QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
AMENDMENT NO. 2
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 March 31, 2000
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
------------------ ---------------------------
Commission file number 0-29363
------------
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
--------------------------------------------------------------------------------
(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: 8,287,555 shares of common
stock, par value $.001 per share as of March 31, 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............
<PAGE>
In this amendment we have revised our revenue recognition policy as disclosed in
the financial statements and in the Overview section of the Management's
Discussion and Analysis. We have also discussed how the company accounts for
barter transactions in Note 2 and Note 9 of the financial statements. Finally,
we have recorded unused magazine advertising rights as a separate "prepaid
advertising" line item, rather than including them in "accounts receivable."
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PLAYERS NETWORK
FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<PAGE>
THE PLAYERS NETWORK
INDEX TO CONDENSED FINANCIAL STATEMENTS
Condensed Balance Sheet as of March 31, 2000 1
Condensed Statement of Operations
Three Months Ended March 31, 2000 and 1999 2
Condensed Statement of Cash Flows
Three Months Ended March 31, 2000 and 1999 3
Notes to Condensed Financial Statements 4 - 12
<PAGE>
THE PLAYERS NETWORK
CONDENSED BALANCE SHEET
March 31, 2000
ASSETS estated)
Current assets
Cash $ 147,848
Accounts receivable 81,021
Prepaid advertising 182,000
Prepaid expenses 77,262
-------------
Total current assets 488,131
Property and equipment - net 436,716
Capitalized video production costs - net 926,097
Capitalized web site development costs - net 222,975
Intangible and other assets 10,392
-------------
Total assets $2,084,311
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 88,654
Accrued expenses 207,317
Current portion of long-term liabilities 39,976
Installment purchase agreement 125,000
Deferred revenue 18,000
-------------
Total current liabilities 478,947
Deferred revenue 26,500
Long-term liabilities, less current portion 113,120
-------------
Total liabilities 618,567
-------------
Stockholders' Equity
Common stock, $.001 par value;
25,000,000 shares authorized,
8,178,081 shares issued and
outstanding 8,178
Additional paid-in capital 5,555,812
Accumulated deficit (4,098,246)
-------------
Stockholders' equity 1,465,744
-------------
Total liabilities and stockholders' equity $2,084,311
=============
<PAGE>
THE PLAYERS NETWORK
NOTES TO 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 three months ended March 31, 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 $49,000 during the three months ended March 31, 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 formerly listed on the Over the Counter
Bulletin Board, but is not currently listed.
Restatement of March 31, 2000 financial statements:
The financial statements as of March 31, 2000 and for the three months then
ended have been restated from those previously included in our Form 10QSB/A
dated May 16, 2000. The restated amounts have been prepared to recognize network
revenue on a straight line basis over the term of the related contract. The
unaudited financial statements previously issued have been restated with revenue
being reduced by $44,500 and deferred revenue being recorded in the same amount.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
The effect of the restatement on the previously reported amounts is as follows:
THREE MONTHS ENDED MARCH 31, 2000
As As Previously
Restated Reported
-------- --------
Net income (loss) $ (16,290) $ 28,210
Basic and diluted net income
(loss) per share (0.002) (0.003)
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 $55,000 and $47,000 was charged to operations for the three months
ended March 31, 2000 and 1999, respectively. Accumulated amortization was
approximately $360,000 and $131,000 at March 31, 2000 and 1999, respectively.
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 March 31, 2000
were $234,300. These costs will be amortized on a straight-line basis over a
period of three years. Amortization expense for the three months ended March 31,
2000 was $11,325.
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 three months ended March 31, 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.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
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.
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 SAB 101, by recognizing network revenue on a straight-line basis over the
contractual term. Deferred initial and subscription fees were $44,500 at March
31, 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 $61,500 and $14,600 were charged to operations during the
three months ended March 31, 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".
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Segment reporting:
During the three months ended March 31, 2000, the Company adopted 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.
New accounting pronouncement:
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 expect
these pronouncements to have a material impact on the results of its operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Studio equipment $ 59,171
Furniture and equipment 63,720
Video equipment 405,578
Work in process 21,359
--------------
Total cost
Accumulated depreciation (113,112)
--------------
Net book value $ 436,716
==============
Work in process consists of the construction cost of a video production booth,
which will be completed in the year 2000.
The cost of equipment held under capital leases totaled $143,645 at March 31,
2000. The related accumulated depreciation was $19,140 at March 31, 2000.
Depreciation expense charged to operations was $9,940 and $9,346 for the three
months ended March 31, 2000 and 1999, respectively.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
4. NOTES 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.
5. LONG-TERM LIABILITIES
The Company has the following long-term liabilities:
Capital lease obligation payable to Advanta Business
Services, collateralized by specified video equipment,
payable in monthly installments of $228 including
interest at 24.84%. $ 4,696
Capital lease obligation payable to Granite Financial
Services, collateralized by specified video equipment,
payable in monthly installments of $661 including
interest at 18.39%. 13,181
Equipment loan payable to Granite Financial Services,
collateralized by specified video equipment, payable in
monthly installments of $1,022 including interest at
16.4%. 31,921
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%. 43,920
Capital lease obligation payable to FlexLease, Inc.
collateralized by specified studio equipment, payable in
monthly installments of $1,209 including interest at
33.37%. 26,291
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%. 33,087
------------
$ 153,096
============
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Future minimum payments at March 31, 2000 are as follows:
YEAR ENDING
2001 $ 69,801
2002 69,801
2003 59,243
2004 17,338
------------
Less: amount representing interest 63,087
------------
153,096
Less: current portion 39,976
------------
$ 113,120
============
6. STOCKHOLDERS' EQUITY
The Company issued 1,436,830 shares of common stock during the three months
ended March 31, 2000, of which 852,846 shares were for $308,953 in cash, 41,350
shares for services with an estimated value of $35,225, and 542,634 shares for
debt totaling $160,397 (see Note 4).
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 $ 882,152 $ 904,171
Stock-based compensation 40,216 24,376
------------- -------------
922,368 928,547
Less - Valuation allowance (922,368) (928,547)
------------- -------------
Net deferred tax asset $ -0- $ -0-
============= ==============
The Company has available net operating loss carryforwards of approximately
$2,595,000, which expire as follows: 2011, $1,543,000; 2012, $531,000; 2018,
$339,000 and 2019, $181,000.
For the three months ended March 31, 2000, the Company recognized a tax benefit
of approximately $198,000 as a result of the net operating loss carryforward.
<PAGE>
THE PLAYERS NETWORK
NOTES TO 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>
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
Summary information about the Company's stock options and warrants outstanding
at March 31, 2000 is as follows:
</TABLE>
Outstanding and Weighted Average
Weighted Average Exercisable at Contractual Periods
Exercise Price March 31, 2000 in Years
-------------- -------------- --------
OPTIONS
-------
$ .60 12,000 1.83
.75 1,311,500 1.93
1.75 263,000 2.00
2.50 30,000 2.00
-------------
$ .94 1,616,500 1.94
======= ============= =====
WARRANTS
--------
$ 1.25 150,000 2.00
1.50 350,000 2.87
-------------
$ 1.43 500,000 2.44
======= ============= =====
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
The Company accounts for stock options and warrants issued to non-employees
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 a risk-free interest rate of 6.22% and a volatility factor of
expected market price of the Company's common stock of 127.06%. During the three
months ended March 31, 2000, the Company issued 677,500 stock options for
services that expire on December 31, 2000 and carry an exercise price of $.75.
Under the provisions of SFAS No. 123, compensation expense arising from the
issuance of stock options for the quarters ended March 31, 2000 and 1999 was
$47,802 and $48,750, respectively, which was included in selling, general and
administrative expenses.
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 three months ended March 31, 2000, the Company rendered video production
services of $234,000, of which $52,000 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 to 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 three
months ended March 31, 2000, the Company utilized approximately $4,000 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 $17,000 have been
recognized and reflected in the March 31, 2000 financial statements.
10. MAJOR CUSTOMERS
Sales to three customers were approximately 78% of total revenues for each of
the three months ended March 31, 2000 and 1999, respectively.
<PAGE>
THE PLAYERS NETWORK
NOTES TO 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 three months ended March 31,
2000, the total reportable segments information is as follows:
<TABLE>
PN Website Total
--------------- --------------- ----------------
<S> <C> <C> <C>
Reportable segments
External revenues $ 338,466 $ 48,745 $ 387,211
Depreciation and amortization 65,146 11,325 76,471
Operating income 26,060 37,420 63,480
Assets 1,861,336 222,975 2,084,311
Capital expenditures 245,913 99,010 344,923
</TABLE>
Products and services revenues:
The table below presents external revenues for groups of similar products and
services for the three months ended March 31, 2000:
Network $ 49,960
Advertising 48,745
Production and other 288,506
--------------
$ 387,211
==============
Both segments of the Company are operating in and have derived their revenues in
the United States.
<PAGE>
THE PLAYERS NETWORK
CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31, 2000 and 1999
(Restated)
2000 1999
----------- ------------
Revenues
Network $ 49,960 $ 73,543
Advertising 48,745 9,104
Production and other 288,506 17,870
----------- ------------
Total revenues 387,211 100,517
----------- ------------
Operating expenses
Selling, general and administrative 323,731 150,457
Depreciation and amortization 76,471 56,448
----------- ------------
Total operating expenses 400,202 206,905
----------- ------------
Other expenses
Interest expense 3,299 13,278
----------- ------------
Net Loss $ (16,290) $ (119,666)
=========== ============
Basic and diluted loss per share $ (0.002) $ (0.026)
Weighted average shares outstanding 7,793,671 4,683,579
<PAGE>
THE PLAYERS NETWORK
CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2000 and 1999
2000 1999
----------- --------
Cash flows from operating activities $ (105,555) $29,933
Cash flows from investing activities (90,518) (35,885)
Cash flows from financing activities 279,626 5,339
---------- --------
Net increase (decrease) in cash 83,553 (613)
Cash at beginning of period 64,295 1,823
---------- --------
Cash at end of period $ 147,848 $ 1,210
========== ========
Supplemental cash flow information
Non-cash investing and financing activities
Common stock issued in exchange for
notes payable, stockholder $ 160,397
Equipment acquisitions financed by
capital leases 103,298
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 on which it
produces videos. It also rents this facility 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 SAB 101, by recognizing
network revenue on a straight-line basis over the contractual term. Deferred
initial and subscription fees were $44,500 for the three months ended March 31,
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 March 31, 2000, the Company capitalized web site
development costs of approximately $222,975, 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.
The Company had accumulated operating deficits of $4,098,246 and
$2,973,168 as of March 31, 2000 and 1999, respectively. However, the Company had
stockholders' equity of $1,465,744 and $504,651 as of March 31, 2000 and 1999,
respectively.
<PAGE>
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 $118,267 and
$71,610 in stock and options for this purpose for the three months ended March
31, 2000 and 1999, respectively.
As part of the Company's Internet e-commerce, the Company expects to
enter into many barter arrangements. For the three months ended March 31, 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 $251,000 in barter revenue, $52,000 in
advertising expenses, and $4,000 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 March 31,
2000, the Company had positive working capital of $9,184. During the three
months ended March 31, 2000, the Company supplemented its working capital by
receiving cash of $308,953 from the private sale of 852,846 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.
<PAGE>
During the three months ended March 31, 2000, an officer converted
$160,397 of loans into 542,634 restricted common shares. No such loans were
converted during the three months ended March 31, 1999.
RECENT EVENTS
The Company signed three agreements with hotels in December 1999 and
January 2000, which will increase monthly subscription revenues by $10,000 per
month. The agreements also include licensing fees of $48,000. The Company did
not have any transactions related to these agreements for the period ended March
31, 2000.
In January 2000, the Company signed an agreement with iTravel Marketing
and YouTicket.com which will enable the Company to fulfill worldwide web site
room reservations, golf tee times and show tickets. iTravel Marketing also
provides e-commerce internet solutions and software and is the Company's
internet site programmer.
In December 1999, the Company signed an agreement with Play Streaming
Media Group, which agreed to deliver six "GlobeCasters" at no cost to the
Company in exchange for syndication of PLAYERS NETWORK online video content. The
Company does not have title to these "GlobeCasters", and this transaction, which
is structured as an operating lease, will be accounted for as bartering in
accordance with EITF 93-11, "Accounting for Barter Transaction Involving
Credits", and APB No. 29, "Accounting for Nonmonetary Transactions", which
require that the fair value of the nonmonetary assets exchanged be used in
recording the nonmonetary transaction. The syndication of online video content
is referred to as "V-Commerce", which is an area of high interest among media
companies. This equipment enables PLAYERS NETWORK to become a 24-hour a day web
network broadcaster. The Company will be the first digital network focused on
gaming and entertainment content. The Company anticipates completing the
transaction during the third quarter of year 2000.
In March 2000, the Company signed a video production agreement with a
major casino hotel chain for approximately $50,000 to be 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.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Revenues increased 285% from $100,517 for the three months ended March
31, 1999 to $387,211 for the three months ended March 31, 2000. For the three
months ended March 31, 2000, the Company had $49,960 in Network Revenue, $48,745
in Advertising Revenue and $288,506 in Production and Other Revenue compared to
$73,543 in Network Revenue, $9,104 in Advertising Revenue and $17,870 in
Production and Other Revenue for the three months ended March 31, 1999. The
Company recorded approximately $251,000 in revenues from bartering production
services and advertising spots in exchange for magazine advertising during the
three months ended March 31, 2000.
<PAGE>
Selling, general and administrative expenses increased 115% from
$150,457 for the three months ended March 31,1999 to $323,731 for the three
months ended March 31, 2000. The increase in selling, general and administrative
expenses was due to increases in consulting expenses from $42,000 to $80,665;
advertising expense from $1,008 to $52,638; payroll expenses from $43,537 to
$75,220; and legal and accounting expenses from $4,253 to $52,497 for the three
months ended March 31, 1999 compared to the three months ended March 31, 2000,
respectively. Certain expenses, primarily consulting and production costs, were
paid with common stock of $10,007 and $35,225 for the three months ended March
31, 1999 and March 31, 2000, respectively.
Stock-based compensation charged to operations was $47,802 for the
three months ended March 31, 2000 compared to $48,750 for the three months ended
March 31, 1999. Stock-based compensation consists of warrants and options issued
to outside service providers in lieu of cash. For the three months ended March
31, 2000, the Company capitalized $35,240 in video production costs.
Depreciation and amortization increased 35% from $56,448 for the three
months ended March 31, 1999 to $76,471 for the three months ended March 31,
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 75% from $13,278 for the three months ended
March 31, 1999 to $3,299 for the three months ended March 31, 2000 due to the
conversion of $473,090 of shareholder loans to common stock at various times
from May 1999 to March 31, 2000.
NEW ACCOUNTING PRONOUNCEMENT
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 expect these pronouncements to have a material impact on the results of
its operations.
INFLATION
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
<PAGE>
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.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
THE PLAYERS NETWORK
By: /s/ Mark Bradley
--------------------------------
Its: Chief Executive Officer
