Item
1 - Financial Statements
PLAYERS
NETWORK
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
19,019
|
|
|
$
|
65,840
|
|
Accounts
receivable
|
|
|
5,964
|
|
|
|
-
|
|
Other
current assets
|
|
|
126,320
|
|
|
|
83,180
|
|
Inventory
|
|
|
77,969
|
|
|
|
255,486
|
|
Current
assets held for sale
|
|
|
3,778,038
|
|
|
|
-
|
|
Total
current assets
|
|
|
4,007,310
|
|
|
|
404,506
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
379,198
|
|
|
|
396,455
|
|
Construction
in progress
|
|
|
590,696
|
|
|
|
408,812
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
4,977,204
|
|
|
$
|
1,209,773
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
771,134
|
|
|
$
|
702,865
|
|
Accrued
expenses
|
|
|
514,450
|
|
|
|
448,538
|
|
Deferred
rent obligations
|
|
|
32,123
|
|
|
|
28,809
|
|
Convertible debentures,
net of discounts of $1,820,149 and $790,621 at June 30, 2018 and December 31, 2017, respectively
|
|
|
341,651
|
|
|
|
374,679
|
|
Short term debt,
net of discounts of $192,673 and $432,190 at June 30, 2018 and December 31, 2017, respectively
|
|
|
1,122,327
|
|
|
|
775,810
|
|
Derivative
liabilities
|
|
|
5,396,061
|
|
|
|
9,530,296
|
|
Current
liabilities held for sale
|
|
|
4,205,681
|
|
|
|
-
|
|
Total
current liabilities
|
|
|
12,383,427
|
|
|
|
11,860,997
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
12,383,427
|
|
|
|
11,860,997
|
|
|
|
|
|
|
|
|
|
|
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; 621,529,160 and 580,716,669 shares issued and outstanding at June 30, 2018 and
December 31, 2017, respectively
|
|
|
621,529
|
|
|
|
580,717
|
|
Additional
paid-in capital
|
|
|
36,189,302
|
|
|
|
33,753,106
|
|
Subscriptions payable,
consisting of 3,418,508 and -0- shares at June 30, 2018 and December 31, 2017, respectively
|
|
|
145,640
|
|
|
|
-
|
|
Accumulated
(deficit)
|
|
|
(43,886,398
|
)
|
|
|
(44,597,401
|
)
|
|
|
|
(6,915,927
|
)
|
|
|
(10,249,578
|
)
|
Noncontrolling
Interest
|
|
|
(490,296
|
)
|
|
|
(401,646
|
)
|
Total
Stockholders’ (Deficit)
|
|
|
(7,406,223
|
)
|
|
|
(10,651,224
|
)
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ (Deficit)
|
|
$
|
4,977,204
|
|
|
$
|
1,209,773
|
|
See
accompanying notes to financial statements.
PLAYERS
NETWORK
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
$
|
20,102
|
|
|
$
|
2,979
|
|
|
$
|
211,964
|
|
|
$
|
3,070
|
|
Cost
of goods sold
|
|
|
22,873
|
|
|
|
2,208
|
|
|
|
228,049
|
|
|
|
2,208
|
|
Gross
profit (loss)
|
|
|
(2,771
|
)
|
|
|
771
|
|
|
|
(16,085
|
)
|
|
|
862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating costs
|
|
|
131,844
|
|
|
|
71,849
|
|
|
|
243,407
|
|
|
|
93,051
|
|
General
and administrative
|
|
|
694,784
|
|
|
|
734,430
|
|
|
|
1,179,179
|
|
|
|
1,152,866
|
|
Officer
salaries
|
|
|
72,317
|
|
|
|
43,750
|
|
|
|
141,267
|
|
|
|
122,100
|
|
Depreciation
and amortization
|
|
|
31,815
|
|
|
|
11,534
|
|
|
|
62,365
|
|
|
|
14,308
|
|
Total
operating expenses
|
|
|
930,760
|
|
|
|
861,563
|
|
|
|
1,626,218
|
|
|
|
1,382,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(933,531
|
)
|
|
|
(860,792
|
)
|
|
|
(1,642,303
|
)
|
|
|
(1,381,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
30
|
|
|
|
-
|
|
|
|
87
|
|
|
|
-
|
|
Loss
on debt extinguishment, net
|
|
|
(375,788
|
)
|
|
|
-
|
|
|
|
(362,017
|
)
|
|
|
-
|
|
Goodwill
impairment
|
|
|
(1,250,314
|
)
|
|
|
-
|
|
|
|
(1,250,314
|
)
|
|
|
-
|
|
Interest
expense, net
|
|
|
(500,055
|
)
|
|
|
(271,380
|
)
|
|
|
(1,099,440
|
)
|
|
|
(419,915
|
)
|
Change
in derivative liabilities
|
|
|
(589,654
|
)
|
|
|
(1,767,977
|
)
|
|
|
5,112,148
|
|
|
|
(1,867,832
|
)
|
Total
other income (expense)
|
|
|
(2,715,781
|
)
|
|
|
(2,039,357
|
)
|
|
|
2,400,464
|
|
|
|
(2,287,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from
continuing operations
|
|
$
|
(3,649,312
|
)
|
|
$
|
(2,900,149
|
)
|
|
$
|
758,161
|
|
|
$
|
(3,669,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
|
|
(135,808
|
)
|
|
|
-
|
|
|
|
(135,808
|
)
|
|
|
-
|
|
Net income (loss)
|
|
|
(3,785,120
|
)
|
|
|
(2,900,149
|
)
|
|
|
622,353
|
|
|
|
(3,669,210
|
)
|
Less:
Net loss attributable to the noncontrolling interest
|
|
|
49,647
|
|
|
|
29,786
|
|
|
|
88,650
|
|
|
|
57,249
|
|
Net
income (loss) attributable to Players Network
|
|
$
|
(3,735,473
|
)
|
|
$
|
(2,870,363
|
)
|
|
$
|
711,003
|
|
|
$
|
(3,611,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic
|
|
|
602,521,043
|
|
|
|
551,841,797
|
|
|
|
594,314,338
|
|
|
|
546,464,558
|
|
Weighted
average number of common shares outstanding - fully diluted
|
|
|
602,521,043
|
|
|
|
551,841,797
|
|
|
|
619,882,341
|
|
|
|
546,464,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
Net
loss per share - fully diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
See
accompanying notes to financial statements.
PLAYERS
NETWORK
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Six Months Ended
|
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
711,003
|
|
|
$
|
(3,611,961
|
)
|
Minority
interest in net loss
|
|
|
(88,650
|
)
|
|
|
(57,249
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expense
|
|
|
62,365
|
|
|
|
14,308
|
|
Goodwill
impairment expense
|
|
|
1,250,314
|
|
|
|
-
|
|
Loss
on debt extinguishment, net
|
|
|
362,017
|
|
|
|
-
|
|
Change
in fair market value of derivative liabilities
|
|
|
(5,737,388
|
)
|
|
|
1,867,832
|
|
Excess
derivative
|
|
|
625,240
|
|
|
|
-
|
|
Amortization
of debt discounts
|
|
|
1,002,025
|
|
|
|
377,026
|
|
Stock
issued for services
|
|
|
54,550
|
|
|
|
174,925
|
|
Stock
issued for compensation, related party
|
|
|
11,940
|
|
|
|
121,100
|
|
Options
issued for services
|
|
|
-
|
|
|
|
78,813
|
|
Options
issued for compensation, related party
|
|
|
-
|
|
|
|
157,625
|
|
Decrease
(increase) in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(72,064
|
)
|
|
|
-
|
|
Other
current assets
|
|
|
(48,140
|
)
|
|
|
(40,142
|
)
|
Inventory
|
|
|
385,875
|
|
|
|
(259,819
|
)
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
601,026
|
|
|
|
34,183
|
|
Accrued
expenses
|
|
|
190,257
|
|
|
|
75,151
|
|
Deferred
rent obligations
|
|
|
3,314
|
|
|
|
8,184
|
|
Settlements
payable
|
|
|
-
|
|
|
|
(30,000
|
)
|
Net cash used in operating
activities of continuing operations
|
|
|
(686,316
|
)
|
|
|
(1,090,024
|
)
|
Net
cash provided by operating activities of discontinued operations
|
|
|
(302,395
|
)
|
|
|
-
|
|
Net
cash used in operating activities
|
|
|
(988,711
|
)
|
|
|
(1,090,024
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Value
of net assets acquired from LCG Business Enterprises, LLC
|
|
|
135,982
|
|
|
|
-
|
|
Cash
paid for purchase of assets from LCG Business Enterprises, LLC
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
Purchase
of fixed assets and construction in progress
|
|
|
(226,992
|
)
|
|
|
(167,321
|
)
|
Net
cash used in investing activities
|
|
|
(1,091,010
|
)
|
|
|
(167,321
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from convertible debentures
|
|
|
1,814,500
|
|
|
|
-
|
|
Repayments
of convertible debentures
|
|
|
(155,000
|
)
|
|
|
-
|
|
Proceeds
from short term debt
|
|
|
127,000
|
|
|
|
385,000
|
|
Repayment
of short term debt
|
|
|
(10,000
|
)
|
|
|
(10,000
|
)
|
Proceeds
from sale of common stock
|
|
|
256,400
|
|
|
|
800,000
|
|
Net
cash provided by financing activities
|
|
|
2,032,900
|
|
|
|
1,175,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease)
in cash
|
|
|
(46,821
|
)
|
|
|
(82,345
|
)
|
Cash
- beginning
|
|
|
65,840
|
|
|
|
145,119
|
|
Cash
- ending
|
|
$
|
19,019
|
|
|
$
|
62,774
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
750
|
|
|
$
|
200
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Value
of shares issued for settlement of trade payables
|
|
$
|
743,405
|
|
|
$
|
-
|
|
Value
of debt discounts
|
|
$
|
1,748,736
|
|
|
$
|
-
|
|
Value
of shares issued for conversion of debt
|
|
$
|
785,530
|
|
|
$
|
72,350
|
|
Value
of warrants issued with short term debt
|
|
$
|
-
|
|
|
$
|
229,708
|
|
Value
of derivative adjustment due to debt conversions
|
|
$
|
770,823
|
|
|
$
|
59,415
|
|
See
accompanying notes to financial statements.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1 – Basis of Presentation
The
interim condensed consolidated financial statements of Players Network (the “Company”) included herein, presented
in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to not make the information presented misleading.
These
statements reflect all adjustments, which in the opinion of management, are necessary for fair presentation of the information
contained therein. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. It is suggested that
these interim condensed consolidated financial statements be read in conjunction with the financial statements of the Company
for the year ended December 31, 2017 and notes thereto included in the Company’s annual report on Form 10-K filed with the
SEC. The Company follows the same accounting policies in the preparation of interim reports.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control
and ownership:
|
|
State
of
|
|
|
|
Abbreviated
|
Name
of Entity
|
|
Incorporation
|
|
Relationship
|
|
Reference
|
|
|
|
|
|
|
|
Players
Network
(1)
|
|
Nevada
|
|
Parent
|
|
PNTV
|
Green
Leaf Farms Holdings, LLC
(2)
|
|
Nevada
|
|
Subsidiary
|
|
GLFH
|
Players
Michigan LLC
(3)
|
|
Michigan
|
|
Subsidiary
|
|
SALINAS
|
(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”).
(3)
Players
Michigan LLC is a wholly-owned subsidiary formed to acquire substantially all of the assets and liabilities of LCG Business Enterprises,
LLC (“LCG”) pursuant to an Asset Purchase Agreement that closed on May 24, 2018. The parties to the Asset Purchase
Agreement agreed to rescind the transaction on December 31, 2018.
The consolidated financial statements
herein contain the operations of the subsidiary listed above. All significant inter-company transactions have been eliminated
in the preparation of these financial statements. The parent company, PNTV and subsidiary, GLFH will be collectively referred
to herein as the “Company”, “Players Network” or “PNTV”. The Company’s headquarters
are located in Las Vegas, Nevada and substantially all of its customers are within the United States.
Fair
Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements
as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated
by management to approximate fair value primarily due to the short-term nature of the instruments. In addition, the Company had
debt instruments that required fair value measurement on a recurring basis.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out
(FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of prepackaged purchased
goods ready for resale, and cannabis flower grown in-house under our cultivation license, along with produced edibles and extracts
developed under our production license.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Construction
in Progress
The
Company is constructing a grow house in its leased facility, which became operational during the second quarter of 2017 upon completion
of the first phase of improvements, at which time depreciation commenced. On May 31, 2017, the Company placed in service $373,842
of leasehold improvements incurred during the first phase of construction. Phase 2 commenced in July and will be capitalized on
the balance sheet under Construction in Progress. The total estimated cost to complete construction of the facility is approximately
$1.7 million, and an additional $590,696 of construction costs have been capitalized as of June 30, 2018.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements and contracts by applying the following steps: (1) identify
the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4)
allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance
obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605
— Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence
of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount
of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
There
was no impact on the Company’s financial statements as a result of adopting Topic 606 for the six months ended June 30,
2018 and 2017, or the twelve months ended December 31, 2017.
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.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Basic
and Diluted Loss Per Share
Basic
earnings per share (“EPS”) are computed by dividing net income (the numerator) by the weighted average number of common
shares outstanding for the period (the denominator). Diluted EPS is computed by dividing net income by the weighted average number
of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock
options, warrants and restricted stock. The number of potential common shares outstanding relating to stock options, warrants
and restricted stock is computed using the treasury stock method.
The
reconciliation of the denominators used to calculate basic EPS and diluted EPS for the six months ended June 30, 2018 and 2017
are as follows:
|
|
For the
Six Months Ended
|
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
Weighted
average common shares outstanding – basic
|
|
|
594,314,338
|
|
|
|
546,464,558
|
|
Plus: Potentially
dilutive common shares:
|
|
|
|
|
|
|
|
|
Stock
options and warrants
|
|
|
25,568,003
|
|
|
|
-
|
|
Weighted
average common shares outstanding – diluted
|
|
|
619,882,341
|
|
|
|
546,464,558
|
|
For
the six months ended June 30, 2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation
of diluted net loss per common share. Stock options and warrants excluded from the calculation of diluted EPS because their effect
was anti-dilutive were 126,483,872 and 116,233,872 as of June 30, 2018 and 2017, respectively.
Derivative
Liability
The
Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and
Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance
sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value
is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument,
the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments
that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities
at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible
Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked
financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would
enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument
that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock.
A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted
for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s
own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation
of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability
within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set
forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or
incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation
sale.
Recent
Accounting Pronouncements
In
June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
, which
expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.
An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option
pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern
of cost recognition over that period). The new guidance is effective for all entities for annual periods, and interim periods
within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company does not expect the
adoption of this ASU to have a material impact on its consolidated financial statements.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In
March 2018, the FASB issued ASU No. 2018-05,
Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff
Accounting Bulletin No. 118
. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the
“Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from
the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact
all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The
calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to
1986. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In
February 2018, the FASB issued ASU No. 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income
. The guidance permits entities to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result
of tax reform to retained earnings. This new guidance is effective for annual and interim periods in fiscal years beginning after
December 15, 2018. Early adoption is permitted in annual and interim periods and can be applied retrospectively or in the period
of adoption. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.
In
May 2017, the FASB issued 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.
No
other new accounting pronouncements, issued or effective during the six months ended June 30, 2018, have had or are expected to
have a significant impact on the Company’s financial statements.
Note
2 – Going Concern
As
shown in the accompanying condensed consolidated financial statements, the Company has incurred recurring losses from operations
resulting in an accumulated deficit of $43,886,398, and as of June 30, 2018, the Company’s current liabilities exceeded
its current assets by $8,376,117. These factors raise substantial doubt about the Company’s ability to continue as a going
concern. Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking additional
sources of capital to fund short term operations. Management believes these factors will contribute toward achieving profitability.
The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue
as a going concern.
The
financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s
ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability
and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the
Company be unable to continue as a going concern.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
3 – Asset Purchase Acquisition
Asset
Purchase Acquisition – LCG Business Enterprises, LLC, May 24, 2018
On May 24, 2018, through the Company’s
newly-formed wholly-owned Michigan subsidiary, Players Michigan LLC (“Players Michigan”), purchased all of the assets
of LCG Business Enterprises, LLC, a California limited liability company (“LCG”), including all of LCG’s furniture,
fixtures, equipment and inventory, in consideration for an aggregate of $5,000,000, of which $1,000,000 was paid in cash at the
closing and $4,000,000 was financed through short-term seller financed debt of $4,000,000 to be paid in monthly increments of
$1,000,000 over the subsequent four-month period.
LCG
operated a California licensed commercial cannabis agricultural facility consisting of a 56,000 square foot commercial cannabis
agricultural facility at 25600 Encinal Road, Salinas, California. With LCG’s operations, we expected to realize the benefits
of increased efficiency, accountability, and productivity. As disclosed in Note 4, below, due to unanticipated operational and
reporting issues discovered following the closing, Players Michigan and LCG rescinded the transaction on December 31, 2018.
In
connection with the acquisition, LCG and the Company (through Players Michigan) entered into a Management Agreement, pursuant
to which the shareholder of LCG agreed to provide management services to the Company following closing. Pursuant to the agreement,
the seller was to be paid a percentage of net profits until the remaining purchase price was paid in full, as follows:
Percentage
of
|
|
Payment
|
Net
Profit
|
|
Period
|
30%
|
|
Between Closing and
payment in full of Installment 2
(1)
|
25%
|
|
Between the payment
in full of Installment 2 and payment in full of Installment 3
|
20%
|
|
Between the payment
in full of Installment 3 and payment in full of Installment 4
|
15%
|
|
Between the payment
in full of Installment 4 and payment in full of Installment 5
|
0%
|
|
From and the payment
in full of Installment 5 or, if earlier, the prepayment in full of the reaming unpaid portion of the Purchase Price
|
|
(1)
|
Installment
number 2 was never paid, and the liability for these fees was terminated with the rescission agreement.
|
This
acquisition was accounted for as a business combination under the purchase method of accounting, given that substantially all
of the Company’s assets and ongoing operations were acquired. The purchase resulted in $1,250,314 of goodwill that was expensed
as an impairment due to the discontinued operations. According to the purchase method of accounting, the Company recognized the
identifiable assets acquired and liabilities assumed as follows:
|
|
May 24,
|
|
|
|
2018
|
|
Consideration:
|
|
|
|
|
Cash paid
at closing
|
|
$
|
1,000,000
|
|
Seller financed short-term
debt
(1)
|
|
|
4,000,000
|
|
Fair
value of total consideration exchanged
|
|
$
|
5,000,000
|
|
|
|
|
|
|
Fair
value of identifiable assets acquired assumed:
|
|
|
|
|
Cash
|
|
$
|
135,982
|
|
Inventory
|
|
|
3,516,000
|
|
Equipment
and fixtures
|
|
|
97,704
|
|
Total
fair value of assets assumed
|
|
|
3,749,686
|
|
Consideration
paid in excess of fair value (Goodwill)
(2)
|
|
$
|
1,250,314
|
|
|
(1)
Consideration
was financed through short-term seller financed debt of $4,000,000 to be paid in monthly increments of $1,000,000 over the
subsequent four-month period, which was not paid and cancelled pursuant to a rescission agreement on December 31, 2018.
|
|
|
(2)
The consideration paid in excess of the net fair value of assets acquired and liabilities assumed has been recognized
as goodwill and impaired as a result of the subsequent rescission and discontinuance of operations.
|
Supplemental
pro forma results of operations of the combined entities could not be obtained due to the lack of financial record keeping.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
4 – Discontinued Operations
On
December 31, 2018, the Company agreed to a Release Agreement and Agreement to Rescind and Extinguish Asset Purchase
Agreement and Side Letter Agreement (“Rescission Agreement”) with respect to the transactions under the Asset
Purchase Agreement that had closed on May 24, 2018 disclosed in note 3 above. The Company decided to rescind the transaction
primarily due to operational and reporting issues it discovered following the closing, and decided to discontinue its
operations in that location. Subsequently, all of the assets, liabilities and operations of Players Michigan purchased from
LCG were returned to LCG on December 31, 2018. Pursuant to the rescission agreement, LCG paid PNTV $250,000, and agreed to
pay another $350,000 upon the subsequent transaction to any third party. In addition, LCG agreed to pay PNTV an additional
25% of the gross proceeds, less deductions for applicable sales and/or any fair market investment banking commissions paid by
LCG, of any sale in excess of $5,000,000, up to a maximum value of $500,000. If LCG fails to close on a subsequent
transaction and pay the applicable fees by April 1, 2019, LCG shall pay PNTV a guaranteed payment of $50,000 per month until
the total amount of $350,000 has been paid. A tax benefit was not recorded on this loss due to limitations on current tax
recognition. The results of operations from the Salinas business unit have been retrospectively presented as losses from
discontinued operations as presented below for the three months ended June 30, 2018:
|
|
For the
Three
|
|
|
|
Months
Ended
|
|
|
|
June
30, 2018
|
|
|
|
|
|
Revenue:
|
|
$
|
438,225
|
|
Cost
of goods sold
|
|
|
409,835
|
|
Gross
profit
|
|
|
28,390
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
General
and administrative
|
|
|
90,760
|
|
Professional
fees
|
|
|
71,944
|
|
Depreciation
and amortization
|
|
|
1,494
|
|
Total
operating expenses
|
|
|
164,198
|
|
|
|
|
|
|
Operating
loss
|
|
|
(135,808
|
)
|
|
|
|
|
|
Loss
from discontinued operations
|
|
$
|
(135,808
|
)
|
The
carrying value of the assets and liabilities of the discontinued operations were comprised of the following at June 30, 2018:
|
|
June
30,
|
|
|
|
2018
|
|
|
|
|
|
Assets of discontinued
business unit:
|
|
|
|
|
Cash
|
|
$
|
302,395
|
|
Accounts
receivable
|
|
|
66,100
|
|
Other
current assets
|
|
|
5,000
|
|
Inventory
|
|
|
3,307,642
|
|
Fixed
assets, net
|
|
|
96,901
|
|
Total
current assets held for sale
|
|
$
|
3,778,038
|
|
Liabilities of discontinued
business unit:
|
|
|
|
|
Accounts
payable
|
|
$
|
133,737
|
|
Accrued
expenses
|
|
|
71,944
|
|
Short
term debt owed to LCG
|
|
|
4,000,000
|
|
Total
current liabilities held for sale
|
|
$
|
4,205,681
|
|
As
of June 30, 2018, we recognized an impairment loss of $1,250,314 on the goodwill derived from the acquisition in accordance with
the identified discontinued operations.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
5 – Related Party
Officers
On
January 1, 2018, pursuant to his employment agreement, our chief financial officer at that time earned $11,940 of compensation
that was required to be paid with 300,000 shares of our common stock based on the closing stock price on such date. The shares
were subsequently issued on July 11, 2018.
Note
6 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements
and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50
details the disclosures that are required for items measured at fair value.
The
Company has convertible notes that must be measured under the new fair value standard. The Company’s financial assets and
liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date.
Level
2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market
data by correlation or other means (market corroborated inputs).
Level
3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset
or liability.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets
as of June 30, 2018 and December 31, 2017, respectively:
|
|
Fair
Value Measurements at June 30, 2018
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
19,019
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
assets
|
|
|
19,019
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures,
net of discounts of $1,820,149
|
|
|
-
|
|
|
|
-
|
|
|
|
341,651
|
|
Short term debt, net
of discounts of $192,673
|
|
|
-
|
|
|
|
1,122,327
|
|
|
|
-
|
|
Derivative
liability
|
|
|
-
|
|
|
|
-
|
|
|
|
5,396,061
|
|
Total
liabilities
|
|
|
-
|
|
|
|
1,122,327
|
|
|
|
5,737,712
|
|
|
|
$
|
19,019
|
|
|
$
|
(1,122,327
|
)
|
|
$
|
(5,737,712
|
)
|
|
|
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
|
)
|
There
were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the six months ended June 30, 2018
and the year ended December 31, 2017.
Level
2 liabilities consisted of a total of $1,315,000 and $1,208,000 of short term, unsecured, promissory notes, net of discounts of
$192,673 and $432,190 as of June 30, 2018 and December 31, 2017, respectively. No fair value adjustment was necessary during the
six months ended June 30, 2018 and the year ended December 31, 2017.
Level
3 liabilities consist of a total of $2,161,800 and $1,165,300 of convertible debentures, net of discounts of $1,820,149 and $790,621
as of June 30, 2018 and December 31, 2017, respectively, in addition to the related derivative liabilities of $5,396,061 and $4,016,985
at June 30, 2018 and December 31, 2017, respectively.
Note
7 – Minority Interest
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 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, but they have not yet begun to generate significant
revenues. The minority interest’s net loss for the six months ended June 30, 2018 was $88,650, and they have accumulated
a net loss of $490, 296 as of June 30, 2018.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
8 – Other Current Assets
Other
current assets included the following as of June 30, 2018 and December 31, 2017, respectively:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
Security
deposits
|
|
$
|
68,100
|
|
|
$
|
52,100
|
|
Prepaid
expenses
|
|
|
58,220
|
|
|
|
31,080
|
|
|
|
$
|
126,320
|
|
|
$
|
83,180
|
|
Note
9 – Inventory
Inventories,
consisting of material, material overhead, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out)
or market and consist of the following at June 30, 2018:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
Raw
materials
|
|
$
|
-
|
|
|
$
|
76,677
|
|
Finished
goods
|
|
|
77,969
|
|
|
|
178,809
|
|
|
|
$
|
77,969
|
|
|
$
|
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
10 – Fixed Assets and Construction in Progress
Fixed
assets consist of the following at June 30, 2018 and December 31, 2017, respectively:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
Office
equipment
|
|
$
|
147,145
|
|
|
$
|
102,037
|
|
Website development
costs
|
|
|
99,880
|
|
|
|
99,880
|
|
Furniture and fixtures
|
|
|
27,066
|
|
|
|
27,066
|
|
Leasehold
improvements
|
|
|
373,842
|
|
|
|
373,842
|
|
Total
|
|
|
647,933
|
|
|
|
602,825
|
|
Less
accumulated depreciation
|
|
|
(268,735
|
)
|
|
|
(206,370
|
)
|
Fixed
assets, net
|
|
$
|
379,198
|
|
|
$
|
396,455
|
|
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 $590,696 and $408,812 at June 30, 2018 and December 31, 2017, respectively.
Depreciation
and amortization expense totaled $62,365 and $14,308 for the six months ended June 30, 2018 and 2017, respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
11 – Accrued Expenses
Accrued
expenses consisted of the following at June 30, 2018 and December 31, 2017, respectively:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
Accrued
Payroll, Officers
|
|
$
|
136,272
|
|
|
$
|
113,393
|
|
Accrued Payroll
and Payroll Taxes
|
|
|
135,234
|
|
|
|
135,234
|
|
Accrued Interest
|
|
|
160,444
|
|
|
|
117,411
|
|
Refundable
Advances
|
|
|
82,500
|
|
|
|
82,500
|
|
|
|
$
|
514,450
|
|
|
$
|
448,538
|
|
Note
12 – Convertible Debentures
Convertible
debentures consist of the following at June 30, 2018 and December 31, 2017, respectively:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
On
May 18, 2018, the Company received net proceeds of $1,100,000 in exchange for an unsecured convertible promissory note that
carries a 12% interest rate with a face value of $1,100,000 (“First Grass Roots Investors Note”), which matures
on May 18, 2019. The principal and interest are convertible into shares of common stock after 90 days at the discretion of
the note holder at a price equal to 50% of the closing traded price if the average of the high and low trading price of the
Company’s common stock is less than or equal to $0.15, 40% of the closing traded price if such average is more than
$0.15 and less than $0.20, and 30% of the closing traded price if such average is more than $0.20. Interest is payable semi-annually.
The note is currently in default.
|
|
$
|
1,100,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On
May 8, 2018, the Company issued a $108,000 unsecured promissory note to JSJ Investments, Inc., bearing interest at a rate
of 8% per annum, with a maturity date of May 8, 2019 in exchange for net proceeds of $103,000. The note is convertible at
70% of the lowest VWAP during the ten (10) trading days prior to the conversion request date. The note is currently in default.
|
|
|
108,000
|
|
|
|
-
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
May 1, 2018, the Company issued a (i) $240,000 unsecured promissory note to SBI Investments, LLC, bearing interest at a rate
of 5% per annum, with a maturity date of February 1, 2019, and (ii) a Warrant exercisable until May 1, 2021 to purchase 1,000,000
shares of the Company’s common stock at a price of $0.10 per share, in exchange for net proceeds of $225,000. The note
is convertible at 70% of the lowest VWAP during the fifteen (15) trading days prior to the conversion request date. The note
is currently in default.
|
|
|
240,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
April 17, 2018, the Company issued a $38,500 unsecured promissory note to Jefferson Street Capital, LLC, bearing interest
at a rate of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $35,000. The note is convertible
at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request
date. The note is currently in default.
|
|
|
38,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
April 17, 2018, the Company issued a $136,500 unsecured promissory note to BlueHawk Capital, LLC, bearing interest at a rate
of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $125,000. The note is convertible
at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request
date. The note is currently in default.
|
|
|
136,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
February 13, 2018, 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 (“Fifth Group 10 Note”), which matures on February
13, 2019. 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 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. The note is currently
in default.
|
|
|
122,400
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On
January 16, 2018, 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 (“Fourth Group 10 Note”), which matures on January 16,
2019. The principal and interest are 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 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. The note is currently
in default.
|
|
|
122,400
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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 10 Note”), which matures on December
15, 2018. The principal and interest are 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 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. On June 26, 2018
the noteholder converted $50,000 of principal in exchange for the issuance of 1,547,508 shares. The note is currently in default.
|
|
|
72,400
|
|
|
|
122,400
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 various dates between December 11, 2017 and April 17, 2018, the noteholders
converted an aggregate $339,873, consisting of $316,500 of principal and $23,373 of interest, in exchange for the issuance
of 6,875,717 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
266,500
|
|
|
|
|
|
|
|
|
|
|
On
November 8, 2017, the Company issued a $200,000 promissory note (“Second Group 10 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 Company must at all times reserve at least 50 million shares of common stock for potential conversions. On various
dates between December 6, 2017 and February 5, 2018, the noteholder converted $200,000 of principal in exchange for the issuance
of 3,658,652 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
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 10 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 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. On various dates between May 15, 2018 and May 30, 2018,
the noteholders converted an aggregate $128,000, consisting of $122,400 of principal and $5,600 of interest, in exchange for
the issuance of 4,378,352 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
122,400
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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). On various dates between March 22, 2018 and May 30, 2018, the noteholders converted $167,657, consisting of $158,000
of principal and $9,657 of interest, in exchange for the issuance of 5,244,756 shares. The Second Gemini note has been satisfied
in full, and $155,000 of cash was repaid on the Second Black Mountain leaving $3,000 of principal outstanding. The note is
currently in default.
|
|
|
3,000
|
|
|
|
316,000
|
|
|
|
|
|
|
|
|
|
|
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 are 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 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. On June 1, 2018, a penalty of $15,300 was added
to the principal balance of the note due to default provisions. The note is currently in default.
|
|
|
91,800
|
|
|
|
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 are 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. On June 1, 2018, a penalty of $15,300 was added to the principal balance of the
note due to default provisions. The note is currently in default.
|
|
|
91,800
|
|
|
|
76,500
|
|
|
|
|
|
|
|
|
|
|
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 are 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. 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
|
|
|
2,161,800
|
|
|
|
1,165,300
|
|
Less:
unamortized debt discounts
|
|
|
(1,820,149
|
)
|
|
|
(790,621
|
)
|
Convertible
debentures
|
|
$
|
341,651
|
|
|
$
|
374,679
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In
accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $1,802,036 and $1,004,335
for the variable conversion features of the convertible debts incurred during the six months ended June 30, 2018 and the year
ended December 31, 2017. The discounts are being amortized to interest expense over the term of the debentures using the effective
interest method. The Company recorded $772,508 and $42,294 of interest expense pursuant to the amortization of the note discounts
during the six months ended June 30, 2018 and 2017, respectively.
All
of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The
maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s
issued and outstanding shares.
In
accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued represented embedded
derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value
of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.
The
Company recorded interest expense pursuant to the stated interest rates on the convertible debentures in the amount of $64,685
and $8,903 for the six months ended June 30, 2018 and 2017, respectively related to convertible debts.
Note
13 – Short Term Debt
Short-term
debt consists of the following at June 30, 2018 and December 31, 2017, respectively:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
On June
18, 2018, the Company received proceeds of $100,000 in exchange for an unsecured promissory note maturing on August 8, 2018,
carrying a fixed interest amount of $5,000 (“First Irani Note”). The note is currently in default.
|
|
$
|
100,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On March 23, 2018,
the Company received proceeds of $17,000 in exchange for an unsecured promissory note due on demand, carrying a fixed interest
amount of $750. The Company repaid a total of $10,000 between March 29, 2018 and April 19, 2018.
|
|
|
7,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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 under 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 issued 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
|
|
|
|
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
|
|
|
|
50,000
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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. The note is currently in default.
|
|
|
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
short term debt
|
|
|
1,315,000
|
|
|
|
1,208,000
|
|
Less:
unamortized debt discounts
|
|
|
(192,673
|
)
|
|
|
(432,190
|
)
|
Short
term debt
|
|
$
|
1,122,327
|
|
|
$
|
775,810
|
|
The
Company recorded $229,517 and $229,599 of interest expense pursuant to the amortization of the note discounts during the six months
ended June 30, 2018 and 2017, respectively.
The
Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $31,499
and $23,128 at June 30, 2018 and 2017, respectively.
The
following presents components of interest expense by instrument type at June 30, 2018 and 2017, respectively:
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
Interest
on convertible debentures
|
|
$
|
64,685
|
|
|
$
|
8,903
|
|
Amortization of debt
discounts
|
|
|
1,002,025
|
|
|
|
377,026
|
|
Interest on short term
debt
|
|
|
31,499
|
|
|
|
31,809
|
|
Accounts
payable related finance charges
|
|
|
1,231
|
|
|
|
2,177
|
|
|
|
$
|
1,099,440
|
|
|
$
|
419,915
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
14 – Derivative Liabilities
As
discussed in Note 12 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 $5,396,061 and $9,530,296 at June
30, 2018 and December 31, 2017, respectively. The change in fair value of the derivative liabilities resulted in a gain of $5,112,148
and a loss of $1,867,832 for the six months ended June 30, 2018 and 2017, respectively, which has been reported as other expense
in the statements of operations. The gain of $5,112,148 for the six months ended June 30, 2018 consisted of a gain of $5,685 attributable
to the value in excess of discounts on new warrants, a gain of $5,761,228 attributable to the fair value of warrants, a loss of
$625,240 on excess derivative value and a net loss in market value of $23,840 on the convertible notes. The loss of $1,867,832
for the six months ended June 30, 2017 consisted of a loss of $1,792,445 attributable to the fair value of warrants and a net
loss in market value of $75,387 on the convertible notes.
The
following presents the derivative liability value by instrument type at June 30, 2018 and December 31, 2017, respectively:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
Convertible
debentures
|
|
$
|
2,723,524
|
|
|
$
|
1,033,644
|
|
Common
stock warrants
|
|
|
2,672,537
|
|
|
|
8,496,652
|
|
|
|
$
|
5,396,061
|
|
|
$
|
9,530,296
|
|
The
following is a summary of changes in the fair market value of the derivative liability during the six months ended June 30, 2018
and the year ended December 31, 2017, respectively:
|
|
Derivative
|
|
|
|
Liability
|
|
|
|
Total
|
|
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
|
|
Increase in derivative value attributable to issuance of convertible notes
|
|
|
2,373,976
|
|
Increase in derivative value attributable to issuance of warrants
|
|
|
89,546
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
(5,737,388
|
)
|
Debt conversions and redemptions
|
|
|
(860,369
|
)
|
Balance, June 30, 2018
|
|
$
|
5,396,061
|
|
Key
inputs and assumptions used to value the convertible debentures and warrants issued during the six months ended June 30, 2018
and the year ended December 31, 2017:
|
●
|
Stock
prices on all measurement dates were based on the fair market value and would fluctuate with projected volatility.
|
|
●
|
The
projected volatility curve for each valuation period was based on the historical volatility of the Company in the range of
116% to 138%.
|
|
●
|
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 $3,439,887 to $2,188,776 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%.
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
15 – Changes in Stockholders’ Equity (Deficit)
Convertible
Preferred Stock
The
Board, from the authorized capital of 50,000,000 preferred shares, has authorized and designated 2,000,000 shares of series A
preferred stock (“Series A”) and 12,000,0000 shares of series C preferred stock (“Series C”), of which
2,000,000 shares and 12,000,000 shares are issued and outstanding, respectively. A total of 36,000,000 shares remained undesignated.
The
Series A shares carry 25:1 preferential voting rights, and are convertible into shares of common stock on a 1:1 basis.
The
Series C shares carry 50:1 preferential voting rights, and are convertible into shares of common stock on a 1:1 basis
Common
Stock Authorized
The
Company has authorized 1,200,000,000 shares of common stock, of which 678,072,453 shares were issued and outstanding and 206,605,359
shares were reserved as of the date of this filing.
Common
Stock Sales
On
June 29, 2018, the Company sold 1,021,000 units at $0.05 per unit, consisting of 1,021,000 shares of common stock and 1,021,000
warrants exercisable at $0.075 per share over the following 3 years to an individual investor for proceeds of $51,050. The shares
were subsequently issued on September 10, 2018.
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 were subsequently
issued on April 30, 2018.
Common
Stock Issuances for Settlement of Trade Payables
On
June 1, 2018, the Superior Court of the State of California, County of Los Angeles, Central District, entered an order approving
the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended,
in accordance with the Settlement Agreement, in the matter entitled RAI Capital, LLC, Plaintiff (“RAI”), v. Players
Network, Inc., Defendant. RAI commenced the Action against the Company to recover $398,217 of past-due obligations and accounts
payable of the Company which RAI had purchased from certain vendors of the Company pursuant to the terms of separate receivable
purchase agreements between RAI and such vendors. The Order provided for the full and final settlement of the Action, whereby
the Company issued RAI 13,298,837 shares in settlement of $398,217 of outstanding payables. The total fair value of the common
stock was $743,405 based on the closing price of the Company’s common stock on the date of grant, resulting in a loss of
$345,188.
Common
Stock Issuances for Debt Conversions
On
June 26, 2018, a noteholder elected to convert $50,000 of outstanding principal on the Third Group 10 Note in exchange for 1,547,508
shares of common stock. The shares were subsequently issued on July 3, 2018. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
On
May 30, 2018, the Company issued 2,591,362 shares of common stock pursuant to the conversion of $78,000, consisting of $72,400
of outstanding principal and $5,600 of unpaid interest, on the First Group 10 Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been recognized.
On
May 30, 2018, the Company issued 2,118,721 shares of common stock pursuant to the conversion of $61,973, consisting of $58,000
of outstanding principal and $3,973 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
May 15, 2018, the Company issued 1,786,990 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the First Group 10 Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
May 14, 2018, the Company issued 2,009,451 shares of common stock pursuant to the conversion of $53,205, consisting of $50,000
of outstanding principal and $3,205 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
April 17, 2018, the Company issued 707,156 shares of common stock pursuant to the conversion of $24,998, consisting of $13,250
of outstanding principal and $11,748 of unpaid interest, 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 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.
Exercise
of Warrants
On
June 5, 2018, the holder of the Second Black Mountain Note exercised warrants to purchase 7,954,546 shares of common stock on
a cashless basis at $0.0264, resulting in the issuance of 4,389,180 shares.
On
May 31, 2018, the holder of the First Emunah Note exercised warrants to purchase 1,000,000 shares of common stock at $0.03535
per share for proceeds of $35,350.
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 were subsequently issued on April 30, 2018.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Common
Stock Awarded for Services
On
April 19, 2018, the Company awarded 500,000 shares of common stock to BlueHawk Capital, LLC pursuant to a consulting agreement.
The total fair value of the common stock was $29,000 based on the closing price of the Company’s common stock on the date
of grant. The Company subsequently issued the shares on July 11, 2018.
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 Company subsequently issued 300,000 shares on April 30, 2018 and the remaining 50,000 shares on September 10, 2018.
On
January 1, 2018, pursuant to his employment agreement, our chief financial officer at that time earned $11,940 of compensation
that was required to be paid with 300,000 shares of our common stock based on the closing stock price on such date. The shares
were subsequently issued on July 11, 2018.
Note
16 – Options and Warrants
Warrants
Granted
On
June 29, 2018, the Company sold 1,021,000 units at $0.05 per unit, consisting of 1,021,000 shares of common stock and 1,021,000
warrants exercisable at $0.075 per share over the following 3 years, to an individual investor for proceeds of $51,050. The shares
were subsequently issued on September 10, 2018.
On
June 1, 2018, a warrant holder was issued warrants to purchase 3,000,000 shares of common stock at $0.055 per share over the following
5 years as an inducement to exercise his warrants on March 28, 2018.
On
May 31, 2018, the holder of the First Emunah Note exercised warrants to purchase 1,000,000 shares of common stock at $0.03535
per share for proceeds of $35,350.
On
May 14, 2018, warrants issued to Black Mountain Equities, Inc. were adjusted pursuant to terms within their promissory note, resulting
in the issuance of an additional 6,454,545 warrants exercisable at $0.0264 over the remaining term, in addition to the repricing
of an aggregate 2,800,000 previously outstanding warrants to $0.0264 per share.
On
May 14, 2018, warrants issued to Gemini Master Fund, Ltd. were adjusted pursuant to terms within their promissory note, resulting
in the issuance of an additional 5,154,545 warrants exercisable at $0.0264 over the remaining term, in addition to the repricing
of an aggregate 2,800,000 previously outstanding warrants to $0.0264 per share.
On
May 1, 2018, the Company issued warrants exercisable until May 1, 2021 to purchase 1,000,000 shares of the Company’s common
at a price of $0.10 per share, in exchange for net proceeds of $225,000 pursuant to a convertible note offering to SBI Investments,
LLC.
On
April 17, 2018, class A and B warrants issued to Emunah Funding LLC and Fourth Man LLC were adjusted pursuant to terms within
their respective notes, resulting in the issuance of an additional 2,594,714 warrants exercisable at $0.03535 over the remaining
term, in addition to the repricing of an aggregate 6,528,340 previously outstanding warrants to $0.03535 per share. All of these
warrants were subsequently exchanged for two $75,000 convertible notes on October 15, 2018.
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 were subsequently issued on April 30, 2018.
On
March 12, 2018, the Company sold 333,333 units at $0.15 per unit, consisting of 333,333 shares of common stock and 333,333 warrants
exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000. The shares were
subsequently issued on April 30, 2018
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Warrants
Exercised
On
June 5, 2018, the holder of the Second Black Mountain Note exercised warrants to purchase 7,954,546 shares of common stock on
a cashless basis at $0.0264, resulting in the issuance of 4,389,180 shares.
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.
Options
Expired
On
February 20, 2018, a total of 8,000,000 options with a strike price of $0.04 per share expired.
On
June 1, 2018, a total of 3,000,000 options with a strike price of $0.08 per share expired.
Note
17 – Income Taxes
The
Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides
that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For
the six months ended June 30, 2018 and the year ended December 31, 2017, 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 June 30, 2018, the Company had approximately $31,364,000 of federal net operating losses.
The net operating loss carry forwards, if not utilized, will begin to expire in 2025.
The
components of the Company’s deferred tax asset are as follows:
|
|
June
30 2018
|
|
|
December
31, 2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
6,586,440
|
|
|
$
|
9,328,900
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
before valuation allowance
|
|
|
6,586,440
|
|
|
|
9,328,900
|
|
Less:
Valuation allowance
|
|
|
(6,586,440
|
)
|
|
|
(9,328,900
|
)
|
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 June 30, 2018 and December 31, 2017, 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:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Federal
and state statutory rate
|
|
|
21
|
%
|
|
|
35
|
%
|
Change in valuation
allowance on deferred tax assets
|
|
|
(21
|
)%
|
|
|
(35
|
)%
|
In
accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note
18 – Non-Controlling Interest
Non-controlling
interest represents a minority interest in GLFH of 15.6% held by ten individuals. The net loss attributable to the non-controlling
interest totaled $88,650 and $57,249 during the six months ended June 30, 2018 and 2017, respectively. The net loss attributable
to the parent was and $518,540 and $334,870 during the six months ended June 30, 2018 and 2017, respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
19 – Subsequent Events
Rescission
of Salinas Acquisition
On
December 31, 2018, the Company and LCG Business Enterprises, LLC (“LCG”) agreed to rescind the May 24, 2018 purchase
of substantially all the assets of LCG , consisting primarily of a 56,000 square foot commercial cannabis agricultural facility
at 25600 Encinal Road, Salinas, California. The Company decided to rescind the transaction primarily due to operational and reporting
issues it discovered following the closing. Subsequently, all of the assets, liabilities and operations of this subsidiary were
returned to LCG on December 31, 2018.
Proposed Jujuy, Argentina Joint
Venture
In October 2018, Green Leaf and
the Province of Jujuy, Argentina (the “Province”) entered into a Memorandum of Understanding that contemplates the
formation of an entity jointly owned by the Province and Green Leaf that will cultivate, manufacture and distribute cannabis and
cannabis products on land provided to the joint venture by the Province. Pursuant to the Memorandum of Understanding, among other
things, Green Leaf will be responsible for providing the necessary funding for the development of the project and the hiring and
training of local personnel for the project, and the Province will provide all of the necessary permits as well as the use of
land in Jujuy, Argentina at no cost to the joint venture for a 99-year period. The Company’s management believes this venture
presents a significant opportunity for the Company and its stockholders, particularly given the favorable agricultural climate
in Jujuy, Argentina and the local cost of labor in that market. However, the Memorandum of Understanding is subject to the negotiation
and execution of definitive agreements, and there can be no assurance that the transactions contemplated by Memorandum of Understanding
will be effected.
Convertible
Debt Financing
On
October 15, 2018, the Company issued an unsecured convertible promissory note that carries a 3% interest rate with a face value
of $75,000 (“Second Fourth Man Note”), which matures on October 15, 2019. The principal and interest are convertible
into shares of common stock at the discretion of the note holder at a price equal to seventy one percent (71%) of the three lowest
daily volume weighted average 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 note was issued in
exchange for the cancellation of warrants previously awarded on October 27, 2017, consisting of the class A warrant in respect
to the right to purchase 1,000,000 shares and the class B warrant to purchase 75,000 shares.
On
October 15, 2018, the Company issued an unsecured convertible promissory note that carries a 3% interest rate with a face value
of $75,000 (“Second Emunah Note”), which matures on October 15, 2019. The principal and interest are convertible into
shares of common stock at the discretion of the note holder at a price equal to seventy one percent (71%) of the three lowest
daily volume weighted average 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 note was issued in
exchange for the cancellation of warrants previously awarded on October 27, 2017, consisting of the class A warrant in respect
to the right to purchase 1,000,000 shares and the class B warrant to purchase 75,000 shares.
On
July 13, 2018, the Company received net proceeds of $47,250 in exchange for an unsecured convertible promissory note that carries
an 8% interest rate with a face value of $76,500 (“First BHP Note”), which matures on April 13, 2019. The principal
and interest are 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 three (3) lowest closing bid 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 paid total debt issuance costs of $2,750 and 100,000 shares of common stock that is being amortized over the life
of the loan on the straight-line method, which approximates the effective interest method. The Company must at all times reserve
at least 12 million shares of common stock for potential conversions.
Common
Stock Issued on Subscriptions Payable
On
various dates between July 3, 2018, and September 10, 2018, a total of 3,418,508 shares were issued that have been classified
as Subscriptions Payable on our financial statements with respect to shares issued pursuant to stock sales in the prior period
valued at an aggregate $145,640.
Common
Stock Issuances for Debt Conversions
On
various dates between July 16, 2018 and January 9, 2019, the Company issued an aggregate 22,807,918 shares of common stock pursuant
to the conversion of $574,287, consisting of $545,723 of outstanding principal and $28,565 of unpaid interest, on convertible
notes.
Common
Stock Sales
On
December 14, 2018, the Company sold 416,667 units at $0.06 per unit, consisting of 416,667 shares of common stock and 416,667
warrants exercisable at $0.12 per share over the following 3 years to an individual investor for proceeds of $25,000.
On
September 24, 2018, the Company sold 1,000,000 units at $0.065 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.085 per share over the following 3 years to an individual investor for proceeds of $65,000. The shares
were subsequently issued on December 14, 2018.
On
November 30, 2018, the Company sold 300,000 units at $0.05 per unit, consisting of 300,000 shares of common stock and 300,000
warrants exercisable at $0.08 per share over the following 3 years to an individual investor for proceeds of $15,000.
On
November 5, 2018, the Company sold 2,000,000 units at $0.06 per unit, consisting of 2,000,000 shares of common stock and 2,000,000
warrants exercisable at $0.12 per share over the following 3 years to an individual investor for proceeds of $120,000.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Exercise
of Warrants
On
December 19, 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.
Common
Stock Awarded for Services, Officers and Directors
On
July 11, 2018, the Company issued an aggregate total of 4,800,000 shares of common stock to the three board members for services
provided. The total fair value of the common stock was $191,040 based on the closing price of the Company’s common stock
on the date of grant.
On
July 11, 2018, the Company issued an additional 400,000 shares of common stock to one of its board members as a bonus for services
provided. The total fair value of the common stock was $15,920 based on the closing price of the Company’s common stock
on the date of grant.
On
July 11, 2018, the Company issued 3,000,000 shares of common stock to its CEO in satisfaction of unpaid compensation. The total
fair value of the common stock was $119,400 based on the closing price of the Company’s common stock on the date of grant.
Common
Stock Awarded for Services
On
various dates between July 11, 2018 and November 9, 2018, the Company issued a total of 15,400,000 shares of common stock to 27
consultants for services provided. The aggregate fair value of the common stock was $741,990 based on the closing price of the
Company’s common stock on the respective grant dates.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
and Outlook
Players
Network is actively pursuing the cultivation and processing of medical and recreational marijuana in North Las Vegas pursuant
to two medical marijuana establishments (MME) licenses that were granted by the city of North Las Vegas for cultivation and production
to its majority-owned subsidiary, Green Leaf Farms Holdings LLC, in which the Company holds an 85.4% interest. We also distribute
content relating to the cannabis industry at WeedTV.com.
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 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.
Future
Outlook
Green
Leaf plans to focus on developing high quality products and to employ a strong branding strategy to sell its custom cannabis strains.
The quality and consistency of our branded products would help build consumer loyalty. The growing facility, with modular construction
would allow us to scale efficiency from both a cost and operational standpoint.
Proposed Jujuy, Argentina Joint
Venture
In October 2018, Green Leaf and
the Province of Jujuy, Argentina (the “Province”) entered into a Memorandum of Understanding that contemplates the
formation of an entity jointly owned by the Province and Green Leaf that will cultivate, manufacture and distribute cannabis and
cannabis products on land provided to the joint venture by the Province. Pursuant to the Memorandum of Understanding, among other
things, Green Leaf will be responsible for providing the necessary funding for the development of the project and the hiring and
training of local personnel for the project, and the Province will provide all of the necessary permits as well as the use of
land in Jujuy, Argentina at no cost to the joint venture for a 99-year period. The Company’s management believes this venture
presents a significant opportunity for the Company and its stockholders, particularly given the favorable agricultural climate
in Jujuy, Argentina and the local cost of labor in that market. However, the Memorandum of Understanding is subject to the negotiation
and execution of definitive agreements, and there can be no assurance that the transactions contemplated by Memorandum of Understanding
will be effected.
Results
of Operations for the Three Months Ended June 30, 2018 and 2017:
The
following tables and narrative discussion set forth key components of our results of operations for the period indicated and key
components of our income and expenses for the period indicated. Our subsequent discontinued operations necessitated that we present
our historical operations related to those operations as a single line item within the statement of operations. The following
discussion of our results of operations is based on our continuing operations and, therefore, excludes any results or discussion
of our discontinued operation.
|
|
For the Three Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Increase /
|
|
|
|
2018
|
|
|
2017
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
20,102
|
|
|
$
|
2,979
|
|
|
$
|
17,123
|
|
Cost of goods sold
|
|
|
22,873
|
|
|
|
2,208
|
|
|
|
20,665
|
|
Gross profit (loss)
|
|
|
(2,771
|
)
|
|
|
771
|
|
|
|
(3,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
131,844
|
|
|
|
71,849
|
|
|
|
59,995
|
|
General and administrative
|
|
|
694,784
|
|
|
|
734,430
|
|
|
|
(39,646
|
)
|
Officer salaries
|
|
|
72,317
|
|
|
|
43,750
|
|
|
|
28,567
|
|
Depreciation and amortization
|
|
|
31,815
|
|
|
|
11,534
|
|
|
|
20,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
930,760
|
|
|
|
861,563
|
|
|
|
69,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(933,531
|
)
|
|
|
(860,792
|
)
|
|
|
(72,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(2,715,781
|
)
|
|
|
(2,039,357
|
)
|
|
|
676,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(3,649,312
|
)
|
|
$
|
(2,900,149
|
)
|
|
$
|
749,163
|
|
Revenues:
During
the three months ended June 30, 2018 and 2017, we received revenues from the sale of cannabis products, in-home media, advertising
fees and the recognition of deferred revenues on content development. Our sales primarily consisted of the resale of raw materials
that we previously purchased from other licensed production and cultivation facilities and resold to licensed dispensaries as
we progressed in the development of our facility. Aggregate revenues for the three months ended June 30, 2018 were $20,102, compared
to revenues of $2,979 during the three months ended June 30, 2017, an increase in revenues of $17,123, or 575%.
Cost
of Goods Sold
Cost
of goods sold for the three months ended June 30, 2018 were $22,873, compared to $2,208 during the three months ended June 30,
2017, an increase of $20,665, or 936%. 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 increased operations in the current year.
Direct
Operating Costs:
Direct
operating costs were $131,844 for the three months ended June 30, 2018, compared to $71,849 for the three months ended June 30,
2017, an increase of $59,995, or 84%. Our direct operating costs increased primarily due to expanded work on WeedTV and our cannabis
cultivation operations during the three months ended June 30, 2018.
General
and Administrative:
General
and administrative expenses were $694,784 for the three months ended June 30, 2018, compared to $734,430 for the three months
ended June 30, 2017, a decrease of $39,646, or 5%. General and administrative expense decreased primarily due to decreased insurance
and administrative costs during the three months ended June 30, 2018 compared to the three months ended June 30, 2017.
Officer
Salaries:
Officer
salaries expense totaled $72,317 for the three months ended June 30, 2018, compared to $43,750, for the three months ended June
30, 2017, an increase of $28,567, or 65%. Our officer salaries increased due to the employment of a Chief Financial Officer during
the three months ended June 30, 2018 that was not present during the comparative three months ended June 30, 2017.
Depreciation
and Amortization:
Depreciation
and amortization expense was $31,815 for the three months ended June 30, 2018, compared to $11,534 for the three months ended
June 30, 2017, an increase of $20,281, or 176%. Depreciation increased primarily due to placing our leasehold improvements and
other equipment purchases into service for the three months ended June 30, 2018 compared to the three months ended June 30, 2017.
Operating
Loss:
Operating
loss for the three months ended June 30, 2018 was $933,531 or ($0.00) per share, compared to an operating loss of $860,792 for
the three months ended June 30, 2017, or ($0.00) per share, an increase of $72,739, or 8%. Operating loss increased primarily
due to increased operating costs and depreciation as we ramped up efforts to get our cannabis facility operational during the
three months ended June 30, 2018 compared to the three months ended June 30, 2017.
Other
Income (Expense):
Other
expense, on a net basis, was $2,715,781 for the three months ended June 30, 2018, compared to other expense of $2,039,357 for
the three months ended June 30, 2017, an increase of $676,424, or 33%. Other expense increased, on a net basis, primarily due
to a loss on debt extinguishment of $375,788 and the goodwill impairment of $1,250,314 in the current period, and by increased
interest expense on debt financing of $228,675, as diminished by a decreased change in derivative liability of $1,178,323 during
the three months ended June 30, 2018, compared to the three months ended June 30, 2017.
Net
Loss from Continuing Operations:
The
net loss from continuing operations for the three months ended June 30, 2018 was $3,649,312, or $0.01 per share, compared to a
net loss from continuing operations of $2,900,149, or ($0.01) per share, for the three months ended June 30, 2017, an increase
of $749,163, or 26%. Net loss from continuing operations increased primarily due to increased non-cash charges presented as other
expenses, above, during the three months ended June 30, 2018, compared to the three months ended June 30, 2017.
Results
of Operations for the Six Months Ended June 30, 2018 and 2017:
The
following tables and narrative discussion set forth key components of our results of operations for the period indicated and key
components of our income and expenses for the period indicated. Our subsequent discontinued operations necessitated that we present
our historical operations related to those operations as a single line item within the statement of operations. The following
discussion of our results of operations is based on our continuing operations and, therefore, excludes any results or discussion
of our discontinued operation.
|
|
For the Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Increase /
|
|
|
|
2018
|
|
|
2017
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
211,964
|
|
|
$
|
3,070
|
|
|
$
|
208,894
|
|
Cost of goods sold
|
|
|
228,049
|
|
|
|
2,208
|
|
|
|
225,841
|
|
Gross profit (loss)
|
|
|
(16,085
|
)
|
|
|
862
|
|
|
|
(16,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
243,407
|
|
|
|
93,051
|
|
|
|
150,356
|
|
General and administrative
|
|
|
1,179,179
|
|
|
|
1,152,866
|
|
|
|
26,313
|
|
Officer salaries
|
|
|
141,267
|
|
|
|
122,100
|
|
|
|
19,167
|
|
Depreciation and amortization
|
|
|
62,365
|
|
|
|
14,308
|
|
|
|
48,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,642,303
|
|
|
|
1,382,325
|
|
|
|
243,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,642,303
|
)
|
|
|
(1,381,463
|
)
|
|
|
260,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
2,400,464
|
|
|
|
(2,287,747
|
)
|
|
|
4,688,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
758,161
|
|
|
$
|
(3,669,210
|
)
|
|
$
|
4,427,371
|
|
Revenues:
During
the six months ended June 30, 2018 and 2017, we received revenues from the sale of cannabis products, in-home media, advertising
fees and the recognition of deferred revenues on content development. Our sales primarily consisted of the resale of raw materials
that we previously purchased from other licensed production and cultivation facilities and resold to licensed dispensaries as
we progressed in the development of our North Las Vegas facility. Aggregate revenues for the six months ended June 30, 2018 were
$211,964, compared to revenues of $3,070 during the six months ended June 30, 2017, an increase in revenues of $208,894, or 6,804%.
Cost
of Goods Sold
Cost
of goods sold for the six months ended June 30, 2018 were $228,049, compared to $2,208 during the six months ended June 30, 2017,
an increase of $225,841, or 10,228%. 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.
Direct
Operating Costs:
Direct
operating costs were $243,407 for the six months ended June 30, 2018, compared to $93,051 for the six months ended June 30, 2017,
an increase of $150,356, or 162%. Our direct operating costs increased primarily due to increased focus on WeedTV and our cannabis
cultivation operations during the six months ended June 30, 2018.
General
and Administrative:
General
and administrative expenses were $1,179,179 for the six months ended June 30, 2018, compared to $1,152,866 for the six months
ended June 30, 2017, an increase of $26,313, or 2%.
Officer
Salaries:
Officer
salaries expense totaled $141,267 for the six months ended June 30, 2018, compared to $122,100, for the six months ended June
30, 2017, an increase of $19,167, or 16%. Our officer salaries increased due to the employment of a Chief Financial Officer during
the six months ended June 30, 2018 that was not present in the comparative period, which was offset by stock-based compensation
bonuses paid during the six months ended June 30, 2017 that was not paid during the six months ended June 30, 2018.
Depreciation
and Amortization:
Depreciation
and amortization expense was $62,365 for the six months ended June 30, 2018, compared to $14,308 for the six months ended
June 30, 2017, an increase of $48,057, or 336%. Depreciation increased primarily due to placing our leasehold improvements and
other equipment purchases into service for the six months ended June 30, 2018 compared to the six months ended June 30, 2017.
Operating
Loss:
Operating
loss for the six months ended June 30, 2018 was $1,642,303 or ($0.00) per share, compared to an operating loss of $1,381,463 for
the six months ended June 30, 2017, or ($0.00) per share, an increase of $260,840 or 19%. Operating loss increased primarily due
to increased operating costs and depreciation as we significantly ramped up efforts to get our cannabis facility operational during
the six months ended June 30, 2018, compared to the six months ended June 30, 2017.
Other
Income (Expense):
Other
income, on a net basis, was $2,400,464 for the six months ended June 30, 2018, compared to other expenses of $2,287,747 for the
six months ended June 30, 2017, an increase of $4,688,211, or 205%. Other income increased, on a net basis, primarily due to the
increased change in derivative liabilities of $6,979,980, or 374%, as offset by losses on debt extinguishment of $362,017, goodwill
impairment of $1,250,314 and an increased interest expense on debt financing of $679,525, or 162% during the six months ended
June 30, 2018, compared to the six months ended June 30, 2017.
Net
Income (Loss) from Continuing Operations:
The
net income from continuing operations for the six months ended June 30, 2018 was $758,161, or $0.00 per share, compared to a net
loss from continuing operations of $3,669,210, or ($0.01) per share, for the six months ended June 30, 2017, an increase of $4,427,371,
or 121%. Net income increased primarily due to an increased change in our derivative liabilities during the six months ended June
30, 2018, compared to the six months ended June 30, 2017.
LIQUIDITY
AND CAPITAL RESOURCES
The
following table summarizes total assets, accumulated deficit, stockholders’ equity and working capital at June 30, 2018
compared to December 31, 2017.
|
|
June
30,
|
|
|
December
31,
|
|
|
Increase
/
|
|
|
|
2018
|
|
|
2017
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
4,977,204
|
|
|
$
|
1,209,773
|
|
|
$
|
3,767,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
12,383,427
|
|
|
$
|
11,860,997
|
|
|
$
|
522,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated (Deficit)
|
|
$
|
(43,886,398
|
)
|
|
$
|
(44,597,401
|
)
|
|
$
|
(711,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity (Deficit)
|
|
$
|
(7,406,223
|
)
|
|
$
|
(10,651,224
|
)
|
|
$
|
(3,245,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital (Deficit)
|
|
$
|
(8,376,117
|
)
|
|
$
|
(11,456,491
|
)
|
|
$
|
(3,080,374
|
)
|
Our
principal source of operating capital has been provided from equity investments and debt financings. At June 30, 2018, we had
a negative working capital position of $8,376,117.
Debt
Financing
On
October 15, 2018, the Company issued an unsecured convertible promissory note that carries a 3% interest rate with a face value
of $75,000, which matures on October 15, 2019. The principal and interest are convertible into shares of common stock at the discretion
of the note holder at a price equal to seventy one percent (71%) of the three lowest daily volume weighted average prices of the
Company’s common stock over the ten (10) trading days preceding the conversion date.
On
October 15, 2018, the Company issued an unsecured convertible promissory note that carries a 3% interest rate with a face value
of $75,000, which matures on October 15, 2019. The principal and interest are convertible into shares of common stock at the discretion
of the note holder at a price equal to seventy one percent (71%) of the three lowest daily volume weighted average prices of the
Company’s common stock over the ten (10) trading days preceding the conversion date.
On
July 13, 2018, the Company received net proceeds of $47,250 in exchange for an unsecured convertible promissory note that carries
an 8% interest rate with a face value of $76,500 which matures on April 13, 2019. The principal and interest are 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 three
(3) lowest closing bid traded prices of the Company’s common stock over the ten (10) trading days preceding the conversion
date.
On
June 18, 2018, the Company received proceeds of $100,000 in exchange for an unsecured promissory note maturing on August 8, 2018,
carrying a fixed interest amount of $5,000.
On
May 18, 2018, the Company received net proceeds of $1,100,000 in exchange for an unsecured convertible promissory note that carries
a 12% interest rate with a face value of $1,100,000, which matures on May 18, 2019. The principal and interest are convertible
into shares of common stock after 90 days at the discretion of the note holder at a price equal to 50% of the closing traded price
if the average of the high and low trading price of the Company’s common stock is less than or equal to $0.15, 40% of the
closing traded price if such average is more than $0.15 and less than $0.20, and 30% of the closing traded price if such average
is more than $0.20.
On
May 8, 2018, the Company issued a $108,000 unsecured promissory note to JSJ Investments, Inc., bearing interest at a rate of 8%
per annum, with a maturity date of May 8, 2019 in exchange for net proceeds of $103,000. The note is convertible at 70% of the
lowest VWAP during the ten (10) trading days prior to the conversion request date.
On
May 1, 2018, the Company issued a (i) $240,000 unsecured promissory note to SBI Investments, LLC, bearing interest at a rate of
5% per annum, with a maturity date of February 1, 2019, and (ii) a Warrant exercisable until May 1, 2021 to purchase 1,000,000
shares of the Company’s common at a price of $0.10 per share, in exchange for net proceeds of $225,000. The note is convertible
at 70% of the lowest VWAP during the fifteen (15) trading days prior to the conversion request date.
On
April 17, 2018, the Company issued a $38,500 unsecured promissory note to Jefferson Street Capital, LLC, bearing interest at a
rate of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $35,000. The note is convertible
at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request
date.
On
April 17, 2018, the Company issued a $136,500 unsecured promissory note to BlueHawk Capital, LLC, bearing interest at a rate of
8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $125,000. The note is convertible at 70%
of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request date.
On
March 23, 2018, the Company received proceeds of $17,000 in exchange for an unsecured promissory note due on demand, carrying
a fixed interest amount of $750. The Company repaid $3,000 of principal on March 29, 2018.
On
February 13, 2018, 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, which matures on February 13, 2019. The principal and interest are
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
January 16, 2018, 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, which matures on January 16, 2019. The principal and interest are 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.
Common
Stock Sales
On
June 29, 2018, the Company sold 1,021,000 units at $0.05 per unit, consisting of 1,021,000 shares of common stock and 1,021,000
warrants exercisable at $0.075 per share over the following 3 years to an individual investor for proceeds of $51,050.
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.
We
have utilized these funds for our current and planned operations, and to comply with our regulatory reporting requirements. 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 directors, employees
and outside consultants, and the Company expects to continue this practice. In the six months ended June 30, 2018, the Company
incurred a total of $66,490 in stock-based compensation, consisting of the issuance of 300,000 shares valued at $25,550 and 800,000
unissued shares valued at $40,940, including 300,000 shares valued at $11,940 owed to our former CFO. In comparison, we incurred
, a total of $532,463 in stock-based compensation for the six months ended June 30, 2017, consisting of 2,000,000 shares of common
stock valued at $34,600 as a bonus to our CEO, as well as an aggregate 5,000,000 shares of common stock valued at $86,500 to our
directors and an aggregate 4,620,000 shares valued at $174,925 to other service providers. 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 and
2019.
As
of January 25, 2019, we had ten convertible notes outstanding with a cumulative outstanding principal balance of $1,816,078. Repayment
of the notes must be done at a premium to the then-outstanding balance, resulting in the need for approximately $2,000,000 in
liquid capital. If, rather than repay these notes, we allow them to convert into our common stock, such conversions would be effected
at a discount to the market price of our common stock, and such shares of common stock could be sold into the open market immediately
following such conversion. The potential dilutive effects of these conversions at various conversion prices below our most recent
market price of $0.04 per share is as follows:
|
|
|
100%
|
|
|
|
75%
|
|
|
|
50%
|
|
|
|
25%
|
|
Potential conversion
prices
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential dilutive
shares
|
|
|
45,401,938
|
|
|
|
60,535,917
|
|
|
|
90,803,875
|
|
|
|
181,607,750
|
|
Off-Balance
Sheet Arrangements
As
of June 30, 2018, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a material current
or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations liquidity,
capital expenditures or capital resources.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
The
Company has had recurring net losses, an accumulated deficit, and a working capital deficiency. These conditions raise substantial
doubt about its ability to continue as a going concern. Management plans to try to increase sales and improve operating results
through the expansion of the distribution channels of our programming with a view to increasing advertising and sponsorship revenues.
Management believes that funds generated from operations will not be sufficient to cover cash needs in the foreseeable future,
and we will continue to rely on expected increased revenues and private equity to cover our cash needs, although there can be
no assurance in this regard. In the event sales do not materialize at the expected rates, management would seek additional financing
or would conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives,
becoming profitable or continuing our business without either a temporary interruption or a permanent cessation.
The
unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to
continue as a going concern.
Critical
Accounting Policies
We
have identified the following policies below as critical to our business and results of operations. Our reported results are impacted
by the application of the following accounting policies, certain of which require management to make subjective or complex judgments.
These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact
quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly
as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies
are described in the following paragraphs.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control
and ownership:
|
|
|
State
of
|
|
|
|
|
|
|
|
Abbreviated
|
|
Name
of Entity
|
|
|
Incorporation
|
|
|
|
Relationship
|
|
|
|
Reference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Players Network
(1)
|
|
|
Nevada
|
|
|
|
Parent
|
|
|
|
PNTV
|
|
Green Leaf Farms
Holdings, LLC
(2)
|
|
|
Nevada
|
|
|
|
Subsidiary
|
|
|
|
GLFH
|
|
Players Michigan
LLC
(3)
|
|
|
Michigan
|
|
|
|
Subsidiary
|
|
|
|
SALINAS
|
|
(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”).
(3)
Players
Michigan LLC is a wholly-owned subsidiary formed to acquire substantially all of the assets and liabilities of LCG Business Enterprises,
LLC (“LCG”) pursuant to an Asset Purchase Agreement that closed on May 24, 2018, which was subsequently sold back
to LCG on December 31, 2018. The parties to the Asset Purchase Agreement agreed to rescind the transaction on December 31, 2018.
The
consolidated financial statements herein contain the operations of the subsidiary listed above. All significant inter-company
transactions have been eliminated in the preparation of these financial statements. The parent company, PNTV and subsidiary, GLFH
will be collectively referred to herein as the “Company”, “Players Network” or “PNTV”. The
Company’s headquarters are located in Las Vegas, Nevada and substantially all of its customers are within the United States.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following
steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue
when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be
reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met:
(1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has
occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably
assured.
There
was no impact on the Company’s financial statements as a result of adopting Topic 606 for the six months ended June 30,
2018 and 2017, or the twelve months ended December 31, 2017.
The
Company recognizes revenue from its internet television platform from internally generated products and from partnered merchants
when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is
fixed or determinable; and collectability is reasonably assured. These criteria are met when the customers purchase a product
or access a web-based video, the product or web-based video has been electronically delivered to the purchaser and payment has
been received. At that time, the Company’s obligations to the customer is substantially complete. The Company records the
net amount it retains from the sale of items from its internet television platform after paying any agreed upon percentage of
the purchase price to the featured advertising merchant excluding any applicable taxes. Revenue is recorded on a net basis because
the Company is acting as an agent of the partnered merchant in the transaction. Provisions for discounts and rebates to customers,
estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The
Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company
and the customer jointly determine that the product has been delivered or no refund will be required.
Network
revenue consists of monthly network broadcast subscription revenue, which is recognized over the period in which the subscription
service is available. Broadcast television advertising revenue is recognized when advertisements are aired. Video production revenue
is recognized as digital video film is completed and accepted by the customer and collection is reasonably assured.
Revenue
from the distribution of domestic television series is recognized as earned using the following criteria:
|
●
|
Persuasive
evidence of an arrangement exists;
|
|
●
|
The
show/episode is complete, and in accordance with the terms of the arrangement, has been delivered or is available for immediate
and unconditional delivery;
|
|
●
|
The
license period has begun and the customer can begin its exploitation, exhibition or sale;
|
|
●
|
The
price to the customer is fixed and determinable; and
|
|
●
|
Collectability
is reasonably assured.
|
Due
to practical limitations applicable to operating relationships with On-Demand networks, the Company has not considered collectability
of advertising or television license revenues to be reasonably assured, and accordingly, the Company has not recognize such revenue
unless payment has been received.
Audio/Video
content licensing revenues were recognized when the underlying royalties from the sales of the related products were earned. The
Company recognized minimum revenue guarantees, if any, ratably over the term of the license or as earned royalties based on actual
sales of the related products, if greater.
Revenue
from the sale of our cannabis products is recognized by our subsidiary at the point of sale, at which time payment is received.
Management estimates an allowance for sales returns.
Derivative
Liability
The
Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and
Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance
sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value
is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument,
the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments
that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities
at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible
Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked
financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would
enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument
that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock.
A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted
for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s
own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation
of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability
within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set
forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or
incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation
sale.