SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE EXCHANGE ACT OF 1934
The Players Network
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 880343702
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4620 Polaris Avenue, Las Vegas, Nevada 89103
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (702) 895-8884
-----------------------
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class to be registered
None None
----------------------------------- -------------------------------------
----------------------------------- -------------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.001 Per Share
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(Title of class)
<PAGE>
TABLE OF CONTENTS
PAGE
PART I .....................................................................
Item 2. Management's Discussion and Analysis of Plan of Operation............
Part II .....................................................................
Item 4. Recent Sales of Unregistered Securities..............................
Part F/S .....................................................................
<PAGE>
Explanatory Note:
In this amendment we have reconciled the total shares listed in the section
entitled "Recent Sales of Unregistered Securities" with the total shares listed
in the Financial Statements for the year 1998. We have also revised our revenue
recognition policy as disclosed in Note 1 of the Financial Statements.
PART I
Item 2. Management's Discussion and Analysis of 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 which it
uses to produce videos and also rents to various production companies.
The Company has three types of revenues. Network revenue consists of
initial, renewal and subscription fees. The Company adopted the revenue
recognition policy to comply fully with the guidance in SAB 101, by recognizing
the network revenue on a straight-line basis over the contractual term. Costs
and expenses associated with network revenue are not significant and treated as
a period expense. Advertising revenue is recognized when advertisements are
aired. Production and other revenues, which consist of video product, stage
rental and other production-related revenues, are recognized when video
production is completed and the stage rental period has expired.
In June 1999, the Company decided to pursue opportunities available on
the Internet. In 1999, the Company capitalized approximately $136,000 in web
site development costs.
The Company's web site PLAYERSNETWORK.COM, is currently operational and
is continually being expanded and upgraded. 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.
Also through PLAYERSNETWORK.COM, the Company provides travel, tour, show ticket,
and golf time reservation services. The web site also provides information on
every casino/gaming site worldwide and "City Guides" to every location where
casinos are located.
The Company anticipates that its web site will provide consumers with
gaming "how to play" information in print form and video from the Company's
existing library of instructional gaming videos. In addition, the Company
expects that "PlayersNetwork.com" will provide financial reports on casino and
gaming company stocks.
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 $4,081,956 and
$2,853,502 as of December 31, 1999 and December 31, 1998, respectively. However,
the Company had stockholders' equity of $885,698 and $527,623 as of December 31,
1999 and December 31, 1998, respectively.
<PAGE>
The Company expects operating losses and negative operating cash flow
to continue for the foreseeable future. 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 acquisition. The Company issued $1,051,711
and $678,850 in stock and options for this purpose for the years ended December
31, 1999 and December 31, 1998, respectively.
As part of the Company's Internet e-commerce, the Company expects to
enter into many barter arrangements. For the year ended December 31, 1999, 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 Transaction
Involving Credits", and APB No. 29, "Accounting for Nonmonetary Transactions",
which require the fair value of the nonmonetary asset exchanged be used in
recognizing the nonmonetary transaction. As a result of these transactions, the
Company recognized approximately $102,000 in barter revenue, $66,000 in prepaid
production cost, $22,000 in capitalized video production costs, $67,000 in web
site development costs and $14,000 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
December 31, 1999, the Company had a working capital deficiency of $401,697.
During 1999, the Company supplemented its working capital by receiving cash of
$154,375 from the private sale of 379,000 shares of its common stock. In January
and February 2000, the Company received cash of approximately $295,000 from the
private sale of 665,000 shares of its common stock.
During the year 2000, the Company anticipates capital expenditures
ranging from $750,000 to $1,100,000. The capital expenditures consist of
spending: (i) $500,000 to $750,000 to expand its web site, PLAYERSNETWORK.COM,
(ii) $150,000 to $200,000 for equipment and soundstage upgrades related to its
broadcasting activities and (iii) $100,000 to $150,000 for video production
activities. The Company anticipates financing these expenditures by issuing
common stock for services, obtaining equipment leases and using advance payments
by customers. The Company believes that the anticipated cash flow generated by
its revenues will not be sufficient to fund its future operations. The Company
will require additional funding of approximately $300,000 to finance its
operations through private sales and public debt or equity offerings. However,
there can be no assurance that such financing can be obtained by the Company.
<PAGE>
For the year ended December 31, 1999, stockholders and officers
converted $312,693 of loans into 979,597 restricted common shares compared to
the year ended December 31, 1998, when a stockholder converted $294,069 of loans
for 408,430 shares. At December 31, 1999, the Company owed an officer $160,397,
which was converted into 542,634 of common shares in January 2000.
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.
RECENT EVENTS
The Company sold approximately $462,000 in common stock from October
1999 through February 2000.
The Company signed three agreements with hotels in December 1999 and
January 2000, which will increase monthly subscription revenues from $10,000 per
month to over $21,000 per month. The agreements also include initial fees of
$48,000. The Company did not recognize any revenues related to these agreements
for the year ended December 31, 1999.
In November 1999, the Company signed a production-for-hire agreement
worth $240,000 to produce 40 videos from January to May 2000.
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 did not complete the exchange with
the Play Streaming Media Group at December 31, 1999. The Company anticipates
completing the transaction during the third quarter of year 2000. At the present
time, there is no market value for this new technological equipment.
In January 2000, the Company signed an agreement with iTravel Marketing
and YouTicket.com to fulfill worldwide website 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 January 2000 the Company completed a video production barter
transaction for advertising space in various gaming related magazines which, in
accordance will result in recognizing approximately $270,000 in revenues in the
first quarter of 2000.
<PAGE>
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.
Based on existing subscription and video production agreements, the
Company anticipates nearly 100% revenue growth in the year 2000. However, the
Company anticipates sustaining losses throughout the remainder of the year due
to an increase in operating expenses.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, certain matters
discussed in this report are "forward-looking statements" as defined in the
Securities Exchange Act of 1934, as amended, which involve certain risks and
uncertainties that could cause actual results to differ materially from those
discussed herein. Such risks and uncertainties include, but are not limited to
recoverability of the capitalized video production costs, liquidity and
financing requirements, variability of quarterly results and prior losses,
certain accounting policies including amortization and adjustments of the costs,
dependence on key personnel, production deficits, risks involved in the
Internet, competition, government regulation, labor relations, limited operating
history and continued operating losses. In addition, the Company faces risks
associated with offering new services, risks associated with growth and
expansion, liability for online content, rapidly changing technology, standards
and consumer demands, online commerce security risks, including credit card
fraud, system disruptions and capacity constraints. See the relevant discussions
elsewhere herein.
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues increased 43% from $308,872 for the year ended December 31,
1998 to $441,297 for the year ended December 31, 1999. The Company increased the
number of hotel clients from three to five in 1999. The Company recorded
approximately $102,000 in revenues from bartering advertising spots in exchange
for post-production and web site development services. For the year ended
December 31, 1999, the Company had $227,925 in Network Revenue, $130,731 in
Advertising Revenue and $82,641 in Production and Other Revenue, compared to
$232,604 in Network Revenue, $11,806 in Advertising Revenue and $64,462 in
Production and Other Revenue for the year ended December 31, 1998.
The increase in operating expenses was primarily due to increases in
consulting and marketing expenses from $255,871 to $630,587 and legal and
accounting expenses from $76,368 to $99,808 for the year ended December 31, 1998
compared to the year ended December 31, 1999. Some of the increase was paid in
common stock with a fair value of $250,186 compared to $116,400 for the years
ended December 31, 1999 and December 31, 1998, respectively. The majority of the
expenses paid in stock were for consulting and advertising.
Stock-based compensation charged to operations was $703,120 for the
year ended December 31, 1999 compared to $324,537 for the period ended December
31, 1998. Stock-based compensation consists of warrants and options issued to
outside service providers in lieu of cash. In addition, the Company capitalized
$237,913 of stock-based compensation for the year ended December 31, 1998 and
$98,405 for the year ended December 31, 1999 as capitalized video production and
web site development costs.
<PAGE>
Depreciation and amortization increased 114% from $121,969 for the year
ended December 31, 1998 to $260,408 for the year ended December 31, 1999. 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 32% from $67,859 for the year ended December
31, 1998 to $46,037 for the year ended December 31, 1999 due to the conversion
of $312,693 of shareholder loans to common stock at various times during the
year ended December 31, 1999.
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues increased 2,989% from $10,000 for the year ended December 31,
1997 to $308,872 for the year ended December 31, 1998. The increase in revenues
is due to the Company beginning operations after leaving the development stage.
The Company signed its first hotel client in the first quarter of 1998. The
Company also had its first pay for production and stage rental income in the
second quarter of 1998. The Company signed two additional hotel customers and
continued to develop its paid production and stage rental businesses throughout
the remainder of the year.
The increase in operating expenses was due to increases in office
payroll, sales and marketing expenses, legal and accounting expenses, and
occupancy expenses. Selling, general and administrative charges increased 85%
from $492,399 for the year ended December 31, 1997 to $911,074 for the year
ended December 31, 1998. Most of the increase was paid in common stock with a
fair value of $116,400 compared to zero for the year ended December 31, 1998 and
December 31, 1997, respectively. The majority of the expenses paid in common
stock were related to consulting and advertising.
Stock-based compensation charged to operations was $324,537 for the
year ended December 31, 1998. There was none charged to operations in 1997.
Stock- based compensation consists of common stock warrants and options issued
to outside service providers in lieu of cash. In addition, the Company
capitalized $51,690 of stock-based compensation for the year ended December 31,
1997 and $237,913 for the year ended December 31, 1998 as video production
costs. These costs include writers, directors, production supervisors whose
services otherwise would be unaffordable to the Company.
Depreciation and amortization increased 332% from $28,208 for the year
ended December 31, 1997 to $121,969 for the year ended December 31, 1998. The
increase was due to amortization of the capitalized video production costs, the
carrying value of which increased 43% from $656,757 at December 31, 1997 to
$940,848 at December 31, 1998.
Interest expense increased 226% from $20,780 for the year ended
December 31, 1997 to $67,859 for the year ended December 31, 1998 due to the
increase in capital lease obligations outstanding and the average balance of
stockholders' loans throughout the year.
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
<PAGE>
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.
YEAR 2000 READINESS DISCLOSURE
Many existing computer programs cannot distinguish between a year
beginning with "20" and a year beginning with "19" because they use only the
last two digits to refer to a year. For example, these programs may malfunction
or fail completely.
Since our business, and consequently, our hardware, telecommunication
and software systems are new, we believe most of these systems are already year
2000 compliant and we do not expect internal year 2000 problems to materially
affect us. Nevertheless, because our business relies heavily on the internet and
on computer and telecommunications systems, including those of our suppliers,
customers and other third parties, the year 2000 problem could seriously harm
us.
To date, we have not experienced any significant year 2000 problems.
Testing and compliance monitoring will continue into 2000 to ensure proper
operations and that system changes and additions are year 2000 compliant, and to
support the growth and development of our network.
Part II
Item 4. Recent Sales of Unregistered Securities
During the last three fiscal years the Company has raised capital
through private placements and has issued stock to individuals for services
rendered to the Company in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act of 1933. The Company's issuance
of its common stock did not involve a public offering and no underwriters were
used and no underwriting commissions were paid in any of these transactions.
In 1997, the Company sold an aggregate of 688,174 Shares for a total
consideration of $1,135,423.50 as follows:
<TABLE>
<CAPTION>
Date Amount of Name of Person to Whom Sold Nature of Consideration Amount of
---- ---------- --------------------------- ----------------------- ---------
Shares Issued Consideration
------------- -------------
<S> <C> <C> <C> <C>
1/17/97 3,000 Mitsuo Tatsugawa Cash Sale $4,500
1/27/97 4,000 Five Management, LLC Cash Sale $6,000
1/29/97 6,000 David Tarino Production Services $9,000
2/4/97 15,000 Michael Bush Production Services $150
2/4/97 15,000 William Huggins Production Services $150
2/4/97 7,500 Five Management, LLC Cash Sale $11,250
<PAGE>
3/13/97 27,000 Douglas Johnston Cash Sale $40,500
4/22/97 3,000 Billauer Living Trust Cash Sale $4,500
4/22/97 3,500 Thomas Di Salvatore Cash Sale $5,250
4/22/97 24,000 Merry & Elizabeth Haack Cash Sale $36,000
4/22/97 700 Dan Baker Production Services $1,050
4/22/97 1,500 Nanette Barbera Production Services $2,250
4/22/97 12,000 Scott Christensen Production Services $18,000
4/22/97 4,000 Al & Linda Colella Rent $6,000
4/22/97 4,300 Diane Driscol Production Services $6,450
4/22/97 7,000 Nancy Ferguson Production Services $10,500
4/22/97 5,330 Huntington Press Advertising $7,995
4/22/97 2,800 Alistar McKenneh Production Services $4,200
4/22/97 10,000 Bruce Merrin Production Services $15,000
4/22/97 3,000 Tanja Nikolic-Norbert Production Services $4,500
4/22/97 7,000 Peter Nissen Production Services $10,500
4/22/97 25,000 Pratt Wylce and Lords Consulting Services $37,500
4/22/97 50,000 Sea Change International Asset Purchase $75,000
4/22/97 2,000 Roger & Richard Sullivan Production Services $3,000
4/22/97 5,000 Mark Wolfson Production Services $7,500
8/7/97 44,375 Chip & Travis Miller Production Services $221,875
9/14/97 7,500 MicroCap World, L.L.C. Cash Sale $11,250
9/21/97 6,669 Jerome Feinberg Cash Sale $10,003.50
9/21/97 34,000 Kevork Koushagjian Cash Sale $51,000
9/21/97 2,000 Dana Gelbard Cash Sale $3,000
9/21/97 2,000 Dustin Gelbard Cash Sale $3,000
9/21/97 4,000 Aaron Grunfeld Cash Sale $6,000
9/21/97 2,600 Dick Isaacson Cash Sale $3,900
9/21/97 12,500 Pratt Wylce and Lords Cash Sale $18,750
9/21/97 2,000 Paul Spiegler Cash Sale $3,000
9/21/97 42,400 Clint Clark Production Services $63,600
9/23/97 34,000 John Plati Cash Sale $51,000
9/23/97 1,500 Janet Stein Cash Sale $2,250
9/23/97 5,000 Ari Stein Consulting Services $50
10/6/97 120,000 Gaming Ventures Corp. Consulting Services $180,000
10/6/97 80,000 Gaming Ventures Corp. Consulting Services $120,000
10/9/97 500 Nicolette Frederico/Living Cash Sale $750
Trust
10/9/97 1,000 Mitch Kofsky Cash Sale $1,500
10/9/97 2,000 Garrett Mathney Cash Sale $3,000
12/1/97 3,000 Kevin Stocks Cash Sale $4,500
12/10/97 16,750 Terrence Bean, P.C. Cash Sale $25,125
12/19/97 16,750 Joost Van Adelsberg (1) Cash Sale $25,125
(1) Joost Van Adelsberg is a member of the Board of Directors of the Company.
</TABLE>
In 1998, the Company sold an aggregate of 276,933 Shares for a total
consideration of $393,900 as follows:
<PAGE>
<TABLE>
<CAPTION>
Date Amount of Name of Person to Whom Sold Nature of Consideration Amount of
---- ---------- --------------------------- ----------------------- ---------
Shares Issued Consideration
------------- -------------
<S> <C> <C> <C> <C>
2/26/98 33,333 Joost Van Adelsberg (1) Cash Sale $50,000
4/28/98 10,000 Jerry Kutner Marketing Services $15,000
7/13/98 20,000 Susan Jaslow Cash Sale $20,000
8/6/98 5,000 Jay Beynon Cash Sale $5,000
8/7/98 5,000 Billauer Trust Cash Sale $5,000
8/19/98 10,000 Modern Solutions Cash Sale $10,000
9/28/98 3,000 Mateo Urrutia Cash Sale $3,000
10/9/98 3,000 Joyce Carrole Production Services $4,500
10/9/98 5,000 Bonnie Feldgreber (2) Production Services $7,500
10/9/98 2,000 Titanium White Production Services $3,000
10/9/98 50,000 Casino Journal Production Services $75,000
10/9/98 6,000 Rogich Communications Production Services $9,000
10/9/98 3,000 John Raczka Production Services $4,500
10/9/98 15,000 John Dorsett Production Services $22,500
10/9/98 2,000 John Thor Production Services $3,000
10/9/98 2,000 Bess Greenberg Legal Accounting $3,000
Services
10/9/98 1,000 Robert Nash Production Services $1,500
10/9/98 15,000 Seltex Corporation Production Services $22,500
10/9/98 2,000 Kirsten Ashley Board of Directors $3,000
Services
10/9/98 1,600 Linda Colella Outside Service $2,400
10/9/98 5,000 Administrative Systems Legal Accounting $7,500
11/9/98 25,000 Jerome Kutner Marketing Services $37,500
11/9/98 3,000 John O'Reilly Consulting Services $4,500
11/9/98 6,000 Joseph Connell Production Services $9,000
11/9/98 3,000 Joseph Connell Production Services $4,500
11/9/98 12,000 Mike Bush Production Services $18,000
11/9/98 10,000 Jerry Kutner Marketing Services $15,000
11/17/98 5,000 Steve Trapp Outside Service $7,500
12/14/98 2,000 Mark Bradley (3) Board of Directors $3,000
Services
12/14/98 2,000 Mark Bradley (3) Board of Directors $3,000
Services
12/14/98 2,000 Darius Irani (4) Board of Directors $3,000
Services
12/14/98 2,000 Darius Irani (4) Board of Directors $3,000
Services
12/14/98 2,000 Peter Rona (5) Board of Directors $3,000
Services
12/14/98 2,000 Peter Rona (5) Board of Directors $3,000
Services
12/14/98 2,000 Joost Van Adelsberg (1) Board of Directors $3,000
Services
(1) Joost Van Adelsberg is a member of the Board of Directors of the Company.
(2) Bonnie Feldgreber is the sister of the Chief Executive Officer of the Company.
(3) Mark Bradley is the Chief Executive Officer of the Company and is a member of the Board of Directors of the
Company.
(4) Darius Irani is a member of the Board of Directors of the Company.
(5) Peter Rona is the Chairman of the Company and is a member of the Board of Directors of the Company.
</TABLE>
<PAGE>
In 1999, the Company sold an aggregate of 2,074,430 Shares for a total
consideration of $821,548 as follows:
<TABLE>
<CAPTION>
Date Amount of Name of Person to Whom Sold Nature of Consideration Amount of
---- ---------- --------------------------- ----------------------- ---------
Shares Issued Consideration
<S> <C> <C> <C> <C>
01/29/99 25,000 Larry Smith Cash Sale $25,000
02/22/99 2,000 Mark Bradley (3) Consulting Service $1,500
02/22/99 2,000 Darius Irani (4) Consulting Service $1,500
02/22/99 50,000 Peter Rona (1) Consulting Service $37,500
02/22/99 2,000 Peter Rona (1) Consulting Service $1,500
02/22/99 12,000 John Dorsett Consulting Service $9,000
02/22/99 5,000 Steve Trapp Consulting Service $3,750
02/22/99 2,000 Kirsten Ashley Consulting Service $1,500
02/22/99 2,000 Joost Van Adelsberg (2) Consulting Service $1,500
03/22/99 3,000 Sydney Schrek Consulting Service $1,968
03/22/99 3,000 Derek Schreck Consulting Service $1,968
04/26/99 10,000 Kaufman Associates Consulting Service $4,680
04/26/99 70,000 Casino Journal Consulting Service $32,760
05/13/99 30,000 Adam Jaslow Cash Sale $15,000
05/14/99 2,333 John Rigelhoff Consulting Service $1,603
05/14/99 57,399 Myra Feldgreber Conversion of Debt $40,685
05/14/99 25,000 Rogich Communication Consulting Service $17,175
05/14/99 2,000 Mark Bradley (3) Consulting Service $1,374
05/14/99 2,000 Peter Rona (1) Consulting Service $1,374
05/14/99 2,000 Joost Van Adelsberg (2) Consulting Service $1,374
05/14/99 2,000 Darius Irani (4) Consulting Service $1,374
06/08/99 2,000 Darius Irani (4) Consulting Service $812
06/08/99 2,000 Peter Rona (1) Consulting Service $812
06/08/99 2,000 Joost Van Adelsberg (2) Consulting Service $ 812
06/08/99 2,000 Mark Bradley (3) Consulting Service $812
06/08/99 10,000 Kirsten Ashley Consulting Service $4,060
06/08/99 5,000 Tom Nevitt Consulting Service $2,030
08/26/99 10,000 Terrance Bean Conversion of Debt $3,100
08/26/99 10,000 Joost Van Adelsberg (2) Conversion of Debt $3,100
08/26/99 762,198 Mark Bradley (3) Conversion of Debt $222,464
08/26/99 10,000 Bonnie Feldgrebber Conversion of Debt $3,100
08/26/99 10,000 Myra Feldgreber Conversion of Debt $3,100
<PAGE>
10/25/99 10,000 Terrance Bean Cash Sale $5,000
10/27/99 10,000 Joost Van Adelsberg (2) Cash Sale $5,000
12/01/99 80,000 Darius Irani (4) Conversion of Debt $22,569
12/01/99 10,000 Darius Irani (4) Cash Sale $5,000
12/01/99 20,000 Joost Van Adelsberg (2) Cash Sale $10,000
12/01/99 80,000 Vivek Reddy Cash Sale $25,000
12/01/99 30,000 Robert Bedrossian Cash Sale $9,375
12/01/99 40,000 Donte Holdings Cash Sale $12,500
12/01/99 20,000 Jason Lobman Cash Sale $6,250
12/01/99 32,000 Steve Rose Cash Sale $10,000
12/01/99 20,000 Malik Paraonandi Cash Sale $6,250
12/01/99 20,000 Terrrance Bean Cash Sale $10,000
12/01/99 16,000 Steve D'Orio Cash Sale $5,000
12/01/99 16,000 Dorthy Levin Cash Sale $5,000
12/01/99 2,000 Mark Bradley (3) Consulting Service $1,124
12/01/99 2,000 Darius Irani (4) Consulting Service $1,124
12/01/99 2,000 Peter Rona (1) Consulting Service $1,124
12/01/99 25,000 Peter Rona (1) Consulting Service $14,050
12/01/99 2,000 Joost Van Adelsberg (2) Consulting Service $1,124
12/01/99 4,000 Steve Trapp Consulting Service $2,248
12/01/99 4,000 Steve Trapp Consulting Service $2,248
12/01/99 4,000 Steve Trapp Consulting Service $2,248
12/01/99 15,000 Mike Marcovsky Consulting Service $8,430
12/01/99 25,000 Kaufman Associates Consulting Service $14,050
12/01/99 10,000 Kirsten Ashley Consulting Service $5,620
12/01/99 2,000 Bess Greenberg Consulting Service $1,124
12/01/99 10,000 Tom Nevitt Consulting Service $5,620
12/01/99 2,000 Tanja Norbert Consulting Service $1,124
12/01/99 10,000 John Dorsett Consulting Service $5,620
12/01/99 700 John Rigelhoff Consulting Service $393
12/01/99 10,000 Dan Rindos Consulting Service $5,620
12/01/99 10,000 John Raczka Consulting Service $5,620
12/01/99 28,000 Wayne Camardo Consulting Service $15,736
12/01/99 2,000 John Thor Consulting Service $1,124
12/01/99 18,000 Gaming Ventures Consulting Service $10,116
12/01/99 50,000 Seth Horn (5) Consulting Service $28,100
12/01/99 25,000 iTravel Consulting Service $14,050
12/01/99 15,000 AA Capital Ventures Consulting Service $8,430
01/04/2000 40,000 William Li Cash Sale $12,500
01/04/2000 20,000 Steve Rose Cash Sale $6,250
01/04/2000 76,800 Richard Levin Cash Sale $24,000
01/04/2000 50,000 Thieu Do Cash Sale $15,625
<PAGE>
01/04/2000 50,000 Lillian Do Cash Sale $15,625
01/04/2000 10,000 David McNabb Cash Sale $3,125
01/04/2000 10,000 John Colussi Cash Sale $3,125
(1) Peter Rona is the Chairman of the Company and a member of its Board of Directors.
(2) Joost Van Adelsberg is a member of the Board of Directors of the Company.
(3) Mark Bradley is the Chief Executive Officer of the Company and is a member of its Board of Directors.
(4) Darius Irani is a member of the Board of Directors of the Company.
(5) Seth Horn is the Chief Financial Officer of the Company.
(*) Represents shares that were issued in 1999 but that were converted in December 1998.
</TABLE>
<PAGE>
Part F/S
THE PLAYERS NETWORK
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE>
THE PLAYERS NETWORK
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheet as of December 31, 1999 and 1998
Statement of Operations
Years Ended December 31, 1999 and 1998
Statement of Cash Flows
Years Ended December 31, 1999 and 1998
Statement of Changes in Stockholders' Equity
Years Ended December 31, 1999 and 1998
Notes to Financial Statements
<PAGE>
<TABLE>
THE PLAYERS NETWORK
BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
----------------- ------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 64,295 $ 1,823
Prepaid expenses 66,718 2,336
----------------- ------------------
Total current assets 131,013 4,159
Property and equipment - net 299,143 329,599
Capitalized video production costs - net 882,226 940,848
Capitalized web site development costs 135,900 -
Intangible and other assets 8,677 10,953
----------------- ------------------
Total assets $ 1,456,959 $ 1,285,559
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 96,033 $ 92,957
Accrued expenses 115,109 31,696
Current portion of long-term liabilities 14,671 22,932
Installment purchase agreement 146,500 156,500
Notes payable, stockholders 160,397 411,304
----------------- ------------------
Total current liabilities 532,710 715,389
Long-term liabilities, less current portion 38,551 42,547
----------------- ------------------
Total liabilities 571,261 757,936
----------------- ------------------
Stockholders' Equity
Common stock, $.001 par value;
25,000,000 shares authorized,
6,741,251 and 4,666,821 shares
issued and outstanding 6,741 4,666
Additional paid-in capital 4,960,913 3,376,459
Accumulated deficit (4,081,956) (2,853,502)
----------------- ------------------
Stockholders' equity 885,698 527,623
----------------- ------------------
Total liabilities and stockholders' equity $ 1,456,959 $ 1,285,559
================= ==================
</TABLE>
<PAGE>
<TABLE>
THE PLAYERS NETWORK
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
Revenues
Network $ 227,925 $ 232,604
Advertising 130,731 11,806
Production and other 82,641 64,462
-------------------- --------------------
Total revenues 441,297 308,872
-------------------- --------------------
Operating expenses
Selling, general and administrative 1,363,306 911,074
Depreciation and amortization 260,408 121,969
-------------------- --------------------
Total operating expenses 1,623,714 1,033,043
-------------------- --------------------
Other expenses
Interest expense 46,037 67,859
-------------------- --------------------
Net loss $ (1,228,454) $ (792,030)
==================== ====================
Basic and diluted loss per share $ (0.23) $ (0.19)
Weighted average shares outstanding 5,258,891 4,070,204
</TABLE>
<PAGE>
<TABLE>
THE PLAYERS NETWORK
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,228,454) $ (792,030)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 260,408 121,969
Barter transactions (88,000)
Notes payable, stockholders 61,786 155,847
Common stock issued for services 250,186 116,400
Stock-based compensation, non-employees 703,120 324,537
-------------------- --------------------
(40,954) (73,277)
Changes in assets and liabilities:
Prepaid expenses 1,753 (176)
Accounts and other payables (6,924) (8,656)
Accrued expenses 16,413 31,695
-------------------- --------------------
Net cash used in operating activities (29,712) (50,414)
-------------------- --------------------
Investing activities
Increase in capitalized video production costs (110,319) (130,263)
Acquisition of equipment (7,125) (21,359)
Increase in intangible assets (240) (2,831)
-------------------- --------------------
Net cash used in investing activities (117,684) (154,453)
-------------------- --------------------
Financing activities
Proceeds from the issuance of common stock 222,125 93,000
Proceeds from equipment loan - 42,800
Payments on long-term liabilities (12,257) (7,904)
-------------------- --------------------
Net cash provided by financing activities 209,868 127,896
-------------------- --------------------
Net increase (decrease) in cash 62,472 (76,971)
Cash, beginning of year 1,823 78,794
-------------------- --------------------
Cash, end of year $ 64,295 $ 1,823
==================== ====================
Supplemental cash flow information
Interest paid $ 8,983 $ 7,013
Non-cash investing and financing activities
Capitalized web site costs paid with common stock and stock options $ 68,900 $ -
Capitalized web site costs resulting from barter transactions 67,000 -
Capitalized video production costs paid with common stock
and stock options 29,505 237,913
Capitalized video production costs resulting from barter transactions 21,865 -
Common stock issued in exchange for notes payable, stockholders 312,693 294,069
</TABLE>
<PAGE>
<TABLE>
THE PLAYERS NETWORK
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
Common Stock Additional
------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 3,981,458 $ 3,981 $ 2,311,226 $ (2,061,472) $ 253,735
Stock issued for cash 76,333 76 92,924 - 93,000
Stock issued for services 200,600 201 300,699 - 300,900
Stock based compensation from options and warrants - - 377,949 - 377,949
Stock issued at fair value to stockholder in
exchange for note 408,430 408 293,661 - 294,069
Net loss - - - (792,030) (792,030)
--------------------------------------------------------------------------------
Balance at December 31, 1998 4,666,821 4,666 3,376,459 (2,853,502) 527,623
Stock issued for cash 595,800 596 221,529 - 222,125
Stock issued for services 499,033 499 288,306 - 288,805
Stock-based compensation from options and warrants - - 762,906 - 762,906
Stock issued at fair value to stockholders in
exchange for notes 979,597 980 311,713 - 312,693
Net loss - - - (1,228,454) (1,228,454)
--------------------------------------------------------------------------------
Balance at December 31, 1999 6,741,251 $ 6,741 $ 4,960,913 $(4,081,956) $ 885,698
=================================================================================
</TABLE>
<PAGE>
FRIEDMAN
ALPREN & 1700 BROADWAY
GREEN LLP NEW YORK, NY 10019
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS 212-582-1600
FAX 212-265-4761
www.nyccpas.com
INDEPENDENT AUDITORS' REPORT
----------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE PLAYERS NETWORK
We have audited the accompanying balance sheet of THE PLAYERS NETWORK
as of December 31, 1999 and 1998, and the related statements of operations, cash
flows and changes in stockholders' equity for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of THE PLAYERS NETWORK
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
March 20, 2000
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
1. 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 is developing a web site for the purpose of selling
primarily gaming supplies and travel-related services over the Internet. This
web site will become operational during January 2000 and, accordingly, revenues
from this activity were immaterial during the years ended December 31, 1999 and
1998.
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.
Estimates:
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could differ from those estimates.
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 $221,000 and $84,000 was charged to operations for the years ended
December 31, 1999 and 1998, respectively. Accumulated amortization was
approximately $305,000 and $84,000 at December 31, 1999 and 1998, respectively.
Property and equipment:
Property and equipment are carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. When assets
are retired or otherwise disposed of, the cost and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in that period. The cost of repairs and maintenance is charged to
operations as incurred and significant renewals or betterments are capitalized.
Useful lives for property and equipment are as follows:
Office furniture 10 years
Office equipment 3-10 years
Video equipment 10 years
<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 December 31,
1999 were $135,900. These costs will be amortized on a straight-line basis over
a period of three years. There was no amortization expense in 1999.
Intangible assets:
The Company has applied for trademark protection for its videos. Trademark costs
of approximately $2,700 are amortized using the straight-line method over a
period of ten years.
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. The Company has identified approximately
$2,000 of impairment losses for finance costs in 1999. Such losses were written
off and included in the 1999 financial statements.
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.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
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 surrendered 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 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 fees. The Company
adopted the revenue recognition policy to comply fully with the guidance in SAB
101, by recognizing the network revenue on a straight-line basis over the
contractual term. Costs and expenses associated with network revenue are not
significant and treated as a period expense. Advertising revenue is recognized
when advertisements are aired. Production and other revenues, which consist of
video production, stage rental and other production-related revenues, are
recognized when video production is completed and the stage rental period has
expired. The Company did not recognize any significant initial and renewal fees
revenue for the year 1999.
Advertising costs:
The Company's policy is to expense advertising costs as a period expense.
Advertising costs of $35,755 and $475 were charged to operations during the
years ended December 31, 1999 and 1998, 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".
Comprehensive income:
SFAS 130, "Reporting Comprehensive Income", requires the disclosure of
comprehensive income (loss), which consists of net income or net loss and other
comprehensive income. Other comprehensive income (loss) consists of unrealized
gains and losses that are not recorded in the traditional statement of
operations and, instead, are presented as a separate section of stockholders'
equity on the balance sheet. During the years ended December 31, 1999 and 1998,
the Company had no other comprehensive income.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
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.
Reclassifications:
Certain reclassifications have been made to the prior year financial statements
to conform to the current year presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Furniture and equipment $ 21,334 $ 14,209
Video equipment 359,622 359,622
Work in process 21,359 21,359
-------------- --------------
Total cost 395,190
Accumulated depreciation (103,172) (65,591)
-------------- --------------
Net book value $ 299,143 $ 329,599
============== ==============
</TABLE>
Work in process consists of the construction cost of the video production booth,
which will be completed in the year 2000.
The cost of equipment held under capital leases totaled $33,121 at December 31,
1999 and 1998, respectively. The related accumulated depreciation was $18,312
and $9,156 at December 31, 1999 and 1998, respectively.
Depreciation expense charged to operations amounted to $37,581 and $37,257 for
the years ended December 31, 1999 and 1998, respectively.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
3. INSTALLMENT EQUIPMENT PURCHASE
During 1997, the Company entered into an agreement with a vendor to purchase
video equipment for $326,500. The purchase has been executed through the
exchange of 50,000 shares of common stock valued at $75,000, cash payment of
$176,500 to be made in 1998, and $75,000 of deferred advertising services to be
performed over a 3 year period. In addition, the vendor was given options to
purchase an additional 20,000 shares of common stock at $2.50 per share and
30,000 shares at $3.00 per share. The options expired and were never exercised.
The Company made $30,000 in payments of the installment agreement and performed
$10,000 of advertising services.
4. NOTES PAYABLE, STOCKHOLDERS
The Company had short-term notes payable to the president and two other
stockholders aggregating $160,397 and $411,304, including accrued interest, as
of December 31, 1999 and 1998, respectively. The notes are unsecured, payable on
demand and bear interest at 10% per annum. Each of the note holders has the
option to convert the debt instrument into shares of common stock at the average
prevailing price per share at any time prior to repayment. During the years
ended December 31, 1999 and 1998, these notes were issued in lieu of payments of
salary to the president and interest accrued on these notes. Notes totaling
$312,693 were converted into 979,597 common shares at various times throughout
1999 using the market value when the conversions were made. Notes payable to the
president of $160,397 at December 31, 1999 were converted to 542,634 common
shares in January 2000.
5. LONG-TERM LIABILITIES
The Company has the following long-term liabilities:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <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%. $ 5,075 $ 6,376
Capital lease obligation payable to Granite Financial Services,
collateralized by specified video equipment, payable in monthly
installments of $661 including
interest at 18.39%. 14,515 19,283
Equipment loan payable to Granite Financial Services, collateralized by
specified video equipment, payable in monthly installments of $1,022
including
interest at 16.4%. 33,632 39,820
----------- -----------
$ 53,222 $ 65,479
=========== ===========
</TABLE>
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Future minimum payments at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ending
<S> <C>
2000 $ 22,944
2001 22,944
2002 14,502
2003 7,154
------------
Less: amount representing interest 14,322
------------
53,222
Less: current portion 14,671
------------
$ 38,551
============
</TABLE>
6. STOCKHOLDERS' EQUITY
Common stock:
During the year ended December 31, 1998, the Company issued 123,000 shares in
exchange for capitalized video production costs valued at $184,500 and 77,600
shares in exchange for services valued at $116,400. In addition, the president
of the Company converted $294,069 of debt owed to him for 408,430 shares.
During the year ended December 31, 1999, the Company issued 28,700 of shares in
exchange for capitalized video production costs valued at $18,949 and 470,333
shares in exchange for services valued at $269,856. In addition, stockholders
converted $312,692 of notes into 979,597 common shares.
Stock warrants:
On January 15, 1996, the Company issued 90,000 warrants to five specific
stockholders of record, with a 30-day call option at $.001 per warrant. The
warrants expire on January 14, 2000 and carry an exercise price of $2.50 per
share.
On December 4, 1997, the Company's president and principal stockholder received
350,000 warrants with an exercise price of $1.50 per share and a 60-month
expiration period.
In 1999, the Company's president and principal stockholder received 150,000
warrants with an exercise price of $1.25 per share expiring December 31, 2000.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Stock Options:
On January 20, 1997, the Company approved the issuance of 50,000 stock options
as part of the purchase of video equipment (see Note 3).
On January 1, 1998, the Company issued 452,000 stock options for services that
expire in 12 to 24 months and carry an exercise price of $2.50. In addition, the
Company approved 299,500 stock options from February to December 1998 that
expire in 12 to 24 months and carry exercise prices that range from $.60 to
$2.50.
During 1999, the Company issued 659,000 stock options for services that expire
in 24 months and with exercise prices ranging from $.75 to $2.50.
As of December 31, 1999, none of the warrants or options had been exercised.
7. INCOME TAXES AND DEFERRED INCOME TAXES
Income taxes and components of deferred tax assets are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards $ 1,074,444 $ 931,515
Stock-based compensation 588,399 110,343
---------------- ----------------
1,041,858
Less - Valuation allowance (1,662,843) (1,041,858)
---------------- ----------------
Net deferred tax asset $ -0- $ -0-
================ ================
</TABLE>
The Company has available net operating loss carryforwards of approximately
$3,160,000, which expire as follows: 2010, $9,000; 2011, $1,732,000; 2012,
$531,000; 2018, $339,000 and 2019, $549,000.
8. COMMITMENTS
Effective December 4, 1997, the Company entered into a five-year employment
agreement with its president, who is responsible for the day-to-day operations
of the Company's business, the implementation of policies and creative direction
of the Company. The agreement provides for an annual base salary of $70,000,
adjusted annually for cost of living increases. As Executive Producer and
Creator, the president will also be entitled to a 5% fee on any Company
royalties received on the production content developed and produced by him.
Unpaid and accrued salaries of approximately $62,000 and $115,000 are included
in notes payable to stockholders at December 31, 1999 and 1998, respectively.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
The Company entered into numerous "Hotel Affiliate Sales Agreements" with
various hotels to provide an in-house gaming channel over a privately operated
cable television distribution system. The Company agrees to install digital
playback equipment and provide the programming, maintenance and service to this
equipment at no additional cost. The term of these agreements ranges from 12
months to 24 months with renewal options.
On July 8, 1998, the Company entered into an "Independent Consulting/Finders Fee
Agreement" with an independent sales/marketing consultant to enhance the
Company's business, for a term of 24 months. The Company agreed to pay the
independent contractor a base fee of $52,000 per year in cash and 25,000 shares
of restricted stock. He also received a 10% commission on all upfront money for
production and equipment along with a 3% commission on the gross/net revenues as
defined. The agreement was terminated in March 1999.
Effective January 1, 1999, the Company entered into an agreement with a director
to act as the Chairman of the Board of Directors in exchange for 50,000 shares
of restricted stock and 50,000 options that expire in 24 months and carry an
exercise price of $1.50.
9. 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 January 1, 1998 495,500 $ 2.46 990,000 $ 3.96
Issued 751,500 2.19 - -
Exercised - - (100,000) 1.75
Expired (250,000) 2.37 (450,000) 6.67
Cancelled - - - -
----------- -----------
Outstanding at December 31, 1998 997,000 2.26 440,000 1.70
Issued 659,000 .81 150,000 1.25
Exercised - - - -
Expired (415,500) 2.45 - -
Cancelled - - - -
----------- -----------
Outstanding at December 31, 1999 1,240,500 1.43 590,000 1.75
=========== ===========
Stock options exercisable at:
December 31, 1999 1,240,500 1.43
December 31, 1998 997,000 2.26
Warrants exercisable at:
December 31, 1999 590,000 1.75
December 31, 1998 440,000 1.70
</TABLE>
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Summary information about the Company's stock options and warrants outstanding
at December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Outstanding and Weighted Average
Weighted Average Exercisable at Contractual Periods
Exercise Price December 31, 1999 in Years
-------------- ----------------- --------
<S> <C> <C> <C>
OPTIONS
$ .60 12,000 1.83
.75 634,000 1.93
1.75 263,000 2.00
2.50 331,500 2.02
-------------
$ 1.43 1,240,500 1.95
======= ============= =====
WARRANTS
$ 1.25 150,000 2.00
1.50 350,000 2.87
2.50 90,000 4.00
-------------
$ 1.75 590,000 2.96
======= ============= =====
</TABLE>
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 risk-free interest rates of 6.22% and 5.95% and a volatility
factor of expected market price of the Company's common stock of 172.87%. Under
the provisions of SFAS No. 123, compensation expense arising from the issuance
of stock options and warrants for the years ended December 31, 1999 and 1998 was
$703,120 and $324,537, respectively, which was included in selling, general and
administrative expenses.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
The Company also measures compensation in accordance with the provisions of
Accounting Principles Board Opinion No. 25 in accounting for stock options
issued to employees. Accordingly, compensation cost of $2,884 and $602 has been
recorded for stock options issued to employees for the years ended December 31,
1999 and 1998, respectively, using the intrinsic value method. In addition, the
fair value of each stock option and warrant issued has been estimated on the
issuance date using the Black-Scholes Option Valuation Model. The following
assumptions were made in estimating the fair value:
Dividend yield 0%
Risk-free interest rate 5.95% and 6.22%
Expected life 1 and 2 years
Expected volatility 172.87%
Had compensation cost been determined under SFAS No. 123, net loss per share for
the years ended December 31, 1999 and 1998 would have been increased as follows:
<TABLE>
<CAPTION>
1999 1998
---------------- -----------------
<S> <C> <C>
Net loss
As reported $ (1,228,454) $ (792,030)
Pro forma (1,622,939) (1,036,539)
Basic and diluted loss per share
As reported $ (.23) $ (.19)
Pro forma (.31) (.25)
</TABLE>
10. BARTER TRANSACTIONS
In 1999, the Company transferred software acquired from a vendor to a video
postproduction company in exchange for $88,000 in postproduction services, of
which the Company utilized approximately $22,000 of services. These transactions
are reflected in the financial statements for the year ended December 31, 1999.
In connection with two subscription agreements with hotels, the Company receives
up to $5,000 per month in complimentary room and food services. In 1999, the
Company utilized approximately $13,600 in room and food services. These
transactions are reflected in the 1999 financial statements.
The Company entered into an agreement to render advertising services, in
exchange for various services for approximately $350,000. For the year ended
December 31, 1999, unrendered advertising services of $67,000 have been accrued
and reflected in the 1999 financial statements.
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
11. MAJOR CUSTOMERS
Sales to three customers were approximately 60% and 58% of total revenues for
the years ended December 31, 1999 and 1998, respectively.
12. SUBSEQUENT EVENTS
In January and February 2000, the Company issued approximately 665,000 shares of
common stock for approximately $295,000.
<PAGE>
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on behalf of the
undersigned, thereunto duly authorized.
Dated: September 5, 2000
The Players Network
By: /s/ Mark Bradley
-----------------------------------------
Its: Chief Executive Officer
