UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015. |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to _________. |
Commission file number: 000-29363
(Exact name of registrant as specified in
its charter)
Nevada |
|
88-0343702 |
(State or other jurisdiction of
incorporation or organization) |
|
(IRS Employer
Identification No.) |
1771 E. Flamingo Road, #201-A
Las Vegas, NV |
|
89119 |
(Address of principal executive offices) |
|
(Zip Code) |
(702) 734-3457
(Registrant’s
telephone number, including area code)
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
o No x
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§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
x No o
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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 ¨ |
Accelerated filer ¨ |
|
|
Non-accelerated
filer ¨
(Do not check if a smaller reporting company) |
Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
¨ No x
The number of shares outstanding of the Registrant’s Common
Stock on May 11, 2015 was 225,848,659.
PLAYERS NETWORK
FORM 10-Q
Quarterly Period Ended March 31, 2015
INDEX
|
Page |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS |
|
PART I. FINANCIAL INFORMATION |
|
Item 1. |
Financial Statements |
2 |
|
Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014 |
2 |
|
Statements of Operations for the Three Months ended March 31, 2015 and 2014 (Unaudited) |
3 |
|
Statements of Cash Flows for the Three Months ended March 31, 2015 and 2014 (Unaudited) |
4 |
|
Notes to the Condensed Consolidated financial statements (Unaudited) |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
35 |
Item 4. |
Controls and Procedures |
35 |
|
|
|
PART II. OTHER INFORMATION |
|
Item 1. |
Legal Proceedings |
36 |
Item 1A. |
Risk Factors |
36 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
36 |
Item 3. |
Defaults Upon Senior Securities |
37 |
Item 4. |
Mine Safety Disclosures |
37 |
Item 5. |
Other Information |
38 |
Item 6. |
Exhibits |
40 |
|
|
|
SIGNATURES |
42 |
SPECIAL NOTE REGARDING FORWARD—LOOKING
STATEMENTS
On one or more occasions, we may make forward-looking
statements in this Quarterly Report on Form 10-Q regarding our assumptions, projections, expectations, targets, intentions or
beliefs about future events. Words or phrases such as “anticipates,” “may,” “will,” “should,”
“believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,”
“projects,” “targets,” “will likely result,” “will continue” or similar expressions
identify forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are
subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in our Annual Report
on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent
annual, periodic and current reports and other documents filed or furnished with the Securities and Exchange Commission.
Unless the context requires otherwise,
references to “we,” “us,” “our,” and the “Company” refer specifically to Players
Network.
PART I
– FINANCIAL INFORMATION
Item 1 - Financial Statements
PLAYERS NETWORK
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Assets | |
| (Unaudited) | | |
| | |
| |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 109,244 | | |
$ | 207,167 | |
Deferred television costs | |
| 116,454 | | |
| 116,454 | |
Other current assets | |
| 57,834 | | |
| 3,975 | |
Total current assets | |
| 283,532 | | |
| 327,596 | |
| |
| | | |
| | |
Investments, cost method | |
| – | | |
| – | |
Fixed assets, net | |
| 63,735 | | |
| 71,271 | |
Debt issuance costs, net | |
| 9,447 | | |
| 9,959 | |
| |
| | | |
| | |
Total Assets | |
$ | 356,714 | | |
$ | 408,826 | |
| |
| | | |
| | |
Liabilities and Stockholders' (Deficit) | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 279,887 | | |
$ | 264,723 | |
Accrued expenses | |
| 187,127 | | |
| 180,579 | |
Deferred revenues | |
| 135,000 | | |
| 135,000 | |
Deferred rent obligations | |
| 3,972 | | |
| 4,432 | |
Convertible debentures, net of discounts of $439,480 and
$537,505 at March 31, 2015 and December 31, 2014, respectively | |
| 287,338 | | |
| 183,998 | |
Short term debt | |
| – | | |
| 10,625 | |
Derivative liabilities | |
| 1,175,347 | | |
| 1,417,187 | |
Total current liabilities | |
| 2,068,671 | | |
| 2,196,544 | |
| |
| | | |
| | |
Total Liabilities | |
| 2,068,671 | | |
| 2,196,544 | |
| |
| | | |
| | |
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; -0- and 4,349,339 shares issued and outstanding at March 31, 2015 and December 31, 2014,
respectively | |
| – | | |
| 4,349 | |
Common stock, $0.001 par value, 600,000,000 shares authorized; 210,146,167 and 179,271,304 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | |
| 210,146 | | |
| 179,271 | |
Additional paid-in capital | |
| 25,610,090 | | |
| 25,041,295 | |
Subscriptions payable, consisting of -0- and 1,534,929 shares at March 31, 2015 and December 31, 2014, respectively | |
| – | | |
| 19,238 | |
Accumulated (deficit) | |
| (27,347,966 | ) | |
| (26,848,642 | ) |
| |
| (1,525,730 | ) | |
| (1,602,489 | ) |
Noncontrolling Interest | |
| (186,227 | ) | |
| (185,229 | ) |
Total Stockholders' (Deficit) | |
| (1,711,957 | ) | |
| (1,787,718 | ) |
| |
| | | |
| | |
Total Liabilities and Stockholders' (Deficit) | |
$ | 356,714 | | |
$ | 408,826 | |
See accompanying notes to financial statements.
PLAYERS NETWORK
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| |
For the Three | |
| |
Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Revenue: | |
$ | 307 | | |
$ | 290 | |
| |
| | | |
| | |
Expenses: | |
| | | |
| | |
Direct operating costs | |
| 24,603 | | |
| 46,019 | |
General and administrative | |
| 241,297 | | |
| 153,631 | |
Officer salaries | |
| 94,345 | | |
| 383,317 | |
Depreciation and amortization | |
| 7,536 | | |
| 5,737 | |
Total operating expenses | |
| 367,781 | | |
| 588,704 | |
| |
| | | |
| | |
Net operating loss | |
| (367,474 | ) | |
| (588,414 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Gain on debt extinguishment | |
| 6,482 | | |
| 340,825 | |
Interest expense | |
| (291,591 | ) | |
| (67,660 | ) |
Change in derivative liabilities | |
| 152,261 | | |
| (660,326 | ) |
Total other income (expense) | |
| (132,848 | ) | |
| (387,161 | ) |
| |
| | | |
| | |
Net loss | |
$ | (500,322 | ) | |
$ | (975,575 | ) |
Less: Net loss attributable to the noncontrolling interest | |
| 998 | | |
| – | |
Net loss attributable to Players Network | |
$ | (499,324 | ) | |
$ | (975,575 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding - basic and fully diluted | |
| 195,345,677 | | |
| 143,403,016 | |
| |
| | | |
| | |
Net (loss) per share - basic and fully diluted | |
$ | (0.00 | ) | |
$ | (0.01 | ) |
See accompanying notes to financial statements. |
PLAYERS NETWORK
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
For the Three | |
| |
Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
Cash flows from operating activities | |
| | | |
| | |
Net (loss) | |
$ | (499,324 | ) | |
$ | (975,575 | ) |
Minority interest in net loss | |
| (998 | ) | |
| – | |
Adjustments to reconcile net (loss) to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization expense | |
| 7,536 | | |
| 5,737 | |
Gain on debt extinguishment | |
| (6,482 | ) | |
| (340,825 | ) |
Change in fair market value of derivative liabilities | |
| (152,261 | ) | |
| 660,326 | |
Amortization of convertible note payable discounts | |
| 258,525 | | |
| 47,808 | |
Amortization of debt issuance costs | |
| 5,512 | | |
| 5,351 | |
Stock issued for services | |
| 131,483 | | |
| 115,259 | |
Stock issued for compensation, related party | |
| 73,800 | | |
| 120,000 | |
Options and warrants granted for services | |
| – | | |
| 9,024 | |
Options and warrants granted for services, related party | |
| – | | |
| 217,971 | |
Decrease (increase) in assets: | |
| | | |
| | |
Other current assets | |
| (53,859 | ) | |
| (2,650 | ) |
Increase (decrease) in liabilities: | |
| | | |
| | |
Accounts payable | |
| 15,164 | | |
| (30,703 | ) |
Accrued expenses | |
| 14,066 | | |
| 13,087 | |
Deferred rent obligations | |
| (460 | ) | |
| (211 | ) |
Net cash used in operating activities | |
| (207,298 | ) | |
| (155,401 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from convertible debentures | |
| 160,000 | | |
| 91,000 | |
Repayment of convertible debentures | |
| (37,500 | ) | |
| (25,500 | ) |
Repayment of short term debt | |
| (8,125 | ) | |
| – | |
Payments on debt issuance costs | |
| (5,000 | ) | |
| (6,500 | ) |
Proceeds from sale of common stock | |
| – | | |
| 125,000 | |
Net cash provided by financing activities | |
| 109,375 | | |
| 184,000 | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| (97,923 | ) | |
| 28,599 | |
Cash - beginning | |
| 207,167 | | |
| 4,696 | |
Cash - ending | |
$ | 109,244 | | |
$ | 33,295 | |
| |
| | | |
| | |
Supplemental disclosures: | |
| | | |
| | |
Interest paid | |
$ | 13,042 | | |
$ | 13,739 | |
Income taxes paid | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
Non-cash investing and financing activities: | |
| | | |
| | |
Value of debt discounts | |
$ | 155,000 | | |
$ | 95,000 | |
Value of shares issued for conversion of debt | |
$ | 126,221 | | |
$ | 39,000 | |
Value of derivative adjustment due to debt conversions | |
$ | 244,579 | | |
$ | 420,397 | |
See accompanying notes to financial statements.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Note 1 – Basis of Presentation
The interim condensed consolidated financial
statements of Players Network (the “Company”) included herein, presented in accordance with United States generally
accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to not make
the information presented misleading.
These statements reflect all adjustments,
which in the opinion of management, are necessary for fair presentation of the information contained therein. Except as otherwise
disclosed, all such adjustments are of a normal recurring nature. It is suggested that these interim condensed consolidated financial
statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2014
and notes thereto included in the Company's annual report on Form 10-K filed with the SEC. The Company follows the same accounting
policies in the preparation of interim reports.
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.
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.
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 the second quarter 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.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Deferred television costs consist of the
following at March 31, 2015 and December 31, 2014:
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
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.
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 March 31, 2015 and December 31, 2014:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
Deferred revenues on television pilot episodes | |
$ | 135,000 | | |
$ | 135,000 | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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.
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.
Recent Accounting Pronouncements
In April 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation
of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial
statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt
liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective
for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be
applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption
of ASU 2015-03 on its balance sheets.
In August 2014, the FASB issued ASU No.
2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) (“ASU 2014-15”), which
addresses management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a
going concern and in certain circumstances to provide related footnote disclosures. The standard is effective for the annual period
beginning after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. The Company
does not believe that the adoption of ASU 2014-15 will have a material impact on its financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements
in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics
of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09
is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting
period, and early application is not permitted. ASU 2014-09 allows for either full retrospective or modified retrospective adoption.
We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.
No other new accounting pronouncements,
issued or effective during the first quarter of 2015, have had or are expected to have a significant impact on the Company’s
financial statements.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Note 2 – Going Concern
As shown in the accompanying condensed
consolidated financial statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit
of ($27,347,966), and as of March 31, 2015, the Company’s current liabilities exceeded its current assets by $1,785,139
and its total liabilities exceeded its total assets by $1,711,957. 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 financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
The 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.
Note 3 – Related Party
Officers
On February 14, 2015, a total of 80,000
options held by the Company’s CEO expired.
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.
Officer compensation expense was $94,345
and $383,318 at March 31, 2015 and 2014, respectively. The balance owed was $-0- and $27,948 at March 31, 2015
and 2014, respectively.
Board of Directors
On February 29, 2015, a total of 300,000
options held by one of the Company’s Directors expired.
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.
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.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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.
The following schedule summarizes the valuation
of financial instruments at fair value on a non-recurring basis in the balance sheets as of March 31, 2015 and December 31, 2014,
respectively:
| |
Fair Value Measurements at March 31, 2015 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | | |
| | | |
| | |
Cash | |
$ | 109,244 | | |
$ | – | | |
$ | – | |
Total assets | |
| 109,244 | | |
| – | | |
| – | |
Liabilities | |
| | | |
| | | |
| | |
Convertible debentures, net of discounts of $439,480 | |
| – | | |
| – | | |
| 287,338 | |
Derivative liability | |
| – | | |
| – | | |
| 1,175,347 | |
Total liabilities | |
| – | | |
| – | | |
| 1,462,685 | |
| |
$ | 109,244 | | |
$ | – | | |
$ | (1,462,685 | ) |
| |
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 | ) |
There were no transfers of financial assets
or liabilities between Level 1 and Level 2 inputs for the three months ended March 31, 2015 and the year ended December 31, 2014.
Level 2 liabilities consisted of a short
term, unsecured, promissory note. No fair value adjustment was necessary during the three months ended March 31, 2015
and the year ended December 31, 2014.
Level 3 liabilities consist of a total
of $726,818 and $721,503 of convertible debentures and the related derivative liability as of March 31, 2015 and December 31, 2014,
respectively. A discount of $439,480 and $537,505 was recognized at March 31, 2015 and December 31, 2014, respectively.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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.
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 March 31, 2015
and December 31, 2014.
Note 7 – Fixed Assets
Fixed assets consist of the following at
March 31, 2015 and December 31, 2014, respectively:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Office equipment | |
$ | 48,884 | | |
$ | 48,884 | |
Website development costs | |
| 99,880 | | |
| 99,880 | |
Furniture and fixtures | |
| 2,730 | | |
| 2,730 | |
| |
| 151,494 | | |
| 151,494 | |
Less accumulated depreciation | |
| (87,759 | ) | |
| (80,223 | ) |
| |
$ | 63,735 | | |
$ | 71,271 | |
Depreciation and amortization expense totaled
$7,536 and $5,737 for the three months ended March 31, 2015 and 2014, respectively.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Note 8 – Accrued Expenses
As of March 31, 2015 and December 31, 2014
accrued expenses included the following:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Accrued Payroll, Officers | |
$ | – | | |
$ | 228 | |
Accrued Payroll and Payroll Taxes | |
| 135,234 | | |
| 135,234 | |
Accrued Interest | |
| 51,893 | | |
| 45,117 | |
| |
$ | 187,127 | | |
$ | 180,579 | |
Note 9 – Convertible Debentures
Convertible debentures consist of the following
at March 31, 2015 and December 31, 2014, respectively:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
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. | |
$ | 75,000 | | |
$ | – | |
| |
| | | |
| | |
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. | |
| 53,750 | | |
| – | |
| |
| | | |
| | |
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 | |
| 36,750 | | |
| – | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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. 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 | | |
| 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 | | |
| 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 | | |
| 75,250 | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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 | | |
| 38,500 | |
| |
| | | |
| | |
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 | | |
| 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 was amortized over the life of the loan on the straight line method, which approximated the effective interest method. The Company had to at all times reserve at least 9,513,000 shares of common stock for potential conversions. On March 12, 2015, the Company repaid $50,542, 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. | |
| – | | |
| 37,500 | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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 various dates between December 26, 2014 and March 23, 2015, the note holder elected to convert a total of $48,000 of principal in exchange for 6,538,723 shares of common stock. The Company must at all times reserve at least 24 million shares of common stock for potential conversions. | |
| 32,000 | | |
| 70,000 | |
| |
| | | |
| | |
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 various dates between December 10, 2014 and March 10, 2015, the note holder elected to convert a total of $28,923 of principal in exchange for 4,415,571. The Company must at all times reserve at least 35 million shares of common stock for potential conversions. | |
| 26,077 | | |
| 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 March 10, 2015, the note holder elected to convert a total of $80,000 of principal in exchange for 7,391,648 shares of common stock. 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. | |
| 33,000 | | |
| 78,000 | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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 February 2, 2015, the note holder elected to convert a total of $53,536, consisting of $50,000 of principal and $3,536 of interest, in exchange for 5,346,392 shares of common stock in complete satisfaction of the debt. The convertible promissory note was subsequently cancelled as paid in full. The Company had to reserve at least 20 million shares of common stock for potential conversions. | |
| – | | |
| 20,000 | |
| |
| | | |
| | |
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 | | |
| 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 | | |
| 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 | | |
| 44,000 | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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 | | |
$ | 20,491 | |
| |
| | | |
| | |
Total convertible debentures | |
| 726,818 | | |
| 721,503 | |
Less: unamortized debt discounts | |
| (439,480 | ) | |
| (537,505 | ) |
Convertible debentures | |
$ | 287,338 | | |
$ | 183,998 | |
In accordance with ASC 470-20 Debt with
Conversion and Other Options, the Company recorded total discounts of $160,500 and $818,877 for the variable conversion features
of the convertible debts incurred during the three months ended March 31, 2015 and the year ended December 31, 2014,
respectively. The discounts, including Original Issue Discounts of $5,500 and $44,250 during the three months ended March 31, 2015
and the year ended December 31, 2014, respectively, are being amortized to interest expense over the term of the debentures
using the effective interest method. The Company recorded $258,525 and $47,808 of interest expense pursuant to the amortization
of the note discounts during the three months ended March 31, 2015 and 2014, respectively.
In addition, a total of $5,000 and $21,750
of loan origination costs were incurred pursuant to the closings of convertible debentures during the three months ended March 31, 2015,
and the year ended December 31, 2014, 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 $5,512 and $5,351
of interest expense pursuant to the amortization of the loan origination costs during the three months ended March 31, 2015
and 2014, 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 $27,336 and $13,932 for the three months ended March 31, 2015
and 2014, respectively related to convertible debts.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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.
Note 11 – Short Term Debt
Short-term debt consists of the following
at March 31, 2015 and December 31, 2014, respectively:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
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, which were delivered on June 27, 2014, August 26, 2014, November 17, 2014 and February 2, 2015. Pursuant to the terms of the settlement agreement, the note was subsequently cancelled as paid in full, and 4,349,339 shares of series B preferred stock held by the lender were exchanged for 4,349,339 shares of common stock. | |
$ | – | | |
$ | 10,625 | |
The Company recorded interest expense pursuant
to the stated interest rate on the above promissory note in the amount of $-0- and $350 at March 31, 2015 and 2014,
respectively.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The following presents components of interest
expense by instrument type at March 31, 2015 and 2014, respectively:
| |
March 31, | | |
March 31, | |
| |
2015 | | |
2014 | |
Interest on convertible debentures | |
$ | 27,336 | | |
$ | 13,932 | |
Amortization of discount on convertible debentures | |
| 258,525 | | |
| 47,808 | |
Amortization of debt issuance costs | |
| 5,512 | | |
| 5,351 | |
Interest on short term debt | |
| – | | |
| 350 | |
Accounts payable related finance charges | |
| 218 | | |
| 219 | |
| |
$ | 291,591 | | |
$ | 67,660 | |
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 $1,175,347 and $1,417,187 at March 31, 2015 and December 31, 2014,
respectively. The change in fair value of the derivative liabilities resulted in a gain (loss) of $152,261 and ($660,326) for the
three months ended March 31, 2015 and 2014, respectively, which has been reported as other income (expense) in the
statements of operations. The gain of $152,261 for the three months ended March 31, 2015 consisted of a loss of $86,971
due to the value in excess of the face value of the convertible notes, a gain of $2,793 attributable to the fair value of preferred
stock, a gain of $70,467 attributable to the fair value of warrants and a net gain in market value of $165,972 on the convertible
notes. The loss of $660,326 for the three months ended March 31, 2014 consisted of a loss of $51,172 due to the value
in excess of the face value of the convertible notes, a gain of $20,838 attributable to the fair value of preferred stock, a loss
of $29,476 attributable to the fair value of warrants and a net loss in market value of $600,516 on the convertible notes.
The following presents the derivative liability
value by instrument type at March 31, 2015 and December 31, 2014, respectively:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Convertible debentures | |
$ | 1,135,058 | | |
$ | 1,301,032 | |
Common stock warrants | |
| 40,289 | | |
| 110,756 | |
Convertible preferred stock | |
| – | | |
| 5,399 | |
| |
$ | 1,175,347 | | |
$ | 1,417,187 | |
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
The following is a summary of changes in
the fair market value of the derivative liability during the three months ended March 31, 2015 and the year ended December 31, 2014,
respectively:
| |
Derivative | |
| |
Liability | |
| |
Total | |
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 tainted 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 | |
Increase in derivative value due to issuances of convertible promissory notes | |
| 241,971 | |
Increase in derivative value attributable to issuance of warrants | |
| – | |
Change in fair market value of derivative liabilities due to the mark to market adjustment | |
| (239,232 | ) |
Debt conversions | |
| (244,579 | ) |
Balance, March 31, 2015 | |
$ | 1,175,347 | |
Key inputs and assumptions
used to value the convertible debentures and warrants issued during the three months ended March 31, 2015 and the year
ended December 31, 2014:
| • | 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 $0.18, 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 – Changes in Stockholders’
Equity (Deficit)
Convertible
Preferred Stock
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 -0- 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.
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.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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, which were delivered on June 27, 2014, August 26, 2014,
November 17, 2014 and February 2, 2015. Upon successful payment of the settlement obligations, the shareholder
converted his 4,349,339 shares of Convertible Series B Preferred shares into 4,349,339 shares of common stock on March 31, 2015.
Preferred Stock
No preferred shares were issued during
the three months ended March 31, 2015.
Common Stock Authorized
The Company has authorized 600,000,000
shares of common stock, of which 225,848,659 shares were issued and outstanding and 247,150,507 shares were reserved as of the
date of this filing.
Common Stock Issuances for Debt Conversions
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.
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.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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.
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 B 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.
Note 14 – Options and Warrants
Options
and Warrants Granted
No options or warrants were granted during
the three months ended March 31, 2015.
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.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Warrants Expired
On April 19, 2015, a total of 120,000 warrants
held by our CEO with a strike price of $0.15 per share 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.
Options and Warrants Exercised
No options or warrants were exercised during
the three months ended March 31, 2015.
Note 15 – Gain on Debt Settlements
The Company recognized a gain on debt extinguishment
in the total amount of $6,482 and $340,825 during the three months ended March 31, 2015 and 2014, respectively,
as presented in other income within the Statements of Operations.
The Company and one of our lenders 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, which were delivered on June 27, 2014, August 26, 2014, November 17, 2014
and February 2, 2015, resulting in a $6,482 gain on settlement, consisting of $2,500 of principal and $3,982 of accrued
interest, as presented in other income at March 31, 2015.
Note 16 – 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 three months ended March 31, 2015
and the year ended December 31, 2014, 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 March 31, 2015, the Company had approximately $19,200,000 of federal net operating losses. The net
operating loss carry forwards, if not utilized, will begin to expire in 2025.
The components of the Company’s deferred
tax asset are as follows:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Deferred tax assets: | |
| | |
| |
Net operating loss carry forwards | |
$ | 6,720,000 | | |
$ | 6,440,000 | |
| |
| | | |
| | |
Net deferred tax assets before valuation allowance | |
| 6,720,000 | | |
| 6,440,000 | |
Less: Valuation allowance | |
| (6,720,000 | ) | |
| (6,440,000 | ) |
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 March 31, 2015 and December 31, 2014, respectively.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
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:
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
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 17 – Non-Controlling Interest
Non-controlling interest represented 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, which represented the outstanding non-controlling interest for the three months ended March 31, 2015.
The net loss attributable to the non-controlling interest totaled $998 and $185,229 during the three months ended March 31, 2015
and the year ended December 31, 2014, respectively.
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 from July 8, 2014 through December 31, 2014 | |
$ | (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 18 – Subsequent Events
Common Stock Issuances for Debt Conversions
On May 7, 2015, the Company issued 2,112,676
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First KBM Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On April 27, 2015, the Company issued 2,336,449
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Tangiers Note. The note was
converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On April 16, 2015, the Company issued 2,750,000
shares of common stock pursuant to the conversion of $14,479 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 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.
Players Network
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Common Stock Issued for Services
On April 15, 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 April 15, 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 April 15, 2015, the Company issued 1,500,000
shares of restricted common stock for video production services provided. The total fair value of the common stock was $18,000
based on the closing price of the Company’s common stock on the date of grant.
On April 15, 2015, the Company issued 600,000
shares of S-8 common stock for professional services provided. The total fair value of the common stock was $7,200 based on the
closing price of the Company’s common stock on the date of grant.
On April 15, 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 $6,000 based on the
closing price of the Company’s common stock on the date of grant.
On April 15, 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 $6,000 based on the
closing price of the Company’s common stock on the date of grant.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Overview and Outlook
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.
We plan for Weed TV to
have other features by the middle of 2015 and adapt new technology that the 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.
Results of Operations for the Three
Months Ended March 31, 2015 and 2014:
| |
For the Three | | |
| |
| |
Months Ended | | |
| |
| |
March 31, | | |
Increase / | |
| |
2015 | | |
2014 | | |
(Decrease) | |
Revenues | |
$ | 307 | | |
$ | 290 | | |
$ | 17 | |
| |
| | | |
| | | |
| | |
Direct operating costs | |
| 24,603 | | |
| 46,019 | | |
| (21,416 | ) |
General and administrative | |
| 241,297 | | |
| 153,631 | | |
| 87,666 | |
Officer salaries | |
| 94,345 | | |
| 383,317 | | |
| (288,972 | ) |
Depreciation and amortization | |
| 7,536 | | |
| 5,737 | | |
| 1,799 | |
| |
| | | |
| | | |
| | |
Total Operating Expenses | |
| 367,781 | | |
| 588,704 | | |
| (220,923 | ) |
| |
| | | |
| | | |
| | |
Net Operating Loss | |
| (367,474 | ) | |
| (588,414 | ) | |
| (220,940 | ) |
| |
| | | |
| | | |
| | |
Total other income (expense) | |
| (132,848 | ) | |
| (387,161 | ) | |
| (254,313 | ) |
| |
| | | |
| | | |
| | |
Net Loss | |
$ | (500,322 | ) | |
$ | (975,575 | ) | |
$ | (475,253 | ) |
Revenues:
During the three months ended March 31, 2015
and 2014, we received revenues primarily from the sale of in-home media and advertising fees on content development. Aggregate
revenues for the three months ended March 31, 2015 were $307, compared to revenues of $290 in the three months ended
March 31, 2014, an increase in revenues of $17, or 6%.
Direct Operating Costs:
Direct operating costs were $24,603 for the
three months ended March 31, 2015 compared to $46,019 for the three months ended March 31, 2014, a decrease
of $21,416, or 47%. Our direct operating costs decreased primarily due to diminished content production for our new media channel,
Weed.tv, as we focused more on the development of our medical marijuana ventures during the three months ended March 31, 2015.
General and Administrative:
General and administrative expenses were
$241,297 for the three months ended March 31, 2015, compared to $153,631 for the three months ended March 31, 2014,
an increase of $87,666, or 57%. General and administrative expense increased primarily due to increased stock-based compensation
paid to employees and consultants during the three months ended March 31, 2015 compared to the three months ended March 31,
2014.
Officer salaries:
Officer salaries expense totaled $94,345
for the three months ended March 31, 2015, compared to $383,317 for the three months ended March 31, 2014,
a decrease of $288,972, or 75%. The decrease in officer salaries was primarily due to non-cash, stock-based compensation bonuses
issued to our CEO during the three months ended March 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 greater than the comparative stock-based compensation, consisting of 1.5 million shares of common stock with a fair value of $24,600, during the three months
ended March 31, 2015.
Depreciation and Amortization:
Depreciation and amortization expense was
$7,536 for the three months ended March 31, 2015, compared to $5,737 for the three months ended March 31, 2014,
an increase of $1,799, or 31%. The increase in depreciation and amortization was primarily due to additional depreciation on a
total of $34,648 of fixed asset additions acquired during the three months ending March 31, 2014.
Net Operating Loss:
Net operating loss for the three months
ended March 31, 2015 was $367,474, or ($0.00) per share, compared to a net operating loss of $588,414 for the three months
ended March 31, 2014, or ($0.00) per share, a decrease of $220,940, or 38%. Net operating loss decreased primarily due to
stock based compensation bonuses issued to our officers and directors that were granted in the comparative quarter that weren’t
issued during the three months ended March 31, 2015.
Other Income (Expense):
Other income (expense) was $(132,848) for
the three months ended March 31, 2015, compared to $(387,161) for the three months ended March 31, 2014, a
decrease of $254,313, or 66%. Other expense decreased on a net basis primarily due to an $812,587 increase in our $152,261 net
gain related to the change in derivative liabilities on our convertible debentures recognized during the three months ended March 31, 2015,
compared to the net loss of $660,326 related to the change in derivative liabilities recognized during the three months ended March 31,
2014, as diminished by, increased interest expense of $223,931 on our increased indebtedness during the three months ended March 31, 2015,
compared to the three months ended March 31, 2014, and a decreased gain on debt extinguishment of $334,343 during the three
months ended March 31, 2015, compared to the three months ended March 31, 2014.
Net Loss:
The net loss for the three months ended
March 31, 2015 was $500,322, or ($0.00) per share, compared to a net loss of $975,575, or ($0.01) per share, for the
three months ended March 31, 2014, a decreased net loss of $475,253, or 49%. Net loss decreased primarily due to $313,371
less of stock based compensation issued to our CEO, and an $812,587 increase in our net gain related to the change in derivative
liabilities on our convertible debentures, as diminished by, increased interest expense of $223,931 on our increased indebtedness
and a decreased gain on debt extinguishment of $334,343 during the three months ended March 31, 2015, compared to the
three months ended March 31, 2014.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes total assets,
accumulated deficit, stockholders’ equity and working capital at March 31, 2015 compared to December 31, 2014.
| |
March 31, | | |
December 31, | | |
Increase / | |
| |
2015 | | |
2014 | | |
(Decrease) | |
Total Assets | |
$ | 356,714 | | |
$ | 408,826 | | |
$ | (52,112 | ) |
| |
| | | |
| | | |
| | |
Total Liabilities | |
$ | 2,068,671 | | |
$ | 2,196,544 | | |
$ | (127,873 | ) |
| |
| | | |
| | | |
| | |
Accumulated (Deficit) | |
$ | (27,347,966 | ) | |
$ | (26,848,642 | ) | |
$ | 499,324 | |
| |
| | | |
| | | |
| | |
Stockholders’ Equity (Deficit) | |
$ | (1,711,957 | ) | |
$ | (1,787,718 | ) | |
$ | (75,761 | ) |
| |
| | | |
| | | |
| | |
Working Capital (Deficit) | |
$ | (1,785,139 | ) | |
$ | (1,868,948 | ) | |
$ | (83,809 | ) |
Our principal source of operating capital
has been provided from private sales of our common stock, revenues from operations, and debt and equity financings. At March 31, 2015,
we had a negative working capital position of $1,785,139.
Debt Financing
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.
We have utilized these funds to repay $50,542
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 three months ended March 31, 2015, the Company granted a total of 9,600,000 shares of common stock valued at $157,440
in lieu of cash payments to employees and outside consultants, compared to the issuance of 6,708,333 shares of common stock valued
at $235,259 in lieu of cash payments to employees and outside consultants during the three months ending March 31, 2014.
In addition, the Company exchanged 4,349,339 shares of common stock for 4,349,339 shares of series B preferred stock, resulting
in $47,843 of stock based compensation. 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.
During the three months ended March 31, 2015,
we issued a total of 15,390,595 shares of common stock pursuant to the conversion of $126,221 of indebtedness on convertible debentures.
The conversion prices of a total of $726,818 in outstanding convertible notes outstanding as of March 31, 2015, 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. | |
$ | 20,491 | | |
| 1,707,583 | | |
| 2,276,778 | | |
| 3,415,167 | | |
| 6,830,333 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
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. | |
$ | 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. | |
$ | 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. | |
$ | 35,000 | | |
| 2,916,667 | | |
| 3,888,889 | | |
| 5,833,333 | | |
| 11,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Typenex (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%. | |
$ | 33,000 | | |
| 2,750,000 | | |
| 3,666,667 | | |
| 5,500,000 | | |
| 11,000,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Vista Capital (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. | |
$ | 26,077 | | |
| 2,173,083 | | |
| 2,897,444 | | |
| 4,346,167 | | |
| 8,692,333 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
WHC Capital (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. | |
$ | 32,000 | | |
| 2,666,667 | | |
| 3,555,556 | | |
| 5,333,333 | | |
| 10,666,667 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
WHC Capital (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. | |
$ | 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. | |
$ | 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%). | |
$ | 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. | |
$ | 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. | |
$ | 64,000 | | |
| 5,333,333 | | |
| 7,111,111 | | |
| 10,666,667 | | |
| 21,333,333 | |
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%)). | |
$ | 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%). | |
$ | 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 | |
Off-Balance Sheet Arrangements
As of March 31, 2015, we did not have any off-balance
sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations liquidity, capital expenditures or capital resources.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business.
The Company has had recurring net losses, an
accumulated deficit, and a working capital deficiency. These conditions raise substantial doubt about its ability to continue as
a going concern. 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.
The unaudited consolidated financial statements
do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
Critical Accounting Policies
We have identified the following policies below
as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting
policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates
about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations.
For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely
require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.
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.
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.
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.
Item 3. Quantitative and Qualitative Disclosures about Market
Risks
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation as of
March 31, 2015, under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, who are one and the same, of the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(f) and 15d–15(e)). Based upon that evaluation, our
principal executive officer and principal financial officer 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 Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required
time periods and is accumulated and communicated to our management, including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control
over financial reporting during our most recent quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II
– OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, we may
become subject to lawsuits and other claims and proceedings that might arise from litigation matters or regulatory audits. Such
matters are subject to uncertainty and outcomes are often not predictable with assurance. Our management does not presently expect
that such matters will have a material adverse effect on the Company’s financial condition or results of operations. We
are not currently involved in any pending or threatened material litigation or other material legal proceedings, nor have we been
made aware of any penalties from regulatory audits, except as we have previously disclosed, or may in the future disclose.
Item 1A. Risk Factors
As a smaller reporting company, we are
not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
The following sales of equity securities
by the Company occurred during the three month period ended March 31, 2015:
Common Stock Issuances for Debt Conversions
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 foregoing securities issued upon conversion
of the Notes are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuances of the
Notes were exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated
thereunder. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.
Common Stock Issuances for Services
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for professional services provided.
On January 25, 2015, the Company issued
500,000 shares of restricted common stock for platform development services provided.
On January 25, 2015, the Company issued
1,600,000 shares of restricted common stock for video production services provided.
On January 25, 2015, the Company issued
1,500,000 shares of common stock to its CEO as compensation for services as a Director.
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.
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 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.
Common Stock Issued in Settlement for
Series B Preferred Stock Cancellation
On March 31, 2015, the Company issued 4,349,339
shares of common stock in exchange for the cancellation of 4,349,339 shares of Series B Preferred Stock pursuant to a settlement
agreement entered into on April 10, 2014 with Tice Capital, LLC.
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 3. Defaults Upon Senior Securities
On October 24, 2014, a note holder submitted
a conversion request to convert $10,000 of principal on the Second LG Note, which was inconsistent with the conversion terms as
stated in the convertible promissory note. The Company requested that the conversion notice be corrected and resubmitted, at which
time the note holder contended the conversion terms were intended to be based on 55% of the lowest closing bid price over the preceding
twelve trading days, as opposed to the stated 55% of the average of the lowest closing bid price of the Common Stock over the preceding
twelve trading days. On October 31, 2014, the note holder sent demand for repayment on the Second LG Note, consisting of $35,000
of principal and $1,214 of accrued interest outstanding as of March 31, 2015. As a result, we are in default on this convertible
promissory note. The note carries an 18% default interest rate and a penalty of $250 per day that the shares are not issued, beginning
on the 4th day after the conversion notice was delivered to the Company. This penalty increased to $500 per day beginning on the
10th day after the conversion notice was delivered to the Company.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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.
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.
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.
Common Stock Issuances for Debt Conversions
On May 7, 2015, the Company issued 2,112,676
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First KBM Note.
On April 27, 2015, the Company issued 2,336,449
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Tangiers Note.
On April 16, 2015, the Company issued 2,750,000
shares of common stock pursuant to the conversion of $14,479 of outstanding principal on the First Vista Note.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Common Stock Issued in Settlement for
Series Preferred Stock Cancellation
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, and on March 31, 2015,
the Company cancelled 4,349,339 shares of Series B Preferred Stock pursuant to the settlement agreement, and issued 4,349,339 shares
of common stock in exchange. No additional Series B Preferred shares are outstanding.
Item 6. Exhibits
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* |
January 27, 2015 – Form of Convertible Promissory Note (Second Group 10 Note) |
|
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10.2* |
March 2, 2015 – Form of Convertible Promissory Note (First JSJ Note) |
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21.1* |
Subsidiaries |
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31.1* |
Certification of Mark Bradley, CEO and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
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32.1* |
Certification of Mark Bradley, CEO and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act |
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101.INS* |
XBRL Instance Document |
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101.SCH* |
XBRL Schema Document |
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101.CAL* |
XBRL Calculation Linkbase Document |
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101.DEF* |
XBRL Definition Linkbase Document |
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101.LAB* |
XBRL Labels Linkbase Document |
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101.PRE* |
XBRL Presentation Linkbase Document |
* Filed herewith
** Confidential Treatment Requested
*** Management contract or any other compensatory
plan, contract, or arrangement
SIGNATURES
Pursuant to the requirements 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.
Date: May 14, 2015 |
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Players Network |
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/s/ Mark Bradley |
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Mark Bradley |
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Chief Executive Officer |
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(Principal Executive Officer and Principal Financial Officer) |
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Exhibit 10.1
NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE 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 AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
GROUP 10 HOLDINGS, LLC
CONVERTIBLE DEBENTURE
Issuance Date: January 27, 2015 |
Principal Amount: $36,750 |
FOR VALUE RECEIVED,
Players Network, Inc., a Nevada corporation (“Borrower”), hereby promises to pay to Group 10 Holdings LLC (“Holder”)
or its registered assigns or successors in interest, the sum of Thirty Six Thousand Seven Hundred Fifty dollars ($36,750) (the
“Principal Amount”), together with all accrued interest thereon, on the one (1) year anniversary from the Issuance
Date (the “Maturity Date”), if not sooner paid.
The following terms and conditions shall
apply to this Convertible Debenture (the “Debenture”):
ARTICLE
I
DEFINITIONS
1.1 Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, the following terms shall have the following
meanings:
“Bankruptcy
Event’’ means any of the following events: (a) Borrower or any subsidiary (as such term is defined in Rule l-02(w)
of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Borrower or any
subsidiary thereof; (b) there is commenced against Borrower or any subsidiary thereof any such case or proceeding that is not dismissed
within sixty (60) days after commencement; (c) Borrower or any subsidiary thereof is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered; (d) Borrower or any subsidiary thereof suffers any appointment
of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60)
calendar days after such appointment; (e) Borrower or any subsidiary thereof makes a general assignment for the benefit of creditors;
(f) Borrower or any subsidiary thereof calls a meeting of its creditors with a view to arrange a composition, adjustment or restructuring
of its debts; or (g) Borrower or any subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval
of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business
Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States
or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.
“Change of
Control Transaction” means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by
an individual or legal entity or “group” (as described in Rule 13d-5(b)(l) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of Borrower, by contract or otherwise) of in excess of
50% of the voting securities of Borrower (other than by means of conversion or exercise of this Debenture and the securities issued
together with this Debenture) or (ii) Borrower merges into or consolidates with any other Person, or any Person merges into or
consolidates with Borrower and, after giving effect to such transaction, the stockholders of Borrower immediately prior to such
transaction own less than 50% of the aggregate voting power of Borrower or the successor entity of such transaction, or (iii) Borrower
sells or transfers all or substantially all of its assets to another Person and the stockholders of Borrower immediately prior
to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction,
or (iv) a replacement at one time or within a three (3) year period of more than one-half of the members of Borrower’s board
of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by
Borrower of an agreement to which Borrower is a party or by which it is bound, providing for any of the events set forth in clauses
(i) through (iv) above.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Issuance
Date” means the date of the issuance of this Debenture, regardless of any transfers of any Debenture and regardless of
the number of instruments which may be issued to evidence this Debenture.
“Lowest Closing
Price” means, for any date, the price determined by the first of the following clauses that applies: (a) the average
of the two lowest closing bid prices of Borrower’s Common Stock during the seventeen (17) Trading Days prior to such date
or (b) if the Common Stock is not then quoted on a Trading Market, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by Holder and reasonably acceptable to Borrower.
“Most Recent
Balance Sheet” means a true and complete copy of the balance sheet of Borrower as of September 30, 2014 prepared in accordance
with GAAP and disclosed in Borrower’s Form 10-Q for the fiscal quarter ended on such date.
“Permitted
Lien” means the individual and collective reference to the following: (a) liens for taxes, assessments and other governmental
charges or levies not yet due or liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of Borrower) have
been established in accordance with GAAP; and (b) liens imposed by law which were incurred in the ordinary course of Borrower’s
business, such as carriers’, warehousemen’s and mechanics’ liens, statutory landlords’ liens, and other
similar liens arising in the ordinary course of Borrower’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of Borrower and its consolidated subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such lien.
“Person”
means a natural person, sole proprietorship, corporation, limited liability company, firm, partnership, association, joint venture,
trust, unincorporated organization, or other entity, whether acting in an individual, fiduciary, or other capacity.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day”
means a day on which the principal Trading Market is open for business.
“Trading Market”
means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange, the OTC Bulletin Board, or the OTC Markets QX Market, QB Market of Pink Market.
ARTICLE
II
INTEREST & AMORTIZATION
2.1 Contract
Rate. Subject to Sections 7.1 and 8.8 hereof, interest payable on this Debenture shall accrue at a rate per annum equal to
twelve percent (12%) and shall be computed on the basis of a 365-day year.
2.2 Consideration.
In consideration for the Debenture, Holder shall pay to Borrower a purchase price equal to Thirty Five Thousand dollars
($35,000), payable by wire transfer or other immediately available funds.
Thus, as of the Issuance Date, there shall exist a One Thousand Seven Hundred Fifty ($1,750) Original Issue Discount (the “OID”)
from the Principal Amount. Interest shall accrue and be payable on the full Principal Amount of the Debenture, inclusive of the
OID, and payment of the full Principal Amount shall be required regardless of time and manner of payment or prepayment by Borrower.
Upon conversion, Holder shall receive credit for the full Principal Amount converted.
2.3 Payments.
Payment of the aggregate Principal Amount, together with all accrued interest thereon shall be made on the Maturity Date.
2.4 Prepayment
Option. Subject to the approval of Holder for prepayments after one hundred eighty (180) days, Borrower may prepay in cash
all or any portion of the Principal Amount of this Debenture and accrued interest thereon, with a premium, as set forth below (each
a “Prepayment Premium”), upon ten (10) Business Days prior written notice to Holder. Holder shall have the right
to convert all or any portion of the Principal Amount and accrued interest thereon in accordance with Article III hereof during
such ten (10) Business Day notice period. The amount of each Prepayment Premium shall be as follows: (a) one hundred five percent
(105%) of the prepayment amount if such prepayment is made at any time from the Issuance Date until thirty (30) days thereafter;
(b) one hundred fifteen percent (115%) of the prepayment amount if such prepayment is made at any time after thirty (30) days from
the Issuance Date.
ARTICLE
III
CONVERSION REPAYMENT
3.1.
Optional Conversion. Subject to the terms of this Article III, Holder shall have the right, but not the obligation, at
any time after the Issuance Date and until the Maturity Date, or thereafter during an Event of Default, to convert all or any
portion of the outstanding Principal Amount, accrued interest and fees due and payable thereon into fully paid and non-assessable
shares of Common Stock of Borrower at the Conversion Price, as defined below (the “Conversion Shares”).
3.2. Calculation
of Conversion Price. Subject to Section 4.6 hereof, the conversion price (the “Conversion Price”) shall
mean 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).
3.2.1 Conversion
Price Adjustments. Conversion Price shall be 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%)). |
3.3. Conversion Limitation. Notwithstanding anything contained herein to the contrary, the number of Conversion Shares
that may be acquired by Holder upon conversion of this Debenture (or otherwise in respect hereof) shall be limited to the extent
necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially
owned by Holder and its affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with that
of Holder for purposes of Section 13(d) of the Exchange Act does not exceed 4.99% of the total number of issued and outstanding
shares of Common Stock, including, for such purpose, the shares of Common Stock issuable upon such conversion, but excluding the
number of shares of Common Stock issuable upon (a) conversion of the remaining, unconverted Principal Amount of this Debenture
beneficially owned by Holder or any of its affiliates and (b) exercise or conversion of the unexercised or unconverted portion
of any other securities of Borrower subject to a limitation on conversion or exercise analogous to the limitation contained herein
(including, without limitation, any other debenture or warrant) beneficially owned by Holder or any of its affiliates. For such
purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. By written notice to Borrower, Holder may increase, decrease or waive the provisions of this Section
3.3 as to itself but any such waiver will not be effective until the sixty-first (61st) day after delivery thereof.
3.4. Mechanics of Holder’s Conversion. Subject to Section 3.3 hereof, this Debenture may be converted by Holder,
in whole or in part from time to time after the Issuance Date, by submitting to Borrower and/or the transfer agent of record a
notice of conversion (“Notice of Conversion”), the form of which is attached hereto as Exhibit A. Such
Notice of Conversion shall specify the Principal Amount of the Debenture to be converted and the date on which such conversion
shall be effected (the “Conversion Date”). Pursuant to the terms of the Notice of Conversion, Borrower shall
issue instructions to the transfer agent within two (2) Trading Days from the receipt of the Notice of Conversion and shall cause
the transfer agent to transmit the certificates representing the Conversion Shares to Holder by physical delivery or crediting
the account of Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit
Withdrawal Agent Commission (“DWAC”) system within two (2) Trading Days after receipt by Borrower of the Notice
of Conversion (the “Delivery Date”). In the case of the exercise of the conversion rights set forth herein,
the conversion privilege shall be deemed to have been exercised, and the Conversion Shares issuable upon such conversion shall
be deemed to have been issued, upon the Delivery Date and Holder shall be treated for all purposes as the record holder of such
Common Stock, unless Holder provides Borrower with written instructions to the contrary. Conversions hereunder shall have the effect
of lowering the outstanding Principal Amount of this Debenture in an amount equal to the applicable conversion. Holder and Borrower
shall maintain records showing the Principal Amount(s) converted and the Conversion Date(s). In the event of any dispute or discrepancy,
the records of Holder shall be controlling and determinative in the absence of manifest error.
3.5.
Conversion Mechanics. The number of shares of Common Stock to be issued upon each conversion of this Debenture shall be
determined by dividing that portion of the Principal Amount and interest and fees to be converted, if any, by the then applicable
Conversion Price.
3.6 Fractional
Shares. No fractional shares shall be issued upon the conversion of this Debenture. As to any fraction of a share which Holder
would otherwise be entitled to upon such conversion, Borrower shall round up to the next whole share.
3.7 Late Delivery
of Conversion Shares. Borrower understands that a delay in the delivery of Conversion Shares in the form required pursuant
to this Article III beyond the Delivery Date could result in economic loss to Holder. As compensation to Holder for such loss,
Borrower agrees to pay late fees to Holder for late issuance of such shares in the form required pursuant to this Article III upon
conversion of the Debenture, in the amount equal to one thousand dollars ($1,000) per Business Day after the Delivery Date. Borrower
shall pay any fees incurred under this Section in immediately available funds upon demand and such fees shall also be eligible
to be converted into Common Stock pursuant to this Article III.
3.8 Authorized
and Reserved Shares. Borrower represents and warrants and covenants and agrees that upon issuance, the Conversion Shares will
be duly and validly issued, fully issued and non-assessable. Borrower agrees that its issuance of this Debenture 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 Conversion Shares in accordance with the terms and conditions of this Debenture. At all times during
which this Debenture is outstanding, Borrower shall reserve and keep available from its authorized and unissued shares of Common
Stock (the “Share Reserve”) for the sole purpose of issuance upon conversion of this Debenture and payment of
interest on this Debenture, each as herein provided, free from preemptive rights or any other actual or contingent purchase rights
of Persons other than Holder, not less than such aggregate number of shares of the Common Stock that shall be issuable (taking
account the adjustments of Article IV) upon the conversion of the outstanding Principal Amount of this Debenture and payment of
interest hereunder. Initially, the Share Reserve shall be equal to 20,000,000 and shall be adjusted by the transfer agent from
time to time. Borrower agrees that it will take all such reasonable actions as may be necessary to assure that the Conversion Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the applicable
Trading Market upon which the Common Stock may be listed. Borrower agrees to provide Holder with confirmation evidencing the execution
of such share reservation within three (3) Business Days from the Issuance Date.
3.9 Issuance
of New Debenture. Upon any partial conversion of this Debenture, a new Debenture containing the same date and provisions of
this Debenture shall, at the request of Holder, be issued by Borrower to Holder for the principal balance of this Debenture and
accrued interest which shall not have been converted or paid. Subject to the provisions of Article VI, Borrower will pay no costs,
fees or any other consideration to Holder for the production and issuance of a new Debenture.
3.10 Par Value;
Further Assurances.
(a) Borrower covenants
that during the period that the Principal Amount of this Debenture and any accrued interest and fees thereon remain outstanding,
it will ensure that the par value of any Conversion Shares shall not exceed the amount payable therefor upon such exercise immediately
prior to such exercise. Borrower further covenants that it shall take all appropriate actions, including, without limitation, amending
its articles or certificate of incorporation and any other voluntary action, such as calling a meeting of stockholders to approve
any such amendment, to ensure that the amount payable for any Conversion Shares shall at all times exceed the par value thereof
by at least four hundred percent (400%).
(b) Except and to
the extent as waived or consented to by Holder, Borrower shall not by any action, including, without limitation, amending its articles
or certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Debenture, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of Holder as set forth in this Debenture against impairment. Without limiting
the generality of the foregoing, Borrower will (a) not increase the par value of any Conversion Shares above the amount payable
therefor upon such exercise immediately prior to such exercise, (b) take all such action as may be necessary or appropriate in
order that Borrower may validly and legally issue fully paid and nonassessable Conversion Shares upon the exercise of this Debenture
and (c) use its commercially best efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof as may be necessary to enable Borrower to perform its obligations under this Debenture.
3.11 Transfer
Taxes. The issuance of certificates for Conversion Shares shall be made without charge to Holder for any documentary stamp
or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that Borrower shall not
be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of Holder and Borrower shall not be required to issue or deliver such certificates unless
or until the Person or Persons requesting the issuance thereof shall have paid to Borrower the amount of such tax or shall have
established to the satisfaction of Borrower that such tax has been paid.
3.12 Rule 144
Issuer’s Representation Letter. In the event that Holder’s brokers dealer requires a Rule 144 Issuer’s Representation
Letter (the “144 Letter”), Holder will submit to Borrower the 144 Letter along with a corresponding Notice of
Conversion upon which Borrower will have forty-eight (48) hours to execute and return the 144 Letter.
ARTICLE
IV
CERTAIN ADJUSTMENTS
4.1 Stock Dividends
and Stock Splits. If Borrower, at any time while this Debenture is outstanding: (a) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock equivalents (which,
for avoidance of doubt, shall not include any shares of Common Stock issued by Borrower upon conversion of, or payment of interest
on, this Debenture); (b) subdivides outstanding shares of Common Stock into a larger number of shares; or (c) issues, in the event
of a reclassification of shares of the Common Stock, any shares of capital stock of Borrower, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of
Borrower) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or re-classification.
4.2 Subsequent
Rights Offerings. If Borrower, at any time within six (6) months of the Issuance Date, shall issue rights, options or warrants
to all holders of Common Stock (and not to Holder) entitling them to subscribe for or purchase shares of Common Stock at a price
per share that is lower than the Lowest Closing Price on the record date referenced below, then the Conversion Price shall be multiplied
by a fraction of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which
the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number of shares issued (assuming delivery to Borrower
in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such Lowest Closing Price.
Such adjustment shall be made whenever such rights or warrants are issued, other than to officers and directors under equity incentive
plans approved by the board of directors, and shall become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
4.3 Pro
Rata Distributions. If Borrower, at any time while this Debenture is outstanding, distributes to all holders of Common Stock
(and not to Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security (other than the Common Stock, which shall be subject to Section 4.1), then in each such case the Conversion
Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Lowest Closing Price
determined as of the record date mentioned above, and of which the numerator shall be such Lowest Closing Price on such record
date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed
applicable to one (1) outstanding share of the Common Stock as determined by the board of directors of Borrower in good faith.
In either case the adjustments shall be described in a statement delivered to Holder describing the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to one (1) share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
4.4 Fundamental
Transaction. If, at any time while this Debenture is outstanding, (a) Borrower effects any merger or consolidation of Borrower
with or into another Person, (b) Borrower effects any sale of all or substantially all of its assets in one transaction or a series
of related transactions, (c) any tender offer or exchange offer (whether by Borrower or another Person) is completed pursuant to
which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (d) Borrower
effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent conversion of this Debenture, Holder shall have the right to receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind
and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction
if it had been, immediately prior to such Fundamental Transaction, holder of one (1) share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1)
share of Common Stock in such Fundamental Transaction, and Borrower shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then Holder
shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to Borrower or surviving
entity in such Fundamental Transaction shall issue to Holder a new Debenture consistent with the foregoing provisions and evidencing
Holder’s right to convert such Debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this
Section 4.4 and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
4.5 Calculations.
All calculations under this Article III shall be made to four decimal places or the nearest 1/100th of a share, as the case may
be. For purposes of this Article III, the number of shares of Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding any treasury shares of Borrower) issued and outstanding.
4.6 Notice
to Holder.
a) Adjustment to Conversion
Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Article IV, Borrower shall promptly deliver
to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
b) Notice
to Allow Conversion by Holder. If (i) Borrower shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (ii) Borrower shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (iii) Borrower
shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (iv) the approval of any stockholders of Borrower shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which Borrower is a party, any sale or transfer of
all or substantially all of the assets of Borrower, of any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property or (v) Borrower shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of Borrower, then, in each case, Borrower shall cause to be filed at each office or agency maintained for the
purpose of conversion of this Debenture, and shall cause to be delivered to Holder at its last address as it shall appear upon
Borrower’s books and records, at least 20 calendar days prior to the applicable record or effective date hereinafter specified,
a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be determined or (B) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided
that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holder is entitled to convert this Debenture during the 20-day period commencing
on the date of such notice through the effective date of the event triggering such notice.
4.7 Most Favored
Nations Status. So long as this Debenture is outstanding, upon any issuance by Borrower or any of its subsidiaries of any security
(in an amount under one million dollars ($1,000,000)) with any term more favorable to the holder of such security or with a term
in favor of the holder of such security that was not similarly provided to Holder in this Debenture, then Borrower shall notify
Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction
documents with Holder. Such more favorable terms include, but are not limited to, terms addressing conversion discounts, conversion
look-back periods, interest rates, original issue discounts, stock sale price, private placement price per share and warrant coverage.
4.8 Holder’s
Adjustments. Upon the occurrence of either of the following events, Holder may, within three (3) Business Days of such occurrence,
provide the transfer agent with written instructions to increase the Share Reserve in accordance therewith: (a) closing price of
Borrower’s Common Stock is less than .001 for three (3) consecutive Trading Days then the reserve shall be increased to 50,000,000
shares; (b) closing price of Borrower’s Common Stock is less than .0005 for three (3) consecutive Trading Days then the reserve
shall be increased to 150,000,000 shares
ARTICLE
V
NEGATIVE COVENANTS
As long as any portion
of this Debenture remains outstanding, unless Holder shall have otherwise given prior written consent, Borrower shall not, and
shall not permit any of its subsidiaries (whether or not a subsidiary on the Issuance Date) to, directly or indirectly:
5.1 other than Permitted
Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind,
including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom;
5.2 other than Permitted
Liens, enter into, create, incur, assume or suffer to exist any liens or security interests of any kind, on or with respect to
any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
5.3 issue any shares
of Common Stock in exchange for satisfaction or accord, in whole or in part, of any outstanding accounts payable obligations of
Borrower, where such shares would be freely tradable (without restrictions, manner of sale obligations or reporting obligations)
by the recipient thereof (or any transferee thereof) prior to the date which is six (6) months following the date of issuance thereof,
whether pursuant to Section 3(a)(10) of the Securities Act or otherwise;
5.4 amend its charter
documents, including, without limitation, its articles or certificate of incorporation and bylaws, in any manner that materially
and adversely affects any rights of Holder;
5.5 repay, repurchase
or offer to repay, repurchase or otherwise acquire any indebtedness for borrowed money (except for this Debenture in accordance
with the terms hereof and except for the Permitted Indebtedness described under clauses (a), (b) and (d) of the definition thereof
in accordance with the terms of such indebtedness as in effect on the date hereof), other than regularly scheduled principal and
interest payments as such terms are in effect as of the Issuance Date;
5.6 pay cash dividends
or distributions on any equity securities of Borrower;
5.7 combine (including
by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares;
5.8 enter into any
transaction with any affiliate of Borrower which would be required to be disclosed in any public filing with the Securities and
Exchange Commission (the “SEC”), unless such transaction is made on an arm’s-length basis and expressly
approved by a majority of the disinterested directors of Borrower (even if less than a quorum otherwise required for board approval);
or
5.9 enter into any
agreement with respect to any of the foregoing.
ARTICLE
VI
EVENTS OF DEFAULT
The occurrence of any
of the following events, while this Debenture is outstanding, shall be an “Event of Default;” provided that
any Event of Default may be cured within a one (1) Business Day except as otherwise provided herein:
6.1 Failure to
Pay Principal, Interest or Other Fees. Borrower fails to pay the Principal Amount, interest or other fees hereon as and when
the same shall become due and payable and such failure shall continue for a period of one (1) Business Day following the date upon
which any such payment was due.
6.2 Breach of
Covenant. Borrower breaches any covenant or other term or condition of this Debenture, including, but not limited, to the negative
covenants provided in Article V, in any material respect and such breach, if subject to cure, continues for a period of one (1)
Business Day after the occurrence thereof.
6.3 Breach of
Representations and Warranties. Any representation or warranty of Borrower made herein or in any other report, financial statement
or certificate made or delivered to Holder shall be false or misleading in any material respect as of the date when made or deemed
made.
6.4 SEC Filings.
At any point while this Debenture is outstanding, Borrower is not current with its reporting responsibilities under Section 13
of the Exchange Act. Furthermore, Borrower fails to timely file, when due, any SEC report, including any required XBRL file along
with such report (e.g., Forms 8-K, 10-Q or 10-K, or Schedules 14A, 14C or 14(f)), or, if the filing date of such report
is properly extended pursuant to SEC Rule 12b-25, when the date of any such filing extension lapses, or any post-effective amendment
to any SEC Registration Statement.
6.5 Stop Trade.
An SEC stop trade order or trading suspension of the Common Stock on the applicable Trading Market shall be in effect for five
(5) consecutive Trading Days or five (5) Trading Days during a period of ten (10) consecutive Trading Days, provided that Borrower
shall not have been able to cure such trading suspension within thirty (30) Business Days of the notice thereof or list the Common
Stock on another Trading Market within sixty (60) Business Days of such notice.
6.6 SEC Reporting
Status Matters.
(a) Borrower indicates
by check mark on the cover page of an SEC report filing that it has not (i) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such
reports), and (ii) has been subject to such filing requirements for the past ninety (90) days.
(b) Borrower indicates
by check mark on the cover page of an SEC report filing that it has not submitted electronically and posted on its corporate website,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during
the preceding twelve (12) months (or for such shorter period that the registrant was required to submit and post such files).
(c) Borrower indicates
by check mark on the cover page of an SEC report filing that it is a shell company (as defined in Rule 12b-2 of the Exchange
Act); or
(d) Borrower files
a Form 15 with the SEC to deregister its Common Stock. In such an event, Borrower shall file current reports with attorney opinions
on not less than a quarterly basis on www.otcmarkets.com until such time as Borrower re-registers its Common Stock with the SEC.
6.7 Change of
Control. Borrower shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or
dispose of all or substantially all of its assets in one transaction or a series of related transactions (whether or not such sale
would constitute a Change of Control Transaction).
6.8 Receiver
or Trustee. Each of Borrower or its subsidiaries, if any, 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; or shall become insolvent or generally fails to pay, or admits in writing its
inability to pay, its debts as they become due, subject to applicable grace periods, if any.
6.9 Judgments.
Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its subsidiaries or any
of their respective property or other assets for more than one hundred thousand dollars ($100,000) in the aggregate for Borrower,
and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.
6.10 Bankruptcy.
Borrower or any of its subsidiaries shall be subject to a Bankruptcy Event.
6.11 DTC Eligibility.
Borrower shall lose its status as “DTC Eligible” or Borrower’s stockholders shall lose the ability to deposit
(either electronically or by physical certificates, or otherwise) shares into the DTC System through a “deposit chill”
or otherwise.
6.12 Reservation
of Shares. Borrower shall fail timely to reserve shares of Common Stock from its authorized and unissued shares pursuant to
Section 3.8.
ARTICLE
VII
DEFAULT RELATED PROVISIONS AND OTHER
PRIVILEGES
7.1 Default Interest
Rate. If any Event of Default occurs, the outstanding Principal Amount of this Debenture, plus accrued but unpaid interest,
liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at Holder’s
election, immediately due and payable in cash in the sum of (a) one hundred eighteen percent (118%) of the outstanding Principal
Amount of this Debenture plus one hundred percent (100%) of accrued and unpaid interest thereon and (b) all other amounts, costs,
expenses and liquidated damages due in respect of this Debenture (“Mandatory Default Amount”). After the occurrence
of any Event of Default, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of eighteen percent
(18%) per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, Holder
shall promptly surrender this Debenture to or as directed by Borrower. In connection with such acceleration described herein, Holder
need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Holder may immediately
and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available
to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and
Holder shall have all rights as a holder of his Debenture until such time, if any, as Holder receives full payment pursuant to
this Section 7.1. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
7.2 Default Penalty
Payment. Following the occurrence and during the continuance of an Event of Default, Borrower agrees to pay to Holder in the
amount equal to one thousand dollars ($1,000) per Business Day commencing the Business Day following the date of the Event of Default.
Borrower shall pay any fees incurred under this Section in immediately available funds upon demand and such fees shall also be
eligible to be converted into Conversion Shares as set forth in Article III. Such conversion privileges shall remain in full force
and effect immediately from the date hereof and until this Debenture is paid in full.
ARTICLE
VIII
MISCELLANEOUS
8.1 Piggyback
Registration Rights. Borrower shall include on the next registration statement Borrower files with the SEC (or on the subsequent
registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Debenture. Failure
to do so will result in liquidated damages of twenty-five percent (25%) of the outstanding Principal Amount of this Debenture,
but not less than twenty-five thousand dollars ($25,000), being immediately due and payable to Holder at its election in the form
of cash payment or addition to the balance of this Debenture. Notwithstanding the foregoing, in the event a registration statement
is filed with respect to an underwritten offering or a selling stockholder registration statement relating solely to holders of
Borrower’s Common Stock who paid cash for such Common Stock in a sale placed by an independent placement agent, the number
of shares of Common Stock owned by Holder to be included in any such registration statement may be limited if in the opinion of
the underwriter or placement agent, the sale of such shares by Holder would adversely impact the sale of shares by the underwriter
or selling stockholders included therein.
8.2 Failure or
Indulgence Not Waiver. No failure or delay on the part of Holder hereof 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 privilege. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
8.3 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 FedEx or other reputable express courier service with charges prepaid, (iv)
transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or (v) sent via Email whereby a return
Email confirming receipt has been delivered. Any notice or other communication required or permitted to be given hereunder shall
be deemed effective (y) 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 (z) on the next 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 Borrower:
Players Network, Inc.
Attn: Mark Bradley
1771 E. Flamingo Road
Las Vegas, NV 89119
If to Holder:
Group 10 Holdings
LLC
Attn: Adam Wasserman
11 Island Ave. #1108
Miami Beach, FL 33139
EIN # 32-0409845
adam@group10llc.com
No change in any of such
addresses shall be effective insofar as notices under this Section 8.3 are concerned unless such changed address is located in
the United States of America and notice of such change shall have been given to such other party hereto as provided in this Section
8.3.
8.4 Amendment
Provision. Any term of this Debenture may be amended only with the written consent of Holder and Borrower. . The term “Debenture”
and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented, and any successor instrument as it may be amended or supplemented.
8.5 Assignability.
This Debenture shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of Holder and its
successors and assigns, and may not be assigned by Borrower without the prior written consent of Holder, which consent may not
be unreasonably withheld.
8.6 Prevailing
Party and Costs. In the event any attorney is employed by any party with regard to any legal or equitable action, arbitration
or other proceeding brought by such party for the enforcement of this Debenture or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Debenture, the prevailing party in such proceeding will be
entitled to recover from the other party reasonable attorneys' fees and other costs and expenses incurred, in addition to any other
relief to which the prevailing party may be entitled.
8.7 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. This Debenture shall be governed by, and construed in accordance with,
the internal laws of the State of New York, without regard to principles of conflicts of law. HOLDER AND BORROWER WAIVE ANY RIGHT
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS DEBENTURE OR ANY TRANSACTION CONTEMPLATED HEREIN,
INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER COMMON LAW OR STATUTORY BASES. Each party hereby submits
to the exclusive jurisdiction of the state and federal courts located in the County of Miami-Dade, State of Florida. If the jury
waiver set forth in this Section is not enforceable, then any dispute, controversy or claim arising out of or relating to this
Debenture or any of the transactions contemplated herein will be finally settled by binding arbitration in Miami-Dade County, Florida
in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed
in accordance with said rules. The arbitrator shall apply New York law to the resolution of any dispute, without reference to rules
of conflicts of law or rules of statutory arbitration. Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary
or interim equitable relief, or to compel arbitration in accordance with this paragraph. The expenses of the arbitration, including
the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing
party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator.
Unless and until the arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share
equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.
8.8 Maximum Payments.
Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of
the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by Borrower
to Holder and thus refunded to Borrower.
8.9 Construction.
Borrower acknowledges that its legal counsel participated in the preparation of this Debenture and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation
of this Debenture to favor any party against the other.
8.10 Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of Borrower,
which is absolute and unconditional, to pay the Principal Amount of, interest and liquidated damages (if any) on, this Debenture
at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of Borrower.
8.11 Lost or
Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, Borrower shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the Principal Amount of this Debenture so mutilated, lost, stolen or destroyed.
8.12 Opinion
of Counsel. An opinion of the following counsels shall be deemed acceptable to Borrower: Law Firm of Richardson & Patel
LLP, Geenberg Trauirg LLP, Bauman & Associates Law Firm and Law Office of Clifford J. Hunt.
[Signature page follows.]
IN WITNESS WHEREOF,
Borrower has caused this Convertible Debenture to be signed in its name effective as of the date first above indicated.
BORROWER:
Players Network, Inc
By: ________________________
Name: Mark Bradley
Title: CEO
HOLDER:
Group 10 Holdings,
LLC
By: ________________________
Name: Adam Wasserman
Title: Managing Member
EXHIBIT A
NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal under the Convertible Debenture (“Debenture”) of Players Network,
a Nevada corporation (“Borrower”), into shares of common stock (the “Common Stock”) of Borrower
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by Borrower in accordance therewith. No fee will be charged to the undersigned
for any conversion, except for such transfer taxes, if any.
By the delivery of
this Notice of Conversion the undersigned represents and warrants to Borrower that its ownership of Common Stock does not exceed
the amount specified under Section 3.3 of the Debenture, as determined in accordance with Section 13(d) of the Exchange Act.
The undersigned agrees
to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock pursuant to any prospectus.
Conversion calculations: |
|
|
|
|
Date to Effect Conversion: |
|
|
Principal Amount of Note to be Converted: |
|
|
Interest Accrued on Account |
|
of Conversion at Issue: |
|
|
Number of shares of Common Stock to be issued: |
|
|
Name: |
Group 10 Holdings LLC |
|
|
Address for Delivery of Common Stock Certificates: |
|
|
11 Island Ave #1108 |
|
|
Miami Beach, FL 33139 |
|
|
EIN# 32-0409845 |
|
|
Tel: 917.374.8229, Fax: 305.359.5180 |
Exhibit 10.2
NEITHER THIS NOTE NOR THE SECURITIES THAT
MAY BE ISSUED BY THE BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER
THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED: (i) IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (ii) IN THE
ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR;
(iii) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.
12% CONVERTIBLE NOTE
Maturity Date of September 2,
2015 *the “Maturity Date”
$75,000 March 2, 2015 *the “Issuance
Date”
FOR
VALUE RECEIVED, The Players Network, a Nevada Corporation (the “Company”) doing business in Las Vegas, NV hereby
promises to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the “Holder”)
the principal amount of Seventy-Five Thousand Dollars ($75,000), on demand of the Holder at any time on or after September 2,
2015 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of Twelve
Percent (12%) per annum (the “Interest Rate”) from the date hereof (the “Issuance Date”) until the same
becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise; provided, that any amount
of principal or interest on this Note which is not paid when due shall bear interest at such rate on the unpaid principal balance
hereof plus Default Interest from the due date thereof until the same is paid in full. Interest shall commence accruing on the
Issuance Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed and shall accrue daily and,
after the Maturity Date, compound annually.
| 1. | Payments
of Principal and Interest. |
| a. | Payment
of Principal. Until the Ninetieth (90th) day after the Issuance Date the Company may
pay the principal at a cash redemption premium of 125%, in addition to outstanding interest,
without the Holder’s consent; from the 90th day to the One Hundred and Twentieth
(120th) day after the Issuance Date, the Company may pay the principal at a cash redemption
premium of 140%, in addition to outstanding interest, without the Holder’s consent.
After the 120th day, up to and upon the Maturity Date, this note has a cash redemption
premium of 140% of the principal amount, in addition to outstanding interest, but this
provision may only be exercised if the consent of the Holder is obtained. After the Maturity
Date the Company may pay the Note’s outstanding principal at a cash redemption
premium of 140%, in addition to outstanding interest, but this provision may only be
exercised if the consent of the Holder is obtained. The principal and interest balance
of this Note shall be paid to the Holder hereof on demand. |
| b. | Demand
of Repayment. The principal and interest balance of this Note shall be paid to the Holder
hereof on demand by the Holder at any time before or after the Maturity Date. |
| c. | Default
Interest. Any amount of principal on this Note which is not paid when due shall bear
Twelve Percent (12%) interest per annum from the date thereof until the same is paid
(“Default Interest”) and the Holder, at the Holder’s sole discretion,
may include any accrued but unpaid Default Interest in the Conversion Amount. |
| d. | General
Payment Provisions. This Note shall be made in lawful money of the United States of America
by check to such account as the Holder may from time to time designate by written notice
to the Company 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 (as
defined below), 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. For purposes of
this Note, “Business Day” shall mean any day other than a Saturday, Sunday
or a day on which commercial banks in the State of Texas are authorized or required by
law or executive order to remain closed. |
| 2. | Conversion
of Note. At any time prior to the Maturity Date, or after the Maturity Date, the Conversion
Amount of this Note shall be convertible into shares of the Company’s common stock,
share (the “Common Stock”), on the terms and conditions set forth in this
Paragraph 2. |
| a. | Certain
Defined Terms. For purposes of this Note, the following terms shall have the following
meanings: |
“Conversion
Amount” means the sum of (A) the principal amount of this Note to be converted with respect to which this determination
is being made, (B) Interest; and (C) Default Interest, if any, on unpaid interest and principal, if so included at the Holder’s
sole discretion.
“Conversion
Price” means the lower of: (i) a 42% discount to the lowest two closing price during the previous ten (10) trading days
to the date of Conversion; or (ii) a 42% discount to the average of the two lowest closing prices during the previous ten (10)
trading days before the date that this note was executed.
“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.
“Shares”
means the Shares of the Company into which any balance on this Note may be converted upon submission of a “Conversion Notice”
attached hereto as Exhibit 1.
| b. | Holder’s
Conversion Rights. At any time or times on or after the Issuance Date, the Holder shall
be entitled to convert all of the outstanding and unpaid principal amount of this Note
into fully paid and non-assessable shares of Common Stock in accordance with the stated
Conversion Price. |
| c. | Fractional
Shares. The Company shall not issue any fraction of a share of Common Stock upon any
conversion; if such issuance would result in the issuance of a fraction of a share of
Common Stock, the Company shall round such fraction of a share of Common Stock up to
the nearest whole share. |
| d. | Conversion
Amount. The Conversion Amount shall be converted pursuant to Rule 144(b)(1)(ii) and Rule
144(d)(1)(ii) as promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, into free trading shares at the Conversion Price. |
| e. | Mechanics
of Conversion. The conversion of this Note shall be conducted in the following manner: |
Holder’s
Conversion Requirements. To convert this Note into shares of Common Stock on any date set forth in the Conversion Notice by the
Holder (the “Conversion Date”), the Holder hereof shall transmit by email, facsimile or otherwise deliver, for receipt
on or prior to 11:59 p.m., Eastern Time, on such date or on the next business day, a copy of a fully executed notice of conversion
in the form attached hereto as Exhibit 1 to the Company.
Company’s
Response. Upon receipt by the Company of a copy of a Conversion Notice, the Company shall as soon as practicable, but in
no event later than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier,
a confirmation of receipt of such Conversion Notice to such Holder indicating that the Company will process such Conversion Notice
in accordance with the terms herein. Within two (2) Business Days after the date the Conversion Notice is delivered, the Company
shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company
be unable to transfer the shares electronically, it shall, within two (2) Business Days after the date the Conversion was delivered,
have surrendered to FedEx for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered
in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.
Record
Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be
treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.
Timely
Response by Company. Upon receipt by Company of a Conversion Notice, Company shall respond within one business day to Holder confirming
the details of the Conversion, and provide within two business days the Shares requested in the Conversion Notice.
Penalty
for Delinquent Response. If Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the
Company, its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice and within three business
days of the Conversion Date, the Company shall be deemed in “Default of Conversion.” As of the day the Company is
deemed in Default of Conversion, there shall accrue a penalty of Additional Shares due to Holder equal to 25% of the number stated
in the Conversion Notice beginning on the Fourth business day after the date of the Notice. The Additional Shares shall be issued
and the amount of the Note retired will not be reduced beyond that stated in the Conversion Notice. Each additional 5 business
days beyond the Fourth business day after the date of this Notice shall accrue an additional $18,875 penalty for delinquency,
without any corresponding reduction in the amount due under the Note, for so long as Company fails to provide the Shares so demanded.
Any time after a Default of Conversion the Holder may, at their sole discretion, rescind the Conversion.
Rescindment
of Conversion Notice. If (i) the Company fails to respond to Holder within one business day from the date of Conversion confirming
the details of Conversion, (ii) the Company fails to provide the Shares requested in the Conversion Notice within three business
days from the date of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the Shares issued unrestricted
and/or deposited to sell for any reason related to the Company's standing, (iv) the Holder is unable to deposit the Shares requested
in the Conversion Notice for any reason related to the Company's standing, or (v) if OTC Markets changes the Company's designation
to 'Limited Information' (Yield), 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC'
or 'Grey Market' (Exclamation Mark Sign) on the day of or any day after the date of Conversion, the Holder maintains the option
and sole discretion to rescind the Conversion Notice ("Rescindment") with a "Notice of Rescindment."
Transfer
Agent Fees and Legal Fees. The issuance of the certificates shall be without charge or expense to the Holder. The Company shall
pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Convertible Note and processing
of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to the conversion.
The Holder will deduct legal fees in the amount of $2,000 from the principal payment of the Convertible Note. The Holder will
deduct 3rd party due diligence fees in the amount of $3,000 from the principal payment of the Convertible Note.
Conversion
Right Unconditional. If the Holder shall provide a Notice of Conversion as provided herein, the Company’s obligations to
deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged
breach by the Holder of any obligation to the Company.
| 3. | Other
Rights of Holders: Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale of all
or substantially all of the Company’s assets to another Person or other transaction
which is effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets with respect
to or in exchange for Common Stock is referred to herein as “Organic Change.”
Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following
which the Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in each case,
the “Acquiring Entity”) a written agreement (in form and substance reasonably
satisfactory to the Holder) to deliver to Holder in exchange for this Note, a security
of the Acquiring Entity evidenced by a written instrument substantially similar in form
and substance to this Note, and reasonably satisfactory to the Holder. Prior to the consummation
of any other Organic Change, the Company shall make appropriate provision (in form and
substance reasonably satisfactory to the Holders of a majority of the Conversion Amount
of the Notes then outstanding) to ensure that each of the Holders will thereafter have
the right to acquire and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon the conversion
of such Holder’s Note, such shares of stock, securities or assets that would have
been issued or payable in such Organic Change with respect to or in exchange for the
number of shares of Common Stock which would have been acquirable and receivable upon
the conversion of such Holder’s Note as of the date of such Organic Change (without
taking into account any limitations or restrictions on the convertibility of the Note).
All provisions of this Note must be included to the satisfaction of Holder in any new
Note created pursuant to this section. |
| 4. | Representations
and Warranties of the Company. In connection with the transactions provided for herein,
the Company hereby represents and warrants to the Holders the following. |
| a. | Organization,
Good Standing and Qualification. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to carry on its business as now conducted.
The Company is duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its business
or properties. |
| b. | Authorization.
All corporate action has been taken on the part of the Company, its officers, directors
and stockholders necessary for the authorization, execution and delivery of this Agreement.
The Company has taken all corporate action required to make all of the obligations of
the Company reflected in the provisions of this Agreement, valid and enforceable obligations.
The shares of capital stock issuable upon conversion of the Notes have been authorized
or will be authorized prior to the issuance of such shares. |
| c. | Fiduciary
Obligations. The Company hereby represents that it intends to use the proceeds of the
Notes primarily for the operations of its business and not for any personal, family,
or household purpose. The Company hereby represents that its board of directors, in the
exercise of its fiduciary duty, has approved the execution of this Agreement based upon
a reasonable belief that the loan provided for herein is appropriate for the Company
after reasonable inquiry concerning its financial objectives and financial situation. |
| 5. | Reservation
of Shares. The Company shall at all times, so long as any principal amount of the Note
is outstanding, reserve and keep available out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the Note, such number
of shares of Common Stock as shall at all times be sufficient to effect the conversion
of all of the principal amount of the Note then outstanding. The initial number of shares
of Common Stock reserved for conversions of the Notes shall be calculated as three times
the number of shares necessary to convert the entire value of the Note on the day it
was executed, and each increase in the number of shares so reserved shall be allocated
pro rata among the Holders of the Note based on the principal and interest amount of
the Notes held by each Holder at the time of issuance of the Notes or increase in the
number of reserved shares, as the case may be. In the event a Holder shall sell or otherwise
transfer any of such Holder’s Note, each transferee shall be allocated a pro rata
portion of the number of reserved shares of Common Stock reserved for such transferor.
Any shares of Common Stock reserved and allocated to any Person which ceases to hold
any Note shall be allocated to the remaining Holders, pro rata based on the principal
amount of the Note then held by such Holders. |
| 6. | Voting
Rights. Holders of this Note shall have no voting rights, except as required by law. |
| 7. | Reissuance
of Note. In the event of a conversion or redemption pursuant to this Note of less than
all of the Conversion Amount represented by this Note, the Company shall promptly cause
to be issued and delivered to the Holder, upon tender by the Holder of the Note converted
or redeemed, a new note of like tenor representing the remaining principal amount of
this Note which has not been so converted or redeemed and which is in substantially the
same form as this Note, as set forth above. |
| a. | Event
of Default. An “Event of Default” is: (i) default for ten (10) days in payment
of interest or Default Interest on this Note; (ii) default in payment of the principal
amount of this Note when due; (iii) failure by the Company for thirty (30) days after
notice to it to comply with any other material provision of this Note; (iv) breach of
any covenants, warranties, or representations by the Company herein; (v) cessation of
operations by the Company or a material subsidiary; (vi) if the Company pursuant to or
within the meaning of any Bankruptcy Law; (A) commences a voluntary case; (B) consents
to the entry of an order for relief against it in an involuntary case; (C) consents to
the appointment of a Custodian of it or for all or substantially all of its property;
(D) makes a general assignment for the benefit of its creditors; or (E) admits in writing
that it is generally unable to pay its debts as the same become due; or (vi) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (I)
is for relief against the Company in an involuntary case; (2) appoints a Custodian of
the Company or for all or substantially all of its property; or (3) orders the liquidation
of the Company or any subsidiary, and the order or decree remains unstayed and in effect
for thirty (30) days. The Term “Bankruptcy Law” means Title 11, U.S. Code,
or any similar Federal or State Law for the relief of debtors. The term “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law. |
| b. | Remedies.
If an Event of Default occurs and is continuing, the Holder of this Note may declare
all of this Note, including any interest and Default Interest and other amounts due,
to be due and payable immediately. |
| 9. | Vote
to Change the Terms of this Note. This Note and any provision hereof may only be amended
by an instrument in writing signed by the Company and holders of a majority of the aggregate
Conversion Amount of the Notes then outstanding. |
| 10. | Lost
or Stolen Note. Upon receipt by the Company of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft
or destruction, of an indemnification undertaking by the Holder to the Company in a form
reasonably acceptable to the Company and, in the case of mutilation, upon surrender and
cancellation of the Notes, the Company shall execute and deliver a new Note of like tenor
and date and in substantially the same form as this Note; provided, however, the Company
shall not be obligated to re-issue a Note if the Holder contemporaneously requests the
Company to convert such remaining principal amount into Common Stock. |
| 11. | Payment
of Collection, Enforcement and Other Costs. If: (i) this Note is placed in the hands
of an attorney for collection or enforcement or is collected or enforced through any
legal proceeding; or (ii) an attorney is retained to represent the Holder of this Note
in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’
rights and involving a claim under this Note, then the Company shall pay to the Holder
all reasonable attorneys’ fees, costs and expenses incurred in connection therewith,
in addition to all other amounts due hereunder. |
| 12. | Cancellation.
After all principal and accrued interest at any time owed on this Note has been paid
in full, this Note shall automatically be deemed canceled, shall be surrendered to the
Company for cancellation and shall not be reissued. |
| 13. | Waiver
of Notice. To the extent permitted by law, the Company hereby waives demand, notice,
protest and all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note. |
| 14. | Governing
Law. This Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Note shall
be governed by, the laws of the State of Texas, without giving effect to provisions thereof
regarding conflict of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in Texas for the adjudication of
any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being served in
any such suit, action or proceeding by sending by certified mail or overnight courier
a copy thereof to such party at the address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY. |
| 15. | Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided
in this Note shall be cumulative and in addition to all other remedies available under
this Note, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit a Holder’s
right to pursue actual damages for any failure by the Company to comply with the terms
of this Note. The Company covenants to each Holder of Notes that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth
or provided for herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder thereof and shall not, except
as expressly provided herein, be subject to any other obligation of the Company (or the
performance thereof). |
| 16. | Specific
Shall Not Limit General; Construction. No specific provision contained in this Note shall
limit or modify any more general provision contained herein. This Note shall be deemed
to be jointly drafted by the Company and all Holders and shall not be construed against
any person as the drafter hereof. |
| 17. | Failure
or Indulgence Not Waiver. No failure or delay on the part of this Note 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 privilege. |
| 18. | Partial
Payment. In the event of partial payment by the Holder, the principal sum due
to the Holder shall be prorated based on the consideration actually paid by lender such
that the company is only required to repay the amount funded and the company is not required
to repay any unfunded portion of this note. |
19.
Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to
the subjects herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed
by the Parties.
| 20. | Representations
and Warranties. The Company expressly acknowledges that the Holder, including but not
limited to its officer, directors, employees, agents, and affiliates, have not made any
representation or warranty to it outside the terms of this Agreement. The Company further
acknowledges that there have been no representations or warranties about future financing
or subsequent transactions between the parties. |
| 21. | Notices.
All notices and other communications given or made to the Company pursuant hereto shall
be in writing (including facsimile or similar electronic transmissions) and shall be
deemed effectively given: (i) upon personal delivery, (ii) when sent by electronic
mail or facsimile, as deemed received by the close of business on the date sent, (iii)
five (5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery. All communications shall be sent
either by email, or fax, or to the address specified on the signature page. The physical
address, email address, and phone number provided on the signature page shall be considered
valid pursuant to the above stipulations; should the Company’s contact information
change from that listed on the signature page, it is incumbent on the Company to inform
the Holder. |
| 22. | Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable
law, such provision shall be excluded from this Agreement and the rest of the Agreement
shall be enforceable in accordance with its terms. |
| 23. | Usury.
If it shall be found that any interest or other amount deemed interest due hereunder
violates the applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may lawfully do so) that
it will not seek to claim or take advantage of any law that would prohibit or forgive
the Company from paying all or a portion of the principal or interest on this Note. |
| 24. | Successors
and Assigns. This Agreement shall be binding upon successors and assigns. |
—
SIGNATURE PAGE TO FOLLOW —
IN WITNESS
WHEREOF, the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.
COMPANY:
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/s/ Sameer Hirji
Sameer Hirji, President
JSJ Investments Inc.
6060 North Central Expressway, Suite 500
Dallas TX 75206
888-503-2599
Exhibit 1
Conversion Notice
Reference is made to the Replacement Convertible
Promissory Note issued by The Player’s Network (the "Note"), dated March 2, 2015 in the principal amount of $75,000
with 12% interest. This note currently holds a principal balance of $PRINCIPAL. The features of conversion stipulate a Conversion
Price the lower of (i) a 42% discount to the average of the two lowest closing prices during the previous ten (10) trading days
to the date of Conversion; or (ii) a 42% discount to the average of the two lowest closing prices during the previous ten (10)
trading days before the date that this note was executed, pursuant to the provisions of Section 2(a)(2) in the Note.
In accordance with and pursuant to the
Note, the undersigned hereby elects to convert $______ of the PRINCIPAL/INTEREST balance of the Note, indicated below into
shares of Common Stock (the "Common Stock"), of the Company, by tendering the Note specified as of the date specified
below.
Date of Conversion: __________
Please confirm the following information:
Conversion Amount: $ ____________________
Conversion Price: $ ____________________ ( ____ % discount from
$ ____________________)
Number of Common Stock to be issued: _____________________________________________________________________
Current Issued/Outstanding: ____________________________________________________________________________
If the Issuer is DWAC eligible, please issue the Common Stock
into which the Note is being converted in the name of the Holder of the Note and transfer the shares electronically to:
[BROKER INFORMATION]
Holder Authorization:
JSJ Investments Inc.
6060 North Central Expressway, Suite 500 *Do not send certificates to this address
Dallas, TX 75206
888-503-2599
Tax ID: 20-2122354
Sameer Hirji, President
[DATE]
[CONTINUED ON NEXT PAGE]
PLEASE
BE ADVISED, pursuant to Section 2(e)(2) of the Note, “Upon receipt by the Company of a copy of the Conversion Notice,
the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion
Notice, SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT COURIER, A CONFIRMATION
OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER INDICATING THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance
with the terms herein. Within two (2) Business Days after the date of the Conversion Confirmation, the Company shall have issued
and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer
the shares electronically, they shall, within two (2) Business Days after the date of the Conversion Confirmation, have surrendered
to FedEx for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name
of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.”
Signature:
___________________________
CEONAME
CEO
COMPANY
Exhibit 21.1
Subsidiaries
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State of |
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Abbreviated |
Name of Entity(2) |
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Incorporation |
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Relationship |
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Reference |
Players Network(1) |
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Nevada |
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Parent |
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PNTV |
Green Leaf Farms Holdings, Inc.(2) |
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Nevada |
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Subsidiary |
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GLFH |
Green Leaf Medical, LLC(3)(4) |
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Nevada |
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Subsidiary |
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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
CERTIFICATIONS
I, Mark Bradley, certify that:
1. I have reviewed this quarterly report on
Form 10-Q for the fiscal quarter ended March 31, 2015 of Players Network;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements,
and other financial information included in this 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 report;
4. 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 the 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: May 14, 2015
/s/ Mark Bradley
By: Mark Bradley, Chief Executive Officer
(Principal Executive Officer and 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
I, Mark Bradley, Chief Executive Officer
and Principal Financial Officer of Players Network, a Nevada corporation (the "Company"), certify, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The quarterly report on Form
10-Q of Players Network. (the "Registrant") for the quarter ended March 31, 2015 (the "Report")
which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) Information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 14, 2015
/s/ Mark Bradley
Name: Mark Bradley
Title: Chief Executive Officer and
Principal Financial Officer