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 June 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
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(Exact name of small business issuer as specified in its charter)
Nevada 880343702
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
(Issuer's telephone number) (702) 895-8884
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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 June 30, 2000
Transitional Small Business Disclosure Format (check one): Yes [] No[X]
<PAGE>
TABLE OF CONTENTS
PAGE
Item 1. Financial Statements................................................
Item 2. Management's Discussion and Analysis or Plan of Operation...........
PART II - OTHER INFORMATION...................................................
Item 2. Changes in Securities and Use of Proceeds...........................
Item 6. Exhibits and Reports on Form 8-K....................................
<PAGE>
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
THE PLAYERS NETWORK
CONDENSED STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended June 30, For the Three Months Ended June 30,
2000 1999 2000 1999
---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Revenues
Network $ 153,270 $ 117,588 $ 58,810 $ 44,045
Advertising
75,775 22,349 27,030 13,245
Production and other 317,071 45,229 28,565 27,359
---------------- ---------------- ---------------- ------------------
Total revenues 546,116 185,166 114,405 84,649
---------------- ---------------- ---------------- ------------------
Operating expenses
Selling, general and administrative 868,168 263,423 544,437 163,108
Depreciation and amortization 172,018 166,770 95,547 60,180
---------------- ---------------- ---------------- ------------------
Total operating expenses 1,040,186 430,193 639,984 223,288
---------------- ---------------- ---------------- ------------------
Other expenses
Interest expense 11,713 26,352 8,414 13,073
---------------- ---------------- ---------------- ------------------
Net loss $ (505,783) $ (271,379) $ (533,993) $ (151,712)
================ ================ ================ ==================
Basic loss per share $ (0.063) $ (0.066) $ (0.065) $ (0.038)
Weighted average shares outstanding - Basic 8,021,918 4,111,329 8,245,312 4,031,975
</TABLE>
<PAGE>
<TABLE>
THE PLAYERS NETWORK
CONDENSED BALANCE SHEET
JUNE 30, 2000
<CAPTION>
<S> <C>
ASSETS
Current assets
Accounts receivable $ 281,276
Prepaid expenses
33,087
-----------------
Total current assets 314,363
Property and equipment - net 459,685
Capitalized video production costs - net 1,075,727
Capitalized web site development costs - net 229,765
Intangible and other assets 8,724
-----------------
Total assets $ 2,088,264
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Cash overdraft $ 9,115
Accounts payable 249,929
Accrued expenses 194,800
Current portion of long-term liabilities 44,793
Installment purchase agreement 125,000
-----------------
Total current liabilities 623,637
Long-term liabilities, less current portion 99,173
-----------------
Total liabilities 722,810
-----------------
Stockholders' Equity
Common stock, $.001 par value;
25,000,000 shares authorized,
8,328,307 shares issued and
outstanding
8,328
Additional paid-in capital 5,944,865
Accumulated deficit (4,587,739)
-----------------
Stockholders' equity 1,365,454
-----------------
Total liabilities and stockholders' equity $ 2,088,264
=================
</TABLE>
<PAGE>
<TABLE>
THE PLAYERS NETWORK
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<CAPTION>
Common Stock Additional
------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 4,666,821 $ 4,667 $ 3,376,459 $ (2,853,502) $ 527,624
Stock issued for cash 55,000 55 39,945 40,000
-
Stock issued for services 221,333 221 132,517 132,738
-
Stock-based compensation from options and 26,990 26,990
warrants - - -
Stock issued at fair value to stockholders in 57,399 57 40,627 40,684
exchange for notes -
Net loss - - - (271,379) (271,379)
Balance at June 30, 1999 5,000,553 $ 5,000 $ 3,616,538 $ (3,124,881) $ 496,657
=======================================================================================
Balance at January 1, 2000 6,741,251 $ 6,741 $ 4,960,913 $ (4,081,956) $ 885,698
Stock issued for cash 911,975 912 334,541 335,453
-
Stock issued for services 132,447 132 123,020 123,152
-
Stock-based compensation from options 358,717 358,717
- - -
Stock issued at fair value to stockholders in 542,634 543 167,674 168,217
exchange for notes -
Net loss - - - (505,783) (505,783)
Balance at June 30, 2000 8,328,307 $ 8,328 $ 5,944,865 $ (4,587,739) $ 1,365,454
=======================================================================================
</TABLE>
<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 six months ended June 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 $76,000 during the six months ended June 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 is listed on the Over the Counter Bulletin
Board.
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 $115,000 and $97,000 was charged to operations for the six months
ended June 30, 2000 and 1999, respectively. Accumulated amortization was
approximately $420,000 and $182,000 at June 30, 2000 and 1999, respectively.
<PAGE>
THE PLAYERS NETWORK
NOTES TO 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 June 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 six months ended June 30,
2000 was $30,850.
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 six months ended June 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 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 also accounts for
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.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Revenue recognition:
Network revenue, which consists of subscription and licensing revenues, is
recognized when subscription agreements are signed and equipment is installed.
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 $130,700 and $15,600 were charged to operations during the
six months ended June 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 six months ended June 30, 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.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Studio equipment $ 85,595
Furniture and equipment 74,185
Video equipment 405,578
Work in process 21,359
Leasehold improvements 1,900
--------------
Total cost
Accumulated depreciation (128,932)
--------------
Net book value $ 459,685
==============
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 June 30,
2000. The related accumulated depreciation was $22,731 at June 30, 2000.
Depreciation expense charged to operations was $25,760 and $9,346 for the six
months ended June 30, 2000 and 1999, respectively.
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.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
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%. $ 4,293
Capital lease obligation payable to Granite Financial Services,
collateralized by specified video equipment, payable in monthly
installments of $661 including interest at 18.39%. 11,784
Equipment loan payable to Granite Financial Services, collateralized by
specified video equipment, payable in monthly installments of
$1,022 including interest at 16.4%. 30,139
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%. 41,986
Capital lease obligation payable to FlexLease, Inc. collateralized
by specified studio equipment, payable in monthly installments
of $1,209 including interest at 33.37%. 24,817
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%. 30,947
------------
$ 143,966
Future minimum payments at June 30, 2000 are as follows:
YEAR ENDING
2001 $ 69,801
2002 69,801
2003 50,730
2004 12,252
------------
Less: amount representing interest 58,618
------------
143,966
Less: current portion 44,793
------------
$ 99,173
</TABLE>
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
6. STOCKHOLDERS' EQUITY
The Company issued 1,587,056 shares of common stock during the six months ended
June 30, 2000, of which 911,975 shares were for $335,453 in cash, 132,447 shares
for services with an estimated value of $123,153, 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:
<TABLE>
<CAPTION>
2000 1999
---------------- ----------------
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards $ 1,065,896 $ 921,166
Stock-based compensation 163,836 58,963
---------------- ----------------
1,229,732 980,129
Less - Valuation allowance (1,229,732) (980,129)
---------------- ----------------
Net deferred tax asset $ -0- $ -0-
================ ================
</TABLE>
The Company has available net operating loss carryforwards of approximately
$3,462,000, which expire as follows: 2011, $1,741,000; 2012, $531,000; 2018,
$339,000 and 2019, $851,000.
<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>
<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
</TABLE>
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Summary information about the Company's stock options and warrants outstanding
at June 30, 2000 is as follows:
<TABLE>
<CAPTION>
Outstanding and Weighted Average
Weighted Average Exercisable at Contractual Periods
Exercise Price June 30, 2000 in Years
-------------- ------------- --------
<S> <C> <C> <C>
OPTIONS
-------
$ .60 12,000 1.83
.75 2,011,500 2.05
1.10 500,000 3.00
1.75 263,000 2.00
2.50 30,000 2.00
-------------
$ .92 2,816,500 2.06
======= ============= =====
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 6.44% and 6.37% and a volatility factor of expected
market price of the Company's common stock of 251.06%. During the six months
ended June 30, 2000, the Company issued 1,200,000 stock options for services
that expire through June 30, 2003 and carry exercise prices ranging from $.75 to
$1.10. Under the provisions of SFAS No. 123, compensation expense arising from
the issuance of stock options for the quarters ended June 30, 2000 and 1999 was
$275,675 and $40,627, respectively, which was included in selling, general and
administrative expenses.
<PAGE>
THE PLAYERS NETWORK
NOTES TO 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. For the
six months ended June 30, 2000, the Company rendered video production services
of $234,000, which has been reflected in the June 30, 2000 financial statements.
In connection with this transaction, the Company recognized advertising expense
of $100,300 for the six months ended June 30, 2000. The remaining balance of
advertising services to be received is included in accounts receivable.
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 six
months ended June 30, 2000, the Company utilized approximately $17,200 in room
and food services. These transactions are reflected in the June 30, 2000
financial statements.
The Company entered into an agreement to render advertising services, in
exchange for various services. For the six months ended June 30, 2000,
advertising revenues of $16,800 have been recognized and reflected in the June
30, 2000 financial statements.
10. MAJOR CUSTOMERS
Sales to three customers were approximately 65% of total revenues for each of
the six months ended June 30, 2000 and 1999, respectively.
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 six months ended June 30, 2000,
the total reportable segment information is as follows:
<TABLE>
<CAPTION>
PN Website Total
-- ------- -----
<S> <C> <C> <C>
Reportable segments
External revenues $ 470,341 $ 75,775 $ 546,116
Depreciation and amortization 152,493 19,525 172,018
Operating income (loss) (550,320) 56,250 (494,070)
Assets 1,858,499 229,765 2,088,264
Capital expenditures 370,317 124,715 495,032
</TABLE>
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Products and services revenues:
The table below presents external revenues for groups of similar products and
services for the six months ended June 30, 2000:
Network $ 153,270
Advertising 75,775
Production and other 317,071
--------------
$ 546,116
Both segments of the Company are operating in and have derived their revenues in
the United States.
<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 on which it
produces videos. It also rents this facility to various production companies.
The Company has three types of revenues. Network revenue, which
consists of subscription and licensing revenues, is recognized when subscription
agreements are signed and equipment is installed. The Company recognizes its
license revenue when the "Affiliate Agreement" is signed and equipment is
installed in the hotel premise. All license fees are non-refundable. 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 June 30, 2000, the Company capitalized web site
development costs of approximately $229,765 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 $4,587,739 and
$3,124,881 as of June 30, 2000 and 1999, respectively. However, the Company had
stockholders' equity of $1,365,454 and $496,657 as of June 30, 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 $481,870 and
$159,728 in stock and options for this purpose for the six months ended June 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 six months ended June 30, 2000, the
Company recorded certain barter transactions in accordance with EITF 99-17,
"Accounting for Advertising Barter Transactions", which consisted of
approximately $271,000 in barter revenue, $100,400 in advertising expenses, and
$17,000 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 June 30,
2000, the Company had working capital deficiency of $309,274. However, $194,120
of current liabilities are to be paid in common stock and $80,700 are future
obligations on the Company's website and in room television network. During the
six months ended June 30, 2000, the Company supplemented its working capital by
receiving cash of $335,453 from the private sale of 911,975 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.
<PAGE>
During the six months ended June 30, 2000, an officer converted
$160,397 of loans into 542,634 restricted common shares compared to the six
months ended June 30, 1999 where there was no conversion of loans.
RECENT EVENTS
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".
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Revenues increased 195% from $185,166 for the six months ended June
30,1999 to $546,116 for the six months ended June 30, 2000. For the six months
ended June 30, 2000, the Company had $153,270 in Network Revenue, $75,775 in
Advertising Revenue and $317,071 in Production and Other Revenue compared to
$117,588 in Network Revenue, $22,349 in Advertising Revenue and $45,229 in
Production and Other Revenue for the six months ended June 30, 1999. The Company
recorded approximately $277,000 in revenues from bartering production services
and advertising spots in exchange for magazine advertising.
Operating Expenses increased 230% from $263,423 for the six months
ended June 30,1999 to $868,168 for the six months ended June 30, 2000. The
increase in operating expenses was mainly due to increases in consulting
expenses from $53,245 to $302,903; advertising expense from $1,008 to $100,356;
payroll expenses from $80,258 to $158,804; and legal and accounting expenses
from $9,783 to $158,804 for the six months ended June 30, 1999 compared to the
six months ended June 30, 2000, respectively. Certain expenses, primarily
consulting and production costs, were paid with common stock of $132,738 and
$123,153 for the six months ended June 30, 1999 and June 30, 2000, respectively.
Stock-based compensation charged to operations was $471,169 for the six
months ended June 30, 2000 compared to $88,035 for the six months ended June 30,
1999. Stock-based compensation consists of warrants and options issued to
outside service providers in lieu of cash. For the six months ended June 30,
2000, the Company capitalized $145,671 in video production costs. There was none
capitalized for six months ended June 30, 1999.
Depreciation and amortization increased 4% from $166,770 for the six
months ended June 30, 1999 to $172,018 for the six months ended June 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 56% from $26,352 for the six months ended
June 30, 1999 to $11,713 for the six months ended June 30, 2000 due to the
conversion of $473,090 of shareholder loans to common stock at various times
from May 1999 to June 30, 2000.
<PAGE>
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.
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended June 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 April 4, 2000 3,000 shares for $1,500, less a sales commission of 10%
o April 10, 2000 8,000 shares for $4,000 of video production services
o April 10, 2000 16,129 shares for $5,000 upon exercise of a stock option
o May 16, 2000 19,200 shares for $6,000, less a sales commission of 10%
o May 16, 2000 23,950 shares for $24,189.50 of consulting services
o May 16, 2000 16,000 shares for $16,160 of consulting services
o May 16, 2000 3,295 shares for $3,327.95 of consulting services
o May 16, 2000 4,400 shares for $4,444 of consulting services
o May 16, 2000 2,292 shares for $2,314.92 of consulting services
o May 16, 2000 7,000 shares for $7,070 of consulting
o May 16, 2000 14,160 shares for $14,301.60 of public relations work
o May 16, 2000 10,000 shares for $10,100 of equipment rental
o May 16, 2000 2,000 shares for $2,020 of equipment rental
o June 6, 2000 40,000 shares for $20,000, less a sales commission of 10%
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit Page No.
-------------- ---------------- --------
<S> <C> <C>
(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
</TABLE>
(B) REPORTS ON FORM 8-K
None.
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.
Dated: August 11, 2000 THE PLAYERS NETWORK
By: /s/ Mark Bradley
-----------------------------------
Its: Chief Executive Officer
