UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the quarterly period ended September 30, 2017.

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the transition period from ______to _________.

 

Commission file number: 000-29363

 

 

(Exact name of registrant as specified in its charter)

 

Nevada		88-0343702
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

1771 E. Flamingo Road, #201-A Las Vegas, NV		89119
(Address of principal executive offices)		(Zip Code)

 

(702) 840-3270

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]
	Emerging growth company [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

The number of shares outstanding of the Registrant’s Common Stock on November 18, 2017 was 575,967,698.

 

 

 

PLAYERS NETWORK

FORM 10-Q

Quarterly Period Ended September 30, 2017

 

INDEX
		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	2
	Statements of Operations for the Three and Nine Months ended September 30, 2017 and 2016 (Unaudited)	3
	Statements of Cash Flows for the Nine Months ended September 30, 2017 and 2016 (Unaudited)	4
	Notes to the Condensed Consolidated financial statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36

 

 

SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS

 

On one or more occasions, we may make forward-looking statements in this Quarterly Report on Form 10-Q regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. Words or phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions identify forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in our Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent annual, periodic and current reports and other documents filed or furnished with the Securities and Exchange Commission.

 

Unless the context requires otherwise, references to “we,” “us,” “our,” and the “Company” refer specifically to Players Network.

 

 

PART I - FINANCIAL INFORMATION

 

Item 1 - Financial Statements

 

PLAYERS NETWORK

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2017				December 31, 2016
			(Unaudited)
Assets
Current assets:
Cash		$	133,801			$	145,119
Other current assets			99,141				85,150
Inventory			227,012				-
Total current assets			459,954				230,269
Fixed assets, net			407,833				29,128
Construction in progress			314,146				239,220
Total Assets		$	1,181,933			$	498,617
Liabilities and Stockholders' (Deficit)
Current liabilities:
Accounts payable		$	637,177			$	298,861
Accrued expenses			417,108				293,418
Deferred revenue			2,500				-
Deferred rent obligations			26,325				15,656
Settlements payable			-				70,000
Convertible debentures, net of discounts of $192,961 and $241,634 at September 30, 2017 and December 31, 2016, respectively			77,039				58,366
Short term debt, net of discounts of $284,216 and $60 at September 30, 2017 and December 31, 2016, respectively			554,784				142,940
Derivative liabilities			1,582,282				482,674
Total current liabilities			3,297,215				1,361,915
Long term debt, net of discounts of $538,972 and $885,271 at September 30, 2017 and December 31, 2016, respectively			386,028				39,729
Total Liabilities			3,683,243				1,401,644
Stockholders' (Deficit):
Series A convertible preferred stock, $0.001 par value, 2,000,000 shares authorized; 2,000,000 shares issued and outstanding			2,000				2,000
Series C convertible preferred stock, $0.001 par value, 12,000,000 shares authorized; 12,000,000 shares issued and outstanding			12,000				12,000
Common stock, $0.001 par value, 1,200,000,000 shares authorized; 568,209,581 and 524,394,239 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively			568,210				524,394
Additional paid-in capital			32,610,699				29,463,343
Subscriptions payable, consisting of 8,258,117 and 1,000,000 shares at September 30, 2017 and December 31, 2016, respectively			828,875				11,400
Accumulated (deficit)			(36,151,435	)			(30,639,417	)
			(2,129,651	)			(626,280	)
Noncontrolling Interest			(371,659	)			(276,747	)
Total Stockholders' (Deficit)			(2,501,310	)			(903,027	)
Total Liabilities and Stockholders' (Deficit)		$	1,181,933			$	498,617

 

See accompanying notes to financial statements.

 

 

PLAYERS NETWORK

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2017				2016				2017				2016
Revenue:		$	38,074			$	59			$	41,144			$	199
Cost of goods sold			32,806				-				35,014				-
Gross profit			5,268				59				6,130				199
Expenses:
Direct operating costs			334,545				7,537				427,596				24,537
General and administrative			2,559,617				234,402				3,712,483				669,992
Officer salaries			34,350				44,423				156,450				131,923
Depreciation and amortization			28,542				6,969				42,850				21,583
Total operating expenses			2,957,054				293,331				4,339,379				848,035
Operating loss			(2,951,786	)			(293,272	)			(4,333,249	)			(847,836	)
Other income (expense):
Gain on debt extinguishment, net			-				34,002				-				73,505
Interest expense			(325,133	)			(64,719	)			(745,048	)			(345,274	)
Change in derivative liabilities			1,339,199				(196,086	)			(528,633	)			(238,679	)
Total other income (expense)			1,014,066				(226,803	)			(1,273,681	)			(510,448	)
Net loss		$	(1,937,720	)		$	(520,075	)		$	(5,606,930	)		$	(1,358,284	)
Less: Net loss attributable to the noncontrolling interest			37,663				16,289				94,912				31,642
Net loss attributable to Players Network		$	(1,900,057	)		$	(503,786	)		$	(5,512,018	)		$	(1,326,642	)
Weighted average number of common shares outstanding - basic and fully diluted			564,473,234				431,826,412				552,533,416				398,120,154
Net loss per share - basic and fully diluted		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.00	)

 

See accompanying notes to financial statements.

 

 

PLAYERS NETWORK

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Nine Months Ended
		September 30,
		2017				2016
Cash flows from operating activities
Net loss		$	(5,512,018	)		$	(1,326,642	)
Minority interest in net loss			(94,912	)			(31,642	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense			42,850				21,583
Gain on debt extinguishment, net			-				(73,505	)
Change in fair market value of derivative liabilities			528,633				238,679
Amortization of debt discounts			675,239				305,747
Stock issued for services			823,779				7,000
Stock issued for compensation, related party			178,300				339,000
Options issued for services			325,434				-
Options issued for services, related parties			1,252,411				-
Decrease (increase) in assets:
Other current assets			(13,991	)			(279	)
Inventory			(227,012	)			-
Increase (decrease) in liabilities:
Checks drawn in excess of available funds			-				(2,154	)
Accounts payable			338,316				137,460
Accrued expenses			126,965				71,026
Deferred revenue			2,500				-
Deferred rent obligations			10,669				8,613
Settlements payable			(30,000	)			(148,810	)
Net cash used in operating activities			(1,572,837	)			(453,924	)
Cash flows from investing activities
Purchase of fixed assets and construction in progress			(496,481	)			(121,403	)
Net cash used in investing activities			(496,481	)			(121,403	)
Cash flows from financing activities
Proceeds from convertible debentures			-				265,000
Repayment of convertible debentures			-				(80,890	)
Proceeds from short term debt			735,000				188,000
Repayment of short term debt			(10,000	)			(50,000	)
Proceeds from sale of common stock			1,333,000				286,850
Net cash provided by financing activities			2,058,000				608,960
Net increase (decrease) in cash			(11,318	)			33,633
Cash - beginning			145,119				-
Cash - ending		$	133,801			$	33,633
Supplemental disclosures:
Interest paid		$	200			$	328
Income taxes paid		$	-			$	-
Non-cash investing and financing activities:
Contributed capital, debt settlement payment		$	-			$	14,000
Convertible debts settled with cash repayment agreements		$	-			$	320,000
Value of debt discounts		$	46,000			$	257,379
Value of shares issued for conversion of debt		$	148,275			$	124,477
Value of warrants issued with short term debt		$	518,423			$	14,396
Value of derivative adjustment due to debt conversions		$	52,552			$	840,500
Advance exchanged for promissory note		$	-			$	25,000

 

See accompanying notes to financial statements.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Basis of Presentation

 

The interim condensed consolidated financial statements of Players Network (the “Company”) included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to not make the information presented misleading.

 

These statements reflect all adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. It is suggested that these interim condensed consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2016 and notes thereto included in the Company’s annual report on Form 10-K filed with the SEC. The Company follows the same accounting policies in the preparation of interim reports.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership:

 

		State of				Abbreviated
Name of Entity		Incorporation		Relationship		Reference
Players Network(1)		Nevada		Parent		PNTV
Green Leaf Farms Holdings, LLC(2)		Nevada		Subsidiary		GLFH

 

⁽¹⁾Players Network entity is in the form of a corporation.

 

⁽²⁾Majority-owned subsidiary formed on July 8, 2014, in which PNTV retained 84% ownership, with the remaining 16% held by key experts and advisors. An additional 1.6% was sold to an investor on December 8, 2014 and 3% was transferred back from a founding member on December 2, 2015, giving PNTV 85.4% ownership and minority interests ownership of 14.6%. The form of the entity was changed from a corporation to a limited liability company on May 9, 2017 at which time the name was changed from Green Leaf Farms Holdings, Inc. to Green Leaf Farms Holdings, LLC (“GLFH”).

 

The consolidated financial statements herein contain the operations of the subsidiary listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company, PNTV and subsidiary, GLFH will be collectively referred to herein as the “Company”, “Players Network” or “PNTV”. The Company’s headquarters are located in Las Vegas, Nevada and substantially all of its customers are within the United States.

 

Fair Value of Financial Instruments

 

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. In addition, the Company had debt instruments that required fair value measurement on a recurring basis.

 

Inventory

 

Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. Our cannabis products consist of prepackaged purchased goods ready for resale, and cannabis flower grown in-house under our cultivation license, along with produced edibles and extracts developed under our production license.

 

Construction in Progress

 

The Company is constructing a grow house in its leased facility, which became operational during the second quarter of 2017 upon completion of the first phase of improvements, at which time depreciation commenced. On May 31, 2017, the Company placed in service $373,842 of leasehold improvements incurred during the first phase of construction. Phase 2 commenced in July and will be capitalized on the balance sheet under Construction in Progress. The total estimated cost to complete construction of the facility is approximately $1.7 million, and an additional $314,146 of construction costs have been capitalized as of September 30, 2017.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Revenue Recognition

 

Revenue is primarily generated through our subsidiary, Green Leaf Holdings, LLC. Green Leaf recognizes revenue from the sale of the following cannabis products and services to licensed dispensaries within the state of Nevada:

 

●	Premium organic medical cannabis sold wholesale to licensed retailers
●	Recreational marijuana cannabis products sold wholesale to distributors and retailers
●	Extraction products such as oils and waxes derived from in-house cannabis production
●	Processing and extraction services for licensed medical cannabis cultivators in Nevada
●	High quality cannabis strains in the form of vegetative cuttings for sale to licensed medical cannabis cultivators in Nevada

 

Revenue from the sale of our cannabis products is recognized by our subsidiary at the point of sale, at which time payment is received. Management estimates an allowance for sales returns.

 

The Company also intends to recognize revenue from its internet television platform from internally generated products and from partnered merchants when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability is reasonably assured. These criteria are met when the customers purchase a product or access a web-based video, the product or web-based video has been electronically delivered to the purchaser and payment has been received. At that time, the Company's obligations to the customer is substantially complete. The Company records the net amount it retains from the sale of items from its internet television platform after paying any agreed upon percentage of the purchase price to the featured advertising merchant excluding any applicable taxes. Revenue is recorded on a net basis because the Company is acting as an agent of the partnered merchant in the transaction. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

 

Network revenue consists of monthly network broadcast subscription revenue, which is recognized over the period in which the subscription service is available. Broadcast television advertising revenue is recognized when advertisements are aired. Video production revenue is recognized as digital video film is completed and accepted by the customer and collection is reasonably assured.

 

Deferred Rent Obligation

 

The Company has entered into operating lease agreements for its corporate office and GLFH’s warehouse which contains provisions for future rent increases. In accordance with generally accepted accounting principles, the Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease terms. The difference between rent expense recorded and the amount paid is credited or charged to “Deferred rent obligation,” which is reflected as a separate line item in the accompanying Balance Sheets.

 

Derivative Liability

 

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Recent Accounting Pronouncements

 

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company’s financial statements or related disclosures.

 

In March 2017, the FASB issued ASU No. 2017-7, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost, which include interest cost and prior service cost or credit, among others, are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This ASU is effective for the Company’s fiscal year 2018, including interim periods. The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements. The Company has not yet concluded how the new standard will impact the consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-3, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 232): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This ASU expands disclosures regarding potential material effects to the Company’s consolidated financial statements that may occur when adopting ASU’s in the future. When a company cannot reasonably estimate the impact of adopting an ASU, disclosures are to be expanded to include qualitative disclosures including a description to the effect to the company’s accounting policies, a comparison the existing policies, the status of its process to implement the new standard and any significant implementation matters yet to be addressed. This standard will generally require more disclosure in the Company’s consolidated financial statements when adopted.

 

No other new accounting pronouncements, issued or effective during the nine months ended September 30, 2017, have had or are expected to have a significant impact on the Company’s financial statements.

 

Note 2 – Going Concern

 

As shown in the accompanying condensed consolidated financial statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit of ($36,151,435), and as of September 30, 2017, the Company’s current liabilities exceeded its current assets by $2,837,261. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 3 – Related Party

 

Officers

 

On September 11, 2017, the Company issued 150,000 shares of common stock to its CFO as a bonus for services performed. The total fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on October 2, 2017.

 

On August 8, 2017, the Company awarded fully vested cashless options to our CFO, Geoffrey Lawrence, to acquire up to 2,000,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 273% and a call option value of $0.0894, was $178,765.

 

On July 4, 2017, the Board of Directors appointed Geoffrey Lawrence to serve as the Company’s Chief Financial Officer and Chief Compliance Officer, effective July 1, 2017. Mr. Lawrence was issued 250,000 shares of common stock as a signing bonus. The total fair value of the common stock was $42,200 based on the closing price of the Company’s common stock on the date of grant.

 

On July 4, 2017, the Company awarded fully vested cashless options to our CEO, Mark Bradley, to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.

 

On July 4, 2017, the Company awarded fully vested cashless options to the Company’s President of Programming, Michael Berk, to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.

 

On January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000.

 

On January 22, 2017, the Company issued 2,000,000 shares of common stock to its CEO for board services performed. The total fair value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date of grant.

 

Officer compensation expense was $673,636 and $146,923, including $517,186 and $15,000 of stock based bonuses, at September 30, 2017 and 2016, respectively. The balance owed was $93,209 at September 30, 2017.

 

Board of Directors

 

On July 4, 2017, the Company awarded fully vested cashless options to our Director, Brett Pojunis, to acquire up to 3,000,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $422,779.

 

On May 1, 2017, the Company’s Board of Directors granted 2,000,000 fully vested common stock options to a member of the Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525, was $105,083.

 

On May 1, 2017, the Company’s Board of Directors granted 1,000,000 fully vested common stock options to another member of the Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525, was $52,542.

 

On January 22, 2017, the Company issued 2,000,000 shares of common stock one of its three Directors for board services performed. The total fair value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 3,000,000 shares of common stock one of its three Directors for board services performed. The total fair value of the common stock was $51,900 based on the closing price of the Company’s common stock on the date of grant. 

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 4 – Fair Value of Financial Instruments

 

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has convertible notes that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets as of September 30, 2017 and December 31, 2016, respectively:

 

		Fair Value Measurements at September 30, 2017
		Level 1				Level 2				Level 3
Assets
Cash		$	133,801			$	-			$	-
Total assets			133,801				-				-
Liabilities
Convertible debentures, net of discounts of $192,961			-				-				77,039
Long term debt, net of discounts of $538,972			-				386,028				-
Short term debt, net of discounts of $284,216			-				554,784				-
Derivative liability			-				-				1,582,282
Total liabilities			-				940,812				1,659,321
		$	133,801			$	(940,812	)		$	(1,659,321	)

 

		Fair Value Measurements at December 31, 2016
		Level 1				Level 2				Level 3
Assets
Cash		$	145,119			$	-			$	-
Total assets			145,119				-				-
Liabilities
Convertible debentures, net of discounts of $241,634			-				-				58,366
Short term debt, net of discounts of $60			-				142,940				-
Long term debt, net of discounts of $885,271			-				39,729				-
Derivative liability			-				-				482,674
Total liabilities			-				182,669				541,040
		$	145,119			$	(182,669	)		$	(541,040	)

 

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the nine months ended September 30, 2017 and the year ended December 31, 2016.

 

Level 2 liabilities consisted of a total of $839,000 and $143,000 of short term, unsecured, promissory notes, net of discounts of $284,216 and $60 as of September 30, 2017 and December 31, 2016, respectively, along with $925,000 of long term debt, net of discounts of $538,972 and $885,271 as of September 30, 2017 and December 31, 2016, in addition to the related derivative liabilities of $1,582,282 and $482,674 at September 30, 2017 and December 31, 2016, respectively. No fair value adjustment was necessary during the nine months ended September 30, 2017 and the year ended December 31, 2016.

 

Level 3 liabilities consist of a total of $270,000 and $300,000 of convertible debentures, net of discounts of $192,961 and $241,634 as of September 30, 2017 and December 31, 2016, respectively.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 5 – Subsidiary Formation

 

On July 8, 2014, we formed GLFH in which we retained 84% ownership, with the remaining 16% held by key experts and advisors as compensation for their services, including 3% to Mr. Bradley, CEO and 1% to Mr. Berk, President of Programming, and an additional 1% was sold to one of those individuals for $60,000. An additional 1.6% was sold to an investor on December 8, 2014 and 3% was transferred back from a founding member on December 2, 2015, giving PNTV 85.4% ownership and minority interests ownership of 14.6%. The form of the entity was changed from a corporation to a limited liability company on May 9, 2017. GLFH has have received Cultivation and Production special use permits for medical marijuana in North Las Vegas, along with a license for the Cultivation and Production of recreational cannabis, in addition to the related permits in the State of Nevada.

 

Note 6 – Other Current Assets

 

Other current assets included the following as of September 30, 2017 and December 31, 2016, respectively:

 

		September 30, 2017				December 31, 2016
Security deposits		$	52,100			$	50,000
Prepaid expenses			47,041				35,150
		$	99,141			$	85,150

 

Note 7 – Inventory

 

Inventories, consisting of material, material overhead, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out) or market and consist of the following at September 30, 2017:

 

		September 30, 2017				December 31, 2016
Raw materials		$	98,732			$	-
Finished goods			128,280				-
		$	227,012			$	-

 

Raw materials consist of cannabis plants and the materials that are used in our production process prior to being tested and packaged for consumption. Finished goods consist of pre-packaged materials previously purchased from other licensed cultivators and our manufactured edibles and extracts.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 8 – Fixed Assets and Construction in Progress

 

Fixed assets consist of the following at September 30, 2017 and December 31, 2016, respectively:

 

		September 30, 2017				December 31, 2016
Office equipment		$	95,336			$	60,968
Website development costs			99,880				99,880
Furniture and fixtures			16,075				2,730
Leasehold improvements			373,842				-
Total			585,133				163,578
Less accumulated depreciation			(177,300	)			(134,450	)
Fixed assets, net		$	407,833			$	29,128

 

Construction in progress is stated at cost, which includes the cost of construction and other indirect costs attributable to the construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and put into use. Construction in progress was $314,146 and $239,220 at September 30, 2017 and December 31, 2016, respectively.

 

Depreciation and amortization expense totaled $42,850 and $21,583 for the nine months ended September 30, 2017 and 2016, respectively.

 

Note 9 – Accrued Expenses

 

As of September 30, 2017 and December 31, 2016 accrued expenses included the following:

 

		September 30, 2017				December 31, 2016
Accrued Payroll, Officers		$	93,209			$	31,343
Accrued Payroll and Payroll Taxes			138,119				135,234
Accrued Interest			85,780				21,841
Refundable Advances			100,000				105,000
		$	417,108			$	293,418

 

Note 10 – Settlements Payable

 

Settlements payable consisted of $-0- and $70,000 owed to WHC Capital, LLC as of September 30, 2017 and December 31, 2016, respectively.

 

On September 22, 2016, the Company entered into a payoff agreement to pay WHC Capital, LLC a total of $100,000 in five installments ranging between $15,000 and $25,000 payable from October 21, 2016 through February 21, 2017 in satisfaction of a total of $114,002 of principal and unpaid interest on two convertible notes originally entered into with WHC on August 24, 2015 and August 19, 2014. As of September 30, 2017, the Company had repaid the settlement, as specified in the agreement.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 11 – Convertible Debentures

 

Convertible debentures consist of the following at September 30, 2017 and December 31, 2016, respectively:

 

		September 30,			December 31,
		2017			2016
On August 15, 2016, the Company entered into a definitive funding agreement with RxMM Health Limited (“RxMM”) in which a convertible note was issued for a total gross investment of $2,500,000. In consideration of such investment, RxMM will receive 50,000,000 callable warrants as a fee per the milestone schedule below, and will be entitled to 20% of all adjusted gross revenue and 20% of the gross income generated by the Company through any of its medical marijuana holdings or its media platform, of which shall reduce the principal until this debenture is either paid back or converted into equity.   Debenture Funding Milestone - Warrants and Exercise Price Details $400,000                          10 million shares exercisable at $0.05 per share over 2 years $400,001 - $800,000        15 million shares exercisable at $0.06 per share over 2 years $800,001 - $1,600,000     15 million shares exercisable at $0.07 per share over 2 years $1,600,001 - $2,500,000  10 million shares exercisable at $0.08 per share over 2 years   The warrants are callable if the stock averages 200% of the warrant strike price for any thirty (30) day trading period. The convertible debenture, bearing interest at 5% per annum, will mature 24 months after the full investment is realized, and is convertible into common stock at a 25% discount to the preceding 30 day average closing stock price. The Company is required at all times to have authorized and reserved the number of shares that is actually issuable upon full conversion of the note. The Company has received the following payments on the funding agreement: $ 25,000 – August 19, 2016 $ 175,000 – August 15, 2016		$	200,000		$	200,000
On July 28, 2016, the Company received proceeds of $35,000 in exchange for an unsecured convertible promissory note, bearing interest at eight percent (8%) (“First EJR Note”), which matures on July 28, 2017. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy eight percent (78%) of the average of the closing traded prices during the ten (10) trading days prior to the conversion request date (the “Variable Conversion Price”). The Company is required at all times to have authorized and reserved the number of shares that is actually issuable upon full conversion of the note. The note is currently in default.			35,000			35,000
On June 24, 2016, the Company received proceeds of $30,000 in exchange for an unsecured convertible promissory note, bearing interest at eight percent (8%) (“First SH Note”), which matures on June 24, 2017. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to seventy eight percent (78%) of the average of the closing traded prices during the ten (10) trading days prior to the conversion request date (the “Variable Conversion Price”). In the event of default, the outstanding principal, unpaid interest and liquidated damages and fees immediately prior to the occurrence of the event of default shall become immediately due and payable in cash, at the Lender’s election, at a premium default rate determined by dividing the outstanding amount by the Variable Conversion Price on the date of default. The Company was required at all times to have authorized and reserved the number of shares that is actually issuable upon full conversion of the note. On June 16, 2017, the noteholder converted $32,350, consisting of $30,000 of principal and $2,350 of interest, in exchange for the issuance of 392,155 shares.			-			30,000
On April 24, 2014, the Company received net proceeds of $33,250 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $35,000 (“Second LG Note”), which matured on April 11, 2015. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the lowest closing bid prices of the Company’s common stock for the twelve (12) trading days prior to, and including, the conversion date. The note carries an eighteen percent (18%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $1,750 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. The Company must at all times reserve at least 5 million shares of common stock for potential conversions. On October 31, 2014, the note holder sent demand for repayment. The note is currently in default.		$	35,000		$	35,000
Total convertible debentures		270,000			300,000
Less: unamortized debt discounts		(192,961)			(241,634)
Convertible debentures		$	77,039		$	58,366

 

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $257,379 for the variable conversion features of the convertible debts incurred during the year ended December 31, 2016. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $48,733 and $294,207 of interest expense pursuant to the amortization of the note discounts during the nine months ended September 30, 2017 and 2016, respectively.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

All of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares.

 

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued represented embedded derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.

 

The Company recorded interest expense pursuant to the stated interest rates on the convertible debentures in the amount of $12,804 and $29,012 for the nine months ended September 30, 2017 and 2016, respectively related to convertible debts.

 

Note 12 – Short Term Debt

 

Short-term debt consists of the following at September 30, 2017 and December 31, 2016, respectively:

 

		September 30,				December 31,
		2017				2016
On September 19, 2017, the Company issued a $50,000 unsecured promissory note to SK L-58, LLC bearing interest at a rate of 5% per annum, with a maturity date of November 3, 2017. Upon an event of default, the Company is required to issue to lender warrants to acquire one million shares at an exercise price of $0.05 per share every 30 days the note is unpaid. Each warrant issued as a result of an Event of Default will become and remain exercisable for the four (4) complete calendar month period beginning on the first day of the thirty second (32nd) month following an Event of Default. This note is currently in default.		$	50,000			$	-
On September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading).			316,000				-
On May 8, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading).			330,000				-
On April 25, 2017, the Company issued an unsecured promissory note to an individual at par for proceeds of $10,000, bearing interest at a rate of 24% per annum, with a maturity date of May 31, 2017. A total of $10,200, consisting of $10,000 of principal and $200 was repaid on May 8, 2017.			-				-
On April 21, 2017, the Company entered issued a $25,000 unsecured promissory note to SK L-43, LLC bearing interest at a rate of 5% per annum, with a maturity date of July 20, 2017. In accordance with the default provisions, the principal balance of the note and unpaid interest were converted into common stock at $0.04 per share, along with an equal number of warrants, exercisable at $0.08 per share with a call feature entitling the Company to require exercise if the average stock price over the 30 preceding trading days following the six month anniversary of the warrant date exceeds $0.16 per share. On July 1, 2017 the Note was assigned by the holder to SK L-54, LLC, SK L-55, LLC and SK L-56, LLC. On July 20, 2017, the note went into default and the note holders received an aggregate of 632,706 shares in satisfaction of the $25,000 of principal and $308 of interest. The shares were so issued on October 2, 2017.			-				-
On April 5, 2017, the Company issued a $50,000 unsecured promissory note to SK L-43, LLC bearing interest at a rate of 5% per annum, with a maturity date of July 5, 2017. In accordance with the default provisions, the principal balance of the note and unpaid interest were converted into common stock at $0.04 per share, along with an equal number of warrants, exercisable at $0.08 per share with a call feature entitling the borrower to require exercise if the average stock price over the 30 preceding trading days following the six month anniversary of the warrant date exceeds $0.16 per share. On July 5, 2017, the note went into default and the note holder received 1,265,411 shares in satisfaction of the $50,000 of principal and $616 of interest. The shares were so issued on October 2, 2017.			-				-
On various dates between January 11, 2016 and April 20, 2016, the Company received aggregate refundable advances of $143,000 as the Company and an investor developed terms to a potential partnership agreement with GLFH. On June 1, 2016, the Company issued a promissory note in exchange for those deposits. The unsecured promissory note bears interest at 4% per annum (“First ZG Note”), which matured on January 3, 2017, and awarded the lender options to acquire up to 5,000,000 shares of common stock, exercisable at $0.01 per share over a four (4) week period from the origination date, which expired on July 1, 2016, in addition to options to acquire up to another 3,000,000 shares of common stock, exercisable at $0.08 per share over a twenty four (24) month period from the origination date. The aggregate fair value of the options is $6,996 and is being amortized over the earlier of the life of the loan, or the life of the options, as a debt discount. The note carries a default rate of 10% and remains outstanding.			143,000				143,000
Total short term debt			839,000				143,000
Less: unamortized debt discounts			(284,216	)			(60	)
Short term debt		$	554,784			$	142,940

 

The Company recorded $280,207 and $11,540 of interest expense pursuant to the amortization of the note discounts during the nine months ended September 30, 2017 and 2016, respectively.

 

The Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $19,918 and $2,597 at September 30, 2017 and 2016, respectively.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 13 – Long Term Debt

 

Long term debt consists of the following at September 30, 2017 and December 31, 2016, respectively:

 

		September 30,				December 31,
		2017				2016
On November 21, 2016, the Company entered into a letter agreement with SK L-43, LLC providing for the making of loans by the SK L-43 to the Company, at SK L-43’s option (i) in the aggregate principal amount of $925,000 by December 15, 2016, and (ii) in the amounts of $1,500,000 each on or before each of April 1, 2017 and May 1, 2017. Advances under the letter agreement are unsecured; bear interest at a rate of 5% per annum, payable on December 31st of each year; mature two years from the making of the applicable Advance; and are subject to acceleration upon customary events of default set forth in the promissory notes. To date, SK L-43 has advanced to the Company the following loans: $125,000 – November 02, 2016 (including $25,000 assigned from PNTV Investors Note) $267,000 – November 21, 2016 $267,000 – December 02, 2016 $266,000 – December 19, 2016   Pursuant to the advances above, SK L-43 was issued warrants to purchase up to 92,500,002 shares of the Company’s common stock as additional consideration for making the loans at various exercise prices of $0.03 and $0.06 per share. For each additional loan of $1,500,000 each on or before each of April 1, 2017 and May 1, 2017, SK L-43 will also be entitled to additional warrants to purchase 42,857,142 shares of the Company’s common stock. These additional warrants will have an exercise price equal to 125% of the average closing price of the Company’s common stock over the thirty trading days immediately preceding the date of the applicable additional loan; provided, however, that if during the 90 trading day period following the date of such additional loan, the average closing price of the Company’s common stock (the “Post-Advance Closing Average”) is equal to or less than 80% of the Pre-Advance Closing Average, the exercise price for such additional warrant will be equal to 125% of the Post-Advance Closing Average.   Each warrant vested four months following its date of issuance and is exercisable for a period of two years thereafter.		$	925,000			$	925,000
Less: unamortized debt discounts			(538,972	)			(885,271	)
Long term debt		$	386,028			$	39,729

 

The Company recorded $346,299 and $-0- of interest expense pursuant to the amortization of the note discounts during the nine months ended September 30, 2017 and 2016, respectively.

 

The Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $34,692 and $-0- during the nine months ended September 30, 2017 and 2016, respectively.

 

The following presents components of interest expense by instrument type at September 30, 2017 and 2016, respectively:

 

		September 30, 2017				September 30, 2016
Interest on convertible debentures		$	12,804			$	29,012
Amortization of debt discounts			675,239				305,747
Loss on debt conversions			-				4,272
Interest on short and long term debt			54,610				2,597
Accounts payable related finance charges			2,395				3,646
		$	745,048			$	345,274

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 14 – Derivative Liabilities

 

As discussed in Note 11 under Convertible Debentures, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

 

The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $1,582,282 and $482,674 at September 30, 2017 and December 31, 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $528,633 and $238,679 for the nine months ended September 30, 2017 and 2016, respectively, which has been reported as other expense in the statements of operations. The loss of $528,633 for the nine months ended September 30, 2017 consisted of a loss of $475,016 attributable to the fair value of warrants and a net loss in market value of $53,617 on the convertible notes. The loss of $238,679 for the nine months ended September 30, 2016 consisted of a gain of $167 attributable to the fair value of warrants and a net loss in market value of $238,679 on the convertible notes.

 

The following presents the derivative liability value by instrument type at September 30, 2017 and December 31, 2016, respectively:

 

		September 30, 2017				December 31, 2016
Convertible debentures		$	486,903			$	462,489
Common stock warrants			1,095,379				20,185
		$	1,582,282			$	482,674

 

The following is a summary of changes in the fair market value of the derivative liability during the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively:

 

		Derivative
		Liability
		Total
Balance, December 31, 2015		$	1,038,504
Increase in derivative value due to issuances of convertible promissory notes			261,796
Increase in derivative value attributable to issuance of warrants			7,400
Change in fair market value of derivative liabilities due to the mark to market adjustment			227,102
Debt conversions			(1,052,128	)
Balance, December 31, 2016		$	482,674
Increase in derivative value attributable to issuance of warrants			752,205
Change in fair market value of derivative liabilities due to the mark to market adjustment			528,633
Debt conversions and redemptions			(181,230	)
Balance, September 30, 2017		$	1,582,282

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the nine months ended September 30, 2017 and the year ended December 31, 2016:

 

	●	Stock prices on all measurement dates were based on the fair market value and would fluctuate with projected volatility.
	●	The warrant exercise prices ranged from $0.03 to $0.24, exercisable over 2 to 10 year periods from the grant date.
	●	The holders of the securities would convert monthly to the ownership limit starting at 4.99% increasing by 10% per month.
	●	The monthly trading volume would average below $2,740,072 in the period and would increase at 1% per month.
	●	The holder would automatically convert the notes at maturity at the greater of 2 times the conversion price or stock price if the registration was effective and the Company was not in default.
	●	An event of default for the convertible note would occur 0% of the time, increasing to 1% per month to a maximum of 5%.
	●	Alternative financing for the convertible note would be initially available to redeem the note 0% of the time and increase monthly by 5% to a maximum of 50%.
	●	The computed volatility was projected based on historical volatility.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 15 – Changes in Stockholders’ Equity (Deficit)

 

Convertible Preferred Stock

 

The Board, from the authorized capital of 50,000,000 preferred shares, has authorized and designated 2,000,000 shares of series A preferred stock (“Series A”) and 12,000,0000 shares of series C preferred stock (“Series C”), of which 2,000,000 shares and 12,000,000 shares are issued and outstanding, respectively. A total of 36,000,000 shares remained undesignated.

 

The Series A shares carry 25:1 preferential voting rights, and are convertible into shares of common stock on a 1:1 basis.

 

The Series C shares carry 50:1 preferential voting rights, and are convertible into shares of common stock on a 1:1 basis

 

Common Stock Authorized

 

The Company has authorized 1,200,000,000 shares of common stock, of which 575,967,698 shares were issued and outstanding and 112,394,837 shares were reserved as of the date of this filing.

 

Common Stock Sales

 

On September 21, 2017, the Company sold 200,000 units at $0.17 per unit, consisting of 200,000 shares of common stock and 200,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $22,000. The shares were subsequently issued on November 8, 2017.

 

On September 7, 2017, the Company sold 300,000 units at $0.07 per unit, consisting of 300,000 shares of common stock and 300,000 warrants exercisable at $0.11 per share over the following 3 years, along with another 300,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $21,000. The shares were subsequently issued on November 8, 2017.

 

On September 6, 2017, the Company sold 500,000 units at $0.11 per unit, consisting of 500,000 shares of common stock and 500,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $55,000. The shares were subsequently issued on November 10, 2017.

 

On August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.

 

On August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.

 

On July 17, 2017, the Company sold 1,875,000 units at $0.16 per unit, consisting of 1,875,000 shares of common stock and 1,875,000 warrants exercisable at $0.21 per share over the following 3 years, along with another 1,875,000 warrants exercisable at $0.24 per share over the following 3 years, to an individual investor for proceeds of $300,000. The shares were subsequently issued on November 8, 2017.

 

On June 29, 2017, the Company sold 500,000 units at $0.10 per unit, consisting of 500,000 shares of common stock and 500,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 23, 2017, a warrant holder exercised warrants to purchase 2,500,000 shares of common stock at $0.04 per share for proceeds of $100,000.

 

On June 21, 2017, the Company sold 1,000,000 units at $0.10 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $100,000. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 13, 2017, the Company sold 1,000,000 units at $0.05 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20 per share over the following 3 years, to an individual investor for proceeds of $50,000. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

On June 13, 2017, the Company sold 1,000,000 units at $0.075 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20 per share over the following 3 years, to another individual investor for proceeds of $75,000. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

On June 9, 2017, a warrant holder exercised warrants to purchase 1,500,000 shares of common stock at $0.05 per share for proceeds of $75,000.

 

On January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000. The proceeds received were allocated between the common stock and warrants on a relative fair value basis.

 

Common Stock Issuances for Debt Conversions

 

On July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. On July 1, 2017, the note was assigned to three different parties. Pursuant to the conversion, the note holders received an aggregate 632,706 shares in satisfaction of $25,000 of principal and $308 of interest on the debt. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized, and the settlement terms have been fully realized paying off the debt in full. The shares were subsequently issued on October 2, 2017.

 

On July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest on the debt. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized, and the settlement terms have been fully realized paying off the debt in full. The shares were subsequently issued on October 2, 2017.

 

On June 16, 2017, the Company issued 392,155 shares of common stock pursuant to the conversion of $32,350, consisting of $30,000 of outstanding principal and $3,250 of unpaid interest, on the First Howard Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized, and the settlement terms have been fully realized paying off the debt in full.

 

On April 18, 2017, the Company issued 2,009,419 shares of common stock pursuant to the conversion of $40,000 of outstanding principal on the WHC Notes settlement in lieu of cash. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized, and the settlement terms have been fully realized paying off the debt in full.

 

Common Stock Issued for Services

 

On September 11, 2017, the Company issued 150,000 shares of common stock to its CFO as a bonus for services performed. The total fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on October 2, 2017.

 

On September 11, 2017, the Company issued a total of 2,835,000 shares of common stock to sixteen service providers for services provided. The total fair value of the common stock was $283,500 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on October 2, 2017.

 

On August 7, 2017, the Company entered into an Equity Purchase Agreement and a Registration Rights Agreement with Kodiak Capital Group, LLC (“Kodiak”), and agreed to issue Kodiak 500,000 shares of Common Stock as a Commitment upon the execution of the Purchase Agreement in consideration for the Kodiak’s commitment to purchase shares of Common Stock thereunder. The total fair value of the common stock was $56,450 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on October 2, 2017.

 

On July 4, 2017, the Board of Directors appointed Geoffrey Lawrence to serve as the Company’s Chief Financial Officer and Chief Compliance Officer, effective July 1, 2017. Mr. Lawrence was issued 250,000 shares of common stock as a signing bonus. The total fair value of the common stock was $42,200 based on the closing price of the Company’s common stock on the date of grant.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

On July 4, 2017, the Company issued a total of 605,000 shares of common stock to six service providers for services provided on behalf of our subsidiary, GLFH. The total fair value of the common stock was $102,124 based on the closing price of the Company’s common stock on the date of grant.

 

On July 4, 2017, the Company issued a total of 1,225,000 shares of common stock to seven service providers for services provided. The total fair value of the common stock was $206,780 based on the closing price of the Company’s common stock on the date of grant.

 

On May 1, 2017, the Company issued a total of 1,220,000 shares of common stock to four service providers for services provided on behalf of our subsidiary, GLFH. The total fair value of the common stock was $76,250 based on the closing price of the Company’s common stock on the date of grant.

 

On May 1, 2017, the Company issued a total of 1,050,000 shares of common stock to five service providers for services provided. The total fair value of the common stock was $65,625 based on the closing price of the Company’s common stock on the date of grant.

 

On April 20, 2017, the Company issued 350,000 shares of common stock in lieu of cash for video editing services to a consultant. The total fair value of the common stock was $15,750 based on the closing price of the Company’s common stock on the date of grant.

 

On February 2, 2017, we issued 1,000,000 shares of common stock valued at $11,400 to the landlord of our leased facility as payment on a subscription payable from an October 14, 2016 award.

 

On January 22, 2017, the Company issued 2,000,000 shares of common stock to its CEO for board services performed. The total fair value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 2,000,000 shares of common stock one of its three Directors for board services performed. The total fair value of the common stock was $34,600 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 3,000,000 shares of common stock one of its three Directors for board services performed. The total fair value of the common stock was $51,900 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 200,000 shares of common stock for professional services to a consultant for services provided. The total fair value of the common stock was $3,460 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 500,000 shares of common stock for professional services to a consultant for services provided on behalf of our subsidiary, GLFH. The total fair value of the common stock was $8,650 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 150,000 shares of common stock for administrative services to a consultant on behalf of our subsidiary, GLFH. The total fair value of the common stock was $2,595 based on the closing price of the Company’s common stock on the date of grant.

 

On January 22, 2017, the Company issued 150,000 shares of common stock for administrative services to a consultant for services provided. The total fair value of the common stock was $2,595 based on the closing price of the Company’s common stock on the date of grant.

 

Common Stock Issued in Reserve for Legal Matters

 

On August 24, 2017, the Company issued a total of 5,005,435 shares to the Clerk of Courts in the State of Nevada to hold as security in connection with the Court’s issuance of a preliminary injunction in favor of the Company against a former service provider. The preliminary injunction enjoins the former service provider from transferring 1,500,000 shares of common stock held by him that were issued for services. The 5,005,435 shares are being held by the Court as security pending adjudication of the matter, in which the Company seeks the return of the 1,500,000 shares.

 

Note 16 – Options and Warrants

 

Warrants Granted

 

On September 21, 2017, the Company sold 200,000 units at $0.17 per unit, consisting of 200,000 shares of common stock and 200,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $22,000.

 

On September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable until September 14, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading).

 

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

On September 7, 2017, the Company sold 300,000 units at $0.07 per unit, consisting of 300,000 shares of common stock and 300,000 warrants exercisable at $0.11 per share over the following 3 years, along with another 300,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $21,000.

 

On September 6, 2017, the Company sold 500,000 units at $0.11 per unit, consisting of 500,000 shares of common stock and 500,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $55,000.

 

On August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.

 

On August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.

 

On July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants were issued on September 1, 2017 and vest on April 30, 2019, and are exercisable for 4 months thereafter. On July 1, 2017, the note was assigned to three different parties. Pursuant to the conversion, the note holders received an aggregate 632,706 shares in satisfaction of $25,000 of principal and $308 of interest on the debt.

 

On July 17, 2017, the Company sold 1,875,000 units at $0.16 per unit, consisting of 1,875,000 shares of common stock and 1,875,000 warrants exercisable at $0.21 per share over the following 3 years, along with another 1,875,000 warrants exercisable at $0.24 per share over the following 3 years, to an individual investor for proceeds of $300,000.

 

On July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants were issued on September 1, 2017 and vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest on the debt.

 

On June 29, 2017, the Company sold 500,000 units at $0.10 per unit, consisting of 500,000 shares of common stock and 500,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000.

 

On June 21, 2017, the Company sold 1,000,000 units at $0.10 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $100,000.

 

On June 13, 2017, the Company sold 1,000,000 units at $0.05 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20 per share over the following 3 years, to an individual investor for proceeds of $50,000.

 

On June 13, 2017, the Company sold 1,000,000 units at $0.075 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20 per share over the following 3 years, to another individual investor for proceeds of $75,000.

 

On May 8, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes. The Warrants can be exercised on a cashless basis by the Investors, and the Company can require the Investors to exercise the Warrants on a cashless basis at any time following the six-month anniversary of the issuance date, provided that at such time (i) the volume weighted average price of the common stock has been greater than $0.25 for a period of thirty (30) consecutive trading days, and (ii) trading in the common stock has not been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading).

 

On January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Warrants exercised

 

On June 23, 2017, a warrant holder exercised warrants to purchase 2,500,000 shares of common stock at $0.04 per share for proceeds of $100,000.

 

On June 9, 2017, a warrant holder exercised warrants to purchase 1,500,000 shares of common stock at $0.05 per share for proceeds of $75,000.

 

Warrants Expired

 

On August 9, 2017, a total of 200,000 warrants with a strike price of $0.18 per share expired.

 

Options Granted

 

On August 7, 2017, the Company awarded fully vested cashless options to our CFO, Geoffrey Lawrence, to acquire up to 2,000,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 273% and a call option value of $0.0894, was $178,765.

 

On July 4, 2017, the Company awarded fully vested cashless options to our CEO, Mark Bradley, to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.

 

On July 4, 2017, the Company awarded fully vested cashless options to the Company’s President of Programming, Michael Berk, to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.

 

On July 4, 2017, the Company awarded fully vested cashless options to our Director, Brett Pojunis, to acquire up to 3,000,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $422,779.

 

On July 4, 2017, the Company awarded fully vested cashless options to a consultant to acquire up to 1,750,000 shares of common stock, exercisable at $0.17 per share over a thirty six (36) month period from the origination date. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 226% and a call option value of $0.1409, was $246,621.

 

On May 1, 2017, the Company’s Board of Directors granted 2,000,000 fully vested cashless common stock options to a member of the Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525, was $105,083.

 

On May 1, 2017, the Company’s Board of Directors granted 1,000,000 fully vested cashless common stock options to another member of the Board as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525, was $52,542.

 

On May 1, 2017, the Company’s Board of Directors granted 1,000,000 fully vested cashless common stock options to a consultant as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525, was $52,542.

 

On May 1, 2017, the Company’s Board of Directors granted 500,000 fully vested cashless common stock options to a consultant as compensation for services provided. The options are exercisable until May 1, 2020 at an exercise price of $0.07 per share. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 234% and a call option value of $0.0525, was $26,271.

 

Options Expired

 

On March 1, 2017, a total of 1,200,000 warrants with a strike price of $0.08 per share expired.

 

On January 8, 2017, a total of 1,150,000 warrants with a strike price of $0.08 per share expired.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 17 – Income Taxes

 

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

 

For the nine months ended September 30, 2017 and the year ended December 31, 2016, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At September 30, 2017, the Company had approximately $25,300,000 of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2025.

 

The components of the Company’s deferred tax asset are as follows:

 

		September 30, 2017				December 31, 2016
Deferred tax assets:
Net operating loss carry forwards		$	8,855,000			$	7,763,000
Net deferred tax assets before valuation allowance			8,855,000				7,763,000
Less: Valuation allowance			(8,855,000	)			(7,763,000	)
Net deferred tax assets		$	-			$	-

 

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2017 and December 31, 2016, respectively.

 

A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:

 

		September 30, 2017				December 31, 2016
Federal and state statutory rate			35	%			35	%
Change in valuation allowance on deferred tax assets			(35	%)			(35	%)

 

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

 

Note 18 – Non-Controlling Interest

 

Non-controlling interest represents a minority interest in GLFH of 15.6% held by ten individuals. The net loss attributable to the non-controlling interest totaled $94,912 and $31,642 during the nine months ended September 30, 2017 and 2016, respectively. The net loss attributable to the parent was and $555,168 and $171,190 during the nine months ended September 30, 2017 and 2016, respectively.

 

 

Players Network

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 19 – Subsequent Events

 

Common Stock Awarded for Services

 

On October 1, 2017, pursuant to the CFO’s employment agreement, Mr. Lawrence earned $12,960 of compensation to be paid with the issuance of 157,091 shares of common stock based on the closing stock price. The shares have not yet been issued.

 

Common Stock Issued on Subscriptions Payable

 

On November 10, 2017, a total of 500,000 shares were issued on Subscriptions Payable for shares awarded pursuant to stock sales in the prior period valued at an aggregate $55,000.

 

On November 8, 2017, a total of 2,375,000 shares were issued on Subscriptions Payable for shares awarded pursuant to stock sales in the prior period valued at an aggregate $343,000.

 

On November 8, 2017, a total of 2,375,000 shares were issued on Subscriptions Payable for shares awarded pursuant to stock sales in the prior period valued at an aggregate $343,000.

 

On October 2, 2017, a total of 2,985,000 shares were issued on Subscriptions Payable for shares awarded for services in the prior period valued at $298,500.

 

On October 2, 2017, a total of 1,898,117 shares were issued on Subscriptions Payable for shares awarded pursuant to debt conversions in the prior period valued at an aggregate $75,925, consisting of $75,000 of principal and $925 of interest.

 

On October 2, 2017, the Company issued 500,000 shares of Common Stock as a commitment fee upon the execution of the September 7, 2017 Purchase and Registration Rights Agreement with Kodiak.

 

Common Stock Cancellations

 

On November 20, 2017, the Company cancelled 750,000 shares previously issued to a service provider and reissued 250,000 shares. The shares were returned to treasury.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview and Outlook

 

Players Network is actively pursuing the cultivation and processing of medical and recreational marijuana in North Las Vegas pursuant to two medical marijuana establishments (MME) licenses that were granted by the city of North Las Vegas for cultivation and production to its majority-owned subsidiary, Green Leaf Farms Holdings LLC, in which the Company holds an 85.4% interest. We also distribute content relating to the cannabis industry at WeedTV.com.

 

GLFH Overview

 

Green Leaf Farms Holdings, LLC (“GLFH”, “Green Leaf”) was granted two Medical Marijuana Establishment (MME) licenses by the City of North Las Vegas and State of Nevada; one for cultivation, and one for production of extracts, along with cultivation and production licenses for recreational cannabis that went into effect on July 1, 2017.

 

The Cannabis Industry is one of the fastest growing markets in the America, and Nevada is uniquely positioned to become one of, if not the largest market in the country. It is projected that by the end of 2017 there will be 43,000 Nevada State issued medical marijuana cardholders. Of equal importance, is the fact that Nevada law offers reciprocity to Out-of-State medical cannabis cardholders. With nearly one million medical marijuana cardholders residing in states adjacent to Nevada, and more than 52 million annual visitors to Nevada, the market for medical marijuana is substantial, and with the recent passage of recreational marijuana laws that are expected to be implemented in the summer of 2017, Nevada is expected to generate $1.8 billion in revenue from cannabis in 2018. As large as the medical marijuana market is, it is dwarfed by the potential adult recreational marijuana market.

 

Products & Services

 

Green Leaf provides the following products and services:

 

	●	Premium organic medical cannabis sold wholesale to licensed retailers
	●	Recreational marijuana cannabis products sold wholesale to distributors and retailers
	●	Extraction products such as oils and waxes (as distinguished from cultivation grow house atmospheres) derived from in-house cannabis production
	●	Value-added products (e.g., salves, tinctures, oils) processed from in-house cannabis production
	●	Edibles produced in an on-site commercial kitchen from in-house cannabis production
	●	Processing and extraction services for licensed medical cannabis cultivators in Nevada
	●	High quality cannabis genetics in the form of vegetative cuttings for sale to licensed medical cannabis cultivators in Nevada

 

Future Outlook

 

Green Leaf plans to focus on developing high quality products and to employ a strong branding strategy to sell its custom cannabis strains. The quality and consistency of our branded products would help build consumer loyalty. The growing facility, with modular construction would allow us to scale efficiency from both a cost and operational standpoint.

 

 

Results of Operations for the Three Months Ended September 30, 2017 and 2016:

 

		For the Three Months Ended
		September 30,								Increase /
		2017				2016				(Decrease)
Revenues		$	38,074			$	59			$	38,015
Cost of goods sold			32,806				-				32,806
Gross profit			5,268				59				5,209
Direct operating costs			334,545				7,537				327,008
General and administrative			2,559,617				234,402				2,325,215
Officer salaries			34,350				44,423				(10,073	)
Depreciation and amortization			28,542				6,969				21,573
Total Operating Expenses			2,957,054				293,331				2,663,723
Operating Loss			(2,951,786	)			(293,272	)			2,658,514
Total other income (expense)			1,014,066				(226,803	)			1,240,869
Net Loss		$	(1,937,720	)		$	(520,075	)		$	1,417,645

 

Revenues:

 

During the three months ended September 30, 2017 and 2016, we received $48 of revenues from the sale of in-home media products, and $38,026 from the sale of cannabis products. Our sales primarily consisted of the resale of raw materials that we previously purchased from other licensed production and cultivation facilities and resold to licensed dispensaries as we progressed in the development of our facility. We expect to open phase 2 of our facility soon and begin to grow our first crop. Aggregate revenues for the three months ended September 30, 2017 were $38,074, compared to revenues of $59 during the three months ended September 30, 2016, an increase in revenues of $38,015, or 64,432%.

 

Direct Operating Costs:

 

Direct operating costs were $334,545 for the three months ended September 30, 2017 compared to $7,537 for the three months ended September 30, 2016, an increase of $327,008, or 4,339%. Our direct operating costs increased primarily due to the launch of WeedTV during the three months ended September 30, 2017.

 

General and Administrative:

 

General and administrative expenses were $2,559,617 for the three months ended September 30, 2017, compared to $234,402 for the three months ended September 30, 2016, an increase of $2,325,215, or 992%. General and administrative expense increased primarily due to the issuance of stock and options resulting in $2,047,461 of stock-based compensation as we significantly ramped up efforts to get our cannabis facility operational and launch WeedTV during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

 

Officer Salaries:

 

Officer salaries expense totaled $34,350 for the three months ended September 30, 2017, compared to $44,423, for the three months ended September 30, 2016, a decrease of $10,073, or 23%. Our officer salaries decreased due to stock-based compensation bonuses paid during the three months ended September 30, 2016 that were not paid during the three months ended September 30, 2017.

 

Depreciation and Amortization:

 

Depreciation and amortization expense was $28,542 for the three months ended September 30, 2017, compared to $6,969 for the three months ended September 30, 2016, an increase of $21,573, or 310%. Depreciation increased primarily due to placing our leasehold improvements and other equipment purchases into service for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

 

 

Operating Loss:

 

Operating loss for the three months ended September 30, 2017 was $2,951,786 or ($0.01) per share, compared to an operating loss of $293,272 for the three months ended September 30, 2016, or ($0.00) per share, an increase of $2,658,514, or 907%. Operating loss increased primarily due to increased stock-based compensation as we significantly ramped up efforts to get our cannabis facility operational and we launched WeedTV during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

 

Other Income (Expense):

 

Other income (expense), on a net basis, was $1,014,066 for the three months ended September 30, 2017, compared to other expenses of $226,803 for the three months ended September 30, 2016, an increased net income of $1,240,869, or 547%. Other income increased on a net basis primarily due to the increased gain on derivative liability of $1,535,285, or 783%, and by a decreased gain on debt extinguishment of $34,002, as diminished by an increased interest expense on debt financing of $260,414, or 402% during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.

 

Net Loss:

 

The net loss for the three months ended September 30, 2017 was $1,937,720, or ($0.00) per share, compared to a net loss of $520,075, or ($0.00) per share, for the three months ended September 30, 2016, an increased net loss of $1,417,645, or 273%. Net loss increased primarily due to increased non-cash stock-based compensation and the increased costs of readying our cannabis production facility, in addition to increased interest expense on debt financing costs as we financed those efforts, as diminished by an increased gain on our derivative liabilities, during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.

 

 

Results of Operations for the Nine Months Ended September 30, 2017 and 2016:

 

		For the Nine Months Ended
		September 30,								Increase /
		2017				2016				(Decrease)
Revenues		$	41,144			$	199			$	40,945
Cost of goods sold			35,014				-				35,014
Gross profit			6,130				199				5,931
Direct operating costs			427,596				24,537				403,059
General and administrative			3,712,483				669,992				3,042,491
Officer salaries			156,450				131,923				24,527
Depreciation and amortization			42,850				21,583				21,267
Total Operating Expenses			4,339,379				848,035				3,491,344
Operating Loss			(4,333,249	)			(847,836	)			3,485,413
Total other income (expense)			(1,273,681	)			(510,448	)			763,233
Net Loss		$	(5,606,930	)		$	(1,358,284	)		$	4,248,646

 

Revenues:

 

During the nine months ended September 30, 2017 and 2016, we received $216 of revenues from the sale of in-home media products, and $40,928 from the sale of cannabis products. Our sales primarily consisted of the resale of raw materials that we previously purchased from other licensed production and cultivation facilities as we progressed in the development of our facility. We expect to open phase 2 of our facility soon and begin to grow our first crop. Aggregate revenues for the nine months ended September 30, 2017 were $41,144, compared to revenues of $199 during the three months ended September 30, 2016, an increase in revenues of $40,945, or 20,575%.

 

Direct Operating Costs:

 

Direct operating costs were $427,596 for the nine months ended September 30, 2017 compared to $24,537 for the nine months ended September 30, 2016, an increase of $403,059, or 1,643%. Our direct operating costs increased primarily due to the launch of WeedTV during the nine months ended September 30, 2017.

 

General and Administrative:

 

General and administrative expenses were $3,712,483 for the nine months ended September 30, 2017, compared to $669,992 for the nine months ended September 30, 2016, an increase of $3,042,491, or 454%. General and administrative expense increased primarily due to the issuance of stock and options resulting in $2,579,924 of stock-based compensation, compared to $346,000 of stock-based compensation in the comparative period, as we significantly ramped up efforts to get our cannabis facility operational and launch WeedTV during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

 

Officer Salaries:

 

Officer salaries expense totaled $156,450 for the nine months ended September 30, 2017, compared to $131,923, for the nine months ended September 30, 2016, an increase of $24,527, or 19%. The increase was due to the addition of our Chief Financial/Compliance Officer to our team in the current year.

 

Depreciation and Amortization:

 

Depreciation and amortization expense was $42,850 for the nine months ended September 30, 2017, compared to $21,583 for the nine months ended September 30, 2016, an increase of $21,267, or 99%. Depreciation increased primarily due to placing our leasehold improvements and other equipment purchases into service for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

 

 

Operating Loss:

 

Operating loss for the nine months ended September 30, 2017 was $4,339,249 or ($0.01) per share, compared to an operating loss of $847,836 for the nine months ended September 30, 2016, or ($0.00) per share, an increase of $3,485,413, or 411%. Operating loss increased primarily due to $2,579,924 of stock-based compensation, compared to $346,000 of stock-based compensation in the comparative period, as we significantly ramped up efforts to get our cannabis facility operational and launched WeedTV during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

 

Other Income (Expense):

 

Other income (expense), on a net basis, was $(1,273,681) for the nine months ended September 30, 2017, compared to other expense of $(510,448) for the nine months ended September 30, 2016, an increased net expense of $763,233, or 150%. Other expense increased primarily due to the increased derivative liability expense of $289,954, or 121%, over the comparative period, and an increased interest expense on debt financing of approximately $399,774, or 116%, and by a decreased gain on debt extinguishment of $73,505, during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.

 

Net Loss:

 

The net loss for the nine months ended September 30, 2017 was $5,606,930, or ($0.01) per share, compared to a net loss of $1,358,284, or ($0.00) per share, for the nine months ended September 30, 2016, an increased net loss of $4,248,646, or 313%. Net loss increased primarily due to the increased costs of readying our cannabis production facility, increased costs associated with our launch of WeedTV and increased debt financing costs during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

The following table summarizes total assets, accumulated deficit, stockholders’ equity and working capital at September 30, 2017 compared to December 31, 2016.

 

		September 30, 2017				December 31, 2016				Increase / (Decrease)
Total Assets		$	1,181,933			$	498,617			$	683,316
Total Liabilities		$	3,683,243			$	1,401,644			$	2,281,599
Accumulated (Deficit)		$	(36,151,435	)		$	(30,639,417	)		$	5,512,018
Stockholders’ Equity (Deficit)		$	(2,501,310	)		$	(903,027	)		$	1,598,283
Working Capital (Deficit)		$	(2,837,261	)		$	(1,131,646	)		$	1,705,615

 

Our principal source of operating capital has been provided from equity investments and debt financings. At September 30, 2017, we had a negative working capital position of $2,837,261.

 

Debt Financing

 

On September 19, 2017, the Company entered issued a $50,000 unsecured promissory note to SK L-58, LLC bearing interest at a rate of 5% per annum, with a maturity date of November 3, 2017. Upon an event of default, the Company is required to issue to lender warrants to acquire one million shares at an exercise price of $0.05 per share every 30 days the note is unpaid. Each warrant issued as a result of an Event of Default hereunder shall become and remain exercisable for the four (4) complete calendar month period beginning on the first day of the thirty second (32nd) month following an Event of Default. This note is currently in default.

 

On September 14, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $158,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on March 14, 2018, bears interest at a rate of 10% per annum payable at maturity, and is subject to acceleration in the event the Company becomes delinquent in its reporting obligation with the Securities and Exchange Commission and upon other customary events of default set forth in the Notes.

 

On May 8, 2017, the Company entered into a Securities Purchase Agreement with Black Mountain Equities, Inc. and Gemini Master Fund, Ltd. (the “Investors”), pursuant to which the Company sold to each Investor, for a purchase price of $150,000, (i) a Promissory Note (a “Note”) in the principal amount of $165,000, and (ii) a Warrant exercisable until May 31, 2022 to purchase 1,500,000 shares of the Company’s common at a price of $0.14 per share (a “Warrant”), resulting in aggregate gross proceeds to the Company of $300,000. Each Note matures on November 8, 2017, bears interest at a rate of 10% per annum payable at maturity.

 

On April 21, 2017, the Company entered into an unsecured promissory note with SK L-43, LLC bearing interest at a rate of 5% per annum, with a maturity date of July 20, 2017. In accordance with the default provisions, the principal balance of the note and unpaid interest shall be converted into common stock at $0.04 per share, along with an equal number of warrants, exercisable at $0.08 per share with a call feature entitling the borrower to require exercise if the average stock price over the 30 preceding trading days following the six month anniversary of the warrant date exceeds $0.16 per share.

 

On April 5, 2017, the Company entered into an unsecured promissory note with SK L-43, LLC bearing interest at a rate of 5% per annum, with a maturity date of July 5, 2017. In accordance with the default provisions, the principal balance of the note and unpaid interest shall be converted into common stock at $0.04 per share, along with an equal number of warrants, exercisable at $0.08 per share with a call feature entitling the borrower to require exercise if the average stock price over the 30 preceding trading days following the six month anniversary of the warrant date exceeds $0.16 per share.

 

 

Convertible Debenture Repayment and Settlements

 

On July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. On July 1, 2017, the note was assigned to three different parties. Pursuant to the conversion, the note holders received an aggregate 632,706 shares in satisfaction of $25,000 of principal and $308 of interest on the debt. The shares were subsequently issued on October 2, 2017.

 

On July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest on the debt. The shares were subsequently issued on October 2, 2017.

 

During the nine months ended September 30, 2017, the Company repaid $30,000 of debt pursuant to a payoff agreement with WHC Capital, LLC. The remaining $40,000 of the settlement liability was satisfied in full with the issuance of 2,009,419 shares of stock on April 18, 2017.

 

Common Stock Sales

 

On September 21, 2017, the Company sold 200,000 units at $0.17 per unit, consisting of 200,000 shares of common stock and 200,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $22,000.

 

On September 7, 2017, the Company sold 300,000 units at $0.07 per unit, consisting of 300,000 shares of common stock and 300,000 warrants exercisable at $0.11 per share over the following 3 years, along with another 300,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $21,000.

 

On September 6, 2017, the Company sold 500,000 units at $0.11 per unit, consisting of 500,000 shares of common stock and 500,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $55,000.

 

On August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.

 

On August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.

 

On July 17, 2017, the Company sold 1,875,000 units at $0.16 per unit, consisting of 1,875,000 shares of common stock and 1,875,000 warrants exercisable at $0.21 per share over the following 3 years, along with another 1,875,000 warrants exercisable at $0.24 per share over the following 3 years, to an individual investor for proceeds of $300,000.

 

On June 29, 2017, the Company sold 500,000 units at $0.10 per unit, consisting of 500,000 shares of common stock and 500,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000.

 

On June 23, 2017, a warrant holder exercised warrants to purchase 2,500,000 shares of common stock at $0.04 per share for proceeds of $100,000.

 

On June 21, 2017, the Company sold 1,000,000 units at $0.10 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $100,000.

 

On June 13, 2017, the Company sold 1,000,000 units at $0.05 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20 per share over the following 3 years, to an individual investor for proceeds of $50,000.

 

On June 13, 2017, the Company sold 1,000,000 units at $0.075 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.15 per share over the following 3 years, along with another 1,000,000 warrants exercisable at $0.20 per share over the following 3 years, to another individual investor for proceeds of $75,000.

 

On June 9, 2017, a warrant holder exercised warrants to purchase 1,500,000 shares of common stock at $0.05 per share for proceeds of $75,000.

 

On January 26, 2017, the Company sold 14,000,000 units, consisting of 14,000,000 shares of common stock and 14,000,000 warrants exercisable at $0.05 per share over the following 2 years, to its CEO in exchange for proceeds of $350,000.

 

 

We have utilized these funds to repay approximately $30,000 of previously issued convertible debentures and settlements, comply with our regulatory reporting requirements, and to fund our subsidiary’s cannabis business during the quarter. Although our revenues are expected to grow as we expand our operations, our revenues are not expected to exceed our investment and operating costs in the next twelve months, and we do not have funds sufficient to fund our operations at their current level for the next twelve months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of operations. To address these risks, we must, among other things, seek growth opportunities through investment and acquisitions in our industry, effectively monitor and manage our claims for payments that are owed to us, implement and successfully execute our business strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. We cannot assure that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.

 

To conserve on the Company’s capital requirements, the Company has issued shares in lieu of cash payments to outside consultants, and the Company expects to continue this practice. In the nine months ended September 30, 2017, the Company granted a total of $2,579,924 stock-based compensation, consisting of 7,400,000 shares of common stock valued at $178,300, and options valued at $1,252,411, as bonuses to our officers and directors, as well as an aggregate 14,290,435 shares of common stock valued at $823,779, and options valued at $325,434, to other service providers, compared to a total of $346,000 stock-based compensation, consisting of 6,250,000 shares of preferred stock valued at $192,000 and 20,400,000 shares of common stock valued at $102,000 in lieu of cash payments to our CEO, as well as an aggregate 9,000,000 shares of common stock valued at $45,000 to our Directors and 2,000,000 shares valued at $7,000 to an attorney during the nine months ended September 30, 2016. The Company is not now in a position to determine an approximate number of shares that the Company may issue for the preceding purpose in the remainder of 2017.

 

As of November 18, 2017, we had four convertible notes outstanding with a cumulative outstanding principal balance of $270,000. Repayment of the notes must be done at a premium to the then-outstanding balance, resulting in the need for approximately $370,000 in liquid capital. If, rather than repay these notes, we allow them to convert into our common stock, which conversions would be done at a discount to the market price of our common stock, all of which could be sold into the open market at the time of conversion. The potential dilutive effects of these conversions at various conversion prices below our most recent market price of $0.09 per share is as follows:

 

			100%				75%				50%				25%
Potential conversion prices		$	0.09			$	0.675			$	0.045			$	0.0225
Potential dilutive shares			3,000,000				4,000,000				6,000,000				12,000,000

 

Off-Balance Sheet Arrangements

 

As of September 30, 2017, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations liquidity, capital expenditures or capital resources.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

The Company has had recurring net losses, an accumulated deficit, and a working capital deficiency. These conditions raise substantial doubt about its ability to continue as a going concern. Management plans to try to increase sales and improve operating results through the expansion of the distribution channels of our programming with a view to increasing advertising and sponsorship revenues. Management believes that funds generated from operations will not be sufficient to cover cash needs in the foreseeable future, and we will continue to rely on expected increased revenues and private equity to cover our cash needs, although there can be no assurance in this regard. In the event sales do not materialize at the expected rates, management would seek additional financing or would conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing our business without either a temporary interruption or a permanent cessation.

 

The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

Critical Accounting Policies

 

We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership:

 

State of

Abbreviated

Name of Entity

Incorporation

Relationship

Reference

Players Network(1)

Nevada

Parent

PNTV

Green Leaf Farms Holdings, LLC(2)

Nevada

Subsidiary

GLFH

 

⁽¹⁾Players Network entity is in the form of a corporation.

 

⁽²⁾Majority-owned subsidiary formed on July 8, 2014, in which PNTV retained 84% ownership, with the remaining 16% held by key experts and advisors. An additional 1.6% was sold to an investor on December 8, 2014 and 3% was transferred back from a founding member on December 2, 2015, giving PNTV 85.4% ownership and minority interests ownership of 14.6%. The form of the entity was changed from a corporation to a limited liability company on May 9, 2017 at which time the name was changed from Green Leaf Farms Holdings, Inc. to Green Leaf Farms Holdings, LLC.

 

The consolidated financial statements herein contain the operations of the subsidiary listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company, PNTV and subsidiary, GLFH will be collectively referred to herein as the “Company”, “Players Network” or “PNTV”. The Company’s headquarters are located in Las Vegas, Nevada and substantially all of its customers are within the United States.

 

Revenue Recognition

 

The Company recognizes revenue from its internet television platform from internally generated products and from partnered merchants when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability is reasonably assured. These criteria are met when the customers purchase a product or access a web-based video, the product or web-based video has been electronically delivered to the purchaser and payment has been received. At that time, the Company’s obligations to the customer is substantially complete. The Company records the net amount it retains from the sale of items from its internet television platform after paying any agreed upon percentage of the purchase price to the featured advertising merchant excluding any applicable taxes. Revenue is recorded on a net basis because the Company is acting as an agent of the partnered merchant in the transaction. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

 

Network revenue consists of monthly network broadcast subscription revenue, which is recognized over the period in which the subscription service is available. Broadcast television advertising revenue is recognized when advertisements are aired. Video production revenue is recognized as digital video film is completed and accepted by the customer and collection is reasonably assured.

 

Revenue from the distribution of domestic television series is recognized as earned using the following criteria:

 

●	Persuasive evidence of an arrangement exists;
●	The show/episode is complete, and in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery;
●	The license period has begun and the customer can begin its exploitation, exhibition or sale;
●	The price to the customer is fixed and determinable; and
●	Collectability is reasonably assured.

 

Due to practical limitations applicable to operating relationships with On-Demand networks, the Company has not considered collectability of advertising or television license revenues to be reasonably assured, and accordingly, the Company has not recognize such revenue unless payment has been received.

 

  

Audio/Video content licensing revenues were recognized when the underlying royalties from the sales of the related products were earned. The Company recognized minimum revenue guarantees, if any, ratably over the term of the license or as earned royalties based on actual sales of the related products, if greater.

 

Revenue from the sale of our cannabis products is recognized by our subsidiary at the point of sale, at which time payment is received. Management estimates an allowance for sales returns.

 

Derivative Liability

 

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risks

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation as of September 30, 2017, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(f) and 15d–15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

In the ordinary course of business, we are subject to lawsuits and other claims and proceedings that arise from litigation matters or regulatory audits, including with respect to convertible securities we issue from time to time to fund our operations. Such matters are subject to uncertainty and outcomes are often not predictable with assurance. Our management does not presently expect that such matters will have a material adverse effect on the Company’s financial condition or results of operations. There were no material developments in the quarter ended September 30, 2017 with respect to the legal proceedings that we are subject to.

 

Item 1A. Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The following issuances of equity securities by the Company were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder, during the three month period ended September 30, 2017:

 

On August 21, 2017, the Company sold 1,000,000 units at $0.11 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.17 per share over the following 3 years to an individual investor for proceeds of $110,000.

 

On August 8, 2017, the Company sold 208,333 units at $0.12 per unit, consisting of 208,333 shares of common stock and 208,333 warrants exercisable at $0.18 per share over the following 3 years to an individual investor for proceeds of $25,000.

 

On July 4, 2017, the Board of Directors appointed Geoffrey Lawrence to serve as the Company’s Chief Financial Officer and Chief Compliance Officer, effective July 1, 2017. Mr. Lawrence was issued 250,000 shares of common stock as a signing bonus.

 

On July 4, 2017, the Company issued a total of 605,000 shares of common stock to six service providers for services provided on behalf of our subsidiary, GLFH.

 

On July 4, 2017, the Company issued a total of 1,225,000 shares of common stock to seven service providers for services provided.

 

 

Item 3. Defaults Upon Senior Securities

 

On November 3, 2017, the SK L-58, LLC Note in the principal amount of $50,000 became due and payable and went into default. As a result, the Company is required issue to lender warrants to acquire one million shares at an exercise price of $0.05 per share every 30 days the note is unpaid. Each warrant is exercisable for the four (4) complete calendar month period beginning on the first day of the thirty second (32^nd) month following the event of default. As of November 20, 2017, a total of $50,425, consisting of $50,000 of principal and $425 of interest, was outstanding under this Note.

 

On July 28, 2017, the First EJR Note in the principal amount of $35,000 that originated on July 28, 2016 went into default. The note is convertible into common stock, and the note holder has not yet demanded payment, or elected to convert the debt into stock. As of November 20, 2017, a total of $38,673, consisting of $35,000 of principal and $3,173 of interest, was outstanding under this Note.

 

On July 20, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note holders received an aggregate 632,706 shares in satisfaction of $25,000 of principal and $308 of interest on the debt.

 

On July 5, 2017, a promissory note went into default and the default provisions called for the automatic conversion into shares of common stock at a conversion rate of $0.04 per share, along with the issuance of the same number of warrants, exercisable at $0.08 per share. The warrants vest on April 30, 2019, and are exercisable for 4 months thereafter. Pursuant to the conversion, the note holder received 1,265,411 shares in satisfaction of $50,000 of principal and $616 of interest on the debt.

 

On October 24, 2014, LG Capital Funding submitted a conversion request to convert $10,000 of principal on the Second LG Note, which the Company has asserted is inconsistent with the conversion terms as stated in the convertible promissory note. The Company requested that the conversion notice be corrected and resubmitted, at which time the note holder contended the conversion terms were intended to be based on 55% of the lowest closing bid price over the preceding twelve trading days, as opposed to the stated 55% of the average of the lowest closing bid price of the Common Stock over the preceding twelve trading days. The conversion terms of this Note are the subject of a legal dispute between the Company and LG Capital Funding pending in the Supreme Court of the State of New York, Kings County. On October 31, 2014, the note holder sent demand for repayment on the Second LG Note, consisting of $35,000 of principal and $8,214 of accrued interest outstanding as of September 30, 2017. As a result, we are in default on this convertible promissory note. The note carries an 18% default interest rate and a penalty of $250 per day that the shares are not issued, beginning on the 4th day after the conversion notice was delivered to the Company. This penalty increased to $500 per day beginning on the 10th day after the conversion notice was delivered to the Company. As of November 20, 2017, a total of $44,964, consisting of $35,000 of principal and $9,964 of interest, was outstanding under this Note.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

3.1	March 26, 1998 – Articles of Incorporation (incorporated by reference to Exhibit 2.(A)(1) of the Form 10-SB filed with the Securities and Exchange Commission by Players Network on February 7, 2000)
3.2	March 26, 1998 – Bylaws of the Company (incorporated by reference to Exhibit 2.(A)(2) of the Form 10-SB filed with the Securities and Exchange Commission by Players Network on February 7, 2000)
3.3	June 9, 1994 – Certificate of Amendment of Articles of Incorporation adopting name change to Players Network filed with the Nevada Secretary of State (incorporated by reference to Exhibit 5.1 of the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission by Players Network on September 13, 2004)
3.4	June 4, 2007 – Certificate of Amendment of Articles of Incorporation Increasing the Authorized Stock filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the Securities and Exchange Commission by Players Network on June 8, 2007)
3.5	May 6, 2013 – Certificate of Amendment of Articles of Incorporation Increasing the Authorized Stock filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.5 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on May 13, 2013)
3.6	July 8, 2014 - Articles of Incorporation for Green Leaf Farms Holdings, Inc. filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.2 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014)
3.7	July 18, 2014 - Articles of Organization for Green Leaf Medical, LLC. filed with the Nevada Secretary of State (incorporated by reference to Exhibit 3.3 of the Form 10-Q filed with the Securities and Exchange Commission by Players Network on November 18, 2014)
10.1	August 8, 2017 - Employment Agreement between Players Network and Geoffrey Lawrence (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission by Players Network on August 14, 2017)
31.1*	Certification of Mark Bradley, CEO and Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2*	Certification of Geoffrey Lawrence, CFO and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1*	Certification of Mark Bradley, CEO and Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2*	Certification of Geoffrey Lawrence, CFO and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Labels Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

* Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 20, 2017
	Players Network
	/s/ Mark Bradley
	Mark Bradley
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ Geoffrey Lawrence
	Geoffrey Lawrence
	Chief Financial Officer
	(Principal Financial Officer)