SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE EXCHANGE ACT OF 1934
The Players Network
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(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)
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
PART I ...............................................................................................1
Item 1. Description of Business........................................................................1
Item 2. Management's Discussion and Analysis of Plan of Operation......................................4
Item 3. Description of Property........................................................................9
Item 4. Security Ownership of Certain Beneficial Owners and Management.................................9
Item 5. Directors and Executive Officers, Promoters and Control Persons...............................12
Item 6. Executive Compensation........................................................................14
Item 7. Certain Relationships and Related Transactions................................................15
Item 8. Description of Securities.....................................................................15
Part II ..............................................................................................15
Item 1. Market Price of and Dividends on the Registrant's Common Equity and Other Shareholder Matters.15
Item 2. Legal Proceedings.............................................................................16
Item 3. Changes in and Disagreements with Accountants.................................................16
Item 4. Recent Sales of Unregistered Securities.......................................................17
Item 5. Indemnification of Directors and Officers.....................................................22
Part F/S ..............................................................................................23
Part III ..............................................................................................24
Item 1. Index to Exhibits.............................................................................24
</TABLE>
<PAGE>
PART I
Item 1. Description of Business
The Players Network (the "Company") was incorporated under the laws of
the State of Nevada, on March 16, 1993. The Company owns and operates a digital
24-hour gaming and entertainment network called "PLAYERS NETWORK" which
specializes in producing television programming to serve the gaming industry.
The Company currently broadcasts its programming directly into the guestrooms of
casino hotels through a customized private cable channel. The Company's format
is designed to educate new players and promote casino games and activities. The
Company's programming includes shows in basic gaming instruction, news, sports
and racing, entertainment and tournaments. The Company has, until recently,
primarily operated as a television and video production company and programming
distributor. The Company has expanded the placement of its programming from
hotel rooms to home computers through the world wide web.
Products and Services.
---------------------
In addition to operating a 24-hour closed-circuit gaming entertainment
television network in a limited format to guestrooms in casino hotels, the
Company also operates an independent working sound stage in Las Vegas Nevada
where it produces videos for hire. The Company develops and markets gaming
instruction and information videos for consumers. For example, the Company has
produced a series of gaming instructional videos, including videos entitled
"Game Watch" for International Game Technology ("IGT"). IGT distributes these
videos to their casino customers to educate them on the latest slot machines and
technology. The Company also rents its sound stage to other independent
producers.
In September 1999 the Company launched PlayersNetwork.com, the
Company's gaming portal and e-commerce world wide web site. Currently, the
Company's web site, "www.PlayersNetwork.com" (hereinafter referred to as
"PlayersNetwork.com" or the "Company's Web Site") is a gaming information and
e-commerce world wide web site. Presently, PlayersNetwork.com provides
instruction on casino games, enables visitors to make reservations and receive
discounts on airfare and hotels, educates the Company's Web Site visitors about
gaming destinations and sells gaming merchandise.
When fully operational, the Company anticipates that PlayersNetwork.com
will include gaming instructional videos both on a streaming full motion video
basis and on demand. Specifically, the Company intends that PlayersNetwork.com
will feature: (i) 24-hour televised live and prerecorded gaming-related
programming, (ii) on-demand information services, including gaming financial
reports, casino executive and industry profiles, gaming news reports, national
lottery picks, show previews and a gaming travel guide and (iii) interactive
multimedia services, including, daily slot and poker tournaments, interactive
slot and video play, live chat and interviews with guests from the gaming
industry and live events and special report web-cast. We anticipate running
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prerecorded content within the next sixty days and expect to phase in and refine
24-hour televised live programming on our web site over the next two years.
Although portions of the on-demand information services are currently available,
on-demand information services will not be fully operational until the end of
the year 2000. We also expect that portions of the interactive multimedia
services will be available by the end of the year 2000, and we will be
continuously expanding and developing this service in the years ahead.
In December 1999 the Company entered into an agreement with Play
Streaming Media Group ("Play") whereby the Company received the right to utilize
Play's GlobeCaster video production system for the Company's network operations,
video productions and world wide web broadcasting. The Company will utilize this
technology to enter the video commerce industry with the launch of a 24-hour
television network on their PlayersNetwork.com gaming and entertainment internet
portal website. Play's GlobeCaster will enable the Company to record, edit and
stream video onto the internet through PlayersNetwork.com. The Company plans to
provide live broadcasts and pre-recorded programming on events involving the
gaming and entertainment industries.
Distribution and Marketing
--------------------------
The Company markets its closed-circuit network television programs
through "PLAYERS NETWORK" to hotel casinos. The Company's programming is
currently available in hotel casinos in Nevada, Iowa, Louisiana and Mississippi.
The Company has entered into affiliate agreements with these hotels pursuant to
which the Company produces gaming programming for hotel casinos and the hotels
distribute the programming to its guests over the hotel's privately operated
cable television distribution system. The affiliate agreements usually run for a
period of between one to two years and may be renewed upon the mutual agreement
of the Company and the hotel. The affiliate agreements provide the hotel and the
Company with the opportunity to terminate the agreement upon a breach by the
other party of a material term of the agreement and the failure of such party to
cure the breach. The fees payable by the hotel to the Company under these
agreements may include: (i) an initial production and start up fee, (ii) a
monthly programming and customization fee, and (iii) an annual membership fee
which covers, among other things, the cost of equipment and maintenance.
The Company's web site targets the millions of people who visit casinos
in the United States each year as well as the individuals who visit gaming
destinations worldwide and who have access to the internet through a personal
computer (and, to a limited extent, through a Web-TV). PlayersNetwork.com
currently attracts individuals seeking gaming instruction, gaming merchandise
and city directories. As soon as it becomes fully operational, the Company's Web
Site will target individuals seeking 24 hour live televised gaming-related
programming and interactive multimedia services.
In order to create an awareness of the Company's existence among
individuals in the target markets, the Company intends to focus its marketing
efforts primarily on other web sites that are co-branded with the Company's Web
Site and which will enable users of the other sites to link up to the Company's
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Web Site. The use of search engines will also enable PlayersNetwork.com to be
listed as a match if users type in key words such as "gaming," "poker," "racing"
or "Las Vegas hotels and casinos." The Company will also employ direct marketing
techniques that will primarily consist of mass mail campaigns targeting people
who have been a guest at a casino resort in the last 36 months. Additionally,
the Company will advertise the Company's Web Site through traditional media
advertising, including radio, television, print and publicity campaigns.
Competition.
-----------
The Company is not aware of any other companies that currently offer
services similar to the ones it provides within hotels and casinos. The Company
believes that the hotels and casinos that currently provide guests with
instructional video gaming and entertainment services either produce such
products in-house or engage the services of video producers who do not
specialize in producing videos for the gaming industry. Unlike these other video
producers, the Company has already built a significant gaming video library,
developed and acquired market research studies to validate audience demand, owns
digital broadcast equipment and software and has aligned itself with a reserve
of writers, producers and directors who understand the casino industry.
Additionally, the Company believes that PlayersNetwork.com is the only
web site that focuses on the gaming industry by offering gaming entertainment,
education and information, gaming city directories, and thousands of gaming
products but does not contain gambling. Although other internet sites provide
travel reservation services, offer show tickets and educate their audiences
about various gaming destinations, PlayerNetwork.com offers these services in
addition to its original programming content.
Principal Suppliers.
-------------------
The Company's three principal suppliers are: (i) the Gamblers General
Store ("General Store"), (ii) iTravel Marketing, Inc. ("Travel") and (iii) Play
Streaming Media Group ("Play"). The General Store, which is the largest gambling
supply store in the world, has given the Company the right to market and sell
the General Store's products on the Company's Web Site. Currently the Company
offers 900 products from the General Store's catalogue, including, playing
cards, gaming chips, casino tables and slot and video poker machines. Travel
provides individuals who are visiting the Company's web site access to, among
other things, airline, rental car and hotel room reservations and golf
tee-times. Play provides the Company equipment, training and technical support
for the Company' s internet broadcast business.
Major Customers
---------------
In 1998, four customers accounted for 75% of the gross revenue of the
Company. These customers were (i) Primmadonna Corporation, which accounted for
26% of the Company's gross revenue in 1998 (the "1998 Gross Revenue"), (ii) the
Stratosphere Corporation, which accounted for 22% of the 1998 Gross Revenue,
(iii) Networks North, which accounted for 16% of the 1998 Gross Revenue and (iv)
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IGT, which accounted for 11% of the 1998 Gross Revenue. In 1999, three customers
accounted for 60% of the gross revenue of the Company. These customers were (i)
Station Casinos, which accounted for 24% of the Company's gross revenue in 1999
(the "1999 Gross Revenue"), (ii) Primmadonna Corporation, which accounted for
22% of the 1999 Gross Revenue and (iii) IGT, which accounted for 14% of the 1999
Gross Revenue.
Trademark.
---------
The slogans "Everybody wants to be a player" and "The only game in
town" are registered trademarks of the Company with the United States Patent and
Trademark Office. The Company has filed applications for the trademark "Players
Network" and for the service mark "Players Network" and is awaiting registration
of these marks.
Need for Governmental Approval.
------------------------------
The Company does not believe that any governmental approvals are
required to sell its products or services.
Cost of Research and Development.
--------------------------------
In the last two years the Company has expended approximately $2,000,000
in research and development activities related to developing the Company's video
library and internet site, including market research and the purchase of certain
computer hardware and software.
Employees.
---------
The Company currently has six full-time employees. Management will hire
additional employees on an as needed basis. The Company is not a party to any
collective bargaining agreement or labor union contract, nor has it been
subjected to any strikes or employment disruptions in its history.
Item 2. Management's Discussion and Analysis of Plan of Operation
Overview
--------
The Company provides television programming and produces videos related
to gaming instruction and information to hotel casinos in Nevada, Iowa,
Louisiana and Mississippi on a private cable channel known as "PLAYERS NETWORK".
The Company also has an independent working sound stage in Las Vegas on which it
produces videos. It also rents this facility to various production companies.
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The Company has three types of revenues. Network revenue consists of
initial, renewal and subscription fees. Initial fees are recognized when
agreements are signed and equipment is installed. Renewal fees, formerly known
as licensing fees, and subscription fees are recognized ratably over the term of
the agreement. 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.
The Company expects operating losses and negative operating cash flow
to continue for a period of 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 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.
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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 in accordance with EITF 99-17,
"Accounting for Advertising Barter Transactions", which resulted in
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 share of its common stock.
During the year 2000, the Company anticipates capital expenditures
ranging from $750,000 to $1,100,000. The capital expenditures consists 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.
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 517,410 of common shares in January 2000.
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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 for the year 2000.
In December 1999, the Company signed an agreement with Play Streaming
Media Group, which agreed to deliver six "GlobeCasters" to the Company in
exchange for syndication of PLAYERS NETWORK online video content. The
syndication of online video content is referred to as "V-Commerce," which is an
area of high interest among media companies. This equipment will enable PLAYERS
NETWORK to become a 24-hour a day web network broadcaster. The Players Network
will be the first digital network focused gaming and entertainment content. The
Company did not complete the exchange with the Play Streaming Media Group at
December 31, 1999, and, accordingly, did not assign any value to the equipment
or syndication rights.
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 approximately $270,000 in revenues in the first
quarter of 2000.
In March 2000, the Company signed a video production agreement with a
major casino hotel chain for approximately $50,000 to be completed in the second
quarter of 2000.
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.
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Results of Operations - Years Ended December 31, 1999 and 1998
--------------------------------------------------------------
Revenues increased 43% from $308,872 for the period 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 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 year 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 development costs.
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 from December
31, 1998 to December 31, 1999.
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
8
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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.
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, telecommunications
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 telecommunication 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.
Item 3. Description of Property
The principal executive office of the Company is located at 4620
Polaris Avenue, Las Vegas, Nevada 89103. This facility houses the Company's
technical and administrative operations. The Company subleases approximately
7,200 square feet of combined office space and soundproofed warehouse at these
premises pursuant to a 12 month sublease which commenced on March 1, 1998 and
which is continuing on a month to month basis. The monthly rent is $5,300. The
Company is currently negotiating a new lease arrangement for these premises with
the lessor.
The Company believes that this leased property is in good condition, is
well maintained and is adequate for the Company's current and immediately
foreseeable operating needs. The Company does not have any policies regarding
investments in real estate, securities or other forms of property.
Item 4. .........Security Ownership of Certain Beneficial Owners and Management
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Security Ownership of Certain Beneficial Owners.
-----------------------------------------------
The following table sets forth information, to the best of the
Company's knowledge, as of January 4, 2000, regarding the beneficial ownership
of the Company's common stock by each person who is known by the Company to
beneficially own more than 5 percent of the Company's common stock.
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<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of
-------------- -------------------- --------------------- ----------
Beneficial Owner Beneficial Ownership Class(1)
---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Mark Bradley 3,580,277(2) 45%
4620 Polaris Avenue
Las Vegas, NV 89103
Common Stock Cede & Company 1,037,855 14.9%
P.O. Box 222
Bowling Green Station
New York, NY 10274
Common Stock Joost Van Adelsberg 414,258(3) 5.9%
1809 Via Visalia
Palos Verdes, CA 90274
(1) This table is based on 6,977,920 shares of Common Stock ("Shares")
outstanding on January 4, 2000. If a person listed on this table has the right
to obtain additional Shares within sixty (60) days from January 4, 2000, the
additional Shares are deemed to be outstanding for the purpose of computing the
percentage of class owned by such person, but are not deemed to be outstanding
for the purpose of computing the percentage of any other person.
(2) This figure includes: (a) 18,000 Shares issuable upon the exercise of
currently exercisable stock options, 3,000 of which are exercisable at a price
of $.60 per share and 15,000 of which are exercisable at a price of $.75 per
share and (b) 950,000 Shares issuable upon the exercise of a currently
exercisable warrant, 300,000 of which are exercisable at a price of $1.25 per
share, 300,000 of which are exercisable at a price of $.90 per share and 350,000
of which are exercisable at a price of $1.75 per share.
(3) This figure includes 36,000 Shares issuable upon the exercise of currently
exercisable stock options, 12,000 of which are exercisable at a price of $.75
per share, 3,000 of which are exercisable at a price of $.60 per share and
21,000 of which are exercisable at a price of $2.50 per share.
</TABLE>
Security Ownership of Management.
--------------------------------
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of January 4, 2000 by: (i) each of
the Company's directors, (ii) each of the executive officers named in the
summary compensation table set forth in Item 6 -- "Executive Compensation", and
(iii) all directors and executive officers of the Company as a group.
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<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of
-------------- -------------------- --------------------- ----------
Beneficial Owner Beneficial Ownership Class(1)
---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Mark Bradley 3,580,277(2) 45%
4620 Polaris Avenue
Las Vegas, NV 89103
Common Stock Seth A. Horn 50,000 0.7%
4652 Charnock Dr.
Irvine, CA 92604
Common Stock Darius Irani 252,088(3) 3.6%
1809 Via Visalia
Palos Verdes, CA 90274
Common Stock Peter Rona 157,000(4) 2.2%
14 Meteor Dr.
Etobicoke, ON
MOW 1A4
Canada
Common Stock Joost Van Adelsberg 414,258(5) 5.9%
1809 Via Visalia
Palos Verdes, CA 90274
Common Stock Directors and Executive 4,453,623(6) 55%(7)
Officers as a Group
(1) This table is based on 6,977,920 Shares outstanding on January 4, 2000. If a
person listed on this table has the right to obtain additional Shares within
sixty (60) days from January 4, 2000, the additional Shares are deemed to be
outstanding for the purpose of computing the percentage of class owned by such
person, but are not deemed to be outstanding for the purpose of computing the
percentage of any other person.
(2) This figure includes: (a) 18,000 Shares issuable upon the exercise of
currently exercisable stock options, 3,000 of which are exercisable at a price
of $.60 per share and 15,000 of which are exercisable at a price of $.75 per
share and (b) 950,000 Shares issuable upon the exercise of a currently
exercisable warrant, 300,000 of which are exercisable at a price of $1.25 per
share, 300,000 of which are exercisable at a price of $.90 per share and 350,000
of which are exercisable at a price of $1.75 per share.
(3) This figure includes 43,500 Shares issuable upon the exercise of currently
exercisable stock options, 15,000 of which are exercisable at a price of $.75
per share, 3,000 of which are exercisable at a price of $.60 per share and
25,500 of which are exercisable at a price of $2.50 per share.
(4) This figure includes 68,000 Shares issuable upon the exercise of currently
exercisable stock options, 65,000 of which are exercisable at a price of $.75
per share and 3,000 of which are exercisable at a price of $.60 per share.
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(5) This figure includes 36,000 Shares issuable upon the exercise of currently
exercisable stock options, 12,000 of which are exercisable at a price of $.75
per share, 3,000 of which are exercisable at a price of $.60 per share and
21,000 of which are exercisable at a price of $2.50 per share.
(6) This figure is based on the current number of Shares that each director and
executive officer of the Company owns plus the number of Shares that each
director and executive officer has the right to obtain within 60 days from
January 4, 2000.
(7) This percentage was derived by dividing the figure obtained in footnote (6)
above by the total number of Shares outstanding as of January 4, 2000 plus the
number of Shares that each director and executive officer has the right to
obtain within 60 days from January 4, 2000.
</TABLE>
Item 5. Directors and Executive Officers, Promoters and Control
Persons
The Company's directors and executive officers, and their ages as of
January 4, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark Bradley 37 Chief Executive Officer and Director
Seth A. Horn 44 Chief Financial Officer
Darius Irani 67 Director
Peter Rona 53 Chairman and Director
Dr. Joost Van Adelsberg 75 Director
</TABLE>
Terms of Directors.
------------------
Mark Bradley has served as a director of the Company since its
inception in 1993. Peter Rona has served as a director of the Company for one
year and Dr. Joost Van Adelsberg and Darius Irani have served as directors of
the Company for the past two years. The directors of the Company serve as such
until the next annual meeting of the stockholders and until their successors are
elected and qualified.
Business Experience of the Directors and Executive Officers.
-----------------------------------------------------------
Mark Bradley founded the Company in 1993 and has served as its chief
executive officer from 1993 until the present. During 1997 and 1998, Mr. Bradley
was a staff producer/director at United Artists where he produced original
programming and television commercials and also directed multi-camera music
videos and live to tape sports and variety shows. Mr. Bradley was a studio
manager and postproduction supervisor with United Cable Television in Los
Angeles in 1988 and 1989. In this capacity he engaged in the production,
packaging and syndication of television film productions and a myriad of other
entertainment programming content for such media venues as HBO, Nickelodeon,
Prime Ticket and MTV. He was also engaged as an independent producer/director,
13
<PAGE>
creating and promoting live pay-per-view events for television, negotiating
entertainment programming distribution deals and budgeting and packaging
television programming. In 1985 he created the Real Estate Broadcast Network
which was the first 24-hour real estate channel. In 1984 he joined the
partnership of JMJ Communications. He performed media buying and selling
services, produced corporate promotional and marketing videos, and developed
direct-response marketing companies for consumer products. Mr. Bradley's
education includes the completion of the producers program at the University of
California Los Angeles.
Seth Horn is the Company's chief financial officer. He has over ten
years of experience in financial and accounting management and has been a
certified public accountant for almost 20 years. He has experience in capital
markets, mergers and acquisitions, SEC reporting, securities registration and
proxy statements. From 1991 to 1998 Mr. Horn was a managing director at General
Capital, an Investment Banking firm in Newport Beach, California, from 1997 to
1998 he was the Chief Financial Officer and Controller at International Vinyl
Products and from 1998 to 1999 Mr. Horn was a consultant to Powerine Oil
Company. Mr. Horn has a Bachelor of Arts degree in accounting and business from
Pennsylvania State University.
Darius Irani is a member of the Board of the Directors of the Company.
Mr. Irani has served as the managing partner of DHIJ Management Company, a
company that owns and manages real estate income properties from 1992 until the
present. From 1964 to 1992 Mr. Irani worked at Allied Signal Aerospace Company
("Allied") in various technical and management capacities. Mr. Irani's most
recent position with Allied was as Director of Engineering of the Actuation
System Division where he was responsible for the primary and secondary flight
controls for both commercial and military aircraft. Mr. Irani holds a Masters
Degree in Electrical Engineering from the University of Toronto.
Peter Rona is the Chairman of the Company and is a member of the
Company's Board of Directors. In 1985 Mr. Rona founded a communications and
entertainment company named Network North, Inc. ("Network). Mr. Rona is
Network's Chairman, President and Chief Executive Officer. Network's wholly
owned subsidiary, NTN Interactive Network, Inc. ("NTN") is the exclusive
Canadian licensee of NTN Communications, Inc., a leading producer and programmer
of interactive television and on-line and internet entertainment. Magic Lantern
Communications, Ltd., another wholly owned subsidiary of Network, markets and
distributes educational video products, media resources and software to
educational networks and governmental agencies. Mr. Rona has been President of
Anor Management Services, Ltd., a personal consulting and management company
since 1973. He was also a director of NorBee Financial Services, Inc., a company
that specializes in mortgage brokerage and other financial services. Mr. Rona
received a Bachelor of Arts degree from Sir Williams University in Montreal and
Quebec.
Dr. Joost Van Adelsberg is a member of the Board of Directors of the
Company. Dr. Van Adelsberg is a medical doctor and currently has an active
family practice in California. He is a member and is on the staff of the Little
Company of Mary Hospital in Torrance, California. Dr. Van Adelsberg is a
14
<PAGE>
clinical instructor at the Department of Family Practice, School of Medicine at
the University of California at Los Angeles.
Family Relationships.
--------------------
There are no family relationships among directors, executive officers
or persons nominated or chosen by the Company to become directors or executive
officers.
Involvement in Certain Legal Proceedings.
----------------------------------------
The Company is not aware of any material legal proceedings that have
occurred within the past five years concerning any director, director nominee,
promoter or control person which involved a criminal conviction, a pending
criminal proceeding, a pending or concluded administrative or civil proceeding
limiting one's participation in the securities or banking industries, or a
finding of securities or commodities law violations. Moreover, no bankruptcy
petition has been filed by or against any business of which a director, director
nominee, promoter or control person was a general partner or executive officer
either at the time of such bankruptcy or within two years prior to that time.
Item 6. Executive Compensation
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
---------------- ------- ----------------- ----------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Securities
Principal Annual Restricted Underlying All Other
Position Compen-sation Stock Options/ LTIP Compen-sation
Year Salary Bonus Award(s) SARs Payouts
---------------- ------- ----------------- ----------- ------------- ------------- ------------- ----------- -----------
Mark Bradley 1997 $75,232.50(1) None None None None None None
CEO
---------------- ------- ----------------- ----------- ------------- ------------- ------------- ----------- -----------
Mark Bradley 1998 $151,240(2) None None None None None None
CEO
---------------- ------- ----------------- ----------- ------------- ------------- ------------- ----------- -----------
Mark Bradley 1999 $78,100(3) None None None None None None
CEO
---------------- ------- ----------------- ----------- ------------- ------------- ------------- ----------- -----------
Peter Rona 1999 $26,350(4) None None None None None None
Chairman
---------------- ------- ----------------- ----------- ------------- ------------- ------------- ----------- -----------
(1) Mark Bradley's salary consisted of cash in the amount of $75,000 and 23,250 Shares valued at $.01 per share.
(2) Mark Bradley's salary consisted of cash in the amount of $150,000 and 4,000 Shares valued at $0.31 per share.
(3) Mr. Bradley's salary consisted of cash in the amount of $75,000 and 10,000 Shares valued at $0.31 per share.
15
<PAGE>
(4) Mr. Rona's salary consisted of 85,000 Shares valued at $0.31 per share.
</TABLE>
Standard Arrangements
---------------------
Directors of the Corporation do not receive cash compensation for their
services as directors or members of committees of the Board of Directors, but
are given 2,000 Shares and 3,000 options of the Corporation's Common Stock for
each meeting of the Board of the Directors that such director attends.
Item 7. Certain Relationships and Related Transactions
Alan Woinski was a director of the Company from July 1996
through August 1998. Mr. Woinski has been the President of Casino Journal
Publishing Group, Inc. ("Casino Publishing") since February 1998, when another
company that he was the president of, Gaming Ventures Corp. ("Gaming Ventures"),
merged with and into Casino Publishing. Gaming Ventures introduced the Company
to various gaming and casino companies and assisted the Company in writing press
releases. In return for these services, Gaming Ventures obtained shares of the
Company's common stock in October 1997 and in December 1999. Casino Journal
advertises for the Company in Casino Journal, a magazine that it publishes. The
-------------- Company has paid Casino Journal for such advertising by issuing
to Casino Journal the number of shares of common stock of the Company equivalent
to the fair market value of the advertisement services. Casino Journal has also
purchased additional shares of common stock of the Company through open market
transactions.
Item 8. Description of Securities
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $0.001 par value. As of January 4, 2000, 6,977,920
shares of Common Stock were issued and outstanding. All Shares entitle the
holder thereof to: (i) one non-cumulative vote for each share held of record on
all matter submitted to a vote of shareholders, (ii) to participate equally and
to receive any and all such dividends as may be declared by the Board of
Directors out of funds legally available therefore; and (iii) to participate pro
rata in any distribution of assets upon liquidation of the Company. Stockholders
of the Company have no preemptive rights to acquire additional Shares or any
other securities. The Common Stock is not subject to redemption and carries no
subscription or conversion rights. All outstanding Shares are fully paid and
non-assessable. There are not provisions in the Articles of Incorporation or the
Bylaws of the Company that would delay, defer or prevent a change in control of
the Company.
Part II
16
<PAGE>
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters
The Company's Common Stock is currently traded on the over the counter
bulletin board market (OTCBB) under the symbol PNTV. The following table sets
forth the high and low sales prices for each quarter within the last two fiscal
years.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1998
-----------------------------------
Quarter Ended High Sales Price Low Sales Price
------------- ---------------- ---------------
<S> <C> <C>
March 31, 1998 2 3/4 2 7/16
June 30, 1998 2 14/25 1 /18
September 30, 1998 1 7/16 9/16
December 31, 1998 1 1/2 3/8
Fiscal Year Ended December 31, 1999
-----------------------------------
Quarter Ended High Sales Price Low Sales Price
------------- ---------------- ---------------
March 31, 1999 1 1/2 51/86
June 30, 1999 11/16 5/16
September 30, 1999 51/86 5/16
December 31, 1999 3/4 10/37
</TABLE>
As of January 4, 2000, there were approximately 164 holders of record
of the Company's Common Stock. The Company has not declared or paid any cash
dividends on its Common Stock during the past two fiscal years and through
September 30, 1999. The Company's board of directors currently intends to retain
all earnings for use in the Company's business for the foreseeable future. Any
future payment of dividends will depend on the Company's results of operations,
financial condition, cash requirements and other factors deemed relevant by the
Company's board of directors.
Item 2. Legal Proceedings
The Company is not a party to any pending legal proceeding.
Item 3. Changes in and Disagreements with Accountants
17
<PAGE>
The Company hired the accounting firm of Winter and Scheifley ("W&S")
to audit its 1996 and 1997 financial statements. During such engagement W&S
dissolved. The partner that had been in charge of auditing the Company's
financial statements started his own practice and finished the 1996 and the 1997
Company audit. Although Mr. Scheifley proposed to audit the Company's 1998
financial statements, the Board of Directors of the Company determined that the
Company should hire a larger and more established accounting company and
dismissed Mr. Scheifley on December 17, 1999. Therefore, in December of 1999 the
Company hired the accounting firm of Friedman, Alpren & Green.
The Company did not have any disagreements with W&S or Mr. Scheifley on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure. Mr. Scheifley's report on the financial
statements for 1996 and 1997 did not contain an adverse opinion or disclaimer of
opinion and was not modified as to uncertainty, audit scope or accounting
principles.
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
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
18
<PAGE>
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:
<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
19
<PAGE>
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>
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
------------- -------------
20
<PAGE>
<S> <C> <C> <C> <C
1/29/99 25,000 Larry Smith Cash Sale $25,000
2/22/99 2,000 Kirsten Ashley Employee $1,500
2/22/99 50,000 Peter Rona (1) Consulting Services $37,500
2/22/99 2,000 Peter Rona (1) Consulting Services $1,500
2/22/99 5,000 Steve Trapp Public Relations $3,750
2/22/99 2,000 Joost Van Adelsberg (2) Consulting Services $1,500
2/22/99 2,000 Mark Bradley (3) Employee $1,500
2/22/99 12,000 John Dorsett Production Services $9,000
2/22/99 2,000 Darius Irani (4) Consulting Services $1,500
3/22/99 3,000 Derek Schreck Production Services $1,968
3/22/99 3,000 Sydney Schreck Production Services $1,968
4/26/99 70,000 Casino Journal Advertising $32,760
4/26/99 10,000 Kaufman Associates Consulting Services $4,680
5/13/99 30,000 Adam Jaslow Cash Consideration $15,000
5/14/99 2,000 Mark Bradley (3) Board of Director $1,374
Services
5/14/99 57,399 Myra Feldgreber Debt Conversion $40,685
5/14/99 2,000 Darius Irani (4) Consulting Services $1,374
5/14/99 2,333 John Rigelhoff Consulting Services $1,603
5/14/99 25,000 Rogich Communications Consulting Services $17,175
5/14/99 2,000 Peter Rona (1) Consulting Services $1,374
5/14/99 2,000 Joost Van Adeslberg (2) Consulting Services $1,374
6/8/99 10,000 Kirsten Ashley Employee Bonus $4,060
6/8/99 2,000 Mark Bradley (3) Board of Directors $812
Services
6/8/99 25,000(*) Rayna Feldgreber Conversion of Loan $10,250
6/8/99 355,099(*) Mark Bradley (3) Conversion of Loan $273,570
6/8/99 25,000(*) Brenda Carter Conversion of Loan $10,250
6/8/99 2,000 Darius Irani (4) Consulting Services $812
6/8/99 5,000 Tom Nevitt Accounting Services $2,030
6/8/99 2,000 Peter Rona (1) Consulting Services $812
6/8/99 2,000 Joost Van Adelsberg (2) Consulting Services $812
8/26/99 802,198 Mark Bradley Debt Conversion $236,282
8/26/99 10,000 Terrance Bean Debt Conversion $3,100
8/26/99 10,000 Joost Van Adelsberg(2) Debt Conversion $3,100
8/26/99 10,000 Bonnie Feldgreber Debt Conversion $3,100
8/26/99 10,000 Myra Feldgreber Debt Conversion $3,100
10/25/99 10,000 Terrance Bean Cash Sale $5,000
10/27/99 10,000 Joost Van Adelsberg (2) Cash Sale $5,000
12/1/99 20,000 Malik Paraonandi Cash Sale $6,250
12/1/99 20,000 Joost Van Adelsberg (2) Cash Sale 10,000
12/1/99 20,000 Terrance Bean Cash Sale $10,000
12/1/99 30,000 Robert Bedrossian Cash Sale $9,375
12/1/99 16,000 Steve Di'orio Cash Sale $5,000
12/1/99 40,000 Donte Holdings Cash Sale $12,500
12/1/99 80,000 Darius Irani (4) Conversion of Loan $22,569
12/1/99 10,000 Darius Irani (4) Cash Sale $5,000
12/1/99 16,000 Dorothy Levin Cash Sale $5,000
12/1/99 20,000 Jason Lobman Cash Sale $6,250
12/1/99 80,000 Vivek Reddy Cash Sale $25,000
12/1/99 32,000 Steve Rose Cash Sale $10,000
21
<PAGE>
12/1/99 10,000 Kirsten Ashley Bonus $5,620
12/1/99 2,000 Mark Bradley (3) Board of Director $1,124
Services
12/1/99 28,000 Wayne Camardo Consulting Services $15,736
12/1/99 2,000 Darius Irani (4) Consulting Services $1,124
12/1/99 25,000 Kaufman Associates Consulting Services $14,050
12/1/99 5,000 Tom Nevitt Accounting Services $5,620
12/1/99 700 John Rigelhoff Production Services $393
12/1/99 16,000 Steve D'Orio Cash Sale $5,000
12/1/99 2,000 Peter Rona (1) Consulting Services $1,124
12/1/99 25,000 Peter Rona (1) Consulting Services $14,050
12/1/99 4,000 Steve Trapp Public Relations $2,248
Services
12/1/99 4,000 Steve Trapp Public Relations $2,248
Services
12/1/99 4,000 Steve Trapp Public Relations $2,248
Services
12/1/99 2,000 Joost Van Adelsberg (2) Consulting Services $1,124
12/1/99 15,000 AA Capital Ventures Consulting Services $8,430
12/1/99 10,000 John Dorsett Production Services $5,620
12/1/99 2,000 Bess Greenberg Accounting Services $1,124
12/1/99 50,000 Seth Horn (5) Consulting Services $28,100
12/1/99 15,000 Mike Marcovsky Consulting Services $8,430
12/1/99 2,000 Tanja Norbert Consulting Services $1,124
12/1/99 10,000 John Raczka Consulting Services $5,620
12/1/99 2,000 John Thor Advertising $1,124
12/1/99 25,000 iTravel Internet Development $14,050
Services
(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>
Item 5. Indemnification of Directors and Officers
Section 6 of the Company's Articles of Incorporation contains a
provision that eliminates or limits the personal liability of a director,
officer or stockholder for damages for breach of a fiduciary duty but does not
eliminate or limit the liability of a director, officer or stockholder for: (i)
acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law or (ii) the payment of dividends in violation of section 78.300
of the Nevada Revised Statutes.
22
<PAGE>
THE PLAYERS NETWORK
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE>
THE PLAYERS NETWORK
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report 1
Balance Sheet as of December 31, 1999 and 1998 2
Statement of Operations
Years Ended December 31, 1999 and 1998 3
Statement of Cash Flows
Years Ended December 31, 1999 and 1998 4
Statement of Changes in Stockholders' Equity
Years Ended December 31, 1999 and 1998 5
Notes to Financial Statements 6 - 16
<PAGE>
[LETTERHEAD OF FRIEDMAN ALPREN & GREEN LLP]
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.
/s/ FRIEDMAN ALPREN & GREEN LLP
March 20, 2000
<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
================= ==================
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<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
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<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
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
<TABLE>
THE PLAYERS NETWORK
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
Additional
Common Stock 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
================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<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 is listed on the Over the Counter Bulletin
Board.
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
6
<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.
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 surrendered is
determinable based on the Company's experience in receiving cash or other
consideration readily convertible to cash.
7
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
Revenue recognition:
Network revenue consists of initial, subscription and renewal fees. Initial fees
are recognized when agreements are signed and equipment is installed. Renewal
and subscription fees are recognized ratably over the term of the agreement.
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.
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.
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.
8
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
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.
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.
9
<PAGE>
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
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 517,410 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>
10
<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.
11
<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.
12
<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>
13
<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.
14
<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.
15
<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.
16
<PAGE>
Part III
Item 1. Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit Page No.
-------------- ---------------- --------
<S> <C> <C>
(2)(A)(1) Articles of Incorporation of The Players Network
(2)(A)(2) Bylaws of The Players Network
(6)(A)(1) Sublease Agreement between Players Network and Colella
Productions, Inc.
(6)(B)(1) Agreement
(6)(B)(2) Agreement
16 Letter of James Scheifley
</TABLE>
24
<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: June 29, 2000
The Players Network
By: /s/ Mark Bradley
---------------------
Its: Chief Executive Officer
25
