bradley |
Date: April 15, 2015 |
Mark Bradley, Chief Executive Officer |
POWER OF ATTORNEY
Each of the undersigned members of the
Board of Directors of PLAYERS NETWORK, whose signature appears below hereby constitutes and appoints Mark Bradley, such person’s
true and lawful attorney-in-fact and agent with full power of substitution and re-substitution for such person and in such name,
place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 2014 (the “Annual Report”)
of PLAYERS NETWORK and any or all amendments to such Annual Report, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said 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 in and about the premises, as fully
to all intents and purposes as such person 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 and in the capacities
and on the dates indicated.
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/ Mark Bradley |
|
Director & Chief Executive Officer (Principal |
|
April 15, 2015 |
Mark Bradley |
|
Executive Officer & Principal Financial Officer) |
|
|
|
|
|
|
|
/s/ Michael Berk |
|
Director |
|
April 15, 2015 |
Michael Berk |
|
|
|
|
|
|
|
|
|
/s/ Doug Miller |
|
Director |
|
April 15, 2015 |
Doug Miller |
|
|
|
|
Exhibit 10.79
Note: October 13, 2014
NEITHER THESE SECURITIES NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER
OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION
OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST
SET FORTH BELOW.
8% CONVERTIBLE PROMISSORY NOTE
OF
Players
Network
Issuance Date: October 13, 2014
Total Face Value of Note: $236,500
Original Issue Discount: $16,500
Initial Purchase: $75,250
This
Note is a duly authorized Convertible Promissory Note of Players Network a corporation duly organized and existing under
the laws of the State of Nevada (the “Company”), designated as
the Company's 8% Convertible Promissory Note due October 13, 2015 (“Maturity Date”) in the principal amount
of $236,500 (the “Note”).
For
Value Received, the Company hereby promises to pay to the order of Tangiers Investment Group, LLC or its registered
assigns or successors-in-interest (“Holder”) the principal sum of up to $236,500 and to pay “guaranteed”
interest on the principal balance hereof (which principal balance shall be increased by the Holder’s payment of additional
consideration as set forth herein and which increase shall also include the prorated amount of the original issue discount in connection
with Holders payment of additional consideration) at the rate of 8%, all of which “guaranteed” interest shall be deemed
earned as of the date of each such payment of additional consideration by the Holder on the Maturity Date, to the extent such principal
amount and “guaranteed” interest have been repaid or converted into the Company's Common Stock, $0.001 par value per
share (the “Common Stock”), in accordance with the terms hereof.
The initial Purchase
Price will be $75,250 of consideration upon execution of the Note Purchase Agreement and all supporting documentation. The sum
of $70,000 shall be remitted and delivered to the Company, and $5,250 shall be retained by the Purchaser through an original issue
discount for due diligence and legal bills related to this transaction. The Holder reserves the right to pay additional consideration
at any time and in any amount it desires, up to the total face value of this Note, at its sole discretion. The principal sum (including
the prorated amount of the original issue discount) owed by the Company shall be prorated to the amount of consideration paid by
the Holder and only the consideration received by the Company, plus prorated “guaranteed” interest and other fees and
prorated original issue discount, shall be deemed owed by the Company. The original issue discount is set at 7.5% of any consideration
paid. The Company is not responsible to repay any unfunded portion of this Note.
In addition to the
“guaranteed” interest referenced above, and in the Event of Default pursuant to Section 2(e), additional interest will
accrue from the date of the Event of Default at the rate equal to the lower of 20% per annum or the highest rate permitted by law
(the “Default Rate”).
This Note may be
prepaid according to the following schedule: Between 1 and 180 days from the date of execution, this Note may be prepaid for 125%
of face value plus accrued interest. After 180 days from the date of execution until the Due Date, this Note may not be prepaid
without written consent from Tangiers. Whenever any amount expressed to be due by the terms of this Note is due on any day which
is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.
For purposes hereof
the following terms shall have the meanings ascribed to them below:
“Business
Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York
are authorized or required by law or executive order to remain closed.
“Conversion
Price” shall be equal to 60% of the average of the two lowest closing market prices of the Company’s common
stock during the 15 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note. If the
Company is placed on “chilled” status with the Depository Trust Company (“DTC”), the discount shall
be increased by 10% until such chill is remedied. If the Company is not Deposits and Withdrawal at Custodian (“DWAC”)
eligible through their Transfer Agent and the Depository Trust Company’s (“DTC”) Fast Automated Securities
Transfer (“FAST”) system, the discount will be increased by 5%. In the case of both, the discount shall be a
cumulative 15%. This note is subject to a limitation of $37,650 in principal conversion every 20 trading days.
“Principal
Amount” shall refer to the sum of (i) the original principal amount of this Note (including the prorated amount of
the original issue discount), (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Note
but not previously paid or added to the Principal Amount.
“Trading
Day” shall mean a day on which there is trading on the Principal Market.
“Underlying
Shares” means the shares of common stock into which the Note is convertible (including interest or principal payments
in common stock as set forth herein) in accordance with the terms hereof.
The following terms
and conditions shall apply to this Note:
Section 1.00 Conversion.
(a) Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall
have the right, at the Holder's option, at any time to convert the outstanding Principal Amount and interest under this Note in
whole or in part.
(b) The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the “Conversion
Date”.
(i)
Stock Certificates or DWAC. The Company will deliver to the Holder, or Holder’s authorized designee, no later
than two 2 Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive
legends and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this
Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note,
provided the Company's transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable
efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee),
by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposits and Withdrawal
at Custodian (“DWAC”) program (provided that the same time periods herein as for stock certificates shall apply).
(ii)
Charges, Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note
shall be made without charge to the Holder for any issuance fee, transfer tax, postage/mailing charge or any other
expense with respect to the issuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance
of the Common stock to Holder and acknowledges that this is a material obligation of this Note.
If the Company fails to deliver
to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section (free of any restrictions on transfer
or legends) prior to 3 Trading Days after the Conversion Date, the Company shall pay to the Holder as liquidated damages an amount
equal to $2,000 per day, until such certificate or certificates are delivered. The Company acknowledges that it would be extremely
difficult or impracticable to determine the Holder’s actual damages and costs resulting from a failure to deliver the Common
Stock and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable
estimate of those damages and costs. Such liquidated damages will be automatically added to the Principal Amount of the Note.
(c) Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (and
repayments in Common Stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the
Holder, not less than three times the number of shares of Common Stock as shall be issuable (taking into account the adjustments
under this Section 1 but without regard to any ownership limitations contained herein) upon the conversion of this Note to Common
Stock (the “Required Reserve”). These shares shall be reserved in proportion with the consideration actually received
by the Company and the total sharers reserved will be increased with future payments of consideration by Holder to ensure the Required
Reserve is met. The Company covenants that all shares of Common Stock that shall be issuable will, upon issue, be duly authorized,
validly issued, fully-paid, non-assessable and freely-tradable. If the amount of shares on reserve at the Transfer Agent for this
Note in Holder’s name shall drop below the Required Reserve, the Company will, within two (2) business days of written notification
from Holder, instruct the Transfer Agent to increase the number of shares so that the Required Reserve is met. The Company agrees
that this is a material term of this Note and any breach of this will result in a default of the Note.
(d) Conversion Limitation. The Holder will not submit a conversion to the Company that would result in the Holder owning
more than 9.99% of the then total outstanding shares of the Company (“Restricted Ownership
Percentage”).
Section 2.00 Defaults
and Remedies.
(e) Events
of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which
default continues for more than 5 business days after the due date; (ii) a default in the timely issuance of underlying
shares upon and in accordance with terms hereof, which default continues for 3 Business Days after the Company has failed to
issue shares or deliver stock certificates within the 3rd day following the Conversion Date; (iii) failure by the Company for
3 days after notice has been received by the Company to comply with any material provision of the Note Purchase Agreement;
(iv) failure of the Company to remain compliant with DTC, thus incurring a “chilled” status with DTC; (v) if the
Company is subject to any Bankruptcy Event; (vi) any failure of the Company to satisfy its “filing” obligations
under the rules and guidelines issued by OTC Markets News Service, OTC Markets.com and their affiliates; (vii) any failure of
the Company to provide the Holder with information related to the corporate structure including, but not limited to, the
number of authorized and outstanding shares, public float, etc. within 1 day of request by Holder; (viii) failure to have
sufficient number of authorized but unissued shares of the Company’s Common Stock available for any conversion; (ix)
failure of Company’s Common Stock to maintain a bid price in its trading market which occurs for at least 3 consecutive
Trading Days; (x) any delisting for any reason; (xi) failure by Company to pay any of its Transfer Agent fees or to maintain
a Transfer Agent of record; (xii) any trading suspension imposed by the Securities and Exchange Commission under Sections
12(j) or 12(k) of the 1934 Act; (xiii) any breach of Section 1.00 (c); or (xiv) any default after any cure period under, or
acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there
may be secured or evidenced any indebtedness for money borrowed by the Company in excess of $50,000 or for money borrowed the
repayment of which is guaranteed by the Company in excess of $50,000, whether such indebtedness or guarantee now exists or
shall be created hereafter.
Remedies. If an Event
of Default occurs and is continuing with respect to the Note, the Holder may declare all of the then outstanding Principal Amount
of this Note, including any interest due thereon, to be due and payable immediately without further action or notice. In the event
of such acceleration, the amount due and owing to the Holder shall be increased to 150% of the outstanding Principal Amount of
the Note held by the Holder plus all accrued and unpaid interest, fees, and liquidated damages, if any. Additionally, this Note
shall accrue interest on any unpaid principal from and after the occurrence and during the continuance of an Event of Default at
a rate of 20%. Finally, the Note will accrue liquidated damages of $1,000 per day from and after the occurrence and during the
continuance of an Event of Default. The Company acknowledges that it would be extremely difficult or impracticable to determine
the Holder’s actual damages and costs resulting from an Event of Default and any such additional amounts are the agreed upon
liquidated damages representing a reasonable estimate of those damages and costs. The remedies under this Note shall be cumulative
and automatically added to the principal value of the Note.
Section 3.00 General.
(f) Payment of Expenses.
The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by
the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.
(g) Assignment, Etc.
The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be binding upon the Company
and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.
(h) Governing
Law; Jurisdiction.
(i)
Governing
Law. This note will be governed by and construed in accordance with the laws of the state of California without regard to
any conflicts of laws or provisions thereof that would otherwise require the application of the law of any other jurisdiction.
(ii)
Jurisdiction.
Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties hereto
shall be settled by binding arbitration in San Diego, California. All arbitration shall be conducted in accordance with the rules
and regulations of the American Arbitration Association ("AAA"). AAA shall designate an arbitrator from an approved
list of arbitrators following both parties' review and deletion of those arbitrators on the approved list having a conflict of
interest with either party. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.
(ii)
No Jury Trial. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with
respect to any litigation based on, or arising out of, under, or in connection with, this note.
IN WITNESS WHEREOF, the Company has
caused this Convertible Promissory Note to be duly executed on the day and in the year first above written.
Players Network
By:_____________________________
Name:
Title:
Date:
This Note is acknowledged as: Note of October 13, 2014
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to
convert that certain $236,500 Convertible Promissory Note identified as the Note)
DATE: | ____________________________ |
| | |
FROM: | Tangiers Investment Group, LLC |
| | |
| Re: | $236,500 Convertible Promissory Note (this “Note”) originally issued by Players Network,
a Nevada corporation, to Tangiers Investment Group, LLC on October 13, 2014. |
The undersigned
on behalf of Tangiers Investment Group, LLC, hereby elects to convert $_______________________ of the aggregate outstanding
Principal Amount (as defined in the Note) indicated below of this Note into shares of Common Stock, $0.001 par value per share,
of Players Network (the “Company”) according
to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned,
the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions
as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except
for such transfer taxes, if any. The undersigned represents as of the date hereof that, after giving effect to the conversion of
this Note pursuant to this Conversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage”
contained in this Note.
Conversion
information: |
____________________________________________________ |
|
Date to Effect Conversion |
|
|
|
____________________________________________________ |
|
Aggregate Principal Amount of Note Being Converted |
|
|
|
____________________________________________________ |
|
Aggregate Interest on Amount Being Converted |
|
|
|
____________________________________________________ |
|
Number of Shares of Common Stock to be Issued |
|
|
|
____________________________________________________ |
|
Applicable Conversion Price |
|
|
|
____________________________________________________ |
|
Signature |
|
|
|
____________________________________________________ |
|
Name |
|
|
|
____________________________________________________ |
|
Address |
Exhibit 10.80
AMENDMENT
TO THE $236,500 PROMISSORY NOTE DATED OCTOBER
13, 2014
The parties agree that the $236,500 Promissory Note (the “Note”)
by and between Players Network (the “Borrower”) and Tangiers Investment Group, LLC (the “Lender”) is hereby
amended as follows:
| 1. | Payment. The Lender shall make a payment to the Borrower of $53,750 of Consideration ($50,000 in cash and $3,750 in
an OID) under the Note on or before February 5, 2015. |
| 2. | Independent Transactions. The Borrower understands and agrees that the Note sets forth the terms for a series of independent
transactions in which the Lender may elect to make a payment of Consideration to the borrower with each payment of Consideration
creating a separate obligation of the Borrower to the Lender with the terms set forth in the Note. Accordingly, the Maturity Date
of each payment of Consideration, and the repayment terms for each payment of Consideration, are as set forth in the Note. |
ALL OTHER TERMS AND CONDITIONS OF THE NOTE REMAIN IN FULL FORCE
AND EFFECT.
Please indicate acceptance and approval of this amendment dated
February 5, 2015 by signing below:
_________________________ |
_________________________ |
Players Network |
Tangiers Investment Group, LLC |
By: |
By: |
Its: |
Its: Managing Member |
Exhibit 10.81
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Principal Amount: $104,000.00 |
Issue Date: October 27, 2014 |
Purchase Price: $104,000.00 |
|
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED,
PLAYERS NETWORK, a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order
of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the “Holder”) the sum of $104,000.00
together with any interest as set forth herein, on July 29, 2015 (the “Maturity Date”), and to pay interest on the
unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof
(the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).
This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall
apply to this Note:
Article
I. CONVERSION RIGHTS
1.1 Conversion
Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is
one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date
of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the
remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount
of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any
shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of
this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted
portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on
conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon
the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except
as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on
conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower,
and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined
by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then
in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00
p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount”
means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 61% multiplied
by the Market Price (as defined herein) (representing a discount rate of 39%). “Market Price” means the average of
the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the
closing bid price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market
(the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder
(i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on
the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such
security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security
that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the
manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders
of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any
period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
(b)
Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary,
in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other
than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date,
the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment
of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.
1.3 Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have
authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the
Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased
from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities
or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall
be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion
of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates
for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute
full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.
If, at any time the Borrower
does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.
1.4 Method
of Conversion.
(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at
any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail
or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject
to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(b)
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of
this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower
unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall, prima
facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion
of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this
Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate
the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c)
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name
other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name
such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the
amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission
or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided
in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.
(e)
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder
shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount
and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to
issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action
by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to
the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.
(f)
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained
in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit
the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system.
(g)
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue
other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right
are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained
in this Section 1.4(g) are justified.
1.5 Concerning
the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall
have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or
a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule
144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an
Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject
to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note
have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion
of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following
form, as appropriate:
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or
(ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not
accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section
3.2 of the Note.
1.6
Effect of Certain Events.
(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or
substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination
of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:
(i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to
the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in
Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation,
limited liability company, partnership, association, trust or other entity or organization.
(b)
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior
to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation
of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable
upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had
this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this
Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and
of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but
in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve,
or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c)
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock
of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion
of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such
assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had
such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to
such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues
or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance)
of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion
Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.
The Borrower shall be deemed
to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights
and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
Additionally, the Borrower
shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share
for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any,
received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record
is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
(f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result
of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment
and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would
be received upon conversion of the Note.
1.7
Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities
market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise
pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common
Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock
is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date
(as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any
of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu
of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.
1.8
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights
as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates
for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because
of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect
to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder
or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.
In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section
1.3) for the Borrower’s failure to convert this Note.
1.9
Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth
on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment
Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower
is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the order of the Holder
as specified by the Holder in writing to the Borrower, at least one (1) business day prior to the Optional Prepayment Date. If
the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following
this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of
this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment
Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date,
the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
Prepayment Period |
Prepayment Percentage |
1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date. |
112% |
2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date
which is sixty (60) days following the Issue Date |
117% |
3. The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date |
123% |
4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date |
128% |
5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date |
130% |
After the expiration
of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.
Article
II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall
not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution
(whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment
or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which
is approved by a majority of the Borrower’s disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower
shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for
property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock
of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3
Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments
for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed
on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall
be used to repay this Note.
2.4
Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary
course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.5
Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the
date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.
Article
III. EVENTS OF DEFAULT
If any of the following events
of default (each, an “Event of Default”) shall occur:
3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due
on this Note, whether at maturity, upon acceleration or otherwise.
3.2
Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens
in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in
certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or
hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of
Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note,
or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes
any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and
any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not
be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation
of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a
conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the
option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such
advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.
3.3
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in
this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period
of ten (10) days after written notice thereof to the Borrower from the Holder.
3.4
Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase
Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of
time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.5
Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors,
or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business,
or such a receiver or trustee shall otherwise be appointed.
3.6
Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary
of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or
involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower
or any subsidiary of the Borrower.
3.8
Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of
the OTC (which specifically includes the Pink Sheets electronic quotation system) or an equivalent replacement exchange, the Nasdaq
National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.
3.9
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the
Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10 Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.11 Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its
debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a
“going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or
other assets which are necessary to conduct its business (whether now or in the future).
3.13 Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or
period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of
such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on
the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14 Reverse
Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the
Holder.
3.15 Replacement
of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or
default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the
passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under
this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all
rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said
Other Agreement or hereunder. “Other Agreements”
means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of,
(2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the
term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan
transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower
to the Holder.
Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof
or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay
to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).
UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued
and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”)
plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment
plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or
(ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares
of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the
Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion
Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the
Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies
available at law or in equity.
If the Borrower fails to
pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall
have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.
Article
IV. MISCELLANEOUS
4.1
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Borrower,
to:
PLAYERS NETWORK
1771 East Flamingo Road, # 201-A
Las Vegas, NV 89119
Attn: MARK BRADLEY,
Chief Executive Officer
facsimile:
With a copy by fax only
to (which copy shall not constitute notice):
[enter name of law firm]
Attn: [attorney
name]
[enter address
line 1]
[enter city,
state, zip]
facsimile:
[enter fax number]
If to the Holder:
KBM WORLDWIDE, INC.
80 Cuttermill
Road – Suite 410
Great Neck, NY
11021
Attn: Seth Kramer, President
e-mail: info@kbmworldwide.com
With a copy by fax only
to (which copy shall not constitute notice):
Naidich Wurman Birnbaum
& Maday, LLP
Att: Judah A. Eisner,
Esq.
Attn: Bernard S. Feldman,
Esq.
facsimile:
516-466-3555
e-mail: dyork@nwbmlaw.com
4.3
Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower
and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument
(and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then
as so amended or supplemented.
4.4
Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be
the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor”
(as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other lending arrangement.
4.5
Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs
of collection, including reasonable attorneys’ fees.
4.6
Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions
contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and
county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of
any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7
Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding
principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest
on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this
Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty
and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of
Common Stock.
4.8
Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the
Purchase Agreement.
4.9
Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a
Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the
Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty
(20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right
or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges
that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach
or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by its duly authorized officer this October 27, 2014.
PLAYERS NETWORK
By: /s/ MARK BRADLEY
MARK BRADLEY
Chief
Executive Officer
EXHIBIT A – NOTICE OF CONVERSION
The undersigned hereby elects
to convert $_________________ principal amount of the Note (defined below) into that number
of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth
below, of PLAYERS NETWORK, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note
of the Borrower dated as of October 27, 2014 (the “Note”), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable
instructions:
[ ] |
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
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Name of DTC Prime Broker: |
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Account Number: |
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[ ] |
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
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KBM WORLDWIDE, INC.
80 Cuttermill Road – Suite 410
Great Neck, NY 11021
Attention: Certificate Delivery
e-mail: info@kbmworldwide.com |
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Date of Conversion: |
_____________ |
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Applicable Conversion Price: |
$____________ |
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Number of Shares of Common Stock to be Issued |
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Pursuant to Conversion of the Notes: |
_____________ |
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Amount of Principal Balance Due remaining |
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Under the Note after
this conversion: |
_____________ |
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KBM WORLDWIDE, INC.
By:
/s/ Seth Kramer
Name:
Seth Kramer
Title: President
Date: October
27, 2014
|
Exhibit 10.82
SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of October 27, 2014, by and between PLAYERS NETWORK, a Nevada
corporation, with headquarters located at 1771 East Flamingo Road, # 201-A, Las Vegas, NV 89119 (the “Company”), and
KBM WORLDWIDE, INC., a New York corporation, with its address at 80 Cuttermill Road, Suite 410, Great Neck, NY 11021 (the
“Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement
an 8% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $104,000.00
(together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company
(the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is
set forth immediately below its name on the signature pages hereto; and
NOW THEREFORE, the
Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer
agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the
signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note
to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately
available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note
in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages
hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery
of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be 12:00 noon, Eastern Standard Time on or about October 29, 2014, or such other mutually agreed upon time. The closing of
the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as
may be agreed to by the parties.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable
upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if
any, as are issuable (i) on account of interest on the Note, (ii) as a result of the events described in Sections 1.3
and 1.4(g) of the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant
to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and,
collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale
or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D (an “Accredited Investor”).
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States federal and state securities laws and that the Company
is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue
to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any,
have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the
Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will
not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure
to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section
3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware
of any facts that may constitute a breach of any of the Company's representations and warranties made herein.
e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government
or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not
being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered
to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under
the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost
of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement.
g. Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under
the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates for such Securities):
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”
The legend set forth above
shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped,
if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted
by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by
a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.
In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities
pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of
Default pursuant to Section 3.2 of the Note.
h. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed
and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in
accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the
signature pages hereto.
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation
duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full
power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and
the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have
a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation
or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or
other ownership interest.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform
this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance
and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by
the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders
is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such
authorized representative is the true and official representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery
by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized capital stock of the Company consists of: (i) 600,000,000 authorized
shares of Common Stock, $0.001 par value per share, of which 159,787,873 shares are issued and outstanding; and (ii) 2,000,000
authorized shares of Series A Preferred Stock, $0.001 par value per share, of which 2,000,000 shares are issued and outstanding
and (iii) 10,873,347 authorized shares of Series A Preferred Stock, $0.001 par value per share, of which 4,349,339 shares are issued
and outstanding; no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved
for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common
Stock and 43,000,000 shares are reserved for issuance upon conversion of the Note. All of such outstanding shares of capital stock
are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the
Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for
any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or
their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the
Note or the Conversion Shares. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate
of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as
in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common
Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with
a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing
Date.
d. Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the
Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights
of shareholders of the Company and will not impose personal liability upon the holder thereof.
e. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common
Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
f. No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate
of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default
(or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company
or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company
nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or
both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has
taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property
or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually
or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being
conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation
of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order
for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof
or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion
of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date hereof. If the Company is listed on the OTCBB, the
Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and does
not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future. The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. SEC Documents; Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver
to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective
dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None
of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except
for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates,
the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods
involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to June 30, 2014, and (ii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company.
The Company is subject to the reporting requirements of the 1934 Act.
h. Absence of Certain Changes. Since June 30, 2014, there has been no material adverse change and no material adverse
development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects
or 1934 Act reporting status of the Company or any of its Subsidiaries.
i. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity
as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending
or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without
regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
j. Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights
to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct
its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or
other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing.
The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
k. No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s
officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is
a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material
Adverse Effect.
l. Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and
all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver
with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax.
None of the Company’s tax returns is presently being audited by any taxing authority.
m. Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries
makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could
obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors,
or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from
any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
n. Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance
has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports
filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).
o. Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer
is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer
or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents
to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation
of the Company and its representatives.
p. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances
that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities
to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities.
q. No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
r. Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and
there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company
Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since June 30, 2014, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.
s. Environmental Matters.
(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of
the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course
of the Company’s or any of its Subsidiaries’ business.
(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
t. Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would
not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.
u. Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Upon written
request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’
liability coverage, errors and omissions coverage, and commercial general liability coverage.
v. Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
w. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated
or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
x. Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e.,
its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they
become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company
would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.
The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving
effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
y. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this
Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an
“Investment Company”). The Company is not controlled by an Investment Company.
z. Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties
set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be
considered an Event of default under Section 3.4 of the Note.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section
6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take
such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable
closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States
(or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or
prior to the Closing Date.
c. Use of Proceeds. The Company shall use the proceeds for general working capital purposes.
d. Right of First Refusal. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior
to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR
Notice”), including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation
to be entered into in connection therewith, and providing the Buyer an option during the seventy two (72) hour period following
delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such
Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right
of First Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity (or debt with
an equity component) financing in an amount less than $100,000 (“Future Offering(s)”) during the period beginning on
the Closing Date and ending six (6) months following the Closing Date. Notwithstanding anything contained herein to the contrary,
the Company shall not consummate any Future Offering with an investor, or an affiliate of such investor (collectively “Prospective
Investor”), identified on an ROFR Notice whereby the Buyer exercised its Right of First Refusal for a period of forty (45)
days following such exercise; and any subsequent offer by a Prospective Investor is subject to this Section 4(d) and the Right
of First Refusal. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery
of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing
the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy
two (72) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the
same terms as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments
to the terms and conditions of any proposed Future Offering. The Right of First Refusal shall not apply to any transaction involving
(i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or
in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or
in connection with the disposition or acquisition of a business, product or license by the Company. The Right of First Refusal
also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other
convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.
e. Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection
herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and
expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents
or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs
of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise
the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice
by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to
reimburse Buyer’ expenses shall be $4,000.00.
f. Financial Information. Upon written request the Company agrees to send or make available the following reports to
the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with
the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within
one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company
makes available or gives to such shareholders.
g. [INTENTIONALLY DELETED]
h. Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long
as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB or any equivalent replacement
exchange or electronic quotation system (including but not limited to the Pink Sheets electronic quotation system) and will comply
in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry
Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies
of any notices it receives from the OTCBB and any other exchanges or electronic quotation systems on which the Common Stock is
then traded regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.
i. Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i)
assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith
and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the Pink Sheets, OTCQX, OTCBB, Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.
j. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under
circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the
offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
k. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to
any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4
of the Note.
l. Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with
the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934
Act.
m. Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company
and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions
with respect to the common stock of the Company.
5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide,
prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the
Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction
as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date
on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement
and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in
transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer
upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not
fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion
Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement.
Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to
comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides
the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant
to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent
to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the
Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion:
a. The Buyer shall have executed this Agreement and delivered the same to the Company.
b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made
and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note
at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that
these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and delivered the same to the Buyer.
b. The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request)
in accordance with Section 1(b) above.
c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer,
shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
d. The representations and warranties of the Company shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but
not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’
resolutions relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including
but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934
Act reporting obligations.
g. The Conversion Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB
shall not have been suspended by the SEC or the OTCBB.
h. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.
8. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state
and county of Nassau. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.
The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of
any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect
the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest
of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company,
to:
PLAYERS NETWORK
1771 East Flamingo
Road, # 201-A
Las Vegas,
NV 89119
Attn: MARK BRADLEY, Chief Executive
Officer
facsimile: [enter fax number]
With a copy
by fax only to (which copy shall not constitute notice):
[enter name
of law firm]
Attn: [attorney
name]
[enter address
line 1]
[enter city,
state, zip]
facsimile:
[enter fax number]
If to the Buyer:
KBM WORLDWIDE, INC.
80 Cuttermill
Road – Suite 410
Great Neck, NY
11021
Attn: Seth Kramer, President
e-mail: info@kwbmlaw.com
With a copy
by fax only to (which copy shall not constitute notice):
Naidich Wurman Birnbaum
& Maday LLP
Att: Judah A. Eisner,
Esq.
Attn: Bernard S. Feldman,
Esq.
facsimile:
516-466-3555
e-mail: dyork@nwbmlaw.com
Each party shall provide
notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors
and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that
term is defined under the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement
shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The
Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses
as they are incurred.
j. Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance
of any press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any
press release or SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to such transactions as is required
by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
l. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be applied against any party.
m. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the
undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
PLAYERS NETWORK
By: /s/ MARK BRADLEY
MARK BRADLEY
Chief Executive Officer
KBM WORLDWIDE, INC.
By: /s/ Seth Kramer
Name: Seth Kramer
Title: President
80 Cuttermill Road – Suite 410
Great Neck, NY 11021
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note: |
$104,000.00 |
|
|
Aggregate Purchase Price: |
$104,000.00 |
Tranche #1 K-1388 (PNTV)
October 27, 2014
mbradley@playersnetwork.com
Exhibit 10.83
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Principal Amount: $64,000.00 |
Issue Date: December 3, 2014 |
Purchase Price: $64,000.00 |
|
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED,
PLAYERS NETWORK, a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order
of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the “Holder”) the sum of $64,000.00 together
with any interest as set forth herein, on September 5, 2015 (the “Maturity Date”), and to pay interest on the unpaid
principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the
“Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or
otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).
This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall
apply to this Note:
Article
I. CONVERSION RIGHTS
1.1
Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning
on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity
Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III,
each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid
principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue
Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed
or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);
provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation
on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable
upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion
may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and
the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of
this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect
on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00
p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount”
means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 61% multiplied
by the Market Price (as defined herein) (representing a discount rate of 39%). “Market Price” means the average of
the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the
closing bid price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market
(the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder
(i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on
the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such
security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security
that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the
manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders
of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any
period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
(b)
Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary,
in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other
than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date,
the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment
of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.
1.3 Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at
all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of
the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The
Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The
Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In
addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the
number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower
shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of
this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who
are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Note.
If, at any time the Borrower
does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.
1.4
Method of Conversion.
(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at
any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail
or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject
to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(b)
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of
this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower
unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall, prima
facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion
of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this
Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate
the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c)
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name
other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name
such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the
amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission
or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided
in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.
(e)
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder
shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount
and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to
issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action
by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to
the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.
(f)
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained
in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit
the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system.
(g)
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue
other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right
are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained
in this Section 1.4(g) are justified.
1.5 Concerning the Shares.
The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished
with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees
to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined
in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set
forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the
Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date
that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has
not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement
or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”
The legend set forth above
shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144
or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.6
Effect of Certain Events.
(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or
substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination
of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:
(i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to
the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in
Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation,
limited liability company, partnership, association, trust or other entity or organization.
(b)
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior
to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation
of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable
upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had
this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this
Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and
of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but
in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve,
or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c)
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock
of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion
of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such
assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had
such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to
such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues
or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance)
of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion
Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.
The Borrower shall be deemed
to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights
and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
Additionally, the Borrower
shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share
for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any,
received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record
is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
(f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result
of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment
and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would
be received upon conversion of the Note.
1.7
Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities
market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise
pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common
Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock
is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date
(as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any
of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu
of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.
1.8
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights
as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates
for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because
of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect
to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder
or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.
In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section
1.3) for the Borrower’s failure to convert this Note.
1.9
Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth
on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment
Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower
is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the order of the Holder
as specified by the Holder in writing to the Borrower, at least one (1) business day prior to the Optional Prepayment Date. If
the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following
this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of
this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment
Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date,
the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
Prepayment Period |
Prepayment Percentage |
1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date. |
112% |
2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date
which is sixty (60) days following the Issue Date |
117% |
3. The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date |
123% |
4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date |
128% |
5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date |
130% |
After the expiration of one
hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.
Article
II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall
not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution
(whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment
or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which
is approved by a majority of the Borrower’s disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower
shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for
property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock
of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3
Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments
for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed
on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall
be used to repay this Note.
2.4
Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary
course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.5
Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the
date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.
Article
III. EVENTS OF DEFAULT
If any of the following events
of default (each, an “Event of Default”) shall occur:
3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due
on this Note, whether at maturity, upon acceleration or otherwise.
3.2
Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens
in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in
certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or
hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of
Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note,
or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes
any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and
any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not
be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation
of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a
conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the
option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such
advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.
3.3
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in
this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period
of ten (10) days after written notice thereof to the Borrower from the Holder.
3.4
Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase
Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of
time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.5
Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors,
or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business,
or such a receiver or trustee shall otherwise be appointed.
3.6
Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary
of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or
involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower
or any subsidiary of the Borrower.
3.8
Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of
the OTC (which specifically includes the Pink Sheets electronic quotation system) or an equivalent replacement exchange, the Nasdaq
National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.
3.9
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the
Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.11 Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its
debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a
“going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or
other assets which are necessary to conduct its business (whether now or in the future).
3.13 Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or
period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of
such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on
the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14 Reverse
Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to
the Holder.
3.15 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the
Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions
in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably
reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all
applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the
Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the
Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder.
“Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower,
and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes;
provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note.
Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future
debt of Borrower to the Holder.
Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof
or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay
to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).
UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued
and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”)
plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment
plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or
(ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares
of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the
Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion
Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the
Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies
available at law or in equity.
If the Borrower fails to
pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall
have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.
Article
IV. MISCELLANEOUS
4.1
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Borrower,
to:
PLAYERS NETWORK
1771 East Flamingo Road, # 201-A
Las Vegas, NV 89119
Attn: MARK BRADLEY,
Chief Executive Officer
facsimile:
With a copy by fax only
to (which copy shall not constitute notice):
[enter name of law firm]
Attn: [attorney
name]
[enter address
line 1]
[enter city,
state, zip]
facsimile:
[enter fax number]
If to the Holder:
KBM WORLDWIDE, INC.
80 Cuttermill
Road – Suite 410
Great Neck, NY
11021
Attn: Seth Kramer, President
e-mail: info@kbmworldwide.com
With a copy by fax only
to (which copy shall not constitute notice):
Naidich Wurman Birnbaum
& Maday, LLP
Att: Judah A. Eisner,
Esq.
Attn: Bernard S. Feldman,
Esq.
facsimile:
516-466-3555
e-mail: dyork@nwbmlaw.com
4.3
Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower
and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument
(and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then
as so amended or supplemented.
4.4
Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be
the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor”
(as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other lending arrangement.
4.5
Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs
of collection, including reasonable attorneys’ fees.
4.6
Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions
contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and
county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of
any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7
Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding
principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest
on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this
Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty
and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of
Common Stock.
4.8
Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the
Purchase Agreement.
4.9
Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a
Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the
Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty
(20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right
or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges
that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach
or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by its duly authorized officer this December 3, 2014.
PLAYERS NETWORK
By: /s/ MARK BRADLEY
MARK BRADLEY
Chief
Executive Officer
EXHIBIT A – NOTICE OF CONVERSION
The undersigned hereby elects
to convert $_________________ principal amount of the Note (defined below) into that number
of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth
below, of PLAYERS NETWORK, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note
of the Borrower dated as of December 3, 2014 (the “Note”), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable
instructions:
[ ] |
The Borrower
shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
|
|
|
Name of DTC Prime Broker: |
|
Account Number: |
|
|
[ ] |
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
|
|
|
KBM WORLDWIDE, INC.
80 Cuttermill Road – Suite 410
Great Neck, NY 11021
Attention: Certificate Delivery
e-mail: info@kbmworldwide.com |
|
|
|
Date of Conversion: |
_____________ |
|
Applicable Conversion Price: |
$____________ |
|
Number of Shares of Common Stock to be Issued |
|
|
Pursuant to Conversion of the Notes: |
_____________ |
|
Amount of Principal Balance Due remaining |
|
|
Under the Note after
this conversion: |
_____________ |
|
|
|
KBM WORLDWIDE, INC.
By:
/s/ Seth Kramer
Name:
Seth Kramer
Title: President
Date: December
3, 2014
|
Exhibit 10.84
SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of December 3, 2014, by and between PLAYERS NETWORK, a Nevada corporation,
with headquarters located at 1771 East Flamingo Road, # 201-A, Las Vegas, NV 89119 (the “Company”), and KBM WORLDWIDE,
INC., a New York corporation, with its address at 80 Cuttermill Road, Suite 410, Great Neck, NY 11021 (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement
an 8% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $64,000.00
(together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company
(the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is
set forth immediately below its name on the signature pages hereto; and
NOW THEREFORE, the
Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer
agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the
signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note
to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately
available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note
in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages
hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery
of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be 12:00 noon, Eastern Standard Time on or about December 5, 2014, or such other mutually agreed upon time. The closing of
the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as
may be agreed to by the parties.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable
upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if
any, as are issuable (i) on account of interest on the Note, (ii) as a result of the events described in Sections 1.3
and 1.4(g) of the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant
to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and,
collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale
or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D (an “Accredited Investor”).
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States federal and state securities laws and that the Company
is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue
to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any,
have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the
Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will
not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure
to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section
3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware
of any facts that may constitute a breach of any of the Company's representations and warranties made herein.
e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government
or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not
being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered
to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under
the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost
of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement.
g. Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under
the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates for such Securities):
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”
The legend set forth above
shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped,
if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted
by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by
a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.
In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities
pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of
Default pursuant to Section 3.2 of the Note.
h. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed
and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in
accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the
signature pages hereto.
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation
duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full
power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and
the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have
a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation
or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or
other ownership interest.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform
this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance
and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by
the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders
is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such
authorized representative is the true and official representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery
by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized capital stock of the Company consists of: (i) 600,000,000 authorized
shares of Common Stock, $0.001 par value per share, of which 173,709,531 shares are issued and outstanding; and (ii) 2,000,000
authorized shares of Series A Preferred Stock, $0.001 par value per share, of which 2,000,000 shares are issued and outstanding
and (iii) 10,873,347 authorized shares of Series A Preferred Stock, $0.001 par value per share, of which 4,349,339 shares are issued
and outstanding; no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved
for issuance pursuant to securities (other than the Note and a prior convertible promissory note in favor of the Buyer dated October
27, 2014 in the amount of $104,000.00 for which 43,000,000 shares of Common Stock are presently reserved) exercisable for, or convertible
into or exchangeable for shares of Common Stock and 25,000,000 shares are reserved for issuance upon conversion of the Note. All
of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable.
No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Note or the Conversion Shares. The Company has furnished to the Buyer true and correct
copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”),
the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company
shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of
the Company as of the Closing Date.
d. Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the
Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights
of shareholders of the Company and will not impose personal liability upon the holder thereof.
e. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common
Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
f. No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate
of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default
(or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company
or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company
nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or
both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has
taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property
or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually
or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being
conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation
of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order
for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof
or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion
of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date hereof. If the Company is listed on the OTCBB, the
Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and does
not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future. The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. SEC Documents; Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver
to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective
dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None
of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except
for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates,
the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods
involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to September 30, 2014, and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company.
The Company is subject to the reporting requirements of the 1934 Act.
h. Absence of Certain Changes. Since September 30, 2014, there has been no material adverse change and no material adverse
development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects
or 1934 Act reporting status of the Company or any of its Subsidiaries.
i. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity
as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending
or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without
regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
j. Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights
to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct
its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or
other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing.
The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
k. No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s
officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is
a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material
Adverse Effect.
l. Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and
all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver
with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax.
None of the Company’s tax returns is presently being audited by any taxing authority.
m. Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries
makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could
obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors,
or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from
any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
n. Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance
has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports
filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).
o. Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer
is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer
or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents
to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation
of the Company and its representatives.
p. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances
that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities
to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities.
q. No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
r. Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and
there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company
Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since September 30, 2014, neither the Company nor any of its Subsidiaries has received
any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to
possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.
s. Environmental Matters.
(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of
the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course
of the Company’s or any of its Subsidiaries’ business.
(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
t. Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would
not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.
u. Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Upon written
request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’
liability coverage, errors and omissions coverage, and commercial general liability coverage.
v. Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
w. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated
or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
x. Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e.,
its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they
become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company
would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.
The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving
effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
y. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this
Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an
“Investment Company”). The Company is not controlled by an Investment Company.
z. Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties
set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be
considered an Event of default under Section 3.4 of the Note.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section
6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take
such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable
closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States
(or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or
prior to the Closing Date.
c. Use of Proceeds. The Company shall use the proceeds for general working capital purposes.
d. Right of First Refusal. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior
to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR
Notice”), including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation
to be entered into in connection therewith, and providing the Buyer an option during the seventy two (72) hour period following
delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such
Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right
of First Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity (or debt with
an equity component) financing in an amount less than $100,000 (“Future Offering(s)”) during the period beginning on
the Closing Date and ending six (6) months following the Closing Date. Notwithstanding anything contained herein to the contrary,
the Company shall not consummate any Future Offering with an investor, or an affiliate of such investor (collectively “Prospective
Investor”), identified on an ROFR Notice whereby the Buyer exercised its Right of First Refusal for a period of forty (45)
days following such exercise; and any subsequent offer by a Prospective Investor is subject to this Section 4(d) and the Right
of First Refusal. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery
of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing
the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy
two (72) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the
same terms as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments
to the terms and conditions of any proposed Future Offering. The Right of First Refusal shall not apply to any transaction involving
(i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or
in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or
in connection with the disposition or acquisition of a business, product or license by the Company. The Right of First Refusal
also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other
convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.
e. Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection
herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and
expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents
or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs
of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise
the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice
by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to
reimburse Buyer’ expenses shall be $4,000.00.
f. Financial Information. Upon written request the Company agrees to send or make available the following reports to
the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with
the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within
one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company
makes available or gives to such shareholders.
g. [INTENTIONALLY DELETED]
h. Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long
as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB or any equivalent replacement
exchange or electronic quotation system (including but not limited to the Pink Sheets electronic quotation system) and will comply
in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry
Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies
of any notices it receives from the OTCBB and any other exchanges or electronic quotation systems on which the Common Stock is
then traded regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.
i. Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i)
assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith
and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the Pink Sheets, OTCQX, OTCBB, Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.
j. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under
circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the
offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
k. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to
any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4
of the Note.
l. Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with
the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934
Act.
m. Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company
and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions
with respect to the common stock of the Company.
5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide,
prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the
Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction
as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date
on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement
and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in
transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer
upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not
fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion
Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement.
Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to
comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides
the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant
to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent
to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the
Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion:
a. The Buyer shall have executed this Agreement and delivered the same to the Company.
b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made
and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note
at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that
these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and delivered the same to the Buyer.
b. The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request)
in accordance with Section 1(b) above.
c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer,
shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
d. The representations and warranties of the Company shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but
not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’
resolutions relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including
but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934
Act reporting obligations.
g. The Conversion Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB
shall not have been suspended by the SEC or the OTCBB.
h. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.
8. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state
and county of Nassau. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.
The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of
any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect
the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest
of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company,
to:
PLAYERS NETWORK
1771 East Flamingo
Road, # 201-A
Las Vegas,
NV 89119
Attn: MARK BRADLEY, Chief Executive
Officer
facsimile: [enter fax number]
With a copy
by fax only to (which copy shall not constitute notice):
[enter name
of law firm]
Attn: [attorney
name]
[enter address
line 1]
[enter city,
state, zip]
facsimile:
[enter fax number]
If to the Buyer:
KBM WORLDWIDE, INC.
80 Cuttermill
Road – Suite 410
Great Neck, NY
11021
Attn: Seth Kramer, President
e-mail: info@kwbmlaw.com
With a copy
by fax only to (which copy shall not constitute notice):
Naidich Wurman Birnbaum
& Maday LLP
Att: Judah A. Eisner,
Esq.
Attn: Bernard S. Feldman,
Esq.
facsimile:
516-466-3555
e-mail: dyork@nwbmlaw.com
Each party shall provide
notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors
and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that
term is defined under the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement
shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The
Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses
as they are incurred.
j. Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance
of any press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any
press release or SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to such transactions as is required
by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
l. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be applied against any party.
m. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the
undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
PLAYERS NETWORK
By: /s/ MARK BRADLEY
MARK BRADLEY
Chief Executive Officer
KBM WORLDWIDE, INC.
By: /s/ Seth Kramer
Name: Seth Kramer
Title: President
80 Cuttermill Road – Suite 410
Great Neck, NY 11021
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note: |
$64,000.00 |
|
|
Aggregate Purchase Price: |
$64,000.00 |
Tranche #2 K-1481 (PNTV)
December 3, 2014
mbradley@playersnetwork.com
Exhibit 21.1
Subsidiaries
|
|
State of |
|
|
|
Abbreviated |
Name of Entity(2) |
|
Incorporation |
|
Relationship |
|
Reference |
Players Network(1) |
|
Nevada |
|
Parent |
|
PNTV |
Green Leaf Farms Holdings, Inc.(2) |
|
Nevada |
|
Subsidiary |
|
GLFH |
Green Leaf Medical, LLC(3)(4) |
|
Nevada |
|
Subsidiary |
|
GLML |
_______________
(1)Players Network entity is in
the form of a Corporation.
(2)Majority-owned subsidiary formed
on July 8, 2014, in which PNTV retained 83% ownership, with the remaining 17% held by key experts and advisors. An additional
1.6% was sold to an investor on December 8, 2014, giving PNTV 81.4% ownership and minority interests ownership of 18.6%
as of December 31, 2014.
(3)Wholly-Owned subsidiary of GLFH
formed for prospective purposes, but has not incurred any income or expenses to date.
(4)Entity formed for prospective
purposes, but has not incurred any income or expenses to date.
Exhibit 31.1
Certification of Principal Executive
Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
and Securities and Exchange Commission
Release 34-46427
I, Mark Bradley, certify that:
1. I have reviewed this annual report on Form 10-K of Players
Network;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. As the principal executive officer, I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 15, 2015
|
/s/ Mark Bradley |
|
Mark Bradley,
Principal Executive Officer |
Exhibit 31.2
Certification of Principal Financial
Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
and Securities and Exchange Commission
Release 34-46427
I, Mark Bradley, certify that:
1. I have reviewed this annual report on Form 10-K of Players
Network;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. As the principal financial officer, I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 15, 2015
|
/s/ Mark Bradley |
|
Mark Bradley,
Principal Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the annual report of Players Network. (the
"Company") on Form 10-K for the fiscal year ended December 31, 2014 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Mark Bradley, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements
of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 15, 2015
|
/s/ Mark Bradley |
|
Mark Bradley,
Principal Executive Officer and
Principal Financial Officer |