Item
1 - Financial Statements
PLAYERS
NETWORK
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
133,801
|
|
|
$
|
145,119
|
|
Other current assets
|
|
|
99,141
|
|
|
|
85,150
|
|
Inventory
|
|
|
227,012
|
|
|
|
-
|
|
Total current assets
|
|
|
459,954
|
|
|
|
230,269
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
407,833
|
|
|
|
29,128
|
|
Construction in progress
|
|
|
314,146
|
|
|
|
239,220
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,181,933
|
|
|
$
|
498,617
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
637,177
|
|
|
$
|
298,861
|
|
Accrued expenses
|
|
|
417,108
|
|
|
|
293,418
|
|
Deferred revenue
|
|
|
2,500
|
|
|
|
-
|
|
Deferred rent obligations
|
|
|
26,325
|
|
|
|
15,656
|
|
Settlements payable
|
|
|
-
|
|
|
|
70,000
|
|
Convertible
debentures, net of discounts of $192,961 and $241,634 at September 30, 2017 and December 31, 2016, respectively
|
|
|
77,039
|
|
|
|
58,366
|
|
Short
term debt, net of discounts of $284,216 and $60 at September 30, 2017 and December 31, 2016, respectively
|
|
|
554,784
|
|
|
|
142,940
|
|
Derivative liabilities
|
|
|
1,582,282
|
|
|
|
482,674
|
|
Total current liabilities
|
|
|
3,297,215
|
|
|
|
1,361,915
|
|
|
|
|
|
|
|
|
|
|
Long
term debt, net of discounts of $538,972 and $885,271 at September 30, 2017 and December 31, 2016, respectively
|
|
|
386,028
|
|
|
|
39,729
|
|
Total Liabilities
|
|
|
3,683,243
|
|
|
|
1,401,644
|
|
|
|
|
|
|
|
|
|
|
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
C convertible preferred stock, $0.001 par value, 12,000,000 shares authorized; 12,000,000 shares issued and outstanding
|
|
|
12,000
|
|
|
|
12,000
|
|
Common
stock, $0.001 par value, 1,200,000,000 shares authorized; 568,209,581 and 524,394,239 shares issued and outstanding at September
30, 2017 and December 31, 2016, respectively
|
|
|
568,210
|
|
|
|
524,394
|
|
Additional paid-in
capital
|
|
|
32,610,699
|
|
|
|
29,463,343
|
|
Subscriptions
payable, consisting of 8,258,117 and 1,000,000 shares at September 30, 2017 and December 31, 2016, respectively
|
|
|
828,875
|
|
|
|
11,400
|
|
Accumulated (deficit)
|
|
|
(36,151,435
|
)
|
|
|
(30,639,417
|
)
|
|
|
|
(2,129,651
|
)
|
|
|
(626,280
|
)
|
Noncontrolling Interest
|
|
|
(371,659
|
)
|
|
|
(276,747
|
)
|
Total Stockholders' (Deficit)
|
|
|
(2,501,310
|
)
|
|
|
(903,027
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
(Deficit)
|
|
$
|
1,181,933
|
|
|
$
|
498,617
|
|
See
accompanying notes to financial statements.
PLAYERS
NETWORK
CONDENSED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
$
|
38,074
|
|
|
$
|
59
|
|
|
$
|
41,144
|
|
|
$
|
199
|
|
Cost of goods sold
|
|
|
32,806
|
|
|
|
-
|
|
|
|
35,014
|
|
|
|
-
|
|
Gross profit
|
|
|
5,268
|
|
|
|
59
|
|
|
|
6,130
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating
costs
|
|
|
334,545
|
|
|
|
7,537
|
|
|
|
427,596
|
|
|
|
24,537
|
|
General and administrative
|
|
|
2,559,617
|
|
|
|
234,402
|
|
|
|
3,712,483
|
|
|
|
669,992
|
|
Officer salaries
|
|
|
34,350
|
|
|
|
44,423
|
|
|
|
156,450
|
|
|
|
131,923
|
|
Depreciation and
amortization
|
|
|
28,542
|
|
|
|
6,969
|
|
|
|
42,850
|
|
|
|
21,583
|
|
Total operating expenses
|
|
|
2,957,054
|
|
|
|
293,331
|
|
|
|
4,339,379
|
|
|
|
848,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,951,786
|
)
|
|
|
(293,272
|
)
|
|
|
(4,333,249
|
)
|
|
|
(847,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on debt extinguishment,
net
|
|
|
-
|
|
|
|
34,002
|
|
|
|
-
|
|
|
|
73,505
|
|
Interest expense
|
|
|
(325,133
|
)
|
|
|
(64,719
|
)
|
|
|
(745,048
|
)
|
|
|
(345,274
|
)
|
Change in derivative
liabilities
|
|
|
1,339,199
|
|
|
|
(196,086
|
)
|
|
|
(528,633
|
)
|
|
|
(238,679
|
)
|
Total other income
(expense)
|
|
|
1,014,066
|
|
|
|
(226,803
|
)
|
|
|
(1,273,681
|
)
|
|
|
(510,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,937,720
|
)
|
|
$
|
(520,075
|
)
|
|
$
|
(5,606,930
|
)
|
|
$
|
(1,358,284
|
)
|
Less:
Net loss attributable to the noncontrolling interest
|
|
|
37,663
|
|
|
|
16,289
|
|
|
|
94,912
|
|
|
|
31,642
|
|
Net loss attributable to Players Network
|
|
$
|
(1,900,057
|
)
|
|
$
|
(503,786
|
)
|
|
$
|
(5,512,018
|
)
|
|
$
|
(1,326,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and fully diluted
|
|
|
564,473,234
|
|
|
|
431,826,412
|
|
|
|
552,533,416
|
|
|
|
398,120,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
- basic and fully diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
See
accompanying notes to financial statements.
PLAYERS
NETWORK
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,512,018
|
)
|
|
$
|
(1,326,642
|
)
|
Minority interest
in net loss
|
|
|
(94,912
|
)
|
|
|
(31,642
|
)
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
|
42,850
|
|
|
|
21,583
|
|
Gain on debt extinguishment,
net
|
|
|
-
|
|
|
|
(73,505
|
)
|
Change in fair market
value of derivative liabilities
|
|
|
528,633
|
|
|
|
238,679
|
|
Amortization of
debt discounts
|
|
|
675,239
|
|
|
|
305,747
|
|
Stock issued for
services
|
|
|
823,779
|
|
|
|
7,000
|
|
Stock issued for
compensation, related party
|
|
|
178,300
|
|
|
|
339,000
|
|
Options issued for
services
|
|
|
325,434
|
|
|
|
-
|
|
Options issued for
services, related parties
|
|
|
1,252,411
|
|
|
|
-
|
|
Decrease (increase)
in assets:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(13,991
|
)
|
|
|
(279
|
)
|
Inventory
|
|
|
(227,012
|
)
|
|
|
-
|
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
|
Checks drawn in
excess of available funds
|
|
|
-
|
|
|
|
(2,154
|
)
|
Accounts payable
|
|
|
338,316
|
|
|
|
137,460
|
|
Accrued expenses
|
|
|
126,965
|
|
|
|
71,026
|
|
Deferred revenue
|
|
|
2,500
|
|
|
|
-
|
|
Deferred rent obligations
|
|
|
10,669
|
|
|
|
8,613
|
|
Settlements payable
|
|
|
(30,000
|
)
|
|
|
(148,810
|
)
|
Net cash used in operating activities
|
|
|
(1,572,837
|
)
|
|
|
(453,924
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Purchase of fixed
assets and construction in progress
|
|
|
(496,481
|
)
|
|
|
(121,403
|
)
|
Net cash used in investing activities
|
|
|
(496,481
|
)
|
|
|
(121,403
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from convertible
debentures
|
|
|
-
|
|
|
|
265,000
|
|
Repayment of convertible
debentures
|
|
|
-
|
|
|
|
(80,890
|
)
|
Proceeds from short
term debt
|
|
|
735,000
|
|
|
|
188,000
|
|
Repayment of short
term debt
|
|
|
(10,000
|
)
|
|
|
(50,000
|
)
|
Proceeds from sale
of common stock
|
|
|
1,333,000
|
|
|
|
286,850
|
|
Net cash provided by financing activities
|
|
|
2,058,000
|
|
|
|
608,960
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(11,318
|
)
|
|
|
33,633
|
|
Cash - beginning
|
|
|
145,119
|
|
|
|
-
|
|
Cash - ending
|
|
$
|
133,801
|
|
|
$
|
33,633
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
200
|
|
|
$
|
328
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Contributed capital,
debt settlement payment
|
|
$
|
-
|
|
|
$
|
14,000
|
|
Convertible debts
settled with cash repayment agreements
|
|
$
|
-
|
|
|
$
|
320,000
|
|
Value of debt discounts
|
|
$
|
46,000
|
|
|
$
|
257,379
|
|
Value of shares issued for conversion
of debt
|
|
$
|
148,275
|
|
|
$
|
124,477
|
|
Value of warrants
issued with short term debt
|
|
$
|
518,423
|
|
|
$
|
14,396
|
|
Value of derivative
adjustment due to debt conversions
|
|
$
|
52,552
|
|
|
$
|
840,500
|
|
Advance exchanged
for promissory note
|
|
$
|
-
|
|
|
$
|
25,000
|
|
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, 2016 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
|
|
Incorporation
|
|
Relationship
|
|
Reference
|
|
|
|
|
|
|
|
Players Network
(1)
|
|
Nevada
|
|
Parent
|
|
PNTV
|
Green Leaf Farms Holdings, LLC
(2)
|
|
Nevada
|
|
Subsidiary
|
|
GLFH
|
(1)
Players
Network entity is in the form of a corporation.
(2)
Majority-owned
subsidiary formed on July 8, 2014, in which PNTV retained 84% ownership, with the remaining 16% held by key experts and advisors.
An additional 1.6% was sold to an investor on December 8, 2014 and 3% was transferred back from a founding member on December
2, 2015, giving PNTV 85.4% ownership and minority interests ownership of 14.6%. The form of the entity was changed from a corporation
to a limited liability company on May 9, 2017 at which time the name was changed from Green Leaf Farms Holdings, Inc.
to Green Leaf Farms Holdings, LLC (“GLFH”).
The
consolidated financial statements herein contain the operations of the subsidiary listed above. All significant inter-company
transactions have been eliminated in the preparation of these financial statements. The parent company, PNTV and subsidiary, GLFH
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.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out
(FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of prepackaged purchased
goods ready for resale, and cannabis flower grown in-house under our cultivation license, along with produced edibles and extracts
developed under our production license.
Construction
in Progress
The
Company is constructing a grow house in its leased facility, which became operational during the second quarter of 2017 upon completion
of the first phase of improvements, at which time depreciation commenced. On May 31, 2017, the Company placed in service $373,842
of leasehold improvements incurred during the first phase of construction. Phase 2 commenced in July and will be capitalized on
the balance sheet under Construction in Progress. The total estimated cost to complete construction of the facility is approximately
$1.7 million, and an additional $314,146 of construction costs have been capitalized as of September 30, 2017.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Revenue
Recognition
Revenue
is primarily generated through our subsidiary, Green Leaf Holdings, LLC. Green Leaf recognizes revenue from the sale of the following
cannabis products and services to licensed dispensaries within the state of Nevada:
●
|
Premium
organic medical cannabis sold wholesale to licensed retailers
|
●
|
Recreational
marijuana cannabis products sold wholesale to distributors and retailers
|
●
|
Extraction
products such as oils and waxes derived from in-house cannabis production
|
●
|
Processing
and extraction services for licensed medical cannabis cultivators in Nevada
|
●
|
High
quality cannabis strains in the form of vegetative cuttings for sale to licensed medical cannabis cultivators in Nevada
|
Revenue
from the sale of our cannabis products is recognized by our subsidiary at the point of sale, at which time payment is received.
Management estimates an allowance for sales returns.
The
Company also intends to recognize 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.
Deferred
Rent Obligation
The
Company has entered into operating lease agreements for its corporate office and GLFH’s warehouse 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.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Recent
Accounting Pronouncements
In
May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
No. 2017-09
, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting.
ASU 2017-09, which
provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification
accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are
met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified
award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used)
of the original award immediately before the original award is modified. If the modification does not affect any of the inputs
to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately
before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of
the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity
instrument or a liability instrument is the same as the classification of the original award immediately before the original award
is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification
accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods
in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for
(1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU
should be applied prospectively to an award modified on or after the adoption date. The adoption of
ASU 2017-9
is not expected
to have a material impact on the Company’s financial statements or related disclosures.
In
March 2017, the FASB issued ASU No. 2017-7,
Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
. This ASU requires that an employer report the service
cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees
during the period. The other components of net benefit cost, which include interest cost and prior service cost or credit, among
others, are required to be presented in the income statement separately from the service cost component and outside a subtotal
of income from operations, if one is presented. This ASU is effective for the Company’s fiscal year 2018, including interim
periods. The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial
statements. The Company has not yet concluded how the new standard will impact the consolidated financial statements.
In
January 2017, the FASB issued ASU No. 2017-3,
Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method
and Joint Ventures (Topic 232): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November
17, 2016 EITF Meetings
. This ASU expands disclosures regarding potential material effects to the Company’s consolidated
financial statements that may occur when adopting ASU’s in the future. When a company cannot reasonably estimate the impact
of adopting an ASU, disclosures are to be expanded to include qualitative disclosures including a description to the effect to
the company’s accounting policies, a comparison the existing policies, the status of its process to implement the new standard
and any significant implementation matters yet to be addressed. This standard will generally require more disclosure in the Company’s
consolidated financial statements when adopted.
No
other new accounting pronouncements, issued or effective during the nine months ended September 30, 2017, have had or are expected
to have a significant impact on the Company’s financial statements.
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 ($36,151,435), and as of September 30, 2017, the Company’s current liabilities exceeded
its current assets by $2,837,261. 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.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
3 – Related Party
Officers
On
September 11, 2017, the Company issued 150,000 shares of common stock to its CFO as a bonus for services performed. The total
fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant.
The shares were subsequently issued on October 2, 2017.
On
August 8, 2017, the Company awarded fully vested cashless options to our CFO, Geoffrey Lawrence, to acquire up to 2,000,000
shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 273% and a call option value of $0.0894, was $178,765.
On
July 4, 2017, the Board of Directors appointed Geoffrey Lawrence to serve as the Company’s Chief Financial Officer and Chief
Compliance Officer, effective July 1, 2017. Mr. Lawrence was issued 250,000 shares of common stock as a signing bonus. The total
fair value of the common stock was $42,200 based on the closing price of the Company’s common stock on the date of grant.
On
July 4, 2017, the Company awarded fully vested cashless options to our CEO, Mark Bradley, to acquire up to 1,750,000 shares of
common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.
On
July 4, 2017, the Company awarded fully vested cashless options to the Company’s President of Programming, Michael Berk,
to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the
origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option
value of $0.1409, was $246,621.
On
January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable
at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000.
On
January 22, 2017, the Company issued 2,000,000 shares of common stock to its CEO for board services performed. The total fair
value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date of grant.
Officer
compensation expense was $673,636 and $146,923, including $517,186 and $15,000 of stock based bonuses, at September 30, 2017 and
2016, respectively. The balance owed was $93,209 at September 30, 2017.
Board
of Directors
On
July 4, 2017, the Company awarded fully vested cashless options to our Director, Brett Pojunis, to acquire up to 3,000,000 shares
of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $422,779.
On
May 1, 2017, the Company’s Board of Directors granted 2,000,000 fully vested common stock options to a member of the Board
as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525,
was $105,083.
On
May 1, 2017, the Company’s Board of Directors granted 1,000,000 fully vested common stock options to another member of the
Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525,
was $52,542.
On
January 22, 2017, the Company issued 2,000,000 shares of common stock one of its three Directors for board services performed.
The total fair value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date
of grant.
On
January 22, 2017, the Company issued 3,000,000 shares of common stock one of its three Directors for board services performed.
The total fair value of the common stock was $51,900 based on the closing price of the Company’s common stock on the date
of grant.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
4 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements
and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50
details the disclosures that are required for items measured at fair value.
The
Company has convertible notes that must be measured under the new fair value standard. The Company’s financial assets and
liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date.
Level
2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market
data by correlation or other means (market corroborated inputs).
Level
3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset
or liability.
The
following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets
as of September 30, 2017 and December 31, 2016, respectively:
|
|
Fair
Value Measurements at September 30, 2017
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
133,801
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
assets
|
|
|
133,801
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of discounts
of $192,961
|
|
|
-
|
|
|
|
-
|
|
|
|
77,039
|
|
Long term debt, net of discounts of
$538,972
|
|
|
-
|
|
|
|
386,028
|
|
|
|
-
|
|
Short term debt, net of discounts of
$284,216
|
|
|
-
|
|
|
|
554,784
|
|
|
|
-
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
1,582,282
|
|
Total
liabilities
|
|
|
-
|
|
|
|
940,812
|
|
|
|
1,659,321
|
|
|
|
$
|
133,801
|
|
|
$
|
(940,812
|
)
|
|
$
|
(1,659,321
|
)
|
|
|
Fair
Value Measurements at December 31, 2016
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
145,119
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
assets
|
|
|
145,119
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of discounts
of $241,634
|
|
|
-
|
|
|
|
-
|
|
|
|
58,366
|
|
Short term debt, net of discounts of
$60
|
|
|
-
|
|
|
|
142,940
|
|
|
|
-
|
|
Long term debt, net of discounts of
$885,271
|
|
|
-
|
|
|
|
39,729
|
|
|
|
-
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
482,674
|
|
Total
liabilities
|
|
|
-
|
|
|
|
182,669
|
|
|
|
541,040
|
|
|
|
$
|
145,119
|
|
|
$
|
(182,669
|
)
|
|
$
|
(541,040
|
)
|
There
were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the nine months ended September 30,
2017 and the year ended December 31, 2016.
Level
2 liabilities consisted of a total of $839,000 and $143,000 of short term, unsecured,
promissory notes, net of discounts of $284,216 and $60 as of September 30, 2017 and December
31, 2016, respectively, along with $925,000 of long term debt, net of discounts of $538,972
and $885,271 as of September 30, 2017 and December 31, 2016, in addition to the related
derivative liabilities of $1,582,282 and $482,674 at September 30, 2017 and December
31, 2016, respectively. No fair value adjustment was necessary during the nine months
ended September 30, 2017 and the year ended December 31, 2016.
Level
3 liabilities consist of a total of $270,000 and $300,000 of convertible debentures, net of discounts of $192,961 and $241,634
as of September 30, 2017 and December 31, 2016, respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
5 – Subsidiary Formation
On
July 8, 2014, we formed GLFH in which we retained 84% ownership, with the remaining 16% held by key experts and advisors 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 and 3% was transferred
back from a founding member on December 2, 2015, giving PNTV 85.4% ownership and minority interests ownership of 14.6%. The form
of the entity was changed from a corporation to a limited liability company on May 9, 2017. GLFH has have received Cultivation
and Production special use permits for medical marijuana in North Las Vegas, along with a license for the Cultivation and Production
of recreational cannabis, in addition to the related permits in the State of Nevada.
Note
6 – Other Current Assets
Other
current assets included the following as of September 30, 2017 and December 31, 2016, respectively:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
Security deposits
|
|
$
|
52,100
|
|
|
$
|
50,000
|
|
Prepaid expenses
|
|
|
47,041
|
|
|
|
35,150
|
|
|
|
$
|
99,141
|
|
|
$
|
85,150
|
|
Note
7 – Inventory
Inventories,
consisting of material, material overhead, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out)
or market and consist of the following at September 30, 2017:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
Raw materials
|
|
$
|
98,732
|
|
|
$
|
-
|
|
Finished goods
|
|
|
128,280
|
|
|
|
-
|
|
|
|
$
|
227,012
|
|
|
$
|
-
|
|
Raw
materials consist of cannabis plants and the materials that are used in our production process prior to being tested and packaged
for consumption. Finished goods consist of pre-packaged materials previously purchased from other licensed cultivators and our
manufactured edibles and extracts.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
8 – Fixed Assets and Construction in Progress
Fixed
assets consist of the following at September 30, 2017 and December 31, 2016, respectively:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
Office equipment
|
|
$
|
95,336
|
|
|
$
|
60,968
|
|
Website development costs
|
|
|
99,880
|
|
|
|
99,880
|
|
Furniture and fixtures
|
|
|
16,075
|
|
|
|
2,730
|
|
Leasehold
improvements
|
|
|
373,842
|
|
|
|
-
|
|
Total
|
|
|
585,133
|
|
|
|
163,578
|
|
Less
accumulated depreciation
|
|
|
(177,300
|
)
|
|
|
(134,450
|
)
|
Fixed
assets, net
|
|
$
|
407,833
|
|
|
$
|
29,128
|
|
Construction
in progress is stated at cost, which includes the cost of construction and other indirect costs attributable to the construction.
No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and put
into use. Construction in progress was $314,146 and $239,220 at September 30, 2017 and December 31, 2016, respectively.
Depreciation
and amortization expense totaled $42,850 and $21,583 for the nine months ended September 30, 2017 and 2016, respectively.
Note
9 – Accrued Expenses
As
of September 30, 2017 and December 31, 2016 accrued expenses included the following:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
Accrued Payroll, Officers
|
|
$
|
93,209
|
|
|
$
|
31,343
|
|
Accrued Payroll and Payroll Taxes
|
|
|
138,119
|
|
|
|
135,234
|
|
Accrued Interest
|
|
|
85,780
|
|
|
|
21,841
|
|
Refundable
Advances
|
|
|
100,000
|
|
|
|
105,000
|
|
|
|
$
|
417,108
|
|
|
$
|
293,418
|
|
Note
10 – Settlements Payable
Settlements
payable consisted of $-0- and $70,000 owed to WHC Capital, LLC as of September 30, 2017 and December 31, 2016, respectively.
On
September 22, 2016, the Company entered into a payoff agreement to pay WHC Capital, LLC a total of $100,000 in five installments
ranging between $15,000 and $25,000 payable from October 21, 2016 through February 21, 2017 in satisfaction of a total of $114,002
of principal and unpaid interest on two convertible notes originally entered into with WHC on August 24, 2015 and August 19, 2014.
As of September 30, 2017, the Company had repaid the settlement, as specified in the agreement.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
11 – Convertible Debentures
Convertible
debentures consist of the following at September 30, 2017 and December 31, 2016, respectively:
|
|
September
30,
|
|
December
31,
|
|
|
2017
|
|
2016
|
On
August 15, 2016, the Company entered into a definitive funding agreement with RxMM Health
Limited (“RxMM”) in which a convertible note was issued for a total gross
investment of $2,500,000. In consideration of such investment, RxMM will receive 50,000,000
callable warrants as a fee per the milestone schedule below, and will be entitled to
20% of all adjusted gross revenue and 20% of the gross income generated by the Company
through any of its medical marijuana holdings or its media platform, of which shall reduce
the principal until this debenture is either paid back or converted into equity.
Debenture
Funding Milestone
-
Warrants and Exercise Price Details
$400,000
10 million
shares exercisable at $0.05 per share over 2 years
$400,001
- $800,000 15 million shares exercisable at $0.06 per share over 2 years
$800,001
- $1,600,000 15 million shares exercisable at $0.07 per share over 2 years
$1,600,001
- $2,500,000 10 million shares exercisable at $0.08 per share over 2 years
The
warrants are callable if the stock averages 200% of the warrant strike price for any thirty (30) day trading period. The
convertible debenture, bearing interest at 5% per annum, will mature 24 months after the full investment is realized,
and is convertible into common stock at a 25% discount to the preceding 30 day average closing stock price. The Company
is required at all times to have authorized and reserved the number of shares that is actually issuable upon full conversion
of the note. The Company has received the following payments on the funding agreement:
$
25,000 – August 19, 2016
$
175,000 – August 15, 2016
|
|
$
|
200,000
|
|
$
|
200,000
|
|
|
|
|
|
|
|
On
July 28, 2016, the Company received proceeds of $35,000 in exchange for an unsecured convertible promissory note, bearing
interest at eight percent (8%) (“First EJR Note”), which matures on July 28, 2017. The principal and interest
is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy eight percent
(78%) of the average of the closing traded prices during the ten (10) trading days prior to the conversion request date (the
“Variable Conversion Price”). The Company is required at all times to have authorized and reserved the number
of shares that is actually issuable upon full conversion of the note. The note is currently in default.
|
|
|
35,000
|
|
|
35,000
|
|
|
|
|
|
|
|
On
June 24, 2016, the Company received proceeds of $30,000 in exchange for an unsecured convertible promissory note, bearing
interest at eight percent (8%) (“First SH Note”), which matures on June 24, 2017. The principal and interest is
convertible into shares of common stock at the discretion of the note holder at a price equal to seventy eight percent (78%)
of the average of the closing traded prices during the ten (10) trading days prior to the conversion request date (the “Variable
Conversion Price”). In the event of default, the outstanding principal, unpaid interest and liquidated damages and fees
immediately prior to the occurrence of the event of default shall become immediately due and payable in cash, at the Lender’s
election, at a premium default rate determined by dividing the outstanding amount by the Variable Conversion Price on the
date of default. The Company was required at all times to have authorized and reserved the number of shares that is actually
issuable upon full conversion of the note. On June 16, 2017, the noteholder converted $32,350, consisting of $30,000 of principal
and $2,350 of interest, in exchange for the issuance of 392,155 shares.
|
|
|
-
|
|
|
30,000
|
|
|
|
|
|
|
|
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 matured 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
|
|
|
|
|
|
Total
convertible debentures
|
|
270,000
|
|
300,000
|
Less:
unamortized debt discounts
|
|
(192,961)
|
|
(241,634)
|
Convertible
debentures
|
|
$
|
77,039
|
|
$
|
58,366
|
In
accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $257,379 for the variable
conversion features of the convertible debts incurred during the year ended December 31, 2016. The discounts are being amortized
to interest expense over the term of the debentures using the effective interest method. The Company recorded $48,733 and $294,207
of interest expense pursuant to the amortization of the note discounts during the nine months ended September 30, 2017 and 2016,
respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 $12,804
and $29,012 for the nine months ended September 30, 2017 and 2016, respectively related to convertible debts.
Note
12 – Short Term Debt
Short-term
debt consists of the following at September 30, 2017 and December 31, 2016, respectively:
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
On
September 19, 2017, the Company issued a $50,000 unsecured promissory note to SK L-58, LLC bearing interest
at a rate of 5% per annum, with a maturity date of November 3, 2017. Upon an event of default, the Company is required
to issue to lender warrants to acquire one million shares at an exercise price of $0.05 per share every 30 days the note
is unpaid. Each warrant issued as a result of an Event of Default will become and remain exercisable for the four (4)
complete calendar month period beginning on the first day of the thirty second (32
nd
) month following an Event
of Default. This note is currently in default.
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On
September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini
Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price
of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable
until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”),
resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a
rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its
reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the
Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise
the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such
time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive
trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the
OTC Bulletin Board (or other exchange or market on which the Common Stock is trading).
|
|
|
316,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
May 8, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master
Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000,
(i) a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May
31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”),
resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at
a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in
its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth
in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors
to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided
that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty
(30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange
Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading).
|
|
|
330,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
April 25, 2017, the Company issued an unsecured promissory note to an individual at par for proceeds
of $10,000, bearing interest at a rate of 24% per annum, with a maturity date of May 31, 2017. A total of $10,200, consisting
of $10,000 of principal and $200 was repaid on May 8, 2017.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
April 21, 2017, the Company entered issued a $25,000 unsecured promissory note to SK L-43, LLC bearing interest
at a rate of 5% per annum, with a maturity date of July 20, 2017. In accordance with the default provisions, the principal
balance of the note and unpaid interest were converted into common stock at $0.04 per share, along with an equal number
of warrants, exercisable at $0.08 per share with a call feature entitling the Company to require exercise if the average
stock price over the 30 preceding trading days following the six month anniversary of the warrant date exceeds $0.16 per share.
On July 1, 2017 the Note was assigned by the holder to SK L-54, LLC, SK L-55, LLC and SK L-56, LLC. On July 20, 2017,
the note went into default and the note holders received an aggregate of 632,706 shares in satisfaction of the $25,000
of principal and $308 of interest. The shares were so issued on October 2, 2017.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
April 5, 2017, the Company issued a $50,000 unsecured promissory note to SK L-43, LLC bearing interest
at a rate of 5% per annum, with a maturity date of July 5, 2017. In accordance with the default provisions, the principal
balance of the note and unpaid interest were converted into common stock at $0.04 per share, along with an equal number
of warrants, exercisable at $0.08 per share with a call feature entitling the borrower to require exercise if the average
stock price over the 30 preceding trading days following the six month anniversary of the warrant date exceeds $0.16 per share.
On July 5, 2017, the note went into default and the note holder received 1,265,411 shares in satisfaction of the $50,000 of
principal and $616 of interest. The shares were so issued on October 2, 2017.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
various dates between January 11, 2016 and April 20, 2016, the Company received aggregate refundable advances of $143,000
as the Company and an investor developed terms to a potential partnership agreement with GLFH. On June 1, 2016, the Company
issued a promissory note in exchange for those deposits. The unsecured promissory note bears interest at 4% per annum (“First
ZG Note”), which matured on January 3, 2017, and awarded the lender options to acquire up to 5,000,000 shares
of common stock, exercisable at $0.01 per share over a four (4) week period from the origination date, which expired on July
1, 2016, in addition to options to acquire up to another 3,000,000 shares of common stock, exercisable at $0.08 per share
over a twenty four (24) month period from the origination date. The aggregate fair value of the options is $6,996 and is being
amortized over the earlier of the life of the loan, or the life of the options, as a debt discount. The note carries a default
rate of 10% and remains outstanding.
|
|
|
143,000
|
|
|
|
143,000
|
|
|
|
|
|
|
|
|
|
|
Total
short term debt
|
|
|
839,000
|
|
|
|
143,000
|
|
Less:
unamortized debt discounts
|
|
|
(284,216
|
)
|
|
|
(60
|
)
|
Short
term debt
|
|
$
|
554,784
|
|
|
$
|
142,940
|
|
The
Company recorded $280,207 and $11,540 of interest expense pursuant to the amortization of the note discounts during the nine months
ended September 30, 2017 and 2016, respectively.
The
Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $19,918
and $2,597 at September 30, 2017 and 2016, respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
13 – Long Term Debt
Long
term debt consists of the following at September 30, 2017 and December 31, 2016, respectively:
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
On
November 21, 2016, the Company entered into a letter agreement with SK L-43, LLC providing
for the making of loans by the SK L-43 to the Company, at SK L-43’s option (i)
in the aggregate principal amount of $925,000 by December 15, 2016, and (ii) in the amounts
of $1,500,000 each on or before each of April 1, 2017 and May 1, 2017. Advances under
the letter agreement are unsecured; bear interest at a rate of 5% per annum, payable
on December 31
st
of each year; mature two years from the making of the applicable
Advance; and are subject to acceleration upon customary events of default set forth in
the promissory notes. To date, SK L-43 has advanced to the Company the following loans:
$125,000
– November 02, 2016 (including $25,000 assigned from PNTV Investors Note)
$267,000
– November 21, 2016
$267,000
– December 02, 2016
$266,000
– December 19, 2016
Pursuant
to the advances above, SK L-43 was issued warrants to purchase up to 92,500,002 shares
of the Company’s common stock as additional consideration for making the loans
at various exercise prices of $0.03 and $0.06 per share. For each additional loan of
$1,500,000 each on or before each of April 1, 2017 and May 1, 2017, SK L-43 will also
be entitled to additional warrants to purchase 42,857,142 shares of the Company’s
common stock. These additional warrants will have an exercise price equal to 125% of
the average closing price of the Company’s common stock over the thirty trading
days immediately preceding the date of the applicable additional loan; provided, however,
that if during the 90 trading day period following the date of such additional loan,
the average closing price of the Company’s common stock (the “Post-Advance
Closing Average”) is equal to or less than 80% of the Pre-Advance Closing Average,
the exercise price for such additional warrant will be equal to 125% of the Post-Advance
Closing Average.
Each
warrant vested four months following its date of issuance and is exercisable
for a period of two years thereafter.
|
|
$
|
925,000
|
|
|
$
|
925,000
|
|
Less:
unamortized debt discounts
|
|
|
(538,972
|
)
|
|
|
(885,271
|
)
|
Long
term debt
|
|
$
|
386,028
|
|
|
$
|
39,729
|
|
The
Company recorded $346,299 and $-0- of interest expense pursuant to the amortization of the note discounts during the nine months
ended September 30, 2017 and 2016, respectively.
The
Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $34,692
and $-0- during the nine months ended September 30, 2017 and 2016, respectively.
The
following presents components of interest expense by instrument type at September 30, 2017 and 2016, respectively:
|
|
September
30,
2017
|
|
|
September
30,
2016
|
|
Interest on convertible
debentures
|
|
$
|
12,804
|
|
|
$
|
29,012
|
|
Amortization of debt discounts
|
|
|
675,239
|
|
|
|
305,747
|
|
Loss on debt conversions
|
|
|
-
|
|
|
|
4,272
|
|
Interest on short and long term debt
|
|
|
54,610
|
|
|
|
2,597
|
|
Accounts payable
related finance charges
|
|
|
2,395
|
|
|
|
3,646
|
|
|
|
$
|
745,048
|
|
|
$
|
345,274
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
14 – Derivative Liabilities
As
discussed in Note 11 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 $1,582,282 and $482,674 at September
30, 2017 and December 31, 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $528,633
and $238,679 for the nine months ended September 30, 2017 and 2016, respectively, which has been reported as other expense in
the statements of operations. The loss of $528,633 for the nine months ended September 30, 2017 consisted of a loss of $475,016
attributable to the fair value of warrants and a net loss in market value of $53,617 on the convertible notes. The loss of $238,679
for the nine months ended September 30, 2016 consisted of a gain of $167 attributable to the fair value of warrants and a net
loss in market value of $238,679 on the convertible notes.
The
following presents the derivative liability value by instrument type at September 30, 2017 and December 31, 2016, respectively:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
Convertible debentures
|
|
$
|
486,903
|
|
|
$
|
462,489
|
|
Common stock
warrants
|
|
|
1,095,379
|
|
|
|
20,185
|
|
|
|
$
|
1,582,282
|
|
|
$
|
482,674
|
|
The
following is a summary of changes in the fair market value of the derivative liability during the nine months ended September
30, 2017 and the year ended December 31, 2016, respectively:
|
|
Derivative
|
|
|
|
Liability
|
|
|
|
Total
|
|
Balance, December 31, 2015
|
|
$
|
1,038,504
|
|
Increase in derivative
value due to issuances of convertible promissory notes
|
|
|
261,796
|
|
Increase in derivative
value attributable to issuance of warrants
|
|
|
7,400
|
|
Change in fair market
value of derivative liabilities due to the mark to market adjustment
|
|
|
227,102
|
|
Debt
conversions
|
|
|
(1,052,128
|
)
|
Balance, December 31, 2016
|
|
$
|
482,674
|
|
Increase in derivative
value attributable to issuance of warrants
|
|
|
752,205
|
|
Change in fair market
value of derivative liabilities due to the mark to market adjustment
|
|
|
528,633
|
|
Debt
conversions and redemptions
|
|
|
(181,230
|
)
|
Balance, September
30, 2017
|
|
$
|
1,582,282
|
|
Key
inputs and assumptions used to value the convertible debentures and warrants issued during the nine months ended September 30,
2017 and the year ended December 31, 2016:
|
●
|
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 $0.03 to $0.24, 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
monthly trading volume would average below $2,740,072 in the period and would increase at 1% per month.
|
|
●
|
The
holder would automatically convert the notes at maturity at the greater of 2 times the conversion price or stock price if
the registration was effective and the Company was not in default.
|
|
●
|
An
event of default for the convertible note would occur 0% of the time, increasing to 1% per month to a maximum of 5%.
|
|
●
|
Alternative
financing for the convertible note would be initially available to redeem the note 0% of the time and increase monthly by
5% to a maximum of 50%.
|
|
●
|
The
computed volatility was projected based on historical volatility.
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
15 – Changes in Stockholders’ Equity (Deficit)
Convertible
Preferred Stock
The
Board, from the authorized capital of 50,000,000 preferred shares, has authorized and designated 2,000,000 shares of series A
preferred stock (“Series A”) and 12,000,0000 shares of series C preferred stock (“Series C”), of which
2,000,000 shares and 12,000,000 shares are issued and outstanding, respectively. A total of 36,000,000 shares remained 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 C shares carry 50:1 preferential voting rights, and are convertible into shares of common stock on a 1:1 basis
Common
Stock Authorized
The
Company has authorized 1,200,000,000 shares of common stock, of which 575,967,698 shares were issued and outstanding and 112,394,837
shares were reserved as of the date of this filing.
Common
Stock Sales
On
September 21, 2017, the Company sold 200,000 units at $0.17 per unit, consisting of 200,000 shares of common stock and 200,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $22,000. The shares
were subsequently issued on November 8, 2017.
On
September 7, 2017, the Company sold 300,000 units at $0.07 per unit, consisting of 300,000 shares of common stock and 300,000
warrants exercisable at $0.11 per share over the following 3 years, along with another 300,000 warrants exercisable at $0.15 per
share over the following 3 years, to an individual investor for proceeds of $21,000. The shares were subsequently issued on November
8, 2017.
On
September 6, 2017, the Company sold 500,000 units at $0.11 per unit, consisting of 500,000 shares of common stock and 500,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $55,000. The shares
were subsequently issued on November 10, 2017.
On
August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.
On
August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants
exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.
On
July 17, 2017, the Company sold 1,875,000 units at $0.16 per unit, consisting of 1,875,000 shares of common stock and 1,875,000
warrants exercisable at $0.21 per share over the following 3 years, along with another 1,875,000 warrants exercisable at $0.24
per share over the following 3 years, to an individual investor for proceeds of $300,000. The shares were subsequently issued
on November 8, 2017.
On
June 29, 2017, the Company sold 500,000 units at $0.10 per unit, consisting of 500,000 shares of common stock and 500,000 warrants
exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000. The proceeds received
were allocated between the common stock and warrants on a relative fair value basis.
On
June 23, 2017, a warrant holder exercised warrants to purchase 2,500,000 shares of common stock at $0.04 per share for proceeds
of $100,000.
On
June 21, 2017, the Company sold 1,000,000 units at $0.10 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $100,000. The proceeds
received were allocated between the common stock and warrants on a relative fair value basis.
On
June 13, 2017, the Company sold 1,000,000 units at $0.05 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20
per share over the following 3 years, to an individual investor for proceeds of $50,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value basis.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
June 13, 2017, the Company sold 1,000,000 units at $0.075 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20
per share over the following 3 years, to another individual investor for proceeds of $75,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value basis.
On
June 9, 2017, a warrant holder exercised warrants to purchase 1,500,000 shares of common stock at $0.05 per share for proceeds
of $75,000.
On
January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable
at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000. The proceeds received were allocated
between the common stock and warrants on a relative fair value basis.
Common
Stock Issuances for Debt Conversions
On
July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares
of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at
$0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. On July 1, 2017, the note was
assigned to three different parties. Pursuant to the conversion, the note holders received an aggregate 632,706 shares in satisfaction
of $25,000 of principal and $308 of interest on the debt. The note was converted in accordance with the conversion terms; therefore
no gain or loss has been recognized, and the settlement terms have been fully realized paying off the debt in full. The shares
were subsequently issued on October 2, 2017.
On
July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of
common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08
per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note
holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest on the debt. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized, and the settlement terms have been fully
realized paying off the debt in full. The shares were subsequently issued on October 2, 2017.
On
June 16, 2017, the Company issued 392,155 shares of common stock pursuant to the conversion of $32,350, consisting of $30,000
of outstanding principal and $3,250 of unpaid interest, on the First Howard Note. The note was converted in accordance with the
conversion terms; therefore no gain or loss has been recognized, and the settlement terms have been fully realized paying off
the debt in full.
On
April 18, 2017, the Company issued 2,009,419 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the WHC Notes settlement in lieu of cash. The note was converted in accordance with the conversion terms; therefore no gain
or loss has been recognized, and the settlement terms have been fully realized paying off the debt in full.
Common
Stock Issued for Services
On
September 11, 2017, the Company issued 150,000 shares of common stock to its CFO as a bonus for services performed. The total
fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant.
The shares were subsequently issued on October 2, 2017.
On
September 11, 2017, the Company issued a total of 2,835,000 shares of common stock to sixteen service providers for services provided.
The total fair value of the common stock was $283,500 based on the closing price of the Company’s common stock on the date
of grant. The shares were subsequently issued on October 2, 2017.
On
August 7, 2017, the Company entered into an Equity Purchase Agreement and a Registration Rights Agreement with Kodiak Capital
Group, LLC (“Kodiak”), and agreed to issue Kodiak 500,000 shares of Common Stock as a Commitment upon the execution
of the Purchase Agreement in consideration for the Kodiak’s commitment to purchase shares of Common Stock thereunder. The
total fair value of the common stock was $56,450 based on the closing price of the Company’s common stock on the date of
grant. The shares were subsequently issued on October 2, 2017.
On
July 4, 2017, the Board of Directors appointed Geoffrey Lawrence to serve as the Company’s Chief Financial Officer and Chief
Compliance Officer, effective July 1, 2017. Mr. Lawrence was issued 250,000 shares of common stock as a signing bonus. The total
fair value of the common stock was $42,200 based on the closing price of the Company’s common stock on the date of grant.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
July 4, 2017, the Company issued a total of 605,000 shares of common stock to six service providers for services provided on behalf
of our subsidiary, GLFH. The total fair value of the common stock was $102,124 based on the closing price of the Company’s
common stock on the date of grant.
On
July 4, 2017, the Company issued a total of 1,225,000 shares of common stock to seven service providers for services provided.
The total fair value of the common stock was $206,780 based on the closing price of the Company’s common stock on the date
of grant.
On
May 1, 2017, the Company issued a total of 1,220,000 shares of common stock to four service providers for services provided on
behalf of our subsidiary, GLFH. The total fair value of the common stock was $76,250 based on the closing price of the Company’s
common stock on the date of grant.
On
May 1, 2017, the Company issued a total of 1,050,000 shares of common stock to five service providers for services provided. The
total fair value of the common stock was $65,625 based on the closing price of the Company’s common stock on the date of
grant.
On
April 20, 2017, the Company issued 350,000 shares of common stock in lieu of cash for video editing services to a consultant.
The total fair value of the common stock was $15,750 based on the closing price of the Company’s common stock on the date
of grant.
On
February 2, 2017, we issued 1,000,000 shares of common stock valued at $11,400 to the landlord of our leased facility as payment
on a subscription payable from an October 14, 2016 award.
On
January 22, 2017, the Company issued 2,000,000 shares of common stock to its CEO for board services performed. The total fair
value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date of grant.
On
January 22, 2017, the Company issued 2,000,000 shares of common stock one of its three Directors for board services performed.
The total fair value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date
of grant.
On
January 22, 2017, the Company issued 3,000,000 shares of common stock one of its three Directors for board services performed.
The total fair value of the common stock was $51,900 based on the closing price of the Company’s common stock on the date
of grant.
On
January 22, 2017, the Company issued 200,000 shares of common stock for professional services to a consultant for services provided.
The total fair value of the common stock was $3,460 based on the closing price of the Company’s common stock on the date
of grant.
On
January 22, 2017, the Company issued 500,000 shares of common stock for professional services to a consultant for services provided
on behalf of our subsidiary, GLFH. The total fair value of the common stock was $8,650 based on the closing price of the Company’s
common stock on the date of grant.
On
January 22, 2017, the Company issued 150,000 shares of common stock for administrative services to a consultant on behalf of our
subsidiary, GLFH. The total fair value of the common stock was $2,595 based on the closing price of the Company’s common
stock on the date of grant.
On
January 22, 2017, the Company issued 150,000 shares of common stock for administrative services to a consultant for services provided.
The total fair value of the common stock was $2,595 based on the closing price of the Company’s common stock on the date
of grant.
Common
Stock Issued in Reserve for Legal Matters
On August 24, 2017, the Company issued
a total of 5,005,435 shares to the Clerk of Courts in the State of Nevada to hold as security in connection with the Court’s
issuance of a preliminary injunction in favor of the Company against a former service provider. The preliminary injunction enjoins
the former service provider from transferring 1,500,000 shares of common stock held by him that were issued for services. The
5,005,435 shares are being held by the Court as security pending adjudication of the matter, in which the Company seeks the return
of the 1,500,000 shares.
Note
16 – Options and Warrants
Warrants
Granted
On
September 21, 2017, the Company sold 200,000 units at $0.17 per unit, consisting of 200,000 shares of common stock and 200,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $22,000.
On
September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master
Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000,
(i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable until September
14, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting
in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a rate of 10% per
annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation
with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can
be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless
basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted
average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading
in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange
or market on which the Common Stock is trading).
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
September 7, 2017, the Company sold 300,000 units at $0.07 per unit, consisting of 300,000 shares of common stock and 300,000
warrants exercisable at $0.11 per share over the following 3 years, along with another 300,000 warrants exercisable at $0.15 per
share over the following 3 years, to an individual investor for proceeds of $21,000.
On
September 6, 2017, the Company sold 500,000 units at $0.11 per unit, consisting of 500,000 shares of common stock and 500,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $55,000.
On
August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.
On
August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants
exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.
On
July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares
of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at
$0.08 per share. The warrants were issued on September 1, 2017 and vest on April 30, 2019, and are exercisable for 4 months thereafter.
On July 1, 2017, the note was assigned to three different parties. Pursuant to the conversion, the note holders received an aggregate
632,706 shares in satisfaction of $25,000 of principal and $308 of interest on the debt.
On
July 17, 2017, the Company sold 1,875,000 units at $0.16 per unit, consisting of 1,875,000 shares of common stock and 1,875,000
warrants exercisable at $0.21 per share over the following 3 years, along with another 1,875,000 warrants exercisable at $0.24
per share over the following 3 years, to an individual investor for proceeds of $300,000.
On
July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of
common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08
per share. The warrants were issued on September 1, 2017 and vest on April 30, 2019, and are exercisable for 4 months thereafter.
Pursuant to the conversion, the note holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest
on the debt.
On
June 29, 2017, the Company sold 500,000 units at $0.10 per unit, consisting of 500,000 shares of common stock and 500,000 warrants
exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000.
On
June 21, 2017, the Company sold 1,000,000 units at $0.10 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $100,000.
On
June 13, 2017, the Company sold 1,000,000 units at $0.05 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20
per share over the following 3 years, to an individual investor for proceeds of $50,000.
On
June 13, 2017, the Company sold 1,000,000 units at $0.075 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20
per share over the following 3 years, to another individual investor for proceeds of $75,000.
On
May 8, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund,
Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i)
a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May 31, 2022
to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting
in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at a rate of 10%
per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation
with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can
be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless
basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted
average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading
in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange
or market on which the Common Stock is trading).
On
January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable
at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Warrants
exercised
On
June 23, 2017, a warrant holder exercised warrants to purchase 2,500,000 shares of common stock at $0.04 per share for proceeds
of $100,000.
On
June 9, 2017, a warrant holder exercised warrants to purchase 1,500,000 shares of common stock at $0.05 per share for proceeds
of $75,000.
Warrants
Expired
On
August 9, 2017, a total of 200,000 warrants with a strike price of $0.18 per share expired.
Options
Granted
On
August 7, 2017, the Company awarded fully vested cashless options to our CFO, Geoffrey Lawrence, to acquire up to 2,000,000 shares
of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 273% and a call option value of $0.0894, was $178,765.
On
July 4, 2017, the Company awarded fully vested cashless options to our CEO, Mark Bradley, to acquire up to 1,750,000 shares of
common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.
On
July 4, 2017, the Company awarded fully vested cashless options to the Company’s President of Programming, Michael Berk,
to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the
origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option
value of $0.1409, was $246,621.
On
July 4, 2017, the Company awarded fully vested cashless options to our Director, Brett Pojunis, to acquire up to 3,000,000 shares
of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value
using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $422,779.
On
July 4, 2017, the Company awarded fully vested cashless options to a consultant to acquire up to 1,750,000 shares of common stock,
exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes
Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.
On
May 1, 2017, the Company’s Board of Directors granted 2,000,000 fully vested cashless common stock options to a member of
the Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per
share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of
$0.0525, was $105,083.
On
May 1, 2017, the Company’s Board of Directors granted 1,000,000 fully vested cashless common stock options to another member
of the Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07
per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value
of $0.0525, was $52,542.
On
May 1, 2017, the Company’s Board of Directors granted 1,000,000 fully vested cashless common stock options to a consultant
as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525,
was $52,542.
On
May 1, 2017, the Company’s Board of Directors granted 500,000 fully vested cashless common stock options to a consultant
as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share.
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525,
was $26,271.
Options
Expired
On
March 1, 2017, a total of 1,200,000 warrants with a strike price of $0.08 per share expired.
On
January 8, 2017, a total of 1,150,000 warrants with a strike price of $0.08 per share expired.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
17 – 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 nine months ended September 30, 2017 and the year ended December 31, 2016, 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 September 30, 2017, the Company had approximately $25,300,000 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:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
8,855,000
|
|
|
$
|
7,763,000
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation
allowance
|
|
|
8,855,000
|
|
|
|
7,763,000
|
|
Less:
Valuation allowance
|
|
|
(8,855,000
|
)
|
|
|
(7,763,000
|
)
|
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 September 30, 2017 and December 31, 2016, respectively.
A
reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income
tax rate to pre-tax loss is as follows:
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
|
|
|
|
|
|
|
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
18 – Non-Controlling Interest
Non-controlling
interest represents a minority interest in GLFH of 15.6% held by ten individuals. The net loss attributable
to the non-controlling interest totaled $94,912 and $31,642 during the nine months ended September 30, 2017 and 2016, respectively.
The net loss attributable to the parent was and $555,168 and $171,190 during the nine months ended September 30, 2017 and 2016,
respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
19 – Subsequent Events
Common
Stock Awarded for Services
On
October 1, 2017, pursuant to the CFO’s employment agreement, Mr. Lawrence earned $12,960 of compensation to be paid with
the issuance of 157,091 shares of common stock based on the closing stock price. The shares have not yet been issued.
Common
Stock Issued on Subscriptions Payable
On
November 10, 2017, a total of 500,000 shares were issued on Subscriptions Payable for shares awarded pursuant to stock sales in
the prior period valued at an aggregate $55,000.
On
November 8, 2017, a total of 2,375,000 shares were issued on Subscriptions Payable for shares awarded pursuant to stock sales
in the prior period valued at an aggregate $343,000.
On
November 8, 2017, a total of 2,375,000 shares were issued on Subscriptions Payable for shares awarded pursuant to stock sales
in the prior period valued at an aggregate $343,000.
On
October 2, 2017, a total of 2,985,000 shares were issued on Subscriptions Payable for shares awarded for services in the prior
period valued at $298,500.
On
October 2, 2017, a total of 1,898,117 shares were issued on Subscriptions Payable for shares awarded pursuant to debt conversions
in the prior period valued at an aggregate $75,925, consisting of $75,000 of principal and $925 of interest.
On
October 2, 2017, the Company issued 500,000 shares of Common Stock as a commitment fee upon the execution of the September
7, 2017 Purchase and Registration Rights Agreement with Kodiak.
Common
Stock Cancellations
On
November 20, 2017, the Company cancelled 750,000 shares previously issued to a service provider and reissued 250,000 shares. The
shares were returned to treasury.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
and Outlook
Players
Network is actively pursuing the cultivation and processing of medical and recreational marijuana in North Las Vegas
pursuant to two medical marijuana establishments (MME) licenses that were granted by the city of North Las Vegas for cultivation
and production to its majority-owned subsidiary, Green Leaf Farms Holdings LLC, in which the Company holds an 85.4% interest.
We also distribute content relating to the cannabis industry at WeedTV.com.
GLFH
Overview
Green
Leaf Farms Holdings,
LLC (“GLFH”, “Green Leaf”) was granted two Medical Marijuana Establishment (MME) licenses by the City
of North Las Vegas and State of Nevada; one for cultivation, and one for production of extracts, along with cultivation and production
licenses for recreational cannabis that went into effect on July 1, 2017.
The
Cannabis Industry is one of the fastest growing markets in the America, and Nevada is uniquely positioned to become one of, if
not the largest market in the country. It is projected that by the end of 2017 there will be 43,000 Nevada State issued medical
marijuana cardholders. Of equal importance, is the fact that Nevada law offers reciprocity to Out-of-State medical cannabis cardholders.
With nearly one million medical marijuana cardholders residing in states adjacent to Nevada, and more than 52 million annual visitors
to Nevada, the market for medical marijuana is substantial, and with the recent passage of recreational marijuana laws that are
expected to be implemented in the summer of 2017, Nevada is expected to generate $1.8 billion in revenue from cannabis in 2018.
As large as the medical marijuana market is, it is dwarfed by the potential adult recreational marijuana market.
Products
& Services
Green
Leaf
provides the following
products and services:
|
●
|
Premium
organic medical cannabis sold wholesale to licensed retailers
|
|
●
|
Recreational
marijuana
cannabis products sold wholesale to distributors and retailers
|
|
●
|
Extraction
products such as oils and waxes (as distinguished from cultivation grow house atmospheres)
derived from in-house cannabis production
|
|
●
|
Value-added
products (e.g., salves, tinctures, oils) processed from in-house cannabis production
|
|
●
|
Edibles
produced in an on-site commercial kitchen from in-house cannabis production
|
|
●
|
Processing
and extraction services for licensed medical cannabis cultivators in Nevada
|
|
●
|
High
quality cannabis genetics in the form of vegetative cuttings for sale to licensed medical
cannabis cultivators in Nevada
|
Future
Outlook
Green
Leaf plans to focus on developing high quality products and to employ a strong branding strategy to sell its custom cannabis strains.
The quality and consistency of our branded products would help build consumer loyalty. The growing facility, with modular construction
would allow us to scale efficiency from both a cost and operational standpoint.
Results
of Operations for the Three Months Ended September 30, 2017 and 2016:
|
|
For the Three Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Increase /
|
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
38,074
|
|
|
$
|
59
|
|
|
$
|
38,015
|
|
Cost of goods
sold
|
|
|
32,806
|
|
|
|
-
|
|
|
|
32,806
|
|
Gross profit
|
|
|
5,268
|
|
|
|
59
|
|
|
|
5,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
334,545
|
|
|
|
7,537
|
|
|
|
327,008
|
|
General and administrative
|
|
|
2,559,617
|
|
|
|
234,402
|
|
|
|
2,325,215
|
|
Officer salaries
|
|
|
34,350
|
|
|
|
44,423
|
|
|
|
(10,073
|
)
|
Depreciation
and amortization
|
|
|
28,542
|
|
|
|
6,969
|
|
|
|
21,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating
Expenses
|
|
|
2,957,054
|
|
|
|
293,331
|
|
|
|
2,663,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(2,951,786
|
)
|
|
|
(293,272
|
)
|
|
|
2,658,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense)
|
|
|
1,014,066
|
|
|
|
(226,803
|
)
|
|
|
1,240,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,937,720
|
)
|
|
$
|
(520,075
|
)
|
|
$
|
1,417,645
|
|
Revenues:
During the three months ended September 30,
2017 and 2016, we received $48 of revenues from the sale of in-home media products, and $38,026 from the sale of
cannabis products. Our sales primarily consisted of the resale of raw materials that we previously purchased from other licensed
production and cultivation facilities and resold to licensed dispensaries as we progressed in the development of our facility.
We expect to open phase 2 of our facility soon and begin to grow our first crop. Aggregate revenues for the three months ended
September 30, 2017 were $38,074, compared to revenues of $59 during the three months ended September 30, 2016, an increase in
revenues of $38,015, or 64,432%.
Direct
Operating Costs:
Direct
operating costs were $334,545 for the three months ended September 30, 2017 compared to $7,537 for the three months ended September
30, 2016, an increase of $327,008, or 4,339%. Our direct operating costs increased primarily due to the launch of WeedTV during
the three months ended September 30, 2017.
General
and Administrative:
General
and administrative expenses were $2,559,617 for the three months ended September 30, 2017, compared to $234,402 for the three
months ended September 30, 2016, an increase of $2,325,215, or 992%. General and administrative expense increased primarily due
to the issuance of stock and options resulting in $2,047,461 of stock-based compensation as we significantly ramped up
efforts to get our cannabis facility operational and launch WeedTV during the three months ended September 30, 2017 compared to
the three months ended September 30, 2016.
Officer
Salaries:
Officer
salaries expense totaled $34,350 for the three months ended September 30, 2017, compared to $44,423, for the three months ended
September 30, 2016, a decrease of $10,073, or 23%. Our officer salaries decreased due to stock-based compensation bonuses paid
during the three months ended September 30, 2016 that were not paid during the three months ended September 30, 2017.
Depreciation
and Amortization:
Depreciation
and amortization expense was $28,542 for the three months ended September 30, 2017, compared to $6,969 for the three months ended
September 30, 2016, an increase of $21,573, or 310%. Depreciation increased primarily due to placing our leasehold improvements
and other equipment purchases into service for the three months ended September 30, 2017 compared to the three months ended September
30, 2016.
Operating
Loss:
Operating
loss for the three months ended September 30, 2017 was $2,951,786 or ($0.01) per share, compared to an operating loss of $293,272
for the three months ended September 30, 2016, or ($0.00) per share, an increase of $2,658,514, or 907%. Operating loss increased
primarily due to increased stock-based compensation as we significantly ramped up efforts to get our cannabis facility operational
and we launched WeedTV during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.
Other
Income (Expense):
Other
income (expense), on a net basis, was $1,014,066 for the three months ended September 30, 2017, compared to other expenses of
$226,803 for the three months ended September 30, 2016, an increased net income of $1,240,869, or 547%. Other income increased
on a net basis primarily due to the increased gain on derivative liability of $1,535,285, or 783%, and by a decreased gain on
debt extinguishment of $34,002, as diminished by an increased interest expense on debt financing of $260,414, or 402% during the
three months ended September 30, 2017, compared to the three months ended September 30, 2016.
Net
Loss:
The
net loss for the three months ended September 30, 2017 was $1,937,720, or ($0.00) per share, compared to a net loss of $520,075,
or ($0.00) per share, for the three months ended September 30, 2016, an increased net loss of $1,417,645, or 273%. Net loss increased
primarily due to increased non-cash stock-based compensation and the increased costs of readying our cannabis production facility,
in addition to increased interest expense on debt financing costs as we financed those efforts, as diminished by an increased
gain on our derivative liabilities, during the three months ended September 30, 2017, compared to the three months ended September
30, 2016.
Results
of Operations for the Nine Months Ended September 30, 2017 and 2016:
|
|
For the Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Increase /
|
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
41,144
|
|
|
$
|
199
|
|
|
$
|
40,945
|
|
Cost of goods
sold
|
|
|
35,014
|
|
|
|
-
|
|
|
|
35,014
|
|
Gross profit
|
|
|
6,130
|
|
|
|
199
|
|
|
|
5,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
427,596
|
|
|
|
24,537
|
|
|
|
403,059
|
|
General and administrative
|
|
|
3,712,483
|
|
|
|
669,992
|
|
|
|
3,042,491
|
|
Officer salaries
|
|
|
156,450
|
|
|
|
131,923
|
|
|
|
24,527
|
|
Depreciation
and amortization
|
|
|
42,850
|
|
|
|
21,583
|
|
|
|
21,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating
Expenses
|
|
|
4,339,379
|
|
|
|
848,035
|
|
|
|
3,491,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(4,333,249
|
)
|
|
|
(847,836
|
)
|
|
|
3,485,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense)
|
|
|
(1,273,681
|
)
|
|
|
(510,448
|
)
|
|
|
763,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(5,606,930
|
)
|
|
$
|
(1,358,284
|
)
|
|
$
|
4,248,646
|
|
Revenues:
During the nine months ended September 30,
2017 and 2016, we received $216 of revenues from the sale of in-home media products, and $40,928 from the sale of
cannabis products. Our sales primarily consisted of the resale of raw materials that we previously purchased from other licensed
production and cultivation facilities as we progressed in the development of our facility. We expect to open phase 2 of our facility
soon and begin to grow our first crop. Aggregate revenues for the nine months ended September 30, 2017 were $41,144, compared
to revenues of $199 during the three months ended September 30, 2016, an increase in revenues of $40,945, or 20,575%.
Direct
Operating Costs:
Direct
operating costs were $427,596 for the nine months ended September 30, 2017 compared to $24,537 for the nine months ended September
30, 2016, an increase of $403,059, or 1,643%. Our direct operating costs increased primarily due to the launch of WeedTV during
the nine months ended September 30, 2017.
General
and Administrative:
General
and administrative expenses were $3,712,483 for the nine months ended September 30, 2017, compared to $669,992 for the nine months
ended September 30, 2016, an increase of $3,042,491, or 454%. General and administrative expense increased primarily due to the
issuance of stock and options resulting in $2,579,924 of stock-based compensation, compared to $346,000 of stock-based
compensation in the comparative period, as we significantly ramped up efforts to get our cannabis facility operational and launch
WeedTV during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.
Officer
Salaries:
Officer
salaries expense totaled $156,450 for the nine months ended September 30, 2017, compared to $131,923, for the nine months ended
September 30, 2016, an increase of $24,527, or 19%. The increase was due to the addition of our Chief Financial/Compliance Officer
to our team in the current year.
Depreciation
and Amortization:
Depreciation
and amortization expense was $42,850 for the nine months ended September 30, 2017, compared to $21,583 for the nine months ended
September 30, 2016, an increase of $21,267, or 99%. Depreciation increased primarily due to placing our leasehold improvements
and other equipment purchases into service for the nine months ended September 30, 2017 compared to the nine months ended September
30, 2016.
Operating
Loss:
Operating
loss for the nine months ended September 30, 2017 was $4,339,249 or ($0.01) per share, compared to an operating loss of $847,836
for the nine months ended September 30, 2016, or ($0.00) per share, an increase of $3,485,413, or 411%. Operating loss increased
primarily due to $2,579,924 of stock-based compensation, compared to $346,000 of stock-based compensation in the comparative period,
as we significantly ramped up efforts to get our cannabis facility operational and launched WeedTV during the nine months ended
September 30, 2017 compared to the nine months ended September 30, 2016.
Other
Income (Expense):
Other
income (expense), on a net basis, was $(1,273,681) for the nine months ended September 30, 2017, compared to other expense of
$(510,448) for the nine months ended September 30, 2016, an increased net expense of $763,233, or 150%. Other expense increased
primarily due to the increased derivative liability expense of $289,954, or 121%, over the comparative period, and an increased
interest expense on debt financing of approximately $399,774, or 116%, and by a decreased gain on debt extinguishment of $73,505,
during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.
Net
Loss:
The
net loss for the nine months ended September 30, 2017 was $5,606,930, or ($0.01) per share, compared to a net loss of $1,358,284,
or ($0.00) per share, for the nine months ended September 30, 2016, an increased net loss of $4,248,646, or 313%. Net loss increased
primarily due to the increased costs of readying our cannabis production facility, increased costs associated with our launch
of WeedTV and increased debt financing costs during the nine months ended September 30, 2017, compared to the nine months ended
September 30, 2016.
LIQUIDITY
AND CAPITAL RESOURCES
The
following table summarizes total assets, accumulated deficit, stockholders’ equity and working capital at September 30,
2017 compared to December 31, 2016.
|
|
September
30,
2017
|
|
|
December
31,
2016
|
|
|
Increase
/
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,181,933
|
|
|
$
|
498,617
|
|
|
$
|
683,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
3,683,243
|
|
|
$
|
1,401,644
|
|
|
$
|
2,281,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated (Deficit)
|
|
$
|
(36,151,435
|
)
|
|
$
|
(30,639,417
|
)
|
|
$
|
5,512,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit)
|
|
$
|
(2,501,310
|
)
|
|
$
|
(903,027
|
)
|
|
$
|
1,598,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital (Deficit)
|
|
$
|
(2,837,261
|
)
|
|
$
|
(1,131,646
|
)
|
|
$
|
1,705,615
|
|
Our
principal source of operating capital has been provided from equity investments and debt financings. At September 30, 2017, we
had a negative working capital position of $2,837,261.
Debt
Financing
On
September 19, 2017, the Company entered issued a $50,000 unsecured promissory note to SK L-58, LLC bearing interest
at a rate of 5% per annum, with a maturity date of November 3, 2017. Upon an event of default, the Company is required to
issue to lender warrants to acquire one million shares at an exercise price of $0.05 per share every 30 days the note is unpaid.
Each warrant issued as a result of an Event of Default hereunder shall become and remain exercisable for the four (4) complete
calendar month period beginning on the first day of the thirty second (32nd) month following an Event of Default. This
note is currently in default.
On
September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master
Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000,
(i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable until May 31,
2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting
in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a rate of 10% per
annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation
with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes.
On
May 8, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund,
Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i)
a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May 31, 2022
to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting
in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at a rate of 10%
per annum payable at maturity.
On
April 21, 2017, the Company entered into an unsecured promissory note with SK L-43, LLC bearing interest at a rate of 5% per annum,
with a maturity date of July 20, 2017. In accordance with the default provisions, the principal balance of the note and unpaid
interest shall be converted into common stock at $0.04 per share, along with an equal number of warrants, exercisable at $0.08
per share with a call feature entitling the borrower to require exercise if the average stock price over the 30 preceding trading
days following the six month anniversary of the warrant date exceeds $0.16 per share.
On
April 5, 2017, the Company entered into an unsecured promissory note with SK L-43, LLC bearing interest at a rate of 5% per annum,
with a maturity date of July 5, 2017. In accordance with the default provisions, the principal balance of the note and unpaid
interest shall be converted into common stock at $0.04 per share, along with an equal number of warrants, exercisable at $0.08
per share with a call feature entitling the borrower to require exercise if the average stock price over the 30 preceding trading
days following the six month anniversary of the warrant date exceeds $0.16 per share.
Convertible
Debenture Repayment and Settlements
On
July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares
of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at
$0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. On July 1, 2017, the note was
assigned to three different parties. Pursuant to the conversion, the note holders received an aggregate 632,706 shares in satisfaction
of $25,000 of principal and $308 of interest on the debt. The shares were subsequently issued on October 2, 2017.
On
July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of
common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08
per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note
holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest on the debt. The shares were subsequently
issued on October 2, 2017.
During
the nine months ended September 30, 2017, the Company repaid $30,000 of debt pursuant to a payoff agreement with WHC Capital,
LLC. The remaining $40,000 of the settlement liability was satisfied in full with the issuance of 2,009,419 shares of stock on
April 18, 2017.
Common
Stock Sales
On
September 21, 2017, the Company sold 200,000 units at $0.17 per unit, consisting of 200,000 shares of common stock and 200,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $22,000.
On
September 7, 2017, the Company sold 300,000 units at $0.07 per unit, consisting of 300,000 shares of common stock and 300,000
warrants exercisable at $0.11 per share over the following 3 years, along with another 300,000 warrants exercisable at $0.15 per
share over the following 3 years, to an individual investor for proceeds of $21,000.
On
September 6, 2017, the Company sold 500,000 units at $0.11 per unit, consisting of 500,000 shares of common stock and 500,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $55,000.
On
August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.
On
August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants
exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.
On
July 17, 2017, the Company sold 1,875,000 units at $0.16 per unit, consisting of 1,875,000 shares of common stock and 1,875,000
warrants exercisable at $0.21 per share over the following 3 years, along with another 1,875,000 warrants exercisable at $0.24
per share over the following 3 years, to an individual investor for proceeds of $300,000.
On
June 29, 2017, the Company sold 500,000 units at $0.10 per unit, consisting of 500,000 shares of common stock and 500,000 warrants
exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000.
On
June 23, 2017, a warrant holder exercised warrants to purchase 2,500,000 shares of common stock at $0.04 per share for proceeds
of $100,000.
On
June 21, 2017, the Company sold 1,000,000 units at $0.10 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $100,000.
On
June 13, 2017, the Company sold 1,000,000 units at $0.05 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20
per share over the following 3 years, to an individual investor for proceeds of $50,000.
On
June 13, 2017, the Company sold 1,000,000 units at $0.075 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20
per share over the following 3 years, to another individual investor for proceeds of $75,000.
On
June 9, 2017, a warrant holder exercised warrants to purchase 1,500,000 shares of common stock at $0.05 per share for proceeds
of $75,000.
On
January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable
at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000.
We
have utilized these funds to repay approximately $30,000 of previously issued convertible debentures and settlements, comply with
our regulatory reporting requirements, and to fund our subsidiary’s cannabis business during the quarter. 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 nine months ended September 30, 2017, the Company granted a total of
$2,579,924 stock-based compensation, consisting of 7,400,000 shares of common stock valued at $178,300, and options valued at
$1,252,411, as bonuses to our officers and directors, as well as an aggregate 14,290,435 shares of common stock valued at $823,779,
and options valued at $325,434, to other service providers, compared to a total of $346,000 stock-based compensation, consisting
of 6,250,000 shares of preferred stock valued at $192,000 and 20,400,000 shares of common stock valued at $102,000 in lieu of
cash payments to our CEO, as well as an aggregate 9,000,000 shares of common stock valued at $45,000 to our Directors and 2,000,000
shares valued at $7,000 to an attorney during the nine months ended September 30, 2016. 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 2017.
As
of November 18, 2017, we had four convertible notes outstanding with a cumulative outstanding principal balance of $270,000. Repayment
of the notes must be done at a premium to the then-outstanding balance, resulting in the need for approximately $370,000 in liquid
capital. If, rather than repay these notes, we allow them to convert into our common stock, which conversions would be done at
a discount to the market price of our common stock, all of which could be sold into the open market at the time of conversion.
The potential dilutive effects of these conversions at various conversion prices below our most recent market price of $0.09 per
share is as follows:
|
|
|
100%
|
|
|
|
75%
|
|
|
|
50%
|
|
|
|
25%
|
|
Potential conversion
prices
|
|
$
|
0.09
|
|
|
$
|
0.675
|
|
|
$
|
0.045
|
|
|
$
|
0.0225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
dilutive shares
|
|
|
3,000,000
|
|
|
|
4,000,000
|
|
|
|
6,000,000
|
|
|
|
12,000,000
|
|
Off-Balance
Sheet Arrangements
As
of September 30, 2017, 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
|
|
|
Incorporation
|
|
|
|
Relationship
|
|
|
|
Reference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Players
Network
(1)
|
|
|
Nevada
|
|
|
|
Parent
|
|
|
|
PNTV
|
|
Green
Leaf Farms Holdings, LLC
(2)
|
|
|
Nevada
|
|
|
|
Subsidiary
|
|
|
|
GLFH
|
|
(1)
Players
Network entity is in the form of a corporation.
(2)
Majority-owned
subsidiary formed on July 8, 2014, in which PNTV retained 84% ownership, with the remaining 16% held by key experts and advisors.
An additional 1.6% was sold to an investor on December 8, 2014 and 3% was transferred back from a founding member on December
2, 2015, giving PNTV 85.4% ownership and minority interests ownership of 14.6%. The form of the entity was changed from a corporation
to a limited liability company on May 9, 2017 at which time the name was changed from Green Leaf Farms Holdings, Inc. to Green
Leaf Farms Holdings, LLC.
The
consolidated financial statements herein contain the operations of the subsidiary listed above. All significant inter-company
transactions have been eliminated in the preparation of these financial statements. The parent company, PNTV and subsidiary, GLFH
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:
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Persuasive
evidence of an arrangement exists;
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●
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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;
|
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The
license period has begun and the customer can begin its exploitation, exhibition or sale;
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●
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The
price to the customer is fixed and determinable; and
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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.
Revenue
from the sale of our cannabis products is recognized by our subsidiary at the point of sale, at which time payment is received.
Management estimates an allowance for sales returns.
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.