RISK
FACTORS
Investment
in our securities involves a high degree of risk. You should carefully consider the risks described below, as well as the other
information in this prospectus. Each of the risks could adversely affect our business, financial condition, results of operations
and prospects, and could result in a complete loss of your investment. This prospectus also contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks mentioned above.
Risks
Relating to our Company
We
have had a history of losses, we expect losses in the future, and there can be no assurance that we will become profitable in
the future.
We
were incorporated under the laws of the State of Nevada on March 16, 1993. Since inception, we have experienced operating losses
on an on-going basis. For our fiscal years ended December 31, 2017 and 2016, we incurred net losses of $13,957,984 and $1,701,810,
respectively. As of such dates, we had accumulated deficits of $44,597,401 and $30,639,417, respectively. We expect our losses
to continue for the foreseeable future. These continuing losses may be greater than current levels. If our revenues do not increase
substantially or if our expenses exceed our expectations, we may never become profitable. Even if we do achieve profitability,
we may not sustain profitability on a quarterly or annual basis in the future.
Our
auditor has given us a “going concern” qualification, which questions our ability to continue as a going concern without
additional financing.
Our
independent certified public accountant has added an emphasis paragraph to its report on our financial statements for the year
ended December 31, 2017 regarding our ability to continue as a going concern. Key to this determination is our recurring net losses,
an accumulated deficit, and a working capital deficiency. Management plans to try to increase sales and improve operating results
through the expansion of the distribution channels of our programming with a view to increasing advertising and sponsorship revenues.
Management believes that funds generated from operations will not be sufficient to cover cash needs in the foreseeable future,
and we will continue to rely on expected increased revenues and private equity to cover our cash needs, although there can be
no assurance in this regard. In the event sales do not materialize at the expected rates, management would seek additional financing
or would conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives,
becoming profitable or continuing our business without either a temporary interruption or a permanent cessation.
We
need additional capital in the future to finance our planned growth, which we may not be able to raise or it may only be available
on terms unfavorable to us or our stockholders, which may result in our inability to fund our working capital requirements and
harm our operational results.
We
have and expect to continue to have substantial capital expenditure and working capital needs. We do not now have funds sufficient
to fund our operations at their current level for the next 12 months. We need to raise additional cash to fund our operations
and implement our business plan. We are maintaining an on-going effort to locate sources of additional funding, without which
we will not be able to remain a viable entity. If we are able to obtain the financing required to remain in business, eventually
achieving operating profits will require substantially increasing revenues or drastically reducing expenses from their current
levels or both. If we are able to obtain the required financing to remain in business, future operating results depend upon a
number of factors that are outside of our control. The expected operating losses, coupled with a lack of liquidity, raise a substantial
doubt about our ability to continue as a going concern. If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights,
preferences or privileges senior to those of existing stockholders.
At
this stage of our business operations, investors may lose their entire investment.
Because
of the factors described above, and given the nature of our business and our changing business focus, we may not be able to execute
our business plan and may be forced to cease operations, which could result in the loss by investors of their entire investment
in our common stock.
If
we are unable to retain the services of Messrs. Bradley or Berk, or if we are unable to successfully recruit qualified managerial
and sales personnel having experience in business, we may not be able to continue our operations.
Our
success depends to a significant extent upon the continued service of Mark Bradley, our Chief Executive Officer and Michael Berk,
our President of Programming. Loss of the services of Messrs. Bradley or Berk could have a material adverse effect on our growth,
revenues, and prospective business. In order to successfully implement and manage our business plan, we will be dependent upon
(among other things) successfully recruiting qualified managerial and sales personnel having experience in business. Competition
for qualified individuals is intense. There can be no assurance that we will be able to find, attract and retain existing employees
or that we will be able to find, attract and retain qualified personnel on acceptable terms.
Our
current management resources may not be sufficient for the future, and we have no assurance that we can attract additional qualified
personnel.
There
can be no assurance that the current level of management is sufficient to perform all responsibilities necessary or beneficial
for management to perform. Our success in attracting additional qualified personnel will depend on many factors, including our
ability to provide them with competitive compensation arrangements, equity participation and other benefits. There is no assurance
that (if we need to) we will be successful in attracting highly qualified individuals in key management positions.
Limitations
on claims against our officers and directors, and our obligation to indemnify them, could prevent our recovery for losses caused
by them.
The
corporation law of Nevada allows a Nevada corporation to limit the liability of its directors to the corporation and its stockholders
to a certain extent, and our Articles of Incorporation have eliminated our directors’ and officers’ personal liability
for damages for breaches of fiduciary duty but do not eliminate or limit the liability of a director officer for (a) acts or omissions
which involve intentional misconduct, fraud or a knowing violation of the law, or (b) the payment of dividends in violation of
applicable law. The corporation law of Nevada allows a Nevada corporation to indemnify each director, officer, agent and/or employee
to the extent that certain standards are met. Further, we may purchase and maintain insurance on behalf of any such persons whether
or not we have the power to indemnify such person against the liability insured against. Consequently, because of the actions
or omissions of officers, directors, agents and employees, we could incur substantial losses and be prevented from recovering
such losses from such persons. Further, the Commission maintains that indemnification for liabilities arising under the Securities
Act is against the public policy expressed in the Securities Act, and is therefore unenforceable.
Mark
Bradley, our Chief Executive Officer controls a majority of our outstanding voting shares, which prevents other stockholders from
influencing significant corporate decisions.
Mark
Bradley, our founder CEO, is able to exercise voting rights with respect to approximately 56.7% of the voting power of our outstanding
capital stock, and therefore has the ability to control the outcome of all matters submitted to our stockholders for approval,
including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. This concentrated
control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our
assets that our other stockholders support, or conversely, could result in the consummation of such a transaction that our other
stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our common stock
due to the limited voting power of such stock relative to the Series A and Series C preferred stock held by Mr. Bradley.
We
may experience rapid growth, and in such case we will need to manage this growth effectively.
We
believe that, given the right business opportunities, we may expand our operations rapidly and significantly. If rapid growth
were to occur, it could place a significant strain on our management, operational and financial resources. To manage any significant
growth of our operations, we will be required to undertake the following successfully:
|
●
|
Manage
relationships with various strategic partners and other third parties;
|
|
●
|
Hire
and retain skilled personnel necessary to support our business;
|
|
●
|
Train
and manage a growing employee base; and
|
|
●
|
Continually
develop our financial and information management systems.
|
If
we fail to make adequate allowances for the costs and risks associated with this expansion or if our systems, procedures or controls
are not adequate to support our operations, our business could be harmed. Our inability to manage growth effectively could materially
adversely affect our business, results of operations and financial condition.
Risks
Related To Our Cannabis Business
Cannabis
remains illegal under federal law and a change in federal enforcement practices could significantly and negatively affect our
cannabis cultivation and production business.
State
laws legalizing medicinal and adult cannabis use are in conflict with the Federal Controlled Substances Act, which classifies
cannabis as a Schedule-I controlled substance and makes cannabis use and possession illegal on a national level. The United States
Supreme Court has ruled that the Federal government has the right to regulate and criminalize cannabis, even for medical purposes,
and thus Federal law criminalizing the use of cannabis preempts state laws that legalize its use. While the prior Obama Administration
has effectively stated that it is not an efficient use of resources to direct Federal law enforcement agencies to prosecute those
lawfully abiding by state-designated laws allowing the use and distribution of medical and recreational cannabis, on January 4,
2018, the United States Attorney General announced the rescission of the Obama Administration’s policy, which negatively
impacted our stock price. The Federal government’s enforcement of Federal laws could cause significant financial damage
to us and our stockholders.
Our
business is dependent on state laws pertaining to the cannabis industry.
Twenty-nine
states and the District of Columbia allow its citizens to use medical cannabis. Additionally, Alaska, California, Colorado, Maine,
Massachusetts, Nevada, Oregon, and Washington, and the District of Columbia have legalized cannabis for adult recreational use,
and additional recreational measures are expected to be pursued by other states in the future. Continued development of the cannabis
industry is dependent upon continued legislative authorization of cannabis at the state level. Any number of factors could slow
or halt progress in this area. Further, progress in the cannabis industry, while encouraging, is not assured. While there may
be ample public support for legislative action, numerous factors impact the legislative process. Any one of these factors could
slow or halt use of cannabis, which would negatively impact our business.
Laws
and regulations affecting the cannabis and marijuana industries are constantly changing, which could detrimentally affect our
business, and we cannot predict the impact that future regulations may have on us.
Local,
state and federal cannabis laws and regulations are constantly changing and they are subject to evolving interpretations, which
could require us to incur substantial costs associated with compliance or to alter one or more of our service offerings. In addition,
violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect
on our revenues, profitability, and financial condition. We cannot predict the nature of any future laws, regulations, interpretations
or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures,
when and if promulgated, could have on our business. Any change in law or interpretation could have a material adverse effect
on our business, financial condition, and results of operations.
Expansion
by well-established cultivation and production companies into the cannabis industry could prevent us from realizing anticipated
growth in customers and revenues.
Established
dispensary companies may expand their businesses into cannabis cultivation and production. If they decided to expand into cultivation
and production, this could hurt the growth of our business and cause our revenues to be lower than we expect.
Due
to our involvement in the cannabis industry, we may have a difficult time obtaining the various insurances that are desired to
operate our business, which may expose us to additional risk and financial liabilities.
Insurance
that is otherwise readily available, such as workers compensation, general liability, and directors and officers insurance, is
more difficult for us to find, and more expensive, because we are service providers to companies in the cannabis industry. There
are no guarantees that we will be able to find such insurances in the future, or that the cost will be affordable to us. If we
are forced to go without such insurances, it may prevent us from entering into certain business sectors, may inhibit our growth,
and may expose us to additional risk and financial liabilities.
Participants
in the cannabis industry have difficulty accessing the service of banks, which may make it difficult for us to operate.
Despite
recent rules issued by the United States Department of the Treasury mitigating the risk to banks that do business with cannabis
companies permitted under state law, as well as recent guidance from the United States Department of Justice, banks remain wary
to accept funds from businesses in the cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains
a compelling argument that banks may be in violation of Federal law when accepting for deposit, funds derived from the sale or
distribution of cannabis. Consequently, businesses involved in the cannabis industry continue to have trouble establishing banking
relationships. An inability to open bank accounts may make it difficult for us, or some of our customers, to do business.
We
have identified material weaknesses in our internal controls over financial reporting.
As
a result of management’s assessment of our internal control over financial reporting as of December 31, 2017, management
concluded that there were weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or
a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely
basis. While we have identified material weaknesses, we believe that our consolidated audited financial statements have been prepared
in accordance with accounting principles generally accepted in the United States.
Risks
Related To Our Media Business
We
face intense competition in our Weed TV and media business.
We
operate in a highly competitive industry, and we may not be able to generate or maintain advertising and sales revenues, if any,
from our media content. Our media and advertising businesses compete for audiences and advertising revenues with other media businesses,
as well as with other media, such as newspapers, magazines, television, direct mail, mobile devices, satellite radio, Internet-based
services and live entertainment. Our competitors may develop technology, services or advertising media that are equal or superior
to those we provide or that achieve greater market acceptance and brand recognition than we achieve. It also is possible that
new competitors may emerge and rapidly acquire significant market share in any of our business segments. An increased level of
competition for advertising dollars may lead to lower advertising rates as we attempt to retain customers or may cause us to lose
customers to our competitors who offer lower rates that we are unable or unwilling to match.
If
our security measures are breached, we may face liability and public perception of our services could be diminished, which would
negatively impact our ability to attract listeners, business partners and advertisers.
Although
we have security measures to protect against the loss, misuse and alteration of our websites, digital assets and proprietary business
information as well as consumer information, no security measures are perfect and impenetrable and we may be unable to anticipate
or prevent unauthorized access. A security breach could occur due to the actions of outside parties, employee error, malfeasance
or a combination of these or other actions. If an actual or perceived breach of our security occurs, we could lose competitively
sensitive business information or suffer disruptions to our business operations. In addition, the public perception of the effectiveness
of our security measures or services could be harmed, we could lose consumers, business partners and advertisers and we could
suffer financial exposure in connection with remediation efforts, investigations and legal proceedings and changes in our security
and system protection measures.
Additional
restrictions on advertising of cannabis and other products may further restrict the categories of clients that can advertise on
Weed TV.
Out-of-court
settlements between the major U.S. tobacco companies and all 50 states, the District of Columbia, the Commonwealth of Puerto Rico
and other U.S. territories include a ban on the outdoor advertising of tobacco products. Other products and services may be targeted
in the U.S. in the future, including cannabis products. Any significant reduction in cannabis-related advertising or advertising
of other products due to content-related restrictions could cause a reduction in our direct revenues from such advertisements.
There
are various risks associated with our intellectual property rights.
No
patent protection
. We have no patents and rely on a combination of copyright and trade secret protection and nondisclosure
agreements to establish and protect our proprietary rights. Despite our precautions, it may be possible for a third party to copy
or otherwise obtain and use our proprietary information, products or technology without authorization, to imitate our programming,
or to develop similar or superior programming or ideas independently. Imitation of our programming, the creation of similar or
superior programming, or the infringement of our intellectual property rights could diminish the value of our programming or otherwise
adversely affect our potential for revenue. Policing unauthorized use of our intellectual property will be difficult and expensive.
Enforcing
our proprietary rights may require litigation
. Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to protect our copyrights, to determine the validity and scope of the proprietary rights
of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our business, operating results or financial condition.
Others
may assert infringement claims against us
. One of the risks of our business is the possibility of claims that our productions
infringe on the intellectual property rights of third parties with respect to previously developed content. In addition, our technology
and software may be subject to patent, copyright or other intellectual property claims of third parties. We could receive in the
future claims of infringement of other parties’ proprietary rights. There can be no assurance that infringement claims will
not be asserted or prosecuted against us, or that any assertions or prosecutions will not materially adversely affect our business,
financial condition or results of operations. Irrespective of the validity or the successful assertion of such claims, we would
incur significant costs and diversion of resources with respect to the defense thereof, which could have a material adverse effect
on our business, financial condition or results of operations. If any claims or actions are asserted against us, we may seek to
obtain a license under a third party’s intellectual property rights. We cannot provide any assurances, however, that under
such circumstances a license would be available on reasonable terms or at all.
We
rely on a number of third parties, and such reliance exposes us to a number of risks.
Our
operations depend and will depend on a number of third parties. We have limited control over these third parties. We do not and
in the future may not have long-term agreements with them. In addition, we do not own a gateway onto the Internet. Instead, we
now and presumably always will rely on a network operating center to connect our Web site to the Internet. Overall, our inability
to maintain satisfactory relationships with the requisite third parties on acceptable commercial terms, or the failure of such
third parties to maintain the quality of services they provide at a satisfactory standard, could materially adversely affect our
business, results of operations and financial condition.
Risks
Related To Our Common Stock
We
have both the obligation and the ability to issue additional shares of our common stock, and the issuance of such additional shares
of common stock may depress the price of our common stock.
We
have both the ability as well as outstanding obligations to issue additional shares of common stock in the future. These include
the following:
|
●
|
We
may sell and issue to Kodiak up to 37,500,000 shares of common stock under the Purchase Agreement and will be required to
issue up to an additional 37,500,000 shares of common stock under the warrant held by Kodiak upon exercise by Kodiak;
|
|
●
|
Our
Amended and Restated 2004 Non-Qualified Stock Option Plan allows us to issue up to 25,000,000 shares of common stock and options.
We currently have 2,075,272 shares of our common stock available for issuance under our Amended and Restated 2004 Non-Qualified
Stock Option Plan;
|
|
●
|
There
are 160,506,452 shares of common stock issuable pursuant to common stock options and warrants outstanding as of the date of
this prospectus;
|
|
●
|
There
are 2,000,000 shares of common stock reserved for issuance upon conversion of 2,000,000 shares of outstanding Series A Preferred
Stock;
|
|
●
|
There
are 12,000,000 shares of common stock reserved for issuance upon conversion of 2,000,000 shares of outstanding Series C Preferred
Stock; and
|
|
●
|
Shares
of common stock issuable pursuant to convertible debt instruments outstanding, as described further below.
|
The
options, warrants and other convertible securities described above will permit the holders to purchase shares of common stock
at specified prices. These purchase prices may be less than the then current market price of our common stock. Any shares of common
stock issued pursuant to these options would further dilute the percentage ownership of existing stockholders. The terms on which
we could obtain additional capital during the life of these options and warrants may be adversely affected because of such potential
dilution. Finally, we may issue additional shares in the future other than as listed above. There are no preemptive rights in
connection with our common stock. Thus, the percentage ownership of existing stockholders may be diluted if we issue additional
shares in the future. Future issuances of additional shares pursuant to options, warrants other convertible securities could cause
immediate and substantial dilution to the net tangible book value of shares of common stock issued and outstanding immediately
before such issuances. Any future decrease in the net tangible book value of such issued and outstanding shares could materially
and adversely affect the market value of the shares.
We
may issue additional stock without stockholder consent.
Our
Board of Directors has authority, without action or vote of the stockholders, to issue all or part of our authorized but unissued
shares. Additional shares may be issued in connection with future financing, acquisitions, employee stock plans, or otherwise.
Any such issuance will dilute the percentage ownership of existing stockholders. The Board, from the authorized capital of 25,000,000
preferred shares, has authorized and designated 2,000,000 shares of Series A Preferred Stock and 12,000,0000 shares of Series
C Preferred Stock, of which 2,000,000 shares and 12,000,000 shares are issued and outstanding, respectively. The Board of Directors
can issue preferred stock in one or more series and fix the terms of such stock without stockholder approval. Preferred stock
may include the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion and redemption
rights and sinking fund provisions. The issuance of preferred stock could adversely affect the rights of the holders of common
stock and reduce the value of the common stock. In addition, specific rights granted to holders of preferred stock could discourage,
delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders.
Such issuance could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors
of your choosing and to cause us to take other corporate actions you desire.
Offers
or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding
period under Rule 144, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred
to as an “overhang” and cause the market price of our common stock to fall. The existence of an overhang, whether
or not sales have occurred or are occurring, also could hinder our ability to raise additional financing through the sale of equity
or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Broker-dealers
may be discouraged from effecting transactions in our common stock because it is considered a penny stock and is subject to the
penny stock rules.
Our
common stock currently constitutes “penny stock.” Subject to certain exceptions, for the purposes relevant to us,
“penny stock” includes any equity security that has a market price of less than $5.00 per share. Rules 15g-1 through
15g-9 promulgated under the Securities Exchange Act of 1934, as amended, impose sales practice and disclosure requirements on
certain brokers-dealers who engage in certain transactions involving a “penny stock.” In particular, a broker-dealer
selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual
with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse), must
make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction
prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require
the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities
and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current
quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information
with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny
stocks.
The
additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from effecting
transactions in our shares, which could severely limit the market liquidity of the shares and impede the sale of our shares in
the secondary market.
As
an issuer of “Penny Stock” the protection provided by the federal securities laws relating to forward looking statements
does not apply to us.
Although
the federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under
the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit
of this particular safe harbor protection in the event of any claim that the material provided by us contained a material misstatement
of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements
not misleading.
Because
our Board of Directors does not intend to pay dividends on our common stock in the foreseeable future, stockholders may have to
sell their shares of our common stock to realize a return on their investment in the company.
Holders
of our common stock are entitled to receive dividends when, as and if declared by our Board of Directors out of funds legally
available. To date, we have paid no dividends. Our Board of Directors does not intend to declare any dividends in the foreseeable
future, but instead intends to retain all earnings, if any, for use in our business operations. Accordingly, a return on an investment
in shares of our common stock may be realized only through a sale of such shares, if at all.
We
have outstanding convertible debt, which, if repaid will require a significant amount of capital, or if converted into our common
stock could have a material adverse effect on our stock price.
As
of December 31, 2017, we had convertible notes outstanding with a cumulative outstanding principal balance of $1,165,300 which,
if not converted into our common stock, require repayment at a premium to the outstanding balance, resulting in the need for approximately
$2,500,000 in liquid capital. If, rather than repay these notes, we allow them to convert into our common stock, the conversions
would be done at a discount to the market price of our common stock. The potential dilutive effects of these conversions at various
conversion prices below our most recent market price of $0.05 per share is as follows:
|
|
|
100%
|
|
|
75%
|
|
|
50%
|
|
|
25%
|
|
|
|
$0.05
|
|
|
$0.375
|
|
|
$0.025
|
|
|
$0.0125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
dilutive shares
|
|
|
23,306,000
|
|
|
31,074,667
|
|
|
4
6,612,000
|
|
|
93,224,000
|
The
issuance and sale of common stock upon conversion of outstanding convertible notes may depress the market price of our common
stock.
As
sequential conversions of our convertible notes with conversion prices tied to the trading price of our common stock are effected,
and sales of the shares issued on conversion occur, the price of our common stock may decline, and as a result, the holder of
these notes will be entitled to receive an increasing number of shares in connection with its conversions, which shares could
then be sold in the market, triggering further price declines and conversions for even larger numbers of shares, to the detriment
of our investors. The shares of common stock which the convertible notes are convertible into may be sold without restriction
pursuant to Rule 144 provided the notes were held for at least six months. As a result, the sale of these shares may adversely
affect the market price of our common stock.
In
addition, the common stock issuable upon conversion of these convertible notes may represent overhang that may also adversely
affect the market price of our common stock. As described above, overhang occurs when there is a greater supply of a company’s
stock in the market than there is demand for that stock. When this happens the price of the company’s stock will decrease,
and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. We have
issued various convertible notes that are convertible into shares of our common stock at a discount to market, which provides
the holders with the ability to sell their common stock at or below market and still make a profit. In the event of such overhang,
the note holder will have an incentive to sell their common stock as quickly as possible. If the share volume of our common stock
cannot absorb the discounted shares, then the value of our common stock will likely decrease.
The
continuously adjustable conversion price feature of our convertible notes may encourage short selling of our common stock, which
could have a depressive effect on the price of our common stock.
The
significant downward pressure on the price of our common stock as the holder of the convertible notes converts and sells material
amounts of our common stock could encourage investors to short sell our common stock. This could place further downward pressure
on the price of our common stock. In addition, not only the sale of shares issued upon conversion of the convertible notes, but
also the mere perception that these sales could occur, may adversely affect the market price of our common stock.
Market
volatility has significantly affected our stock price and is likely to effect the value of your shares.
The
market price for our common stock has been and is likely to continue to be extremely volatile. In addition, the market price of
our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among
others:
|
●
|
fluctuations
in stock market prices and trading volumes of similar companies;
|
|
●
|
regulatory
or legal developments;
|
|
●
|
general
market conditions and overall fluctuations in U.S. equity markets;
|
|
●
|
variations
in our quarterly operating results;
|
|
●
|
changes
in accounting principles;
|
|
●
|
our
ability to raise additional capital and the terms on which we can raise it;
|
|
●
|
sales
of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;
|
|
●
|
announcements
of new products, brands, services, commercial relationships, acquisitions or other events by us or our competitors;
|
|
●
|
additions
or departures of key personnel;
|
|
●
|
discussion
of us or our stock price by the press or in online investor communities; and
|
|
●
|
other
risks and uncertainties described in these risk factors.
|
Risks
Relating to Our Agreements with Kodiak Capital Group, LLC
The
sale of our common stock to Kodiak may cause dilution, and the sale of the shares of common stock acquired by Kodiak, or the perception
that such sales may occur, could cause the price of our common stock to fall.
Pursuant
to the Purchase Agreement, as amended, Kodiak has committed to purchase up to an aggregate of 37,500,000 shares of our common
stock. The shares that may be sold pursuant to the Purchase Agreement in the future may be sold by us to Kodiak at our discretion
from time to time, commencing after the SEC has declared effective the registration statement that includes this prospectus and
concluding on March 31, 2019. The per share purchase price for the shares that we may sell to Kodiak under the Purchase Agreement
will fluctuate based on the price of our common stock, and will be equal to 80% of the lowest daily volume weighted average price
of our common stock during the three trading days following our delivery of the applicable Put Notice to Kodiak to purchase the
shares. Closings from time to time under the Purchase Agreement will only occur if the lowest daily volume weighted average price
of the Company’s common stock during the applicable valuation period is greater than or equal to $0.14 per share, unless
otherwise agreed to by Kodiak and us. Depending on market liquidity at the time, sales of shares of common stock to Kodiak may
cause the trading price of our common stock to fall.
We
generally have the right to control the timing and amount of any sales of our shares to Kodiak, except that, pursuant to the Purchase
Agreement, we may not sell shares to Kodiak if the sale would result in its beneficial ownership of more than 9.99% of our the
outstanding common stock. Kodiak may ultimately purchase all, some or none of the shares of our common stock that may be sold
pursuant to the Purchase Agreement and, after it has acquired shares, Kodiak may sell all, some or none of those shares. Therefore,
sales to Kodiak by us could result in substantial dilution to the interests of other holders of our common stock. Additionally,
the sale of a substantial number of shares of our common stock to Kodiak, or the anticipation of such sales, could make it more
difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish
to effect sales.
Kodiak
will pay less than the then-prevailing market price for our common stock for purchases under the Purchase Agreement.
The
common stock to be issued to Kodiak pursuant to the Purchase Agreement may be purchased at a 20% discount to the daily volume
weighted average price of the Company’s common stock during the three trading days following the delivery of the applicable
Put Notice. Kodiak has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit
equal to the difference between the discounted price and the market price. If Kodiak sells the shares, the price of our common
stock could decrease. If our stock price decreases, Kodiak may have a further incentive to sell the shares of our common stock
that it holds. These sales may have a further impact on our stock price.
We
may not be able to put to Kodiak all 37,500,000 shares available under the Purchase Agreement.
The
Purchase Agreement provides for the purchase by Kodiak of up to 37,500,000 shares of our common stock, which at the minimum purchase
price of $0.14 per share under the Purchase Agreement would result in gross proceeds to us of $5,250,000. Our ability to draw
down funds and sell shares under the Purchase Agreement requires the satisfaction of a number of conditions, including that the
registration statement of which this prospectus is a part be declared effective by the SEC and continue to be effective at the
time of the put, as well as Kodiak’s compliance with its obligations under the Purchase Agreement. Accordingly, there
can be no guarantee that that we will be able to draw down all or any portion of the $5,250,000 available to us under the Purchase
Agreement.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
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.
Green
Leaf Cannabis Business
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. The sale of cannabis in Nevada for medical purposes has been legal since 2015, and on July
1, 2017, the recreational use of cannabis became legal in the State of Nevada.
It
is estimated that there are approximately 43,000 Nevada State issued medical marijuana cardholders. Nevada also 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 were 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 Nevada’s adult recreational
marijuana market.
Green
Leaf offers 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 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
|
Media
Content Distribution; Weed TV
Historically,
we have distributed video and other media content over cable television channels and a wide variety of internet enabled devices,
focusing primarily on the gaming industry and Las Vegas lifestyle. Our current media operations are focused on our recently launched
Web site WeedTV.com, and its related social media presence.
Weed
TV is a source of informational entertainment, products and services for people who relate to the marijuana lifestyle and social
community. Weed TV content is currently available at
www.weedtv.com
. We plan to continuously add features and content to
Weed TV, including a directory of businesses that cater to the marijuana business, such as dispensaries, smoke shops, doctors,
financial institutions, manufacturers and more.
Critical
Accounting Policies
Segment
Reporting
Under
FASB ASC 280-10-50, the Company operates as a single segment and will evaluate additional segment disclosure requirements as it
expands its operations.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements
as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated
by management to approximate fair value primarily due to the short term nature of the instruments. In addition, the Company had
debt instruments that required fair value measurement on a recurring basis.
Cash
and Cash Equivalents
We
maintain cash balances in non-interest-bearing transaction accounts, which do not currently exceed federally insured limits. For
the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are
considered to be cash equivalents. There were no cash equivalents on hand at December 31, 2017 and 2016.
Allowance
for Doubtful Accounts
We
generate the majority of our revenues and corresponding accounts receivable from video production services on a project basis
and subscriptions for video content. We evaluate the collectability of our accounts receivable considering a combination of factors.
In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record
a specific reserve for bad debts against amounts due in order to reduce the net recognized receivable to the amount we reasonably
believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off experience and
the length of time the receivables are past due. We had no debts expense during the years ended December 31, 2017 and 2016, respectively.
Cost
Method of Accounting for Investments
Investee
companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method
of accounting. Under this method, the Company’s share of the earnings or losses of such Investee companies is not included
in the Balance Sheet or Statement of Operations. However, impairment charges are recognized in the Statement of Operations. If
circumstances suggest that the value of the Investee Company has subsequently recovered, such recovery is not recorded. Our investments
which are accounted for on the cost method of accounting have been completely impaired previously, and no impairment expense was
recognized during the years ended December 31, 2017 or 2016.
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.
Fixed
Assets
Fixed
assets are stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated
using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based on the
following life expectancy:
Software
|
3
years
|
Office
equipment and website development costs
|
5
years
|
Furniture
and fixtures
|
7
years
|
Repairs
and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which have extend the
useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are
retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss
is reflected in operations.
Impairment
of Long-Lived Assets
Long-lived
assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon
historical results and current projections of earnings before interest and taxes. Impairment is measured using discounted cash
flows of future operating results based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating
results to the extent that carrying value exceeds discounted cash flows of future operations. The Company did not recognize any
impairment losses on the disposal of fixed assets during the years ended December 31, 2017 and 2016.
Construction
in Progress
The
Company is constructing a grow house in its leased facility, which became operational during the first quarter of 2018, at which
time depreciation commenced. The Company incurred and capitalized within Construction in Progress a total of $408,812 and $239,220,
respectively. The estimated cost to be incurred to complete construction of the grow house is approximately $1.7 million. The
construction will be completed in phases and the portion of the $1.7 million incurred after the facility is initially operational
will be capitalized separately as separate leasehold improvements, while the costs incurred to get the facility operational will
begin to be depreciated upon commencement of operations.
Deferred
Rent Obligation
The
Company has entered into operating lease agreements for its corporate office which contains provisions for future rent increases.
In accordance with generally accepted accounting principles, the Company records monthly rent expense equal to the total of the
payments due over the lease term, divided by the number of months of the lease terms. The difference between rent expense recorded
and the amount paid is credited or charged to “Deferred rent obligation,” which is reflected as a separate line item
in the accompanying Balance Sheets.
Revenue
Recognition
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.
Advertising
Costs
The
Company expenses the cost of advertising and promotions as incurred. Advertising and promotions expense was $111,416 and $11,571
for the years ended December 31, 2017 and 2016, respectively.
Basic
and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive securities. For 2017 and 2016, potential dilutive
securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Stock-Based
Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer an alternative. Stock and stock options issued
for services and compensation totaled $2,744,884 and $431,500 for the years ended December 31, 2017 and 2016, respectively.
Income
Taxes
PNTV
recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and
liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered.
PNTV provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more
likely than not.
Uncertain
Tax Positions
In
accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing
authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These
standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition.
Various
taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s
tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.
In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established,
is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The
assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with
the Company’s various filing positions.
Various
taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s
tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.
In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established,
is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The
assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with
the Company’s various filing positions.
Recent
Accounting Pronouncements
In
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 year ended December 31, 2017, have had or are expected to
have a significant impact on the Company’s financial statements.
Results
of Operations
Years
Ended December 31, 2017 and 2016:
|
|
For
the Years Ended
|
|
|
|
|
|
|
December
31,
|
|
|
Increase
/
|
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
87,913
|
|
|
$
|
135,234
|
|
|
$
|
(47,321
|
)
|
Cost
of Goods Sold
|
|
|
60,816
|
|
|
|
-
|
|
|
|
60,816
|
|
Gross
Profit
|
|
|
27,097
|
|
|
|
135,234
|
|
|
|
(108,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
Operating Costs
|
|
|
499,799
|
|
|
|
145,324
|
|
|
|
354,475
|
|
General
and Administrative
|
|
|
3,941,394
|
|
|
|
1,078,409
|
|
|
|
2,862,985
|
|
Officer
Salaries
|
|
|
650,786
|
|
|
|
175,673
|
|
|
|
475,113
|
|
Depreciation
and Amortization
|
|
|
71,920
|
|
|
|
24,084
|
|
|
|
47,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
5,163,899
|
|
|
|
1,423,490
|
|
|
|
3,740,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Operating (Loss)
|
|
|
(5,136,802
|
)
|
|
|
(1,288,256
|
)
|
|
|
3,848,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other Income (Expense)
|
|
|
(8,946,081
|
)
|
|
|
(475,552
|
)
|
|
|
8,470,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(14,082,883
|
)
|
|
$
|
(1,763,808
|
)
|
|
$
|
12,319,075
|
|
Revenues:
During
the years ended December 31, 2017 and 2016, we received revenues from the sale of cannabis products, in-home media, advertising
fees and the recognition of deferred revenues on content development. Aggregate revenues for the year ended December 31, 2017
were $87,913, compared to revenues of $135,234 in the year ended December 31, 2016, a decrease in revenues of $47,321, or 35%.
During the year ended December 31, 2017, our sales consisted of $70,165 from 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, and $17,748 from advertising fees. We launched the second phase of construction at our growing facility in the
first quarter of 2018, and have begun to grow our first crop. Our revenues decreased primarily due to the absence of the recognition
of a total of $135,000 from deferred revenues on pilot videos and a series of webisodes recognized in the prior year.
Cost
of Goods Sold
Cost
of sales for the year ended December 31, 2017 were $60,816, compared to $-0- during the year ended December 31, 2016, an increase
of $60,816. Cost of sales consists primarily of labor, depreciation and maintenance on cultivation and production equipment, in
addition to raw materials sold and consumed in our cultivation and production operations. The increased cost of sales in the current
period was due to the commencement of operations in the current year. Our gross margins were approximately 31%. We expect gross
margins to increase along with revenues as we realize efficiencies and economies of scale and increase our pricing as demand continues
to increase with the legalization of recreational cannabis in Nevada.
Direct
Operating Costs:
Direct
operating costs were $499,799 for the year ended December 31, 2017, compared to $145,324 for the year ended December 31, 2016,
an increase of $354,475, or 244%. Our direct operating costs increased primarily due to the launch of WeedTV.
General
and Administrative:
General
and administrative expenses were $3,941,394 for the year ended December 31, 2017, compared to $1,078,409 for the year ended December
31, 2016, an increase of $2,862,985, or 265%. General and administrative expense increased primarily due to the issuance of stock
and options resulting in $2,319,498 of stock-based compensation as we significantly ramped up efforts to get our cannabis facility
operational and launch WeedTV during the year ended December 31, 2017.
Officer
Salaries:
Officer
salaries expense totaled $650,786 for the year ended December 31, 2017, compared to $175,673 for the year ended December 31, 2016,
an increase of $475,113, or 270%. The increase in officer salaries was primarily due to non-cash, stock based compensation bonuses
issued to our officers during the year ended December 31, 2017, consisting of a total of 2,657,091 shares of common stock with
a fair value of $114,260, and common stock options valued at $425,386 that were not present during the comparative year ended
December 31, 2016.
Depreciation
and Amortization:
Depreciation
and amortization expense was $71,920 for the year ended December 31, 2017, compared to $24,084 for the year ended December 31,
2016, an increase of $47,836, or 199%. The increase in depreciation and amortization was primarily due to placing our leasehold
improvements and other equipment purchases into service during 2017. We expect depreciation and amortization to increase in 2018,
as we place additional fixed asset additions in service and our construction in process is completed.
Net
Operating Loss:
Net
operating loss for the year ended December 31, 2017 was $5,136,802, or ($0.01) per share compared to a net operating loss of $1,288,256,
or ($0.00) per share for the year ended December 31, 2016, an increase of $3,848,546, or 299%. Net 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 year ended December 31, 2017.
Other
Income (Expense):
Other
expense, on a net basis, was $8,946,081 for the year ended December 31, 2017, compared to other expense, on a net basis, of $475,552
for the year ended December 31, 2016, an increase of $8,470,529, or 1,781%. Other expense increased on a net basis primarily due
to the increased loss on derivative liability of $7,362,617, or 3,180%, and by a decreased gain on debt extinguishment of $228,256,
and increased interest expense on debt financing of $1,014,895, or 248%, as diminished by a $135,239 of other income, consisting
primarily of a settlement gain, net of legal fees, during the year ended December 31, 2017, compared to the year ended December
31, 2016.
Net
Loss:
The
net loss for the year ended December 31, 2017 was $14,082,883, or ($0.03) per share, compared to a net loss of $1,763,808, or
($0.00) per share, for the year ended December 31, 2016, an increased net loss of $12,319,075, or 698%. 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 and losses on derivative costs associated with debt financing costs as we financed those efforts.
Liquidity
and Capital Resources
The
following table summarizes total assets, accumulated deficit, stockholders’ equity and working capital at December 31, 2017
compared to December 31, 2016.
|
|
December
31,
|
|
|
December
31,
|
|
|
Increase
/
|
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,209,773
|
|
|
$
|
498,617
|
|
|
$
|
711,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
$
|
11,860,997
|
|
|
$
|
1,401,644
|
|
|
$
|
10,459,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
(Deficit)
|
|
$
|
(44,597,401
|
)
|
|
$
|
(30,639,417
|
)
|
|
$
|
13,957,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity (Deficit)
|
|
$
|
(10,651,224
|
)
|
|
$
|
(903,027
|
)
|
|
$
|
9,748,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
Capital (Deficit)
|
|
$
|
(11,456,491
|
)
|
|
$
|
(1,131,646
|
)
|
|
$
|
10,324,845
|
|
Sources
and Uses of Cash
Our
principal source of operating capital has been provided from debt financing, including in a reduced capacity, convertible debt
financing, private sales of our common stock, and revenues from operations. At December 31, 2017, we had a negative
working capital position of $(11,456,491). As we continue the shift in our business focus and attempt to expand operational activities,
we expect to continue to experience net negative cash flows from operations in amounts not now determinable, and will be required
to obtain additional financing to fund operations through debt borrowings and common stock offerings to the extent necessary to
provide working capital. We have and expect to continue to have substantial capital expenditure and working capital needs. We
do not now have funds sufficient to fund our operations at their current level for the next twelve months. We need to raise additional
cash to fund our operations and implement our business plan. We expect that the additional financing will (if available) take
the form of debt financing, although we may be able to obtain additional equity financing in lieu thereof. We are maintaining
an on-going effort to locate sources of additional funding, without which we will not be able to remain a viable entity. If we
are able to obtain the financing required to remain in business, eventually achieving operating profits will require substantially
increasing revenues or drastically reducing expenses from their current levels, or both. If we are able to obtain the required
financing to remain in business, future operating results depend upon a number of factors that are outside of our control.
Debt
Instruments, Guarantees, and Related Covenants
Kodiak
Equity Purchase Agreement
On
August 14, 2017, we entered into an Equity Purchase Agreement and a Registration Rights Agreement with Kodiak Capital Group, LLC,
and issued Kodiak a Common Stock Purchase Warrant under which Kodiak may purchase up to 37,500,000 shares of our common stock.
Pursuant
to the Purchase Agreement, as amended on January 5, 2018, subject to the filing of the registration statement which includes this
prospectus and it becoming effective under the Securities Act of 1933, Kodiak has committed to purchase up to 37,500,000 shares
of common stock upon delivery by us to Kodiak of “Put Notices” from time to time, at a price equal to the greater
of (i) $0.14 per share and (ii) 80% of the lowest daily volume weighted average price of our common stock during the three trading
days following the delivery of the applicable Put Notice (the “VWAP Price”), but in no event at a price greater than
$0.50 per share. Notwithstanding the foregoing, Kodiak will not be required to purchase common stock under a Put Notice if the
VWAP Price during the applicable valuation period is less than $0.14 per share, unless otherwise agreed to by Kodiak and us. Kodiak’s
commitment to purchase common stock under the Purchase Agreement will terminate on March 31, 2019. The Purchase Agreement also
provides that Kodiak shall not be required to purchase common stock to the extent that following such purchase, Kodiak would beneficially
own in excess of 9.99% of the outstanding shares of common stock.
We
issued to Kodiak and its designee an aggregate of 500,000 shares of common stock upon the execution of the Purchase Agreement
in consideration for Kodiak’s commitment to purchase shares of common stock thereunder. In accordance with the terms of
the Registration Rights Agreement, we agreed to prepare and file the registration statement that includes this prospectus with
the Securities and Exchange Commission covering the 400,000 shares of common stock we issued to Kodiak upon the execution of the
Purchase Agreement and the shares of common stock that may be purchased by Kodiak under the Purchase Agreement.
In
connection with the Purchase Agreement, we issued Kodiak the warrant, which is exercisable for a three-year period and has an
initial exercise price that will be equal to 140% of the initial purchase price paid by Kodiak under the Purchase Agreement. The
warrant restricts Kodiak from exercising the warrant to the extent that following such exercise, Kodiak would either beneficially
own in excess of 4.99% of the outstanding shares of common stock or together with shares issuable under the Purchase Agreement
would beneficially own in excess of 9.99% of the outstanding shares of common stock.
Debt
Financing
On
December 15, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that
carries a 10% interest rate with a face value of $122,400 (“Third Group Ten Note”), which matures on December 15,
2018. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal
to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen
(15) trading days preceding the conversion date.
On
November 7, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note with
a face value of $122,400 (“First Group Ten Note”), which matures on November 7, 2018. The principal and interest is
convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the
average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding
the conversion date.
On
October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that carries
an 8% interest rate with a face value of $76,500 (“First Fourth Man Note”), which matures on October 27, 2018. The
principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy
five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading days preceding
the conversion date.
On
October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that carries
an 8% interest rate with a face value of $76,500 (“First Emunah Note”), which matures on October 27, 2018. The principal
and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five
percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading days preceding the
conversion date.
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. Pursuant to the terms of the Warrant and the Note, as a result of a subsequent sale of our securities
below the exercise price of the Warrants, each Investor’s Warrant is now exercisable to purchase 2,800,000 shares of common
stock at a purchase price of $0.075 per share, and each Note is convertible into shares of common stock at a conversion price
of $0.075 per share.
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 year ended December 31, 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 year ended December 31, 2017, the Company granted a total of $2,744,884
of stock-based compensation, consisting of 7,657,091 shares of common stock valued at $200,760, and options valued at $1,252,411,
as bonuses to our officers and directors, as well as an aggregate 10,785,000 shares of common stock valued at $966,279, and options
valued at $325,434, to other service providers, compared to a total of $37,900,000 shares of common stock and 6,250,000 shares
of preferred stock valued at an aggregate of $431,500 in lieu of cash payments to employees and outside consultants during the
year ended December 31, 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 2018.
Satisfaction
of Our Cash Obligations for the Next 12 Months
As
of December 31, 2017, our cash on hand was $65,840. We believe we cannot satisfy our cash requirements for the next twelve months
with our current cash on hand. Our operations are subject to attaining adequate financing. We cannot assure investors that adequate
financing will be available. In the absence of such financing, we may be unable to proceed with our operations.
We
anticipate that our operational, and general & administrative expenses for the next 12 months will total approximately $3,000,000,
of which we expect a portion will be satisfied with the issuance of stock based compensation in lieu of cash. We anticipate the
purchase of a significant amount of equipment necessary to implement our medical marijuana operations. Should we be able to commence
operations pursuant to our plans to enter into the medical marijuana business, we will also need to either, purchase or lease,
a warehouse facility to produce marijuana pursuant to the license we were awarded by the City of North Las Vegas. We also would
expect a significant addition to the number of employees. We have not yet begun to develop a facility to commence our medical
marijuana operations, and are not now in a position to determine an approximate amount that would be necessary. The foregoing
represents our best estimate of our cash needs based on current planning and business conditions. The exact allocation, purposes
and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds
raised and our progress with the execution of our planned operations. Our plan for satisfying our cash requirements for the next
twelve months, in addition to our revenues from our Enterprise Technology Platform, is through convertible debt financing, the
sale of shares of our common stock, third party financing, and/or traditional debt financing. We may continue to pay for services
with shares of common stock in lieu of cash if financing is unavailable.
In
the event we are not successful in obtaining financing, we may not be able to proceed with our business plan for the commercialization
of our products and further research and development of new products. We anticipate that we will incur operating losses in the
foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Off-Balance
Sheet Arrangements
As
of December 31, 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.
DESCRIPTION
OF OUR BUSINESS
Players
Network was incorporated in the State of Nevada in March of 1993. We are 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 our majority-owned subsidiary, Green Leaf Farms Holdings LLC,
in which we hold an 85.4% interest. Green Leaf commenced operations on May 31, 2017. We also distribute content relating to the
cannabis industry at WeedTV.com.
Green
Leaf Cannabis Business Overview
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. The sale of cannabis in Nevada for medical purposes has been legal since 2015, and on July
1, 2017, the recreational use of cannabis became legal in the State of Nevada.
It
is estimated that there are approximately 43,000 Nevada State issued medical marijuana cardholders. Nevada also 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 were 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 Nevada’s adult recreational
marijuana market.
Green
Leaf offers 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 derived from in-house cannabis production
|
●
|
High
quality cannabis strains in the form of vegetative cuttings for sale to licensed medical cannabis cultivators in Nevada
|
Media
Content Distribution; Weed TV
Historically,
we have distributed video and other media content over cable television channels and a wide variety of internet enabled devices,
focusing primarily on the gaming industry and Las Vegas lifestyle. Our current media operations are focused on our recently launched
Web site WeedTV.com, and its related social media presence.
Weed
TV is a source of informational entertainment, products and services for people who relate to the marijuana lifestyle and social
community. Weed TV content is currently available at
www.weedtv.com
. We plan to continuously add features and content to
Weed TV, including a directory of businesses that cater to the marijuana business, such as dispensaries, smoke shops, doctors,
financial institutions, manufacturers and more. WeedTV.com may generate revenues through advertising, cross selling with other
companies and premium membership subscriptions. We estimate our advertising market for Weed TV to be in excess of 70,000 businesses
and will continue to grow as more states legalize MME businesses. However, to date, we have generated only approximately $25,000
of revenue from Weed TV.
Market
Opportunity for Media Platform
The
digital revolution has rapidly changed the way consumers’ access television content. Instead of scheduled programming, video
can now be viewed “On Demand” through digital cable television and satellite networks, broadband internet, and by
downloading content to mobile and wireless devices such as smart phones and tablets.
Each
new network we create is expected to become an integrated channel destination that will include VOD television and a social community
to complete and complement a vertical distribution and marketing strategy. Each network is expected to command a new audience
and generate advertisement revenues tied to the amount of monthly viewers. We plan on integrating our website destinations with
social media elements in order to create communities and increase memberships.
Media
Distribution
We
intend to heavily market and cross-promote Weed TV and are actively exploring additional relationships through social media networks.
We also intend to use our website to develop cannabis communities, then offer the members of these communities live video events,
information services, discounts, travel, internet based commerce, etc., as well as instant messaging, chat, comments, reviews
and perspectives from consumers on a variety of topical subjects.
Content/Programming
The
development of our programming is led by Michael Berk, a successful Hollywood television producer. Michael Berk has created over
500 hours of network television that includes five television series. Mr. Berk is best known for his series “Baywatch”,
for which he was the Executive Producer for twelve years. Baywatch is distributed in 144 countries and is in the Guinness Book
of World Records as the most watched television show in history.
Our
Weed TV brand recently began developing original content as well as acquiring the rights to other marijuana related programming
that includes documentaries, cooking shows, concerts, travel shows, growing shows, medical shows, political shows, financial shows
and more. We have produced an aggregated of over 450 original short video segments to feature documentaries that we own or have
rebroadcast rights for.
Competition
Cannabis
Green
Leaf’s cannabis business is subject to intense and increasing competition. Some of our competitors have substantially greater
capital resources, facilities and infrastructure then we have, which enable them to compete more effectively in this market. These
competitors include subsidiaries of TerraTech Corp., which is a public company, and numerous other local businesses engaged in
the cultivation and production of cannabis, and the operation of dispensary facilities in Nevada. Numerous companies not currently
operating were also granted MME licenses, and, therefore, we anticipate that Green Leaf will face competition with these other
companies especially those with locations near Green Leaf’s facilities.
Media
Weed
TV faces intense competition from a variety of other companies. In addition to other Web sites that provide content focused on
the cannabis industry, we face competition from other media businesses, as well as other media, such as newspapers, magazines,
television, direct mail, mobile devices, satellite radio, Internet-based services and live entertainment. Our competitors may
develop technology, services or advertising media that are equal or superior to those we provide or that achieve greater market
acceptance and brand recognition than we achieve.
Intellectual
Property
We
have a library of over 1,800 gaming and cannabis lifestyle videos. We own the intellectual property rights in the programming
and content that we produce. Moreover, the slogans, “WeedTV.com”, “Everybody wants to be a player” and
“The only game in town” are trademarks we have registered with the United States Patent and Trademark Office (the
“PTO”). “Players Network” is also a registered trademark with the PTO.
Governmental
Approval and Regulation
Cannabis
Business
As
of December 2017, 29 states and the District of Columbia have passed legislation legalizing medicinal cannabis, and eight of those
states and the District of Columbia have legalized the recreational use of cannabis. These state laws are in direct conflict with
the United States Federal Controlled Substances Act, under which cannabis is classified as a Schedule I drug, which is viewed
as having a high potential for abuse, with no currently-accepted use for medical treatment in the U.S. State laws vary, but generally
exempt patients who use medicinal cannabis under a physician’s supervision from state criminal penalties.
The
conflict between federal and state laws has also limited the access to banking and other financial services by marijuana businesses.
Recently the U.S. Department of Justice and the U.S. Department of Treasury issued guidance for banks considering conducting business
with marijuana dispensaries in states where those businesses are legal, pursuant to which banks must now file a Marijuana Limited
Suspicious Activity Report that states the marijuana business is following the government’s guidelines with regard to revenue
that is generated exclusively from legal sales. However, since the same guidance noted that banks could still face prosecution
if they provide financial services to marijuana businesses, it has led to the widespread refusal of the banking industry to offer
banking services to marijuana businesses operating within state and local laws.
On
August 29, 2013, United States Deputy Attorney General James Cole issued the Cole Memo to United States Attorneys guiding them
to prioritize enforcement of Federal law away from the cannabis industry operating as permitted under state law, so long as:
●
|
cannabis
is not being distributed to minors and dispensaries are not located around schools and public buildings;
|
●
|
the
proceeds from sales are not going to gangs, cartels or criminal enterprises;
|
●
|
cannabis
grown in states where it is legal is not being diverted to other states;
|
●
|
cannabis-related
businesses are not being used as a cover for sales of other illegal drugs or illegal activity;
|
●
|
there
is not any violence or use of fire-arms in the cultivation and sale of marijuana;
|
●
|
there
is strict enforcement of drugged-driving laws and adequate prevention of adverse health consequences; and
|
●
|
cannabis
is not grown, used, or possessed on Federal properties.
|
The
Cole Memo was meant only as a guide for United States Attorneys and did not alter in any way the Department of Justice’s
Federal authority to enforce Federal law, including Federal laws relating to cannabis, regardless of state law.
On
January 4, 2018, United States Attorney General Jefferson Sessions issued a Memorandum to United States Attorneys rescinding the
Cole Memo, stating that prosecutors should follow well-established principles in effect prior to the issuance of the Cole Memo
that govern all federal prosecutions in deciding which activities to prosecute under existing federal laws. The federal government’s
enforcement of current federal laws could cause significant financial damage to us.
Media
Business
We
do not believe that any governmental approvals are required to distribute our media products or services. The Communications Act
of 1934, as amended by the Cable Communications Policy Act of 1984, the Cable Television Consumer Protection and Competition Act
of 1992 and the Telecommunications Act of 1996, govern the distribution of video programming by cable, satellite or over-the-air
technology, through regulation by the Federal Communications Commission (“FCC”). However, because our media distribution
systems do not use any public rights of way, they are not classified as cable systems and are subject to minimal regulation. Thus,
the FCC does not directly regulate our programming.
Although
the FCC generally does not directly regulate the services provided by us, the regulation of media distribution and communications
services is subject to the political process and has been in constant flux over the past decade. Further material changes in the
law and regulatory requirements must be anticipated and there can be no assurance that our business will not be adversely affected
by future legislation or new regulations.
Employees
We
currently have 2 full-time employees: our chief executive officer, Mark Bradley, and our chief financial officer Geoffrey Lawrence.
In addition, we currently have engaged approximately 20 outside consultants to cover needed support such as business affairs,
programming and technology design, cultivation and deployment supported by independent contractors on an as needed basis.
DESCRIPTION
OF PROPERTY
Our
executive offices are located at 1771 E. Flamingo Road, #201-A, Las Vegas, Nevada 89119. Our office space consists of approximately
2,800 square feet leased pursuant to a three-year lease that expired on August 31, 2016, and is now on a month-to-month basis
at a monthly payment of $3,191.
We
also leased a commercial building that originated on April 17, 2016 for our medical marijuana production and cultivation business
in North Las Vegas. The five-year operating lease expires on April 16, 2021 and is renewable for another five year term, required
a $50,000 security deposit and includes an option to purchase the building for $3.8 million during the third, fourth and fifth
years of the lease. The lease provides for increases in future minimum annual rental payments based on defined annual increases
beginning with monthly payments of $26,786 and culminating in a monthly payment of $30,148 in 2021.
These
properties are in good condition, well maintained and adequate for our current and immediately foreseeable operating needs.
LEGAL
PROCEEDINGS
Michael
Pratter
On
November 3, 2016, Michael S. Pratter commenced an action in the Eighth Judicial District Court, Clark County, Nevada, against
Players Network, Green Leaf Farms Holdings, and our Chief Executive Officer. In his complaint, Pratter asserts several causes
of action, including for breach of contract and fraud, relating to his claim that he provided consulting services to us for which
he was not fully paid. We are defending ourselves vigorously in this matter and believe that Pratter’s claims are without
merit, and that in fact we over-paid Pratter. In November 2017 we filed a Counterclaim against Mr. Pratter in this proceeding
in which we asserted ten causes of action, which relate in part to Mr. Pratter’s representations that he would provide us
with legal services when in fact he was not licensed to practice law in the State of Nevada and had been disbarred by the California
State Bar. Among other relief, our Counterclaim seeks disgorgement of all amounts paid to Mr. Pratter during his engagement by
us, including the return of 1.5 million shares of our Common Stock we had issued to him. Previously, in August 2017, following
our motion and our posting of treasury shares with the Clerk of the Court as security, the Court approved our application for
a temporary restraining order and preliminary injunction under which Mr. Pratter is prohibited from transferring the 1.5 million
shares of Common Stock we had issued to him, until further order of the Court.
LG
Capital Funding
We
are a defendant in case pending in the Supreme Court of the State of New York, Kings County, that was commenced by LG Capital
Funding LLC, in February 2015, in which LG Capital asserts that we are in default of our obligations to honor its conversion rights
under a $35,000 promissory note, due to a typographical error in the note. LG Capital seeks declaratory relief as to conversion
formula under the promissory note and monetary damages in the amount of principal and accrued interest under the promissory note.
This case is currently in the preliminary discovery stages. We believe LG Funding’s claims are without merit.
Index
to Consolidated Financial Statements
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Players Network
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Players Network (the Company) as of December 31, 2017 and 2016, and
the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the
two-year period ended December 31, 2017, and the related notes and schedules (collectively referred to as the financial statements).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period
ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the consolidated financial statements, the Company suffered a net loss from operations and has a net
capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans
regarding those matters are described in Note 2. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/
M&K CPAS, PLLC
We
have served as the Company’s auditor since 2010.
Houston,
Texas
April
17, 2018
PLAYERS
NETWORK
CONSOLIDATED
BALANCE SHEETS
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
65,840
|
|
|
$
|
145,119
|
|
Other
current assets
|
|
|
83,180
|
|
|
|
85,150
|
|
Inventory
|
|
|
255,486
|
|
|
|
-
|
|
Total
current assets
|
|
|
404,506
|
|
|
|
230,269
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
396,455
|
|
|
|
29,128
|
|
Construction
in progress
|
|
|
408,812
|
|
|
|
239,220
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
1,209,773
|
|
|
$
|
498,617
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
702,865
|
|
|
$
|
298,861
|
|
Accrued
expenses
|
|
|
448,538
|
|
|
|
293,418
|
|
Deferred
rent obligations
|
|
|
28,809
|
|
|
|
15,656
|
|
Settlements
payable
|
|
|
-
|
|
|
|
70,000
|
|
Convertible
debentures, net of discounts of $790,621 and $241,634 at December 31, 2017 and 2016, respectively
|
|
|
374,679
|
|
|
|
58,366
|
|
Short
term debt, net of discounts of $432,190 and $60 at December 31, 2017 and 2016, respectively
|
|
|
775,810
|
|
|
|
142,940
|
|
Derivative
liabilities
|
|
|
9,530,296
|
|
|
|
482,674
|
|
Total
current liabilities
|
|
|
11,860,997
|
|
|
|
1,361,915
|
|
|
|
|
|
|
|
|
|
|
Long
term debt, net of discounts of $-0- and $885,271 at December 31, 2017 and 2016, respectively
|
|
|
-
|
|
|
|
39,729
|
|
Total
Liabilities
|
|
|
11,860,997
|
|
|
|
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; 580,716,669 and 524,394,239 shares issued and outstanding at December
31, 2017 and 2016, respectively
|
|
|
580,717
|
|
|
|
524,394
|
|
Additional
paid-in capital
|
|
|
33,753,106
|
|
|
|
29,463,343
|
|
Subscriptions
payable, consisting of -0- and 1,000,000 shares at December 31, 2017 and 2016, respectively
|
|
|
-
|
|
|
|
11,400
|
|
Accumulated
(deficit)
|
|
|
(44,597,401
|
)
|
|
|
(30,639,417
|
)
|
|
|
|
(10,249,578
|
)
|
|
|
(626,280
|
)
|
Noncontrolling
Interest
|
|
|
(401,646
|
)
|
|
|
(276,747
|
)
|
Total
Stockholders’ (Deficit)
|
|
|
(10,651,224
|
)
|
|
|
(903,027
|
)
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ (Deficit)
|
|
$
|
1,209,773
|
|
|
$
|
498,617
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
PLAYERS
NETWORK
STATEMENTS
OF OPERATIONS
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Revenue:
|
|
$
|
87,913
|
|
|
$
|
135,234
|
|
Cost
of goods sold
|
|
|
60,816
|
|
|
|
-
|
|
Gross
profit
|
|
|
27,097
|
|
|
|
135,234
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Direct
operating costs
|
|
|
499,799
|
|
|
|
145,324
|
|
General
and administrative
|
|
|
3,941,394
|
|
|
|
1,078,409
|
|
Officer
salaries
|
|
|
650,786
|
|
|
|
175,673
|
|
Depreciation
and amortization
|
|
|
71,920
|
|
|
|
24,084
|
|
Total
operating expenses
|
|
|
5,163,899
|
|
|
|
1,423,490
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(5,136,802
|
)
|
|
|
(1,288,256
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
135,239
|
|
|
|
-
|
|
Gain
(loss) on debt extinguishment, net
|
|
|
(62,641
|
)
|
|
|
165,615
|
|
Interest
expense, net
|
|
|
(1,424,543
|
)
|
|
|
(409,648
|
)
|
Change
in derivative liabilities
|
|
|
(7,594,136
|
)
|
|
|
(231,519
|
)
|
Total
other income (expense)
|
|
|
(8,946,081
|
)
|
|
|
(475,552
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(14,082,883
|
)
|
|
$
|
(1,763,808
|
)
|
Less:
Net loss attributable to the noncontrolling interest
|
|
|
124,899
|
|
|
|
61,998
|
|
Net
loss attributable to Players Network
|
|
$
|
(13,957,984
|
)
|
|
$
|
(1,701,810
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and fully diluted
|
|
|
558,393,739
|
|
|
|
428,311,253
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and fully diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.00
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
PLAYERS
NETWORK
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Series
A
|
|
|
Series
C
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
|
|
|
|
Preferred
Stock
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Subscriptions
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Payable
|
|
|
(Deficit)
|
|
|
Interest
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2015
|
|
|
2,000,000
|
|
|
$
|
2,000
|
|
|
|
5,750,000
|
|
|
$
|
5,750
|
|
|
|
351,827,400
|
|
|
$
|
351,827
|
|
|
$
|
26,703,900
|
|
|
$
|
-
|
|
|
$
|
(28,937,607
|
)
|
|
$
|
(214,749
|
)
|
|
$
|
(2,088,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,250,000
|
|
|
|
56,250
|
|
|
|
242,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
298,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,500,000
|
|
|
|
8,500
|
|
|
|
72,600
|
|
|
|
11,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
92,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services, related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
6,250,000
|
|
|
|
6,250
|
|
|
|
29,400,000
|
|
|
|
29,400
|
|
|
|
303,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
339,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for conversion of debts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,416,839
|
|
|
|
78,417
|
|
|
|
142,769
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
221,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
capital, debt settlement payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for debt financing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
931,996
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
931,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to derivative liability due to debt conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,052,128
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,052,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,701,810
|
)
|
|
|
(61,998
|
)
|
|
|
(1,763,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
|
2,000,000
|
|
|
$
|
2,000
|
|
|
|
12,000,000
|
|
|
$
|
12,000
|
|
|
|
524,394,239
|
|
|
$
|
524,394
|
|
|
$
|
29,463,343
|
|
|
$
|
11,400
|
|
|
$
|
(30,639,417
|
)
|
|
$
|
(276,747
|
)
|
|
$
|
(903,027
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,583,333
|
|
|
|
7,583
|
|
|
|
800,417
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
808,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash, warrant exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
171,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,000,000
|
|
|
|
14,000
|
|
|
|
336,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,790,435
|
|
|
|
15,791
|
|
|
|
961,888
|
|
|
|
(11,400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
966,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services, related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,657,091
|
|
|
|
7,657
|
|
|
|
193,103
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
awarded for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
325,434
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
325,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
awarded for services, related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,252,411
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,252,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for conversion of debts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,291,571
|
|
|
|
7,292
|
|
|
|
309,832
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
317,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to derivative liability due to debt conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(60,322
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(60,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,957,984
|
)
|
|
|
(124,899
|
)
|
|
|
(14,082,883
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
|
|
2,000,000
|
|
|
$
|
2,000
|
|
|
|
12,000,000
|
|
|
$
|
12,000
|
|
|
|
580,716,669
|
|
|
$
|
580,717
|
|
|
$
|
33,753,106
|
|
|
$
|
-
|
|
|
$
|
(44,597,401
|
)
|
|
$
|
(401,646
|
)
|
|
$
|
(10,651,224
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
PLAYERS
NETWORK
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(13,957,984
|
)
|
|
$
|
(1,701,810
|
)
|
Minority
interest in net loss
|
|
|
(124,899
|
)
|
|
|
(61,998
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expense
|
|
|
71,920
|
|
|
|
24,084
|
|
(Gain)
loss on debt extinguishment, net
|
|
|
62,641
|
|
|
|
(161,343
|
)
|
Change
in fair market value of derivative liabilities
|
|
|
7,594,136
|
|
|
|
231,519
|
|
Amortization
of debt discounts
|
|
|
1,318,977
|
|
|
|
357,612
|
|
Stock
issued for services
|
|
|
966,279
|
|
|
|
92,500
|
|
Stock
issued for compensation, related party
|
|
|
200,760
|
|
|
|
339,000
|
|
Options
issued for services
|
|
|
325,434
|
|
|
|
-
|
|
Options
issued for services, related parties
|
|
|
1,252,411
|
|
|
|
-
|
|
Decrease
(increase) in assets:
|
|
|
|
|
|
|
|
|
Deferred
television costs
|
|
|
-
|
|
|
|
116,454
|
|
Other
current assets
|
|
|
1,970
|
|
|
|
(84,525
|
)
|
Inventory
|
|
|
(255,486
|
)
|
|
|
-
|
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Checks
drawn in excess of available funds
|
|
|
-
|
|
|
|
(2,154
|
)
|
Accounts
payable
|
|
|
404,004
|
|
|
|
(45,546
|
)
|
Accrued
expenses
|
|
|
162,244
|
|
|
|
96,972
|
|
Deferred
revenue
|
|
|
-
|
|
|
|
(135,000
|
)
|
Deferred
rent obligations
|
|
|
13,153
|
|
|
|
13,508
|
|
Settlements
payable
|
|
|
(30,000
|
)
|
|
|
(203,810
|
)
|
Net
cash used in operating activities
|
|
|
(1,994,440
|
)
|
|
|
(1,124,537
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets and construction in progress
|
|
|
(608,839
|
)
|
|
|
(251,304
|
)
|
Net
cash used in investing activities
|
|
|
(608,839
|
)
|
|
|
(251,304
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from convertible debentures
|
|
|
986,000
|
|
|
|
265,000
|
|
Repayment
of convertible debentures
|
|
|
-
|
|
|
|
(80,890
|
)
|
Proceeds
from short term debt
|
|
|
215,000
|
|
|
|
1,088,000
|
|
Repayment
of short term debt
|
|
|
(10,000
|
)
|
|
|
(50,000
|
)
|
Proceeds
from sale of common stock
|
|
|
1,333,000
|
|
|
|
298,850
|
|
Net
cash provided by financing activities
|
|
|
2,524,000
|
|
|
|
1,520,960
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(79,279
|
)
|
|
|
145,119
|
|
Cash
- beginning
|
|
|
145,119
|
|
|
|
-
|
|
Cash
- ending
|
|
$
|
65,840
|
|
|
$
|
145,119
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
1,004,335
|
|
|
$
|
257,379
|
|
Value
of shares issued for conversion of debt
|
|
$
|
317,124
|
|
|
$
|
221,186
|
|
Value
of warrants issued with short term debt
|
|
$
|
518,423
|
|
|
$
|
939,396
|
|
Value
of derivative adjustment due to debt conversions
|
|
$
|
60,322
|
|
|
$
|
1,052,128
|
|
Value
of shares issued for injunction
|
|
$
|
528,073
|
|
|
|
-
|
|
Advance
exchanged for promissory note
|
|
$
|
-
|
|
|
$
|
25,000
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1 – Nature of Business and Significant Accounting Policies
Nature
of Business
Players
Network (Stock Symbol: PNTV) was incorporated in the State of Nevada in March of 1993. 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.
Basis
of Accounting
Our
consolidated financial statements are prepared using the accrual method of accounting as generally accepted in the United States
of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC).
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control
and ownership:
|
|
State
of
|
|
|
|
Abbreviated
|
Name
of Entity
|
|
Incorporation
|
|
Relationship
|
|
Reference
|
|
|
|
|
|
|
|
Players
Network
(1)
|
|
Nevada
|
|
Parent
|
|
PNTV
|
Green
Leaf Farms Holdings, Inc.
(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 wholly-owned subsidiaries listed above. All significant
inter-company transactions have been eliminated in the preparation of these financial statements. The parent company, PNTV and
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.
These
statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary
for fair presentation of the information contained therein.
Segment
Reporting
Under
FASB ASC 280-10-50, the Company operates as a single segment and will evaluate additional segment disclosure requirements as it
expands its operations.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Fair
Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements
as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated
by management to approximate fair value primarily due to the short term nature of the instruments. In addition, the Company had
debt instruments that required fair value measurement on a recurring basis.
Cash
and Cash Equivalents
PNTV
maintains cash balances in non-interest-bearing transaction accounts, which do not currently exceed federally insured limits.
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less
are considered to be cash equivalents. There were no cash equivalents on hand at December 31, 2017 and 2016.
Allowance
for Doubtful Accounts
We
generate the majority of our revenues and corresponding accounts receivable from video production services on a project basis
and subscriptions for video content. We evaluate the collectability of our accounts receivable considering a combination of factors.
In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record
a specific reserve for bad debts against amounts due in order to reduce the net recognized receivable to the amount we reasonably
believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off experience and
the length of time the receivables are past due. We had no debts expense during the years ended December 31, 2017 and 2016, respectively.
Cost
Method of Accounting for Investments
Investee
companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method
of accounting. Under this method, the Company’s share of the earnings or losses of such Investee companies is not included
in the Balance Sheet or Statement of Operations. However, impairment charges are recognized in the Statement of Operations. If
circumstances suggest that the value of the Investee Company has subsequently recovered, such recovery is not recorded. Our investments
which are accounted for on the cost method of accounting have been completely impaired previously, and no impairment expense was
recognized during the years ended December 31, 2017 or 2016.
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.
Fixed
Assets
Fixed
assets are stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated
using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based on the
following life expectancy:
Software
|
3
years
|
Office
equipment and website development costs
|
5
years
|
Furniture
and fixtures
|
7
years
|
Repairs
and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which have extend the
useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are
retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss
is reflected in operations.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment
of Long-Lived Assets
Long-lived
assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon
historical results and current projections of earnings before interest and taxes. Impairment is measured using discounted cash
flows of future operating results based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating
results to the extent that carrying value exceeds discounted cash flows of future operations. The Company did not recognize any
impairment losses on the disposal of fixed assets during the years ended December 31, 2017 and 2016.
Construction
in Progress
The
Company is constructing a grow house in its leased facility, which became operational during the first quarter of 2018, at which
time depreciation commenced. The Company incurred and capitalized within Construction in Progress a total of $408,812 and $239,220,
respectively. The estimated cost to be incurred to complete construction of the grow house is approximately $1.7 million. The
construction will be completed in phases and the portion of the $1.7 million incurred after the facility is initially operational
will be capitalized separately as separate leasehold improvements, while the costs incurred to get the facility operational will
begin to be depreciated upon commencement of operations.
Deferred
Rent Obligation
The
Company has entered into operating lease agreements for its corporate office which contains provisions for future rent increases.
In accordance with generally accepted accounting principles, the Company records monthly rent expense equal to the total of the
payments due over the lease term, divided by the number of months of the lease terms. The difference between rent expense recorded
and the amount paid is credited or charged to “Deferred rent obligation,” which is reflected as a separate line item
in the accompanying Balance Sheets.
Revenue
Recognition
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.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Advertising
Costs
The
Company expenses the cost of advertising and promotions as incurred. Advertising and promotions expense was $111,416 and $11,571
for the years ended December 31, 2017 and 2016, respectively.
Basic
and Diluted Loss Per Share
The
basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive securities. For 2017 and 2016, potential dilutive
securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Stock-Based
Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer an alternative. Stock and stock options issued
for services and compensation totaled $2,744,884 and $431,500 for the years ended December 31, 2017 and 2016, respectively.
Income
Taxes
PNTV
recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and
liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered.
PNTV provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more
likely than not.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Uncertain
Tax Positions
In
accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing
authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These
standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition.
Various
taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s
tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.
In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established,
is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The
assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with
the Company’s various filing positions.
Various
taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s
tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.
In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established,
is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The
assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with
the Company’s various filing positions.
Recent
Accounting Pronouncements
In
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, a
n 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.
PLAYERS
NETWORK
NOTES
TO 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 year ended December 31, 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 consolidated financial statements, the Company has incurred recurring losses from operations resulting
in an accumulated deficit of ($44,597,401), and as of December 31, 2017, the Company’s current liabilities exceeded its
current assets by $11,456,491 and its total liabilities exceeded its total assets by $10,651,224. These factors raise substantial
doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new ventures to increase
revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management
believes these factors will contribute toward achieving profitability. The accompanying consolidated financial statements do not
include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The
consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Note
3 – Related Party
Officers
On
December 11, 2017, the Company issued 100,000 shares of common stock to its CFO as a bonus for services performed. The total fair
value of the common stock was $9,500 based on the closing price of the Company’s common stock on the date of grant.
On
October 1, 2017, pursuant to the CFO’s employment agreement, Mr. Lawrence earned $12,960 of compensation that was paid with
the issuance of 157,091 shares of common stock based on the closing stock price.
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.
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.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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
March 2, 2016, we issued a total of 6,250,000 shares of the Company’s series C preferred stock to Mark Bradley, the Company’s
Chief Executive Officer, in lieu of $18,750 of unpaid compensation pursuant to the terms of the new employment agreement. The
total fair value of the Series C shares was $192,000 based on an independent valuation on the date of grant, resulting in additional
compensation expense of $173,250.
On
September 2, 2016, the Company issued 20,400,000 shares of common stock to its CEO in satisfaction of unpaid compensation. The
total fair value of the common stock was $102,000 based on the closing price of the Company’s common stock on the date of
grant.
Officer
compensation expense was $650,786 and $175,673 at December 31, 2017 and 2016, respectively. The balance owed was $113,393 and
$31,343 at December 31, 2017 and 2016, respectively.
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.
On
September 2, 2016, the Company issued 3,000,000 shares of common stock to each of its three Directors for services performed.
The total fair value of the common stock was $45,000 based on the closing price of the Company’s common stock on the date
of grant.
Officer
and Director Changes
On
March 4, 2016, Mr. Brett Pojunis was appointed to the Company’s Board of Directors and Mr. Doug Miller resigned from the
Board.
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).
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 December 31, 2017 and 2016, respectively:
|
|
Fair
Value Measurements at December 31, 2017
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
65,840
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
assets
|
|
|
65,840
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
debentures, net of discounts of $790,621
|
|
|
-
|
|
|
|
-
|
|
|
|
374,679
|
|
Short
term debt, net of discounts of $432,190
|
|
|
-
|
|
|
|
775,810
|
|
|
|
-
|
|
Derivative
liability
|
|
|
-
|
|
|
|
-
|
|
|
|
4,016,985
|
|
Total
liabilities
|
|
|
-
|
|
|
|
775,810
|
|
|
|
4,391,664
|
|
|
|
$
|
65,840
|
|
|
$
|
(775,810
|
)
|
|
$
|
(4,391,664
|
)
|
|
|
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
|
|
|
-
|
|
|
|
142,940
|
|
|
|
580,769
|
|
|
|
$
|
145,119
|
|
|
$
|
(142,940
|
)
|
|
$
|
(580,769
|
)
|
There
were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years ended December 31, 2017
and 2016.
Level
2 liabilities consisted of a total of $1,208,000 and $143,000 of short term, unsecured, promissory notes, net of discounts of
$432,190 and $60 as of December 31, 2017 and 2016, respectively, along with $925,000 of long term debt, net of discounts of $885,271
as of December 31, 2016. No fair value adjustment was necessary years ended December 31, 2017 and 2016.
Level
3 liabilities consist of a total of $1,165,300 and $300,000 of convertible debentures, net of discounts of $790,621 and $241,634
as of December 31, 2017 and 2016, respectively, in addition to the related derivative liabilities of $4,016,985 and $482,674 at
December 31, 2017 and 2016, respectively.
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.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
6 – Other Current Assets
Other
current assets included the following as of December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Security
deposits
|
|
$
|
52,100
|
|
|
$
|
50,000
|
|
Prepaid
expenses
|
|
|
31,080
|
|
|
|
35,150
|
|
|
|
$
|
83,180
|
|
|
$
|
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:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Raw
materials
|
|
$
|
76,677
|
|
|
$
|
-
|
|
Finished
goods
|
|
|
178,809
|
|
|
|
-
|
|
|
|
$
|
255,486
|
|
|
$
|
-
|
|
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.
Note
8 – Fixed Assets and Construction in Progress
Fixed
assets consist of the following at December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Office
equipment
|
|
$
|
102,037
|
|
|
$
|
60,968
|
|
Website
development costs
|
|
|
99,880
|
|
|
|
99,880
|
|
Furniture
and fixtures
|
|
|
27,066
|
|
|
|
2,730
|
|
Leasehold
improvements
|
|
|
373,842
|
|
|
|
-
|
|
Total
|
|
|
602,825
|
|
|
|
163,578
|
|
Less
accumulated depreciation
|
|
|
(206,370
|
)
|
|
|
(134,450
|
)
|
Fixed
assets, net
|
|
$
|
396,455
|
|
|
$
|
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 $408,812 and $239,220 at December 31, 2017 and 2016, respectively.
Depreciation
and amortization expense totaled $71,920 and $24,084 for the years ended December 31, 2017 and 2016, respectively.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
9 – Accrued Expenses
Accrued
expenses included the following as of December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Accrued
payroll, officers
|
|
$
|
113,393
|
|
|
$
|
31,343
|
|
Accrued
payroll and payroll taxes
|
|
|
135,234
|
|
|
|
135,234
|
|
Accrued
interest
|
|
|
117,411
|
|
|
|
21,841
|
|
Advances
|
|
|
82,500
|
|
|
|
105,000
|
|
|
|
$
|
448,538
|
|
|
$
|
293,418
|
|
Note
10 – Settlements Payable
Settlements
payable consisted of $-0- and $70,000 owed to WHC Capital, LLC as of December 31, 2017 and 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 December 31, 2017, the Company had repaid the settlement, as specified in the agreement.
On
August 12, 2016, the Company entered into a settlement agreement to pay Vis Vires a total of $70,000 in four installments of $17,500
payable from August 6, 2016 through November 3, 2016 in satisfaction of the $64,000 of principal and all unpaid interest on the
convertible note originally entered into with Vis Vires on May 1, 2015. The settlement was satisfied in full as of November 22,
2016.
On
January 21, 2016, the Company entered into a settlement agreement with Tangiers Investment Group. Pursuant to the agreement, the
Company is obligated to repay a total of $80,000 in various monthly installments of between $6,000 and $20,000 from February 8,
2016 through June 26, 2016 in satisfaction of a total of approximately $85,820, consisting of $75,500 of principal and $10,320
of interest on the First and Second Tangiers Notes. The settlement was satisfied in full as of August 30, 2016.
On
January 4, 2016, the Company entered into a settlement agreement with JSJ Investments. Pursuant to the agreement, the Company
was obligated to repay a total of $70,000 in six monthly installments of approximately $11,667 from January 21, 2016 through June
21, 2016 in satisfaction of a total of approximately $82,564, consisting of $75,000 of principal and $7,564 of interest on the
First JSJ Note. The settlement was satisfied in full as of June 21, 2016.
Note
11 – Convertible Debentures
Convertible
debentures consist of the following at December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
On
December 15, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note
that carries a 10% interest rate with a face value of $122,400 (“Third Group Ten Note”), which matures on December
15, 2018. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a
price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common
stock over the fifteen (15) trading days preceding the conversion date. The note holder is limited to owning 4.99% of the
Company’s issued and outstanding shares. The Company paid total debt issuance costs of $2,400 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 30 million shares of common stock for potential conversions.
|
|
$
|
122,400
|
|
|
$
|
-
|
|
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
November 8, 2017, the Company amended the two notes with Black Mountain Equities, Inc.
(“First Black Mountain Note”) and Gemini Master Fund, Ltd. (“First
Gemini Note”). The amended notes extended the maturity dates to December 9, 2017,
increased the principal amount owed by $8,250 each, and established conversion features.
The principal and interest became convertible into shares of common stock at the discretion
of the note holder at a price equal to seventy percent (70%) of the lowest volume weighted
average price (“VWAP”) over the fifteen (15) trading days preceding the conversion
date, as limited to $40,000 of conversion during any 10 day trading period. The notes
were originally entered into on May 8, 2017, 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 December 11, 2017, each noteholder converted $40,000 of
principal in exchange for the issuance of 757,576 shares each. The note is currently
in default.
|
|
|
266,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
November 8, 2017, the Company issued a $200,000 promissory note (“Second Group Ten Note”) in exchange for the
debt acquired from Rxmm, as note below. The new note matures on November 8, 2018. The principal and interest is convertible
into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average
of the two lowest closing traded prices of the Company’s common stock over the ten (10) trading days preceding the conversion
date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company must at
all times reserve at least 50 million shares of common stock for potential conversions. On December 6, 2017, the noteholder
converted $50,000 of principal in exchange for the issuance of 908,760 shares.
|
|
|
150,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
November 7, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note with
a face value of $122,400 (“First Group Ten Note”), which matures on November 7, 2018. The principal and interest
is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%)
of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days
preceding the conversion date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares.
The Company paid total debt issuance costs of $2,400 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 50 million shares
of common stock for potential conversions.
|
|
|
122,400
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
November 8, 2017, provisions within two notes with Black Mountain Equities, Inc. (“Second Black Mountain Note”)
and Gemini Master Fund, Ltd. (“Second Gemini Note”) established conversion features. The principal and interest
became convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent
(75%) of the lowest traded price during the fifteen (15) trading days preceding the conversion date. The notes were originally
entered into 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
|
|
|
|
-
|
|
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that
carries an 8% interest rate with a face value of $76,500 (“First Fourth Man Note”), which matures on October 27,
2018. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price
equal to seventy five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading
days preceding the conversion date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding
shares. The Company paid total debt issuance costs of $3,500 that is being amortized over the life of the loan on the straight
line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares
of common stock for potential conversions.
|
|
|
76,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that
carries an 8% interest rate with a face value of $76,500 (“First Emunah Note”), which matures on October 27, 2018.
The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal
to seventy five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading
days preceding the conversion date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding
shares. The Company paid total debt issuance costs of $3,500 that is being amortized over the life of the loan on the straight
line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares
of common stock for potential conversions.
|
|
|
76,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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
would have received 50,000,000 callable warrants as a fee per the milestone schedule below, and would have been 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 would have reduced the principal until this debenture was 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 were callable if the stock averaged 200% of the warrant strike price for any
thirty (30) day trading period. The convertible debenture, bearing interest at 5% per
annum, would have mature 24 months after the full investment was realized, and was convertible
into common stock at a 25% discount to the preceding 30 day average closing stock price.
The Company was required at all times to have authorized and reserved the number of shares
that was actually issuable upon full conversion of the note. The Company had received
the following payments on the funding agreement:
$
25,000 – August 19, 2016
$
175,000 – August 15, 2016
The
$200,000 of debt was sold and assigned to Group 10 on November 8, 2017, at which time the note was exchanged for a new
note (Second Group 10 Note).
|
|
|
-
|
|
|
|
200,000
|
|
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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. On December 12, 2017, the noteholder converted $38,849,
consisting of $35,000 of principal and $3,849 of interest, in exchange for the issuance of 567,968 shares.
|
|
|
-
|
|
|
|
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
|
|
|
1,165,300
|
|
|
|
300,000
|
|
Less:
unamortized debt discounts
|
|
|
(790,621
|
)
|
|
|
(241,634
|
)
|
Convertible
debentures
|
|
$
|
374,679
|
|
|
$
|
58,366
|
|
In
accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $1,004,335 and $257,379
for the variable conversion features of the convertible debts incurred during the years ended December 31, 2017 and 2016, respectively.
The discounts, including Original Issue Discounts of $57,800 and $-0- during the years ended December 31, 2017 and 2016, respectively,
are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded
$437,439 and $357,612 of interest expense pursuant to the amortization of the note discounts during the years ended December 31,
2017 and 2016, respectively.
All
of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The
maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s
issued and outstanding shares.
In
accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued represented embedded
derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value
of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company recorded interest expense pursuant to the stated interest rates on the convertible debentures in the amount of $25,794
and $31,330 for the years ended December 31, 2017 and 2016, respectively related to convertible debts.
Note
12 – Short Term Debt
Short
term debt consists of the following at December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
On
December 28, 2017, the Company received net proceeds of $80,000 in exchange for an unsecured convertible promissory note that
carries a 5% interest rate with a face value of $90,000 (“First RDP Note”), which matured on February 26, 2018.
The Company is required to have fully paid all principal and accrued interest due and owing to SK L-58, LLC, the certain Promissory
Note dated September 19, 2017 in the principal amount of $50,000, as shown below. The note carries an eighteen percent (18%)
interest rate in the event of default. The Company paid total debt issuance cost of $10,000 that is being amortized over the
life of the loan on the straight line method, which approximates the effective interest method. In addition, the Note Holder
was awarded 10,000,000 warrants, exercisable at $0.03 per share over a period of four months, commencing on August 11, 2019.
The warrants are cancellable in exchange for $1 if this note and the SK L-58, LLC note dated September 19, 2017 are repaid
in full. This note is currently in default.
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
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
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.
|
|
|
-
|
|
|
|
-
|
|
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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
|
|
|
|
|
|
|
|
|
|
|
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 is in default and carries a default rate of 10% and remains outstanding.
|
|
|
143,000
|
|
|
|
143,000
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable
|
|
|
1,208,000
|
|
|
|
1,068,000
|
|
Less:
unamortized debt discounts
|
|
|
(432,190
|
)
|
|
|
(885,331
|
)
|
|
|
|
775,810
|
|
|
|
182,669
|
|
Less:
current maturities
|
|
|
(775,810
|
)
|
|
|
(142,940
|
)
|
Long
term debt
|
|
$
|
-
|
|
|
$
|
39,729
|
|
The
Company recorded $463,141 and $14,336 of interest expense pursuant to the amortization of the note discounts during the years
ended December 31, 2017 and 2016, respectively.
The
Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $77,100
and $12,131 during the years ended December 31, 2017 and 2016, respectively.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
following presents components of interest expense, net, by instrument type at December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Interest
on convertible debentures
|
|
$
|
25,794
|
|
|
$
|
31,330
|
|
Amortization
of debt discounts
|
|
|
1,318,977
|
|
|
|
357,612
|
|
Loss
on debt conversions
|
|
|
-
|
|
|
|
4,272
|
|
Interest
on short and long term debt
|
|
|
77,100
|
|
|
|
12,131
|
|
Accounts
payable related finance charges
|
|
|
2,699
|
|
|
|
4,303
|
|
Interest
income
|
|
|
(27
|
)
|
|
|
-
|
|
|
|
$
|
1,424,543
|
|
|
$
|
409,648
|
|
Note
13 – 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 $9,530,296 and $482,674 at December
31, 2017 and 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $7,594,136 and $231,519
for the years ended December 31, 2017 and 2016, respectively, which has been reported as other expense in the statements of operations.
The loss of $7,594,136 for the year ended December 31, 2017 consisted of a loss of $3,372,408 attributable the fair value of convertible
notes, a loss of $4,307,449 attributable to the fair value of warrants and a net gain in market value of $85,721 on the convertible
notes. The loss of $231,519 for the year ended December 31, 2016 consisted of a loss of $4,417 due to the value in excess of the
face value of the convertible notes, a loss of $17,604 attributable to the fair value of warrants and a net loss in market value
of $209,498 on the convertible notes.
The
following presents the derivative liability value by instrument type at December 31, 2017 and 2016, respectively:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
Convertible
debentures
|
|
$
|
1,033,644
|
|
|
$
|
462,489
|
|
Common
stock warrants
|
|
|
8,496,652
|
|
|
|
20,185
|
|
|
|
$
|
9,530,296
|
|
|
$
|
482,674
|
|
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
following is a summary of changes in the fair market value of the derivative liability during the years ended December 31, 2017
and 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 convertible notes
|
|
|
956,320
|
|
Increase
in derivative value attributable to issuance of warrants
|
|
|
4,321,045
|
|
Change
in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
4,221,728
|
|
Debt
conversions and redemptions
|
|
|
(451,471
|
)
|
Balance,
December 31, 2017
|
|
$
|
9,530,296
|
|
Key
inputs and assumptions used to value the convertible debentures and warrants issued during the years ended December 31, 2017 and
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 $8,018,283 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.
|
Note
14 –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
Series
C Preferred Stock Issuances
On
March 2, 2016, we issued a total of 6,250,000 shares of the Company’s series C preferred stock to Mark Bradley, the Company’s
Chief Executive Officer, in lieu of $18,750 of unpaid compensation pursuant to the terms of the new employment agreement. The
total fair value of the Series C shares was $192,000 based on an independent valuation on the date of grant, resulting in additional
compensation expense of $173,250.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Common
Stock Authorized
The
Company has authorized 1,200,000,000 shares of common stock, of which 589,994,130 shares were issued and outstanding and 203,467,564
shares were reserved as of the date of this filing.
Common
Stock Sales (2017)
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. The proceeds received
were allocated between the common stock and warrants on a relative fair value basis.
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.
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
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 Sales (2016)
On
October 14, 2016, the Company sold 1,500,000 shares of its common stock to an accredited investor in exchange for proceeds of
$12,000.
On
September 15, 2016, the Company sold 16,750,000 shares of its common stock to an accredited investor in exchange for proceeds
of $117,250.
On
March 2, 2016, the Company sold 14,000,000 shares of its common stock to an accredited investor in exchange for proceeds of $61,600.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
February 1, 2016, the Company sold 15,000,000 shares of its common stock to an accredited investor in exchange for proceeds of
$63,000.
Exercise
of Warrants (2017)
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.
Exercise
of Warrants (2016)
On
August 5, 2016, the Company issued 9,000,000 shares of its common stock pursuant to the exercise of an equal number warrants in
exchange for proceeds of $45,000 that were used to repay the corresponding First SCP Note.
Common
Stock Issuances for Debt Conversions (2017)
On
December 12, 2017, the Company issued 567,968 shares of common stock pursuant to the conversion of $38,849, consisting of $35,000
of outstanding principal and $3,849 of unpaid interest, on the First EJR Note. The note was converted in accordance with the conversion
terms; therefore no gain or loss has been recognized, and the note has been paid off in full.
On
December 11, 2017, the Company issued 757,576 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
December 11, 2017, the Company issued 757,576 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On
December 6, 2017, the Company issued 908,760 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
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.
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.
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.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Common
Stock Issuances for Debt Conversions (2016)
On
November 3, 2016, the Company issued 12,182,508 shares of common stock pursuant to the conversion of $86,709 of outstanding principal
on the Fourth Vista Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
In addition, Vista Capital forgave the remaining principal and interest on all outstanding Vista Notes, resulting in a gain on
debt extinguishment of $92,110.
On
October 24, 2016, the Company issued 1,461,187 shares of common stock pursuant to the conversion of $10,000 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.
On
September 23, 2016, the Company issued 7,238,041 shares of common stock pursuant to the conversion of $16,512 of outstanding principal
on the First WHC Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
September 22, 2016, the Company issued 13,813,364 shares of common stock pursuant to the conversion of $29,975 of outstanding
principal on the First Collier Note. The note was converted in accordance with the conversion terms; therefore no gain or loss
has been recognized.
On
August 30, 2016, the Company issued 4,667,667 shares of common stock pursuant to the conversion of $7,000 of outstanding principal
on the First Tangiers Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
August 24, 2016, the Company issued 5,000,000 shares of common stock pursuant to the conversion of $7,800 of outstanding principal
on the First WHC Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
August 24, 2016, the Company issued 10,000,000 shares of common stock pursuant to the conversion of $18,900 of outstanding principal
on the First Collier Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
July 20, 2016, the Company issued 4,995,098 shares of common stock pursuant to the conversion of $10,190 of outstanding principal
on the First Tangiers Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
July 15, 2016, the Company issued 969,696 shares of common stock pursuant to the conversion of $2,000 of outstanding principal
on the Second WHC Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
June 15, 2016, the Company issued 5,000,000 shares of common stock pursuant to the conversion of $9,100 of outstanding principal
on the First Collier Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
April 8, 2016, the Company issued 2,777,778 shares of common stock pursuant to the conversion of $5,000 of outstanding principal
on the First Tangiers Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
March 31, 2016, the Company issued 2,500,000 shares of common stock in exchange for $3,500 of outstanding principal and $228 of
interest. The total fair value of the common stock was $8,000 based on the closing price of the Company’s common stock on
the date of grant, resulting in a loss on debt extinguishment of $4,272.
On
March 14, 2016, the Company issued 7,812,500 shares of common stock pursuant to the conversion of $10,000 of outstanding principal
on the First WHC Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common
Stock Issued for Services (2017)
On
December 11, 2017, the Company issued a total of 1,500,000 shares of common stock to eleven service providers for services provided.
The total fair value of the common stock was $142,500 based on the closing price of the Company’s common stock on the date
of grant.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
December 11, 2017, the Company issued 100,000 shares of common stock to its CFO as a bonus for services performed. The total fair
value of the common stock was $9,500 based on the closing price of the Company’s common stock on the date of grant.
On
October 1, 2017, pursuant to the CFO’s employment agreement, Mr. Lawrence earned $12,960 of compensation that was paid with
the issuance of 157,091 shares of common stock based on the closing stock price.
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.
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.
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.
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 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.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 (2017)
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.
Common
Stock Issued for Services (2016)
On
October 14, 2016, the Company has agreed to issue 1,000,000 shares of common stock to the landlord of our leased facility as payment
for deferring our rent on behalf of our subsidiary, GLFH. The total fair value of the common stock was $11,400 based on the closing
price of the Company’s common stock on the date of grant. The shares were subsequently issued on February 2, 2017.
On
October 14, 2016, the Company issued 1,250,000 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 $14,250 based on the closing price of the Company’s
common stock on the date of grant.
On
October 14, 2016, the Company issued 750,000 shares of common stock for cultivation services to an independent contractor for
services provided on behalf of our subsidiary, GLFH. The total fair value of the common stock was $8,550 based on the closing
price of the Company’s common stock on the date of grant.
On
October 14, 2016, the Company issued 500,000 shares of common stock for construction services to a contractor for services provided
on behalf of our subsidiary, GLFH. The total fair value of the common stock was $5,700 based on the closing price of the Company’s
common stock on the date of grant.
On
October 14, 2016, the Company issued 500,000 shares of common stock for cultivation services to an independent contractor for
services provided on behalf of our subsidiary, GLFH. The total fair value of the common stock was $5,700 based on the closing
price of the Company’s common stock on the date of grant.
On
October 14, 2016, the Company issued 500,000 shares of common stock for production services to an independent contractor for services
provided on behalf of our subsidiary, GLFH. The total fair value of the common stock was $5,700 based on the closing price of
the Company’s common stock on the date of grant.
On
October 14, 2016, the Company issued 500,000 shares of common stock for website development services to an independent contractor.
The total fair value of the common stock was $5,700 based on the closing price of the Company’s common stock on the date
of grant.
On
October 14, 2016, the Company has issued 2,500,000 shares of common stock to a vendor as payment for $20,000 of outstanding video
editing services. The total fair value of the common stock was $28,500 based on the closing price of the Company’s common
stock on the date of grant.
On
September 2, 2016, the Company issued 20,400,000 shares of common stock to its CEO in satisfaction of unpaid compensation. The
total fair value of the common stock was $102,000 based on the closing price of the Company’s common stock on the date of
grant.
On
September 2, 2016, the Company issued 3,000,000 shares of common stock to each of its three Directors for services performed.
The total fair value of the common stock was $45,000 based on the closing price of the Company’s common stock on the date
of grant.
On
July 15, 2016, as part of its engagement letter with JSBarkats, securities counsel, the Company issued 2,000,000 shares of common
stock for services to JS Barkats, PLLC. The total fair value of the common stock was $7,000 based on the closing price of the
Company’s common stock on the date of grant.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Common
Stock Cancellations (2017)
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.
Contributed
Capital (2016)
During
May of 2016, a note holder and potential investor in Green Leaf Farms Holdings contributed $14,000 to pay an installment on a
debt settlement agreement with Tangiers Investment Group.
Note
15 – Common Stock Options
Common
Stock Options Granted (2017)
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.
Common
Stock Options Granted (2016)
On
June 1, 2016, the Company awarded a lender fully vested 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. The estimated value using
the Black-Scholes Pricing Model, based on a volatility rate of 227% and a call option value of $0.0001, was $432.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
June 1, 2016, the Company awarded the same lender fully vested options to acquire up to 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 estimated value using the Black-Scholes
Pricing Model, based on a volatility rate of 227% and a call option value of $0.0022, was $6,564.
Common
Stock Options Expired (2017)
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.
Common
Stock Options Expired (2016)
On
July 1, 2016, a total of 5,000,000 options with a strike price of $0.01 per share expired.
On
April 11, 2016, a total of 500,000 options amongst two option holders with a strike price of $0.05 per share expired.
The
following is a summary of information about the Common Stock Options outstanding at December 31, 2017.
|
|
Shares
Underlying
|
Shares
Underlying Options Outstanding
|
|
|
|
Options
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
|
Weighted
|
|
|
Shares
|
|
|
Weighted
|
|
Range
of
|
|
Underlying
|
|
|
Remaining
|
|
|
Average
|
|
|
Underlying
|
|
|
Average
|
|
Exercise
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.04
– $0.17
|
|
|
25,750,000
|
|
|
|
1.51
years
|
|
|
$
|
0.10
|
|
|
|
25,750,000
|
|
|
$
|
0.10
|
|
The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed option plan:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Average
risk-free interest rates
|
|
|
1.35
|
%
|
|
|
0.59
|
%
|
Average
expected life (in years)
|
|
|
2.47
|
|
|
|
1.42
|
|
Volatility
|
|
|
235
|
%
|
|
|
227
|
%
|
The
Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions
including expected stock price volatility. Because the Company’s common stock options have characteristics significantly
different from those of traded options and because changes in the subjective input assumptions can materially affect the fair
value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the
fair value of its common stock options. During 2017 and 2016, there were no options granted with an exercise price below the fair
value of the underlying stock at the grant date.
The
weighted average fair value of options granted with exercise prices at the current fair value of the underlying stock during the
years ended December 31, 2017 and 2016 was approximately $0.14 and $0.08 per option, respectively.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
following is a summary of activity of outstanding common stock options:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
|
of
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2015
|
|
|
10,850,000
|
|
|
$
|
0.05
|
|
Options
expired
|
|
|
(5,500,000
|
)
|
|
|
(0.01
|
)
|
Options
granted
|
|
|
8,000,000
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
|
13,350,000
|
|
|
|
0.06
|
|
Options
expired
|
|
|
(2,350,000
|
)
|
|
|
(0.08
|
)
|
Options
granted
|
|
|
14,750,000
|
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
|
|
25,750,000
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2017
|
|
|
25,750,000
|
|
|
$
|
0.10
|
|
The
Company expensed $1,577,845 and $-0- from the amortization of common stock options during the years ended December 31, 2017 and
2016, respectively.
Note
16 – Common Stock Warrants
Warrants
Granted (2017)
On
December 28, 2017, the Company received net proceeds of $80,000 in exchange for an unsecured convertible promissory note that
carries a 5% interest rate with a face value of $90,000 (First RDP Note), which matured on February 26, 2018. In addition, the
Note Holder was awarded 10,000,000 warrants, exercisable at $0.03 per share over a period of four months, commencing on August
11, 2019. The warrants are cancellable in exchange for $1 if this note and the SK L-58, LLC note dated September 19, 2017 are
repaid in full.
On
October 27, 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 Series A Warrant exercisable until
October 27, 2022 to purchase 1,000,000 shares of the Company’s common at a price of $0.15 per share (a “Series A Warrant”)
, and (iii) a Series B Warrant exercisable until October 27, 2022 to purchase 75,000 shares of the Company’s common at a
price of $0.15 per share (a “Series B Warrant”), resulting in aggregate gross proceeds to the Company of $300,000.
The Series A and B Warrants carry ratchet provisions, which ratcheted on February 7, 2018 to 3,036,437 warrants at a strike price
of $0.0494 and 227,733 warrants at a strike price of $0.0494, respectively. Each Note matured 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).
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 matured on December 9, 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).
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 CONSOLIDATED FINANCIAL STATEMENTS
Warrants
Granted (2016)
On
November 21, 2016, the Company entered into a letter agreement (“Financing Agreement”) with SK L-43, LLC providing
for the making of loans by the Investor to the Company, at the Investor’s option (i) in the aggregate principal amount of
$925,000 by December 15, 2016 (the “Initial Advances”), and (ii) in the amounts of $1,500,000 each on or before each
of April 1, 2017 and May 1, 2017 (the “Additional Advances” and, together with the Initial Advances, the “Advances”).
Pursuant
to the Financing Agreement, SK L-43, LLC was issued warrants to purchase shares of the Company’s common stock as additional
consideration, as follows:
Advance
Date
|
|
Advance
Amount
|
|
|
Warrant
A (Number of Warrant Shares)
|
|
|
Warrant A
Exercise Price
|
|
|
Warrant
B (Number of Warrant Shares)
|
|
|
Warrant B
Exercise Price
|
|
|
Warrant
C (Number of Warrant Shares)
|
|
|
Warrant C
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
02, 2016
|
|
$
|
125,000.00
|
|
|
|
4,166,667
|
|
|
$
|
0.03
|
|
|
|
4,166,667
|
|
|
$
|
0.06
|
|
|
|
4,166,667
|
|
|
$
|
0.06
|
|
November 21,
2016
|
|
$
|
267,000.00
|
|
|
|
8,900,000
|
|
|
$
|
0.03
|
|
|
|
8,900,000
|
|
|
$
|
0.06
|
|
|
|
8,900,000
|
|
|
$
|
0.06
|
|
December 02,
2016
|
|
$
|
267,000.00
|
|
|
|
8,900,000
|
|
|
$
|
0.03
|
|
|
|
8,900,000
|
|
|
$
|
0.06
|
|
|
|
8,900,000
|
|
|
$
|
0.06
|
|
December
19, 2016
|
|
$
|
266,000.00
|
|
|
|
8,866,667
|
|
|
$
|
0.03
|
|
|
|
8,866,667
|
|
|
$
|
0.06
|
|
|
|
8,866,667
|
|
|
$
|
0.06
|
|
Total
|
|
$
|
925,000.00
|
|
|
|
30,833,334
|
|
|
|
|
|
|
|
30,833,334
|
|
|
|
|
|
|
|
30,833,334
|
|
|
|
|
|
Each
Warrant will vest and become exercisable four months following its date of issuance and remain exercisable for a period of two
years thereafter; provided, however, that if the Company’s Common Stock on each of the 30 trading days preceding the vesting
date of a Warrant equals or exceeds 300% of the exercise price for such Warrant, then the Company will have the right to reduce
the length of the exercise period for such Warrant to 45 days following delivery of notice to SK L-43, LLC.
On
March 8, 2016, the Company granted detachable warrants pursuant to a $45,000 promissory note to acquire up to 9,000,000 shares
of common stock, exercisable at $0.005 per share over a period from the origination date until four (4) months after the note
is repaid. The fair value of the warrants is $7,400 and was amortized over the life of the loan as a debt discount. The note carried
a default rate of 18% and an additional 1,000,000 warrants issued each 30 day period the note remained unpaid, however, the note
was repaid out of the proceeds from the exercised warrants on August 5, 2016.
Common
Stock Warrants Expired (2017)
On
August 9, 2017, a total of 200,000 warrants with a strike price of $0.18 per share expired.
Common
Stock Warrants Expired (2016)
On
April 8, 2016, a total of 200,000 warrants with a strike price of $0.06 per share expired.
On
March 28, 2016, a total of 2,000,000 warrants with a strike price of $0.06 per share expired.
On
January 30, 2016, a total of 1,000,000 warrants with a strike price of $0.07 per share expired.
Common
Stock Warrants Exercised (2017)
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.
Common
Stock Warrants Exercised (2016)
On
August 5, 2016, the Company issued 9,000,000 shares of its common stock pursuant to the exercise of an equal number warrants in
exchange for proceeds of $45,000 that were used to repay the corresponding First SCP Note.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
following is a summary of information about the Common Stock Warrants outstanding at December 31, 2017.
|
|
Shares
Underlying
|
Shares
Underlying Warrants Outstanding
|
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
|
Weighted
|
|
|
Shares
|
|
|
Weighted
|
|
Range
of
|
|
Underlying
|
|
|
Remaining
|
|
|
Average
|
|
|
Underlying
|
|
|
Average
|
|
Exercise
|
|
Warrants
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Warrants
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.03
- $0.24
|
|
|
151,284,792
|
|
|
|
1.9
years
|
|
|
$
|
0.03
|
|
|
|
151,284,792
|
|
|
$
|
0.03
|
|
The
fair value of each warrant grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed option plan:
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Average
risk-free interest rates
|
|
|
1.37
|
%
|
|
|
1.13
|
|
Average
expected life (in years)
|
|
|
2.58
|
|
|
|
2.40
|
|
Volatility
|
|
|
221
|
%
|
|
|
238
|
|
The
Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions
including expected stock price volatility. Because the Company’s common stock warrants have characteristics significantly
different from those of traded options and because changes in the subjective input assumptions can materially affect the fair
value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the
fair value of its common stock warrants. During 2017 and 2016, there were no warrants granted with an exercise price below the
fair value of the underlying stock at the grant date.
The
weighted average fair value of warrants granted with exercise prices at the current fair value of the underlying stock during
the years ended December 31, 2017 and 2016 was approximately $0.085 and $0.05 per warrant, respectively.
The
following is a summary of activity of outstanding common stock warrants:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
|
of
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2015
|
|
|
13,400,000
|
|
|
$
|
0.050
|
|
Warrants
expired
|
|
|
(3,200,000
|
)
|
|
|
(0.065
|
)
|
Warrants
granted
|
|
|
101,500,002
|
|
|
|
0.046
|
|
Warrants
exercised
|
|
|
(9,000,000
|
)
|
|
|
(0.005
|
)
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
|
102,700,002
|
|
|
|
0.050
|
|
Warrants
expired
|
|
|
(200,000
|
)
|
|
|
(0.180
|
)
|
Warrants
granted
|
|
|
52,784,790
|
|
|
|
0.085
|
|
Warrants
exercised
|
|
|
(4,000,000
|
)
|
|
|
(0.040
|
)
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
|
|
151,284,792
|
|
|
$
|
0.030
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2017
|
|
|
151,284,792
|
|
|
$
|
0.030
|
|
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
17 – Gain (Loss) on Debt Extinguishment
The
Company recognized a loss of $62,641 and a gain of $165,615 during the years ended December 31, 2017 and 2016,
respectively, as presented in other income within the Statements of Operations.
Debt
Extinguishments (2017)
On
November 8, 2017, $200,000 of outstanding debts owed to Rxmm Health Pty Ltd. were purchased and assigned by Group 10 Holdings.
Subsequent to the assignment, the notes were exchanged for a $200,000 convertible note, convertible at 70% of the average of the
two lowest closing traded prices during the ten (10) trading days prior to the conversion request date, resulting in a gain on
extinguishment of $62,641 due to the net change in derivative liability.
Debt
Extinguishments (2016)
On
November 3, 2016, $92,110 of outstanding debts, consisting of $62,409 of principal and $29,701 of interest, was forgiven on outstanding
debts owed to Vista Capital Investments, LLC.
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,
resulting in a gain of $14,002 on debt extinguishment. In addition, $20,000 of outstanding debts, consisting of $12,980 of principal
and $7,020 of interest, was forgiven on outstanding debts owed to Vista Capital Investments, LLC, which is a company under common
control with WHC Capital.
On
March 2, 2016, the Company repaid $30,000 of principal on the First Collier Note, and an additional $20,000 of principal was forgiven
on the Second Vista Capital Note that are held by common ownership.
On
January 21, 2016, the Company entered into a settlement agreement with Tangiers Investment Group. Pursuant to the agreement, the
Company is obligated to repay a total of $80,000 in various monthly installments of between $6,000 and $20,000 from February 8,
2016 through June 26, 2016 in satisfaction of a total of approximately $85,820, consisting of $75,500 of principal and $10,320
of interest on the First and Second Tangiers Notes, resulting in a gain of $5,820 on debt extinguishment. The convertible promissory
notes were subsequently cancelled as paid in full on August 30, 2016.
On
January 6, 2016, the Company repaid the first and second TJC convertible notes with an aggregate payment of $51,000 in satisfaction
of a total of approximately $50,890 of principal and $1,229 of interest, resulting in a gain of $1,119 on the debt extinguishment.
The convertible promissory notes were subsequently cancelled as paid in full.
On
January 4, 2016, the Company entered into a settlement agreement with JSJ Investments. Pursuant to the agreement, the Company
is obligated to repay a total of $70,000 in six monthly installments of approximately $11,667 from January 21, 2016 through June
21, 2016 in satisfaction of a total of approximately $82,564, consisting of $75,000 of principal and $7,564 of interest on the
First JSJ Note, resulting in a gain of $12,564 on debt extinguishment. The convertible promissory note was subsequently cancelled
as paid in full on June 21, 2016.
The
Company and one of our lenders entered into a settlement agreement whereby an outstanding $35,000 promissory note was satisfied
with the successful payment of $32,500, consisting of four equal payments of $8,125, which were delivered on June 27, 2014, August
26, 2014, November 17, 2014 and February 2, 2015, resulting in a $6,482 gain on settlement, consisting of $2,500 of principal
and $3,982 of accrued interest, as presented in other income at December 31, 2016.
Note
18 – Income Taxes
The
Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides
that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For
the years ended December 31, 2017 and 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 December 31, 2017, the Company had approximately $26,654,000 of federal net operating losses. The net operating
loss carry forwards, if not utilized, will begin to expire in 2025.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
components of the Company’s deferred tax asset are as follows:
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
9,328,900
|
|
|
$
|
7,763,000
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets before valuation allowance
|
|
$
|
9,328,900
|
|
|
$
|
7,763,000
|
|
Less:
Valuation allowance
|
|
|
(9,328,900
|
)
|
|
|
(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 December 31, 2017 and 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:
|
|
December
31,
|
|
|
|
2017
|
|
|
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
19 – 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 $124,899 and $61,998 during the years ended December 30, 2017 and 2016, respectively. The net loss attributable
to the parent was and $730,575 and $335,426 during the years ended December 31, 2017 and 2016, respectively.
Note
20 – Future Minimum Lease Payments
Effective
July 1, 2013, we leased our office space in Las Vegas, Nevada under a 3-year operating lease expiring August 31, 2016. The lease
provides for increases in future minimum annual rental payments based on defined annual increases beginning with monthly payments
of $2,997 and culminating in a monthly payment of $3,191 in 2016. The lease contains provisions for future rent increases and
rent free periods for the first two months of the lease. The total amount of rental payments due over the lease term is being
charged to rent expense according to the straight-line method over the term of the lease. The difference between rent expense
recorded and the amount paid was credited or charged to “Deferred rent obligation,” in the accompanying Balance Sheets.
The lease is now on a month-to-month basis.
On
March 4, 2016, GLFH leased a commercial building from Belmont NLV, LLC that originated on April 17, 2016 for its medical marijuana
production and cultivation business in North Las Vegas. The 5-year operating lease expires on April 16, 2021 and is renewable
for another 5 year term, required a $50,000 security deposit and includes an option to purchase the building for $3.8 million
during the third, fourth and fifth years of the lease. The lease provides for increases in future minimum annual rental payments
based on defined annual increases beginning with monthly payments of $26,786 and culminating in a monthly payment of $30,148 in
2021. The lease contains provisions for future rent increases. The total amount of rental payments due over the lease term is
being charged to rent expense according to the straight-line method over the term of the lease. The difference between rent expense
recorded and the amount paid will be credited or charged to “Deferred rent obligation,” in the Balance Sheets.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Future
minimum lease payments required under operating leases according to our fiscal year-end are as follows:
Year
Ending
|
|
|
|
|
December
31,
|
|
|
Amount
|
|
2018
|
|
|
$
|
337,693
|
|
2019
|
|
|
|
347,824
|
|
2020
|
|
|
|
358,258
|
|
2021
|
|
|
|
107,526
|
|
Thereafter
|
|
|
|
-
|
|
|
|
|
$
|
1,151,301
|
|
Rent
expense was $379,305 and $278,589 for the years ended December 31, 2017 and 2016, respectively.
Note
21 – Legal Proceedings
Michael
Pratter
On
November 3, 2016, Michael S. Pratter commenced an action in the Eighth Judicial District Court, Clark County, Nevada, against
Players Network, Green Leaf Farms Holdings, and our Chief Executive Officer. In his complaint, Pratter asserts several causes
of action, including for breach of contract and fraud, relating to his claim that he provided consulting services to us for which
he was not fully paid. We are defending ourselves vigorously in this matter and believe that Pratter’s claims are without
merit, and that in fact we over-paid Pratter. In November 2017 we filed a Counterclaim against Mr. Pratter in this proceeding
in which we asserted ten causes of action, which relate in part to Mr. Pratter’s representations that he would provide us
with legal services when in fact he was not licensed to practice law in the State of Nevada and had been disbarred by the California
State Bar. Among other relief, our Counterclaim seeks disgorgement of all amounts paid to Mr. Pratter during his engagement by
us, including the return of 1.5 million shares of our Common Stock we had issued to him. Previously, in August 2017, following
our motion and our posting of treasury shares with the Clerk of the Court as security, the Court approved our application for
a temporary restraining order and preliminary injunction under which Mr. Pratter is prohibited from transferring the 1.5 million
shares of Common Stock we had issued to him, until further order of the Court.
LG
Capital Funding
We
are a defendant in case pending in the Supreme Court of the State of New York, Kings County, that was commenced by LG Capital
Funding LLC, in February 2015, in which LG Capital asserts that we are in default of our obligations to honor its conversion rights
under a $35,000 promissory note, due to a typographical error in the note. LG Capital seeks declaratory relief as to conversion
formula under the promissory note and monetary damages in the amount of principal and accrued interest under the promissory note.
This case is currently in the preliminary discovery stages. We believe LG Funding’s claims are without merit.
Note
22 – Subsequent Events
Common
Stock Sales
On
March 12, 2018, the Company sold 333,333 units at $0.15 per unit, consisting of 333,333 shares of common stock and 666,700 warrants
exercisable at $0.15 per share over the following 3 years to an individual investor for proceeds of $50,000. The shares have not
yet been issued.
Exercise
of Warrants
On
March 28, 2018, a warrant holder exercised warrants to purchase 3,000,000 shares of common stock at $0.04 per share for proceeds
of $120,000. The shares have not yet been issued.
Common
Stock Awarded for Services
On
April 1, 2018, pursuant to the CFO’s employment agreement, Mr. Lawrence earned $12,960 of compensation to be paid with the
issuance of 129,960 shares of common stock based on the closing stock price. The shares have not yet been issued.
On
March 12, 2018, the Company issued a total of 350,000 shares of common stock to a consultant for services provided. The total
fair value of the common stock was $25,550 based on the closing price of the Company’s common stock on the date of grant.
The shares have not yet been issued.
On
January 1, 2018, pursuant to the CFO’s employment agreement, Mr. Lawrence earned $12,960 of compensation to be paid with
the issuance of 100,077 shares of common stock based on the closing stock price. The shares have not yet been issued.
PLAYERS
NETWORK
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Common
Stock Issuances for Debt Conversions
On
March 22, 2018, the Company issued 1,116,584 shares of common stock pursuant to the conversion of $52,479, consisting of $50,000
of outstanding principal and $2,479 of unpaid interest, on the Second Gemini Note. The note was converted in accordance with the
conversion terms; therefore no gain or loss has been recognized.
On
March 14, 2018, the Company issued 851,064 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
March 14, 2018, the Company issued 529,246 shares of common stock pursuant to the conversion of $24,875, consisting of $13,250
of outstanding principal and $11,625 of unpaid interest, on the First Black Mountain Note. The note was converted in accordance
with the conversion terms; therefore no gain or loss has been recognized, and the note has been paid off in full.
On
February 20, 2018, the Company issued 801,603 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
February 7, 2018, the Company issued 809,716 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On
February 5, 2018, the Company issued 1,009,489 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
January 22, 2018, the Company issued 806,452 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On
January 22, 2018, the Company issued 806,452 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On
January 16, 2018, the Company issued 955,474 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
On
January 8, 2018, the Company issued 806,452 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On
January 2, 2018, the Company issued 784,929 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been
recognized.
Common
Stock Options Expired
On
February 20, 2018, a total of 8,000,000 options with a strike price of $0.04 per share expired.
93,522,930
SHARES OF COMMON STOCK
OF
PLAYERS NETWORK
PRELIMINARY
PROSPECTUS
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING
AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until
June 18, 2018, all dealers that effect transactions in these securities whether or not participating in this offering may
be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
The
Date of This prospectus is May 9, 2018