QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,2000
------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
----------------------- ----------------------
Commission file number 0-29363
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The Players Network
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 880343702
--------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
(Issuer's telephone number) (702) 895-8884
---------------------------------------------------
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
--- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 8,456,981 shares of common
stock, par value $.001 per share as of September 15, 2000
Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]
<PAGE>
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION.................................................
Item 1. Financial Statements..................................................
Item 2. Management's Discussion and Analysis or Plan of Operation............
PART II - OTHER INFORMATION...................................................
Item 1. Legal Proceedings....................................................
Item 2. Changes in Securities and Use of Proceeds............................
Item 3. Defaults Upon Senior Securities......................................
Item 4. Submission of Matters to a Vote of Securities Holders................
Item 5. Other Information....................................................
Item 6. Exhibits and Reports on Form 8-K.....................................
-i-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PLAYERS NETWORK
CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<PAGE>
THE PLAYERS NETWORK
INDEX TO CONDENSED FINANCIAL STATEMENTS
Condensed Balance Sheet as of September 30, 2000
Condensed Statement of Operations
Nine Months and Three Months Ended September 30, 2000 and 1999
Condensed Statement of Cash Flows
Nine Months and Three Months Ended September 30, 2000 and 1999
Notes to Condensed Financial Statements
<PAGE>
THE PLAYERS NETWORK
CONDENSED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 2000
ASSETS
Current assets
Cash $ 11,072
Accounts receivable 62,270
Prepaid advertising 108,600
Prepaid expenses 16,295
-----------
Total current assets 198,237
Property and equipment - net 464,678
Capitalized video production costs - net 1,076,973
Capitalized web site development costs - net 205,854
Intangible and other assets 8,670
-----------
Total assets $ 1,954,412
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 195,080
Accrued expenses 107,014
Current portion of long-term liabilities 45,100
Installment purchase agreement 125,000
Deferred revenue 18,000
Loans payable, stockholders 45,153
-----------
Total current liabilities 535,347
Deferred revenue 17,500
Long-term liabilities, less current portion 89,346
-----------
Total liabilities 642,193
-----------
Stockholders' equity
Common stock, $.001 par value;
25,000,000 shares authorized,
8,539,994 shares issued and outstanding 8,540
Additional paid-in capital 6,212,379
Accumulated deficit (4,908,700)
-----------
Stockholders' equity 1,312,219
-----------
Total liabilities and stockholders' equity $ 1,954,412
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
THE PLAYERS NETWORK
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------------------------- ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Network $ 196,365 $ 160,968 $ 83,095 $ 43,380
Advertising 92,964 27,948 17,188 5,599
Production and other 400,316 53,942 83,246 8,713
----------- ----------- ----------- -----------
Total revenues 689,645 242,858 183,529 57,692
----------- ----------- ----------- -----------
Operating expenses
Selling, general and administrative 1,211,820 789,353 343,650 425,930
Depreciation and amortization 283,936 180,619 111,919 37,532
----------- ----------- ----------- -----------
Total operating expenses 1,495,756 969,972 455,569 463,462
----------- ----------- ----------- -----------
Other expenses
Interest expense 20,633 38,999 8,920 12,647
----------- ----------- ----------- -----------
Net loss $ (826,744) $ (766,113) $ (280,960) $ (418,417)
=========== =========== =========== ===========
Basic and diluted loss per share $ (0.101) $ (0.154) $ (0.033) $ (0.079)
=========== =========== =========== ===========
Weighted average shares outstanding 8,177,395 4,985,120 8,448,270 5,321,474
=========== =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
-2-
<PAGE>
<TABLE>
THE PLAYERS NETWORK
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------------------------- ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities $ 176,192 $ 247,388 $ 87,001 $ 259,660
Cash flows from investing activities (612,089) (319,453) (266,210) ( 206,563)
Cash flows from financing activities 382,674 75,363 190,281 ( 50,662)
----------- ----------- ----------- -----------
Net increase (decrease) in cash ( 53,223) 3,298 11,072 2,435
Cash at beginning of period 64,295 1,823 - 2,686
----------- ----------- ----------- -----------
Cash at end of period $ 11,072 $ 5,121 $ 11,072 $ 5,121
=========== =========== =========== ===========
Supplemental cash flow information
Noncash investing and financing activities
Common stock issued in exchange for
notes payable, stockholder $ 160,397 $ - $ - $ -
Common stock issued in exchange for
accounts payable and services 272,843 40,627 149,690 40,627
Equipment acquisitions financed by
capital leases 91,976 - - -
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
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<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to make the information
presented not misleading. The condensed financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-SB for the year ended December 31, 1999.
The unaudited condensed financial statements included herein reflect, in the
opinion of management, all adjustments (consisting primarily only of normal
recurring adjustments) necessary to present fairly the results for the interim
periods. The results of operations for the nine months ended September 30, 2000
are not necessarily indicative of results to be expected for the entire year
ending December 31, 2000.
2. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Players Network (the "Company") was organized under the laws of the State of
Nevada on March 16, 1993. The Company is engaged in the development and
marketing of a customized, interactive, full-service gaming television network.
In addition, the Company has developed a web site for the purpose of selling
primarily gaming supplies and travel-related services over the Internet. This
web site became operational during January 2000 and generated advertising
revenues of approximately $93,000 during the nine months ended September 30,
2000.
The Company filed a 15c2-11 with the National Association of Securities Dealers,
which became effective on March 30, 1998 and received the stock-trading symbol
PNTV. The Company's common stock was delisted from the Over the Counter Bulletin
Board on March 7, 2000 and subsequently listed on October 20, 2000.
Capitalized video production costs:
Capitalized video production costs which are expected to benefit future periods
are capitalized as incurred. The individual film forecast method is used to
amortize these costs. Under this method, costs accumulated in the production of
a video are amortized in the proportion that gross realized revenues bear to
management's estimate of total gross revenues. Amortization expense of
approximately $186,000 and $150,000 was charged to operations for the nine
months ended September 30, 2000 and 1999, respectively. Accumulated amortization
was approximately $490,000 and $306,000 at September 30, 2000 and 1999,
respectively.
-4-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
Capitalized web site development costs:
The Company has capitalized certain costs associated with the development of its
e-commerce web site, PLAYERSNETWORK.COM. The Company follows the guidance
promulgated by Statement of Position 98-1, "Accounting for Software Developed
for Internal Use," which requires that all costs incurred to establish
technological feasibility should be expensed as incurred. After technological
feasibility was established, development costs are capitalized and amortized
over the estimated useful life. Total costs capitalized through September 30,
2000 were $260,615. These costs will be amortized on a straight-line basis over
a period of three years. Amortization expense for the nine months ended
September 30, 2000 was $54,761.
Long-lived assets:
The Company makes reviews for the potential impairment of long-lived assets and
certain identifiable intangibles, such as capitalized video production costs and
capitalized web site development costs, whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition
is less than its carrying amount. There were no impairment losses recorded for
the nine months ended September 30, 2000.
Income taxes:
The Company applies the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. A valuation allowance has been
established until realization of deferred tax assets is reasonably assured.
Deferred tax assets and liabilities are measured using the enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled.
Basic and diluted loss per share:
The basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding for the period. Diluted loss per
share is the same as basic loss per share because the assumed exercise of
potential common stock would have an anti-dilutive effect.
Barter transactions:
The Company accounts for barter transactions, where advertising is both rendered
and received, in accordance with EITF 99-17, "Accounting for Advertising Barter
Transactions", which requires the recognition of revenue and expense only if the
fair value of the advertising or services provided is determinable based on the
Company's experience in receiving cash or other consideration readily
convertible to cash. The Company accounts for other barter transactions in
accordance with EITF 93-11, "Accounting for Barter Transaction Involving Barter
Credits", and APB No. 29, "Accounting for Nonmonetary Transactions", which
require that the fair value of the nonmonetary asset exchanged be used in
recording the nonmonetary transactions.
-5-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
Revenue recognition:
Network revenue consists of initial, subscription and renewal revenues. The
Company adopted the revenue recognition policy to comply fully with the guidance
in Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", by recognizing network revenue on a straight-line basis over the
contractual term. Deferred initial and subscription fees were $35,500 at
September 30, 2000, of which $18,000 was current. Advertising revenue is
recognized when advertisements are aired. Production and other revenues consist
of video production, stage rental and other production-related revenues. Video
production revenue is recognized when video production is completed and accepted
by the customer. The stage rental and other production revenue is recognized
when the stage rental period has expired.
Advertising costs:
The Company's policy is to expense advertising costs as a period expense.
Advertising costs of $170,500 and $3,200 were charged to operations during the
nine months ended September 30, 2000 and 1999, respectively.
Stock-based compensation:
The Company has adopted Statement of Financial Accounting Standard No. 123 (SFAS
123), "Accounting for Stock-Based Compensation". In accordance with SFAS 123,
the Company records stock-based compensation for stock instruments issued to
nonemployees in exchange for goods or services based on the fair value of goods
and services received or the fair value of stock instruments surrendered. The
Company measures compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by APB No. 25, "Accounting for
Stock Issued to Employees".
Segment reporting:
During the nine months ended September 30, 2000, the Company first applied
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS No. 131). This statement
establishes standards for the reporting of information about operating segments
in annual and interim financial statements and requires restatement of prior
year information. Operating segments are defined as components of an enterprise
for which separate financial information is available that is evaluated
regularly by the chief operating decision maker(s) in deciding how to allocate
resources and in assessing performance. SFAS No. 131 also requires disclosures
about products and services, geographic areas and major customers. The adoption
of SFAS No. 131 did not affect results of operations or financial position but
did affect the disclosure of segment information, as presented in Note 11.
-6-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
New accounting pronouncements:
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
was issued in June 1998 and was subsequently amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133". SFAS No. 133 addresses the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. Adoption of these pronouncements is
required for the period beginning on July 1, 2000. The Company does not invest
in derivative instruments, as defined, and, accordingly, does not expect these
pronouncements to have a material impact on the results of its operations.
In March 2000, the Emerging Issues Task Force (EITF) issued EITF Issue 00-2,
"Accounting for Web Site Development Costs." This consensus provides guidance on
what types of costs incurred to develop Web sites should be capitalized or
expensed. The Company adopted this consensus on July 1, 2000. During the three
months ended September 30, 2000, the Company did not capitalize any Web site
development costs.
In June 2000, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 00-2, "Accounting by Producers or Distributors of
Films". SOP 00-2 provides guidance on capitalizing film costs and recognizing
related revenues and expenses. The Company currently applies accounting policies
which are in conformity with SOP 00-2 and, accordingly, does not expect SOP 00-2
to have an effect on the financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Studio equipment $ 107,802
Furniture and equipment 74,185
Video equipment 405,578
Work in process 21,359
Leasehold improvements 1,900
--------------
Total cost
Accumulated depreciation (146,146)
--------------
Net book value $ 464,678
==============
Work in process consists of the construction cost of a video production booth,
which will be completed in the year 2000.
-7-
<PAGE>
The cost of equipment held under capital leases totaled $143,645 at September
30, 2000. The related accumulated depreciation was $34,109 at September 30,
2000.
Depreciation expense charged to operations was $42,974 and $28,037 for the nine
months ended September 30, 2000 and 1999, respectively.
-8-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
4. NOTES AND LOANS PAYABLE, STOCKHOLDERS
Notes payable to the president of $160,397 at December 31, 1999 were converted
to 542,634 common shares in January 2000 based on the fair market value of the
stock.
Loans payable, stockholders at September 30, 2000 were due on demand with
interest rates ranging from 10% to 13% per year. Interest expense for the nine
months ended September 30, 2000 was $576.
5. LONG-TERM LIABILITIES
The Company has the following long-term liabilities:
<TABLE>
<CAPTION>
<S> <C>
Capital lease obligation payable to Advanta Business Services,
collateralized by specified video equipment, payable in monthly
installments of $228 including interest at 24.84%. $ 3,864
Capital lease obligation payable to Granite Financial Services,
collateralized by specified video equipment, payable in monthly
installments of $661 including interest at 18.39%. 10,322
Equipment loan payable to Granite Financial Services, collateralized by
specified video equipment, payable in monthly installments of
$1,022 including interest at 16.4%. 28,283
Capital lease obligation payable to GE Capital Colonial Pacific
Leasing, collateralized by specified video equipment, payable in
monthly installments of $1,340 including interest at 17.32%. 39,752
Capital lease obligation payable to FlexLease, Inc. collateralized
by specified studio equipment, payable in monthly installments
of $1,209 including interest at 33.37%. 23,306
Capital lease obligation payable to Pacific Leasing Corporation,
collateralized by specified studio equipment, payable in monthly
installments of $1,356 including interest at 23.82%. 28,919
------------
$ 134,446
============
</TABLE>
-9-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
Future minimum payments at September 30, 2000 are as follows:
Year Ending
-----------
2001 $ 69,802
2002 67,628
2003 42,440
2004 5,494
------------
185,364
Less: amount representing interest 50,918
------------
134,446
Less: current portion 45,100
------------
$ 89,346
============
6. STOCKHOLDERS' EQUITY
The Company issued 1,798,743 shares of common stock during the nine months ended
September 30, 2000, of which 921,975 shares were for $340,453 in cash, 221,014
shares for services with an estimated value of $149,723, and 655,754 shares for
debts totaling $291,337, of which 542,634 shares were for stockholders' debt
(see Note 4) and 113,120 shares were for accounts payable to an unrelated party.
7. INCOME TAXES AND DEFERRED INCOME TAXES
Income taxes and components of deferred tax assets are as follows:
2000 1999
-------------- --------------
Deferred tax assets
Net operating loss carryforwards $ 1,019,426 $ 1,007,777
Stock-based compensation 211,302 114,614
-------------- --------------
1,230,728 1,122,391
Less - Valuation allowance (1,230,728) (1,122,391)
-------------- --------------
Net deferred tax asset $ -0- $ -0-
============== ==============
The Company has available net operating loss carryforwards of approximately
$3,409,000, which expire as follows: 2011, $1,741,000; 2012, $531,000; 2018,
$339,000 and 2019, $798,000.
-10-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
8. STOCK OPTIONS AND WARRANTS
The Company has issued stock options and warrants to purchase the Company's
common stock to officers, key employees, directors and outsiders as compensation
and for services rendered. The stock options and warrants are summarized as
follows:
<TABLE>
<CAPTION>
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Warrants Price
------- ----- -------- -----
<S> <C> <C> <C> <C>
Outstanding at December 31, 1999 1,240,500 $ 1.43 590,000 $ 1.75
Issued 677,500 .75 - -
Exercised - - - -
Expired (301,500) 2.50 (90,000) 2.50
Cancelled - - - -
----------- -----------
Outstanding at March 31, 2000 1,616,500 .94 500,000 1.28
=========== ===========
Stock options exercisable at
March 31, 2000 1,616,500 .94
Warrants exercisable at
March 31, 2000 500,000 1.28
Issued 1,200,000 .90 - -
Exercised - - - -
Expired - - - -
Cancelled - - - -
----------- -----------
Outstanding at June 30, 2000 2,816,500 .92 500,000 1.28
=========== ===========
Stock options exercisable at
June 30, 2000 2,816,500 .92
Warrants exercisable at June 30, 2000 500,000 1.28
Issued 520,000 .75 - -
Exercised - - - -
Expired (292,000) 1.53 - -
Cancelled - - - -
----------- -----------
Outstanding at September 30, 2000 3,044,500 .84 500,000 1.28
=========== ===========
Stock options exercisable at
September 30, 2000 3,044,500 .84
Warrants exercisable at September 30, 2000 500,000 1.28
</TABLE>
-11-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
Summary information about the Company's stock options and warrants outstanding
at September 30, 2000 is as follows:
<TABLE>
<CAPTION>
Outstanding and Weighted Average
Weighted Average Exercisable at Contractual Periods
Exercise Price September 30, 2000 in Years
-------------- ------------------ --------
<S> <C> <C> <C>
OPTIONS
-------
$ .75 2,481,500 2.05
1.10 500,000 3.00
1.75 33,000 2.00
2.50 30,000 2.00
-------------
$ .84 3,044,500 1.94
======= ============= =====
WARRANTS
--------
$ 1.25 150,000 2.00
1.50 350,000 2.87
-------------
$ 1.43 500,000 2.44
======= ============= =====
</TABLE>
The Company accounts for stock options and warrants issued to nonemployees under
the fair value method, pursuant to SFAS No. 123, "Accounting for Stock-Based
Compensation". The fair value of these stock options and warrants was calculated
at the date of issuance using a Black-Scholes Option Valuation Model assuming
risk-free interest rates of 6.57%, 6.59% and 6.61% and a volatility factor of
expected market price of the Company's common stock of 321.05%. During the nine
months ended September 30, 2000, the Company issued 2,397,500 stock options for
services that expire through June 30, 2004 and carry exercise prices ranging
from $.75 to $2.50. Under the provisions of SFAS No. 123, compensation expense
arising from the issuance of stock options for the quarters ended September 30,
2000 and 1999 was $113,035 and $40,627, respectively, which was included in
selling, general and administrative expenses.
No stock options were issued to employees during the nine months ended September
30, 2000.
-12-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
9. BARTER TRANSACTIONS
On January 17, 2000, the Company entered into an agreement to render video
production services, in exchange for advertising services for $234,000. During
the nine months ended September 30, 2000, the Company rendered video production
services of $234,000, of which $138,000 was recognized as advertising expense
and the remaining balance as prepaid advertising. The value of the video
production services is based on the prevailing rate the Company would charge its
customers in the ordinary course of business.
In connection with two subscription agreements with hotels, the Company receives
up to $5,000 per month in complimentary room and food services. During the nine
months ended September 30, 2000, the Company utilized approximately $27,000 in
room and food services, which is reflected in the financial statements.
The Company entered into an agreement to render advertising services, in
exchange for various services. Advertising revenues of $16,800 have been
recognized and reflected in the September 30, 2000 financial statements.
The Company received video equipment with a fair market value of approximately
$15,000 in exchange for production services rendered during the three months
ended September 30, 2000. In connection with this transaction, the Company
recognized production revenue of $15,137 and recorded an asset for the same
value for the three months ended September 30, 2000.
10. MAJOR CUSTOMERS
Sales to six and three customers were approximately 65% of total revenues for
each of the nine months ended September 30, 2000 and 1999, respectively.
-13-
<PAGE>
THE PLAYERS NETWORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
11. REPORTABLE SEGMENTS
The Company has two reportable segments, development and marketing of a
customized, interactive, full-service gaming television network for
hotel-casinos ("PN") and website e-commerce ("website") business in connection
with selling primarily gaming supplies and travel-related services over the
Internet. The accounting policies of the segments are substantially the same as
those described in the summary of significant accounting policies, as presented
in Note 2. All revenues generated in the segments are external. The Company had
only one reportable segment in 1999. The website e-commerce began in 2000 and
has been operational since January 2000. For the nine months ended September 30,
2000, the total reportable segment information is as follows:
<TABLE>
<CAPTION>
PN Website Total
---------------- --------------- -----------------
<S> <C> <C> <C>
Reportable segments
External revenues $ 596,681 $ 92,964 $ 689,645
Depreciation and amortization 229,175 54,761 283,936
Operating income (loss) (844,314) 38,203 (806,111)
Assets 1,748,558 205,854 1,954,412
Capital expenditures 487,458 124,715 612,173
</TABLE>
Products and services revenues:
The table below presents external revenues for groups of similar products and
services for the nine months ended September 30, 2000:
Network $ 196,365
Advertising 92,964
Production and other 400,316
--------------
$ 689,645
==============
Both segments of the Company are operating in and have derived their revenues in
the United States.
12. SUBSEQUENT EVENT
On October 14, 2000, the Company's Board of Directors approved the sales of
stock and stock options to an unrelated party totaling $2,375,000. The stock and
stock option sales will occur over an eighteen-month period.
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
--------
The Company provides television programming and produces videos related
to gaming instruction and information to hotel casinos in Nevada, Iowa,
Louisiana and Mississippi on a private cable channel known as "PLAYERS NETWORK".
The Company also has an independent working sound stage in Las Vegas which it
uses for videos and also rents to various production companies.
The Company has three types of revenues. Network revenue consists of
initial, subscription and renewal revenues. The Company adopted the revenue
recognition policy to comply fully with the guidance in Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", by recognizing
network revenue on a straight-line basis over the contractual term. Deferred
initial and subscription fees were $35,500 at September 30, 2000, of which
$18,000 was current. Advertising revenue is recognized when advertisements are
aired. Production and other revenues consist of video production, stage rentals
and other production-related revenues. Video production revenue is recognized
when video production is completed and accepted by the customer. The stage
rental and other production revenue is recognized when the stage rental period
has expired.
In June 1999, the Company decided to pursue opportunities available on
the Internet. Through September 30, 2000, the Company capitalized web site
development costs of $205,854, which is net of amortization.
The web site "PLAYERSNETWORK.COM", which is operational and is
continually being expanded and upgraded, provides consumers with gaming "How to
Play" information in print form and video from the Company's existing library of
instructional gaming videos. Through "PLAYERSNETWORK.COM" the Company provides
visitors with gaming supplies at The Players General Store, a 900 item catalogue
of gaming items including "How to Play" books and tapes, playing cards, casino
quality gaming chips, casino game table tops, and actual casino tables and slot
machines purchased off the floor of Las Vegas' casinos.
The web site also provides information on almost every casino/gaming
site worldwide and "City Guides" to virtually every location where casinos are
located. In addition, the site provides financial reports on casino and gaming
company stocks. Through "PLAYERSNETWORK.COM" the Company provides travel, tour,
show ticket, and golf time reservation services.
The Company is establishing itself as a 24-hour digital web broadcaster
featuring live and previously recorded content.
-15-
<PAGE>
The Company had accumulated operating deficits of $4,908,700 and
$3,619,615 as of September 30, 2000 and 1999, respectively. However, the Company
had stockholders' equity of $1,312,219 and $686,020 as of September 30, 2000 and
1999, respectively.
The Company expects operating losses and negative operating cash flows
to continue for at least the next twelve months. It anticipates losses to
continue because it expects to incur additional costs and expenses related to
brand development; marketing and other promotional activities; hiring of
management, sales and other personnel; the expansion of infrastructure and
customer support services; strategic relationship development; and potential
acquisitions of related complementary businesses.
The Company saves a significant amount of cash by offering a
combination of cash and common stock and/or stock options to vendors and outside
consultants for services and asset acquisitions. The Company issued $621,475 and
$580,143 in stock and options for this purpose for the nine months ended
September 30, 2000 and 1999, respectively.
As part of the Company's internet e-commerce, the Company expects to
enter into many barter arrangements. For the nine months ended September 30,
2000, the Company recorded certain barter transactions, where advertising was
both rendered and received, in accordance with EITF 99-17, "Accounting for
Advertising Barter Transactions". The Company accounts for other barter
transactions in accordance with EITF 93-11, "Accounting for Barter Transactions
Involving Barter Credits", and APB No. 29, "Accounting for Nonmonetary
Transactions", which require the fair value of the asset exchanged be used in
recognizing the nonmonetary transaction. As a result of these transactions, the
Company recognized approximately $296,000 in barter revenue, $124,000 in
advertising expenses, and $27,000 in travel expenses.
Although the Company has experienced revenue growth since implementing
its Internet e-commerce business, continued revenue growth may not be indicative
of future operating results and there can be no assurance that it will achieve
or maintain profitability. Due to these factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily a
good indication of future performance. The results of operations in some future
periods may be below the expectations of analysts and investors.
Liquidity and Capital Resources
-------------------------------
The Company's principal source of operating capital has been provided
by private sales of the Company's common stock, stockholders loans and equipment
financing arrangements, as well as revenues from the operations. At September
30, 2000, the Company had working capital deficiency of $337,110. However,
$67,000 of current liabilities are to be paid in common stock and $80,000 are
future obligations on the Company's website and in room television network.
During the nine months ended September 30, 2000, the Company supplemented its
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working capital by receiving cash of $340,453 from the private sale of 921,975
shares of its common stock.
The Company anticipates capital expenditures in excess of $1,000,000
for its operations of PLAYERSNETWORK.COM, web broadcasting activities and video
production during the next twelve months. The Company believes that the current
cash flows generated from its revenues will not be sufficient to fund its
anticipated operations. The Company will require additional funding to finance
its operations through private sales and public debt or equity offerings.
However, there is no assurance that such financing can be obtained by the
Company.
As the Company pursues its Internet e-commerce strategy, it expects to
increase the number of full-time employees. In the fourth quarter of 1999, the
Company added three employees, raising the total to six. In the first quarter of
2000, two employees were hired, raising the total to eight. Thereafter, in July
2000, Players Network reduced its staff to seven full-time employees.
During the nine months ended September 30, 2000, an officer converted
$160,397 of loans into 542,634 restricted common shares. No such loans were
converted during the nine months ended September 30, 1999. Accounts payable to
an unrelated party of $123,120 were converted to 113,120 common shares in August
2000 based on the fair market value of the stock.
Recent Events
-------------
In October 2000, the Company signed an agreement with a strategic
investor, who agreed to purchase the Company's stock and stock options totaling
$2,375,000 over an eighteen-month period.
On October 20, 2000, the Company's stock began trading on the
Over-the-Counter Bulletin Board.
In March 2000, the Company signed a video production agreement with a
major casino hotel chain for approximately $50,000, which was completed in the
second quarter of 2000.
With existing subscription and video production agreements in hand, the
Company should experience nearly 100% revenue growth for the year 2000.
In June 2000, the Company named Michael Berk to the Board of Directors.
Michael Berk is the co-creator and executive producer of the syndicated
television show "Baywatch".
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Results of Operations - Nine Months Ended September 30, 2000 and 1999
---------------------------------------------------------------------
Revenues increased 184% from $242,858 for the nine months ended
September 30, 1999 to $689,645 for the nine months ended September 30, 2000. For
the nine months ended September 30, 2000, the Company had $196,365 in Network
Revenue, $92,964 in Advertising Revenue and $400,316 in Production and Other
Revenue compared to $160,968 in Network Revenue, $27,948 in Advertising Revenue
and $53,942 in Production and Other Revenue for the nine months ended September
30, 1999. The Company recorded approximately $296,000 in revenues from bartering
production services and advertising spots in exchange for magazine advertising
during the nine months ended September 30, 2000.
Selling, general, and administrative expenses increased 54% from
$789,353 for the nine months ended September 30, 1999 to $1,211,820 for the nine
months ended September 30, 2000. The increase in selling, general, and
administrative expenses was mainly due to increases in advertising expense from
$1,870 to $140,108; payroll expenses from $114,473 to $231,830; and legal and
accounting expenses from $14,174 to $180,459 for the nine months ended September
30, 1999 compared to the nine months ended September 30, 2000, respectively.
Certain expenses, primarily consulting and production costs, were paid with
common stock of $337,100 and $149,723 for the nine months ended September 30,
1999 and September 30, 2000, respectively.
Stock-based compensation charged to operations was $471,752 for the
nine months ended September 30, 2000 compared to $243,043 for the nine months
ended September 30, 1999. Stock-based compensation consists of warrants and
options issued to outside service providers in lieu of cash. For the nine months
ended September 30, 2000, the Company capitalized $167,884 in video production
costs. There were none capitalized for the nine months ended September 30, 1999.
Depreciation and amortization increased 57% from $180,619 for the nine
months ended September 30, 1999 to $283,936 for the nine months ended September
30, 2000. This was due to a change in the estimated useful life of the
capitalized video production costs from 10 years to 5.
Interest expense decreased 47% from $38,999 for the nine months ended
September 30, 1999 to $20,633 for the nine months ended September 30, 2000 due
to the conversion of $473,090 of shareholder loans to common stock at various
times from May 1999 to September 30, 2000.
New Accounting Pronouncements
-----------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998 and was subsequently amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133". SFAS No. 133 addresses the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. Adoption of these
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pronouncements is required for the period beginning on July 1, 2000. The Company
does not invest in derivative instruments, as defined, and, accordingly, does
not expect these pronouncements to have a material impact on the results of its
operations.
In March 2000, the Emerging Issues Task Force (EITF) issued EITF Issue
00-2, "Accounting for Web Site Development Costs." This consensus provides
guidance on what types of costs incurred to develop Web sites should be
capitalized or expensed. The Company adopted this consensus on July 1, 2000.
During the three months ended September 30, 2000, the Company did not capitalize
any Web site development costs.
In June 2000, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 00-2, "Accounting by Producers or
Distributors of Films". SOP 00-2 provides guidance on capitalizing film costs
and recognizing related revenues and expenses. The Company currently applies
accounting policies which are in conformity with SOP 00-2 and, accordingly, does
not expect SOP 00-2 to have an effect on the financial statements.
Inflation
---------
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Risk Factors and Cautionary Statements
--------------------------------------
Forward-looking statements in this report are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. The Company wishes to advise readers that actual results may differ
substantially from such forward-looking statements. Forward-looking statements
involve risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements, including, but
not limited to, the following: the ability of the Company to meet its cash and
working capital needs, the ability of the Company to successfully market its
product, and other risks detailed in the Company's periodic report filings with
the Securities and Exchange Commission.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended September 30, 2000 the issuer sold shares of
its Common Stock without registration under the Securities Act of 1933, as
amended, in reliance on the exemption provided by Section 4(2) of that Act and
without the use of underwriters, as follows:
o On August 10, 2000, the Company issued 10,000 shares of its Common
Stock for $5,000
o On August 10, 2000, the Company issued 900 shares of its Common
Stock for production services in the amount of $270
o On August 10, 2000, the Company issued 26,662 shares of its Common
Stock for services as a member of the Board of Directors of the
Company in the amount of $7,999
o On August 10, 2000, the Company issued 2,000 shares of its Common
Stock for services as a member of the Board of Directors of the
Company in the amount of $600
o On August 10, 2000, the Company issued 2,000 shares of its Common
Stock for services as a member of the Board of Directors of the
Company in the amount of $600
o On August 10, 2000, the Company issued 2,000 shares of its Common
Stock for services as a member of the Board of Directors of the
Company in the amount of $600
o On August 10, 2000, the Company issued 2,000 shares of its Common
Stock for services as a member of the Board of Directors of the
Company in the amount of $600
o On August 10, 2000, the Company issued 2,000 shares of its Common
Stock for services as a member of the Board of Directors of the
Company in the amount of $600
o On August 10, 2000, the Company issued 17,000 shares of its Common
Stock for consulting services in the amount of $5,100
o On August 10, 2000, the Company issued 10,000 shares of its Common
Stock for consulting services in the amount of $3,000
o On August 10, 2000, the Company issued 24,000 shares of its Common
Stock for consulting services in the amount of $7,200
o On August 10, 2000, the Company issued 113,120 shares of its
Common Stock in connection with accrued liability for web site
services
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit Number
Page No. Title of Exhibit
-------- ----------------
(3)(i) Articles of Incorporation of The Players Network (1)
N/A
(3)(ii) Bylaws of The Players Network (1)
N/A
(10)(i) Sublease Agreement between Players Network and Colella
N/A Productions, Inc. (1)
(10)(ii) Agreement (1)
N/A
27 Financial Data Schedule
N/A
(1) Incorporated by reference to the exhibits filed with the Registration
Statement on Form 10-SB, File No. 0-29363,
(B) REPORTS ON FORM 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 14, 2000
THE PLAYERS NETWORK
By: /s/ Mark Bradley
---------------------------------------
Its: Chief Executive Officer
