The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
November 30, 2016
(unaudited)
1. Nature of Business
Total Sports Media, Inc. (the “Company”) is a digital media and technology services company. The Company provides audio and video streaming and advertising services through its RadioLoyaltyTM Platform (the “Platform”) to over 5,000 internet and terrestrial radio stations and other broadcast content providers. The Platform consists of a web-based and mobile player that manages streaming audio and video content, social media engagement, display and video ad serving within the web player and is also capable of replacing audio ads with video ads within the web player in a live or on-demand environment. The Company offers the Platform directly to its broadcasters and integrates or white labels its technologies with web-based internet radio guides and other web-based content providers. The Company is also continuing development of SportsAlert™, a product subscriber based alert product. The Company was incorporated as a Wyoming corporation on May 6, 2008.
Basis of Presentation
The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K for year ended August 31, 2016. In the opinion of management, all adjustments necessary in order for the consolidated financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ended August 31, 2017. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, StreamTrack Media, Inc. and RadioLoyalty, Inc., California corporations. Radio Loyalty, Inc. is in the process of being dissolved with operations being transferred to StreamTrack Media, Inc.. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented.
Going Concern
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. For the three months ended November 30, 2016, the Company recorded an operating loss of $238,086 and a net loss of $976,980. As of November 30, 2016, the Company had a working capital deficit of $5,883,858, which excluding the derivative liability was $4,795,856. The net loss and negative working capital indicate substantial doubt about the entity’s ability to continue as a going concern.
Management is confident but cannot guarantee that the Company will be able to raise additional capital in order to repay debts and continue operations. As of August 31, 2016, and during fiscal 2017, the Company is obligated to make payments on certain operating leases, convertible debts, and a capital lease, among others. The Company’s normal operating costs are also significant and include consulting fees, professional fees, product development costs and marketing and sales costs associated with management’s business plan. Since inception and through the date of these financial statements, the Company has successfully raised a significant amount of capital through debt and equity offerings. The Company anticipates launching several new product offerings and initiating certain new partnerships during the fiscal year ending August 31, 2018. The Company anticipates those products and partnerships to be profitable but notes that it will require an unknown amount of capital for product development and commercial deployment. The Company will attempt to have its potential partners pay for the some of these costs but management cannot be certain that it will succeed in entering into such arrangements. Management may potentially make a business decision to move forward, delay, or cancel certain partnerships because of the Company’s overall capital needs. Nonetheless, the ability of the Company to continue as a going concern is dependent on the successful execution of the business plan and become profitable. If the Company is unable to become profitable and sustain positive cash flow from operations, the Company could be forced to modify its business operations or possibly cease operations entirely. Management cannot provide any assurances that the Company will be successful in its operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates are used for determining the allowance for doubtful accounts, stock-based compensation, fair values of warrants to purchase common stock, derivative liabilities and income taxes. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s financial statements could be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. As of November 30, 2016, there were 11,207,173,094 potentially dilutive shares of common stock that were excluded because their effect would be anti-dilutive.
Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible debt instruments, preferred stock, restricted stock unit grants and detachable stock warrants. Basic and diluted net loss per share was the same as basic for the three months ended November 30, 2016 and 2015 presented as the inclusion of all potential common shares outstanding would have been anti-dilutive.
Recent Accounting Pronouncements
The Financial Accounting Standards Board issued Accounting Standard Updates (“ASUs”) to amend the authoritative literature in Accounting Standards Codification (“ASC”). There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.
2. Composition of Certain Financial Statement Captions
Property and Equipment
Property and equipment consisted of the following:
|
|
November 30,
2016
|
|
|
August 31,
2016
|
|
|
|
|
|
|
|
|
Software
|
|
$
|
1,673,497
|
|
|
$
|
1,804,257
|
|
Servers, computers, and other related equipment
|
|
|
153,824
|
|
|
|
153,824
|
|
Leasehold improvements
|
|
|
1,675
|
|
|
|
1,675
|
|
|
|
|
1,828,996
|
|
|
|
1,959,756
|
|
Less accumulated depreciation and amortization
|
|
|
(1,609,527
|
)
|
|
|
(1,597,512
|
)
|
Property and equipment, net
|
|
$
|
219,469
|
|
|
$
|
362,244
|
|
Depreciation expense totaled $73,764 and $77,801 for the three months ended November 30, 2016 and 2015, respectively. During the three months ended November 30, 2016, the Company discontinued the development of their Amped Fantasy products. In connection with this, the Company recorded an impairment loss on disposal of assets of $69,011.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
|
|
November 30,
2016
|
|
|
August 31,
2016
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
845,778
|
|
|
$
|
814,707
|
|
Accrued interest
|
|
|
394,971
|
|
|
|
87,661
|
|
Accrued broadcaster commissions
|
|
|
88,981
|
|
|
|
301,883
|
|
Credit card
|
|
|
62,186
|
|
|
|
50,989
|
|
Accounts payable and accrued expenses
|
|
$
|
1,391,916
|
|
|
$
|
1,255,239
|
|
3. Fair Value
Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are required to be disclosed by level within the following fair value hierarchy:
Level 1– Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 – Inputs lack observable market data to corroborate management’s estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
When determining fair value, whenever possible the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available. Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2016 and August 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, prepaids, accounts payable, accrued liabilities, notes payable, and convertible notes payable. Fair values for these items were assumed to approximate carrying values because of their short term in nature or they are payable on demand.
The fair value of these financial assets and liabilities was determined using the following inputs:
|
|
Fair Value Measurement Using
|
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair values as of November 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
-
|
|
|
$
|
1,088,002
|
|
|
|
-
|
|
|
$
|
1,088,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
-
|
|
|
$
|
1,088,002
|
|
|
|
-
|
|
|
$
|
1,088,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair values as of August 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
-
|
|
|
$
|
561,374
|
|
|
|
-
|
|
|
$
|
561,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
-
|
|
|
$
|
561,374
|
|
|
|
-
|
|
|
$
|
561,374
|
|
The Company’s derivative liabilities were classified as Level 2 within the fair value hierarchy because they were valued using significant other observable inputs. At each reporting period, the Company calculates the derivative liability using the Black-Scholes pricing model taking into account variables such as expected life, risk free interest rate, expected volatility, the fair market value of the Company’s common stock and the conversion price.
4.
Asset Acquisition / Disposition
Asset Disposition
On February 19, 2016, the Company, entered into and closed an Asset Purchase Agreement with Electric Lightwave, LLC (“Electric Lightwave”), a wholly owned subsidiary of Integra Telecom Holdings, Inc. pursuant to which, Electric Lightwave purchased from the Company certain assets related to the Company’s data center located in Santa Barbara, including equipment and inventory, for a purchase price of $150,000. As of the date of the sale all the assets were fully depreciated. In connection with the transaction, the Company recorded a gain of $146,012, as rent deposit of $3,988 was transferred as part of the sale, which is recorded within gain on sale of co-location and domain on the accompanying statement of operations.
On February 2, 2016, the Company sold the watchthis.com domain name for $30,000, which is recorded within gain on sale of co-location and domain on the accompanying consolidated statement of operations.
5.
Commitments and Contingencies
On October 23, 2013, the Superior Court in the Judicial District of Danbury, Connecticut entered an order approving the stipulation of the parties (the “Stipulation”) in the matter of ASC Recap LLC (“ASC”) v. StreamTrack, Inc. Under the Stipulation, the Company agreed to issue to ASC, as settlement of liabilities owed by the Company to ASC in the aggregate amount of $766,288 (the “Claim Amount”), shares of common stock (the “Settlement Shares”) as follows:
(a) In one or more tranches as necessary, 4,675 shares of common stock (the “Initial Issuance”) and an additional 250 shares of common stock as a settlement fee.
(b) Through the Initial Issuance and any required additional issuances, that number of shares of common stock with an aggregate value equal to (A) the sum of
(i) the Claim Amount and (ii) reasonable attorney fees and trade execution fees in the amount of $75,000, divided by (B) the Purchase Price (defined under the Stipulation as the market price) (defined as the lowest closing bid price of the Company’s common stock during the valuation period set forth in the Stipulation) less the product of the Discount (equal to 25%) and the market price. The parties reasonably estimated that the fair market value of the Settlement Shares and all other amounts to be received by ASC is equal to approximately $1,100,000.
(c) If at any time during the valuation period the closing bid price of the Company’s common stock is below 90% of the closing bid price on the day before an issuance date, the Company will immediately cause to be issued to ASC such additional shares as may be required to effect the purposes of the Stipulation.
(d) Notwithstanding anything to the contrary in the Stipulation, the number of shares beneficially owned by ASC will not exceed 9.99% of the Company’s outstanding common stock.
In connection with the Settlement Shares, the Company relied on the exemption from registration provided by Section 3(a)(10) under the Securities Act.
There were no shares issued to ASC during the three months ended November 30, 2016 and 2015. The remaining amount on the settlement of liabilities owed by the Company to ASC is in the aggregate amount of $151,290 as of November 30, 2016 and 2015. The Company cannot reasonably estimate the amount of proceeds ASC expects to receive from the sale of these shares which will be used to satisfy the liabilities. Thus, the Company accounts for the transaction as the shares are sold and the liabilities are settled. All amounts are included within accounts payable. Shares which are held by ASC at each reporting period are accounted for as issued but not outstanding, of which there are none as of period end.
Legal Proceedings
The Company is potentially subject to various legal proceedings and claims arising in the ordinary course of its business. There are no pending legal proceedings against the Company as of the date of these financial statements. See Note 11 for a subsequent event related to a legal proceeding.
6. Capital Lease
On March 22, 2013, the Company reached a settlement and release agreement with IBM Credit, LLC, (“IBM”) the lessor associated with the Company’s computer servers and software classified under capital lease. The balance owed to IBM as of March 22, 2013 was agreed to be $108,704. The Company agreed to make payments of $9,000 per month, with a final payment of $9,704 on March 1, 2014, in order to satisfy this balance. As of November 30, 2016 and August 31, 2016, the Company was in default of this agreement and the amount outstanding of $54,704 is reflected as a current liability on the accompanying consolidated balance sheets.
7. Related Party Transactions
The related party payable as of November 30, 2016 and August 31, 2016 consists of unpaid compensation, cash advances and charges on personal credit lines made on behalf of the Company by the Executives. The balances owed to the Executives are not secured and are due on demand. The Company is required to pay the interest charges on personal credit cards. Interest will be charged on these credit line balances based upon effective credit card rates. During the period from December 1, 2014 to May 31, 2015, the Executives agreed to a temporary reduction in their annual salary from $240,000 to $50,000 per annum. As of June 1, 2015 the effective rate of pay should be $240,000 per year but subsequently the executives verbally agreed to continue the moratorium until May 31, 2017. Subsequent to May 31, 2017, the annual salary due to the executives was reinstated to the $240,000 per annum. As of November 30, 2016 and August 31, 2016, amounts due to these Executive related to accrued compensation and advances were $296,600 and $281,291, respectively.
See Notes 8 and 10 for additional related party transactions.
8. Debt Instruments
Line of Credit
On April 11, 2013, the Company executed a non-dilutive asset-based debt financing (the “Lender Financing”) with a third party (the “Lender”). The Lender Financing for a line of credit, secured by all of the Company’s assets. The Company’s management also executed limited recourse guarantees with the Lender. Interest is payable monthly based on a floating interest rate determined based on a formula outlined in detail within the financing agreement. The Company anticipates the effective monthly interest rate charged on the outstanding balance owed to the third party will be approximately 9.75%.
On January 22, 2016, the Company executed an addendum to the Lender Financing agreement whereby the maturity date has been extended to December 15, 2016 with interest calculated at Prime plus 15.25% per annum. In the event the facility is below $750,000 prior to March 15, 2016 the interest rate shall be Prime plus 12.5%; below $500,000 prior to June 15, 2016 the interest rate shall be Prime plus 10%.
On September 6, 2016, the Company executed an addendum to this agreement whereby the maturity date has been extended to November 16, 2017. The line of credit was also increased to $1,055,000.
On June 1, 2017, the Company executed an addendum to this agreement whereby the maturity date has been extended to May 15, 2018 with interest calculated at Prime plus 6.25%. The line of credit was also increased to $1,123,642
Creditor #2 Convertible Promissory Notes
In April 2014, the Creditor entered into an exchange agreement with another lender (the “Creditor #2”) whereby the Creditor transferred the Creditor’s notes and accrued interest to Creditor #2. In April 2014, the Company entered into i) a note agreement for $284,560 representing amounts transferred from the Creditor; ii) two $125,000 notes in which the proceeds were received on the same date (collectively referred to as the “Creditor #2 Notes”) with Creditor #2. The Creditor #2 Notes bear interest per annum at 10.0%, payable six months after the issuance date and are convertible on the date of issuance based upon based upon a 45% discount to lowest trading price, for the 15 trading days prior to conversion. As a result, the lower the stock price at the time the Creditor #2 converts the Creditor #2 Notes, the more common shares the Creditor #2 will receive. There were no conversions during the three months ended November 30, 2016 and 2015. The remaining principal balance was $391,242 as of November 30, 2016 and August 31, 2016. The convertible notes were due October 2014, however, as of the date of this filing there have been no demands or notifications of default received from the holder. Based upon the agreements, at the time of default the Company was potentially liable for $90,000 in additional penalties. During the three months ended November 30, 2016, the Company recorded $90,000 in penalties as accrued interest and interest expense. The impact of the penalty wasn’t significant to previously issued financial statements as well as the current period being reported on. The penalty doesn’t incur interest and isn’t convertible into shares of the Company’s common stock.
To the extent the Creditor #2 converts the Creditor #2 Notes and then sells its common stock, the market price of the common stock may decrease due to the additional shares in the market. This could allow the Creditor #2 to receive greater amounts of common stock upon conversion. The sale of each share of common stock could further depress the stock price. Due to the floating conversion price of the notes, the Company does not know the exact number of shares that the Creditor #2 would be issued upon conversion. The shares issuable upon conversion of the Creditor #2 Notes may result in substantial dilution to the interests of the Company’s other shareholders. In this regard, even though the investor may not hold shares amounting to more than 9.99% of the outstanding shares at one time, this restriction does not prevent the investor from selling some of its holdings and then receiving additional shares. In this way, the investor could sell more than the 9.99% limit while never holding more than the limit.
Creditor #3 Convertible Promissory Note
In December 2014, a convertible promissory note holder (“Holder”) entered into an exchange agreement with another lender (the “Creditor #3”) whereby the Holder transferred the Holder’s notes and accrued interest to Creditor #3. In December 2014, the Company entered into i) a note agreement for $150,000 representing the principal amount transferred from the Holder. The Creditor #3 Note bears interest per annum at 10.0%, due on August 22, 2015 and is convertible on the date of issuance based upon based upon a 25% discount to lowest trading price, for the 5 trading days prior to conversion. As a result, the lower the stock price at the time the Creditor #3 converts the Creditor #3 Notes, the more common shares the Creditor #3 will receive. There were no conversions during the three months ended November 30, 2016 and 2015. In September 2016, the Creditor #3 note and accrued interest was satisfied by the Company for $25,000. The Company recorded a gain on extinguishment of $150,387 during the three months ended November 30, 2016. The gain consisted of forgiven principal and accrued interest of $98,184 and removal of the derivative liability of $52,203. The remaining principal balance was $93,350 as of August 31, 2016.
Convertible Promissory Notes
As of November 30, 2016 and August 31, 2016, in addition to the notes owing to Creditors #2 and #3 (above) the Company has outstanding 35 convertible promissory notes respectively issued between December 2011 and November 2016. The convertible promissory notes bear interest at either 4% or 8% per year and are due in full, including principal and interest, two-three years from the issuance date ranging from August 2014 to February 2018. The convertible promissory notes also include a conversion option whereby the holders may elect at any time to convert any portion or the entire balance into the Company’s common stock at conversion prices ranging from $0.0001 to $0.50. There were no transactions in which impacted these 35 convertible notes payable during the three months ended November 30, 2016, other than the accrual of interest. As of November 30, 2016 and August 31, 2016, the balance of convertible notes payable was $1,704,895 and $1,704,895, respectively.
As of November 30, 2016 and August 31, 2016, 26 of the above-mentioned 35 convertible promissory notes with outstanding balances totaling $1,103,964 and $1,103,964 respectively, are held by related parties. As of November 30, 2016, amounts included within accounts payable and accrued interest due to related parties for accrued interest on these convertible promissory notes was $105,477. These related parties consist of the Company’s officers, a Director, significant shareholders or entities controlled by these individuals.
For some of the convertible promissory notes, the conversion feature associated with the convertible promissory notes provide for a rate of conversion that is below market value. This conversion feature is accounted for as a beneficial conversion feature. A beneficial conversion feature was recorded and classified as a debt discount on the balance sheet at the time of issuance of each convertible promissory note with a corresponding credit to additional paid-in capital.
The discounts are amortized over the term of the convertible promissory note using the straight line method. The amortized value for each period is recorded as an offset against the debt discount on the balance sheet, classified as interest expense. During the three months ended November 30, 2016 and 2015, $94,732 and $123,490 of the discounts were amortized to interest expense, respectively. As of November 30, 2016, $29,106, $28,501 of which is on non-related party notes discounts remained which will be expensed in fiscal 2017 through 2018.
9. Derivatives
In connection with convertible notes payable, the Company records derivative liabilities for the conversion feature. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the three months ended November 30, 2016 and 2015, the Company didn’t record any additional derivative liabilities as no new convertible notes were issued. On November 30, 2016, the derivative liabilities were revalued at $1,088,002 resulting in a loss of $578,831 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices ranging from of $0.044 to $0.072, the closing stock price of the Company’s common stock on the date of valuation $0.08, an expected dividend yield of 0%, expected volatility of 579%, risk-free interest rates ranging from 0.49% to 0.62%, and an expected term of 0.5 years. On November 30, 2015, the derivative liabilities were revalued at $894,974 resulting in a gain of $3,882 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices ranging from of $0.048 to $0.072, the closing stock price of the Company’s common stock on the date of valuation $0.08, an expected dividend yield of 0%, expected volatility of 360%, risk-free interest rates ranging from 0.27% to 0.75%, and an expected term ranging from 0.5 to 1.42 years.
10. Stockholders’ Equity
Series A Preferred Stock
Each share of Series A Preferred Stock has voting rights equal to the voting equivalent of the common stock into which it is convertible at the time of the vote. The holders of the Series A Preferred Stock are not entitled to dividends. The Series A Preferred Stock has no preferential rights to the Company’s common stock and will share in any liquidation proceeds with the common stock on an as converted basis. No shares of Series A Preferred Stock are outstanding as of November 30, 2016.
Series B Preferred Stock
On October 25, 2013, the Company filed a Certificate of Designation of Series B Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of Wyoming. Pursuant to the Series B Certificate of Designation, the Company designated 200,000 shares of its blank check preferred stock as Series B Preferred Stock. The Series B Preferred Stock will rank senior to the common stock, Series A Preferred Stock and any subsequently created series of preferred stock that does not expressly rank pari passu with or senior to the Series B Preferred Stock (the “Junior Stock”). The Series B Preferred Stock will not be entitled to dividends. In the event of a liquidation, the Series B Preferred Stock will be entitled to a payment of the Stated Value of $1.00 per share prior to any payments being made in respect of the Junior Stock. Each share of Series B Preferred Stock will entitle the holder to vote on all matters voted on by holders of common stock as a single class. With respect to any such vote, each share of Series B Preferred Stock will entitle the holder to cast such number of votes equal to 0.000255% of the total number of votes entitled to be cast in other words, 51% of the voting interest for the entire Series B. Effective upon the closing of a Qualified Financing, all issued and outstanding shares of Series B Preferred Stock will automatically convert into common stock in an amount determined by dividing the product of the number of shares being converted and the Stated Value by the Conversion Price. The Conversion Price will be equal to the price per share of the common stock sold under the Qualified Financing (or, if the Qualified Financing involves the sale of securities convertible into common stock, by the conversion price of such convertible securities). A “Qualified Financing” is defined as the sale by the Company in a single offering of common stock or securities convertible into common stock for gross proceeds of at least $5,000,000.
Series C Preferred Stock
Effective December 29, 2014, the Company filed a Certificate of Designation of Series C Convertible Preferred Stock (the “Series C”) with the Secretary of State of Wyoming. Pursuant to the Series C, the Company designated 20,000 shares of its blank check preferred stock as Series C Preferred Stock. Each share of Series C is convertible into $150 in fair market value of the Company’s common stock, which fair market value will be equal to the average closing price of the common stock on the over-the-counter market during the 10 trading days immediately prior to the delivery to the Company of a conversion notice. The Series C will share in any liquidation proceeds with the common stock on an as-converted basis, will not have voting rights prior to being converted to common stock, and in the event of any payment of dividends by the Company, will be entitled to dividends on an as-converted basis with the common stock. The Company has presented the Series C outside of stockholders’ equity due to the variable conversion price.
Common Stock
Each share of common stock has the right to one vote per share. The holders of common stock are also entitled to receive dividends as and when declared by the board of directors of the Company, whenever funds are legally available, subject to the rights under any outstanding preferred stock.
On October 26, 2015, the Company filed a 14C with the Securities and Exchange Commission indicating their intent to amendment the Articles of Incorporation to: (i) change the Company’s name from StreamTrack, Inc. to Total Sports Media, Inc., (ii) effect a 1-for 800 reverse split of the Company’s common stock and (iii) decrease the authorized number of shares of common stock from an unlimited number to 40,000,000. The Company received approval to these actions on December 6, 2016 and will reflect under the new ticker TSMI, after 20 days. The 1-for 800 reverse split has been retroactively reflected within these consolidated financial statements.
Common Stock to be Issued
On April 27, 2015, the Company entered into an Investment Agreement with RTV Media Corp. (“RTV”) pursuant to which RTV initially invested $75,000 into the Company in consideration for $75,000 of worth of warrants. On December 3, 2015, the Company issued RTV additional warrants in consideration of $12,500. The warrants have an exercise price which is equal to the higher of (i) $0.001 or (ii) 85% of the average closing price of the Company’s common stock as quoted on the public securities trading market for the ten (10) consecutive trading days immediately prior to the Holder’s exercise of this warrant. RTV has up to five years to exercise the warrants. In addition, RTV agreed to invest up to an additional $412,500 of capital into the Company in consideration for which additional warrants will be granted upon investment. The Company has accounted for the warrants as common stock to be issued as there are no provisions within the agreement in which will require the Company to return the capital provided. As of November 30, 2016, if exercised, the Company has the obligation to issue 1,286,765 shares of common stock. Subsequent to November 30, 2016, the Company has received an additional $25,000.
11. Subsequent Events
On January 20, 2017, a lawsuit was filed against one of our subsidiaries StreamTrack Media, Inc. by Prodedge, LLC for $80,500 plus attorney fees for breach of contract, covenant of good faith and fair dealing, which has been recorded in accounts payable as of August 31, 2016 and November 30, 2016. The settlement reached stipulated a payment schedule of $2,000 per month for twelve months starting June 15, 2017 and $4,708 per month for twelve months starting June 15, 2018. As of October 31, 2017, $76,500 is still owed under the settlement.
On June 1, 2017, the Company executed an addendum to the Lender Financing agreement whereby the maturity date has been extended to May 15, 2018 with interest calculated at Prime plus 6.25%. The line of credit was also increased to $1,123,642.
On November 10, 2017, the Company entered into an agreement with a third party to sell a website in exchange for 10 million shares of restricted shares of the third party's common stock. The Company is still evaluating the accounting treatment.
See Notes 7, 8 and 10 for additional subsequent events.