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, 2017 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
|
|
Players Michigan LLC
(3)
|
|
|
Michigan
|
|
|
|
Subsidiary
|
|
|
|
SALINAS
|
|
(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”).
(3)
Players
Michigan LLC is a wholly-owned subsidiary formed to acquire substantially all of the assets and liabilities of LCG Business Enterprises,
LLC (“LCG”) pursuant to an Asset Purchase Agreement that closed on May 24, 2018. The parties to the Asset Purchase
Agreement agreed to rescind the transaction on December 31, 2018.
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.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 $595,641 of construction costs have been capitalized as of September 30, 2018.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements and contracts by applying the following steps: (1) identify
the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4)
allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance
obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605
— Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence
of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount
of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
There
was no impact on the Company’s financial statements as a result of adopting Topic 606 for the nine months ended September
30, 2018 and 2017, or the twelve months ended December 31, 2017.
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.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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.
Recent
Accounting Pronouncements
In
June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
, which
expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.
An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option
pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern
of cost recognition over that period). The new guidance is effective for all entities for annual periods, and interim periods
within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company does not expect the
adoption of this ASU to have a material impact on its consolidated financial statements.
In
March 2018, the FASB issued ASU No. 2018-05,
Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff
Accounting Bulletin No. 118
. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the
“Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from
the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact
all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The
calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to
1986. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In
February 2018, the FASB issued ASU No. 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income
. The guidance permits entities to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result
of tax reform to retained earnings. This new guidance is effective for annual and interim periods in fiscal years beginning after
December 15, 2018. Early adoption is permitted in annual and interim periods and can be applied retrospectively or in the period
of adoption. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In
May 2017, the FASB issued 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.
No
other new accounting pronouncements, issued or effective during the nine months ended September 30, 2018, 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 $50,241,952, and as of September 30, 2018, the Company’s current liabilities exceeded
its current assets by $13,175,570. 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.
Note
3 – Asset Purchase Acquisition
Asset
Purchase Acquisition – LCG Business Enterprises, LLC, May 24, 2018
On
May 24, 2018, through the Company’s newly-formed wholly-owned Michigan subsidiary, Players Michigan LLC (“Players
Michigan”), purchased all of the assets of LCG Business Enterprises, LLC, a California limited liability company (“LCG”),
including all of LCG’s furniture, fixtures, equipment and inventory, in consideration for an aggregate of $5,000,000, of
which $1,000,000 was paid in cash at the closing and $4,000,000 was financed through short-term seller financed debt of $4,000,000
to be paid in monthly increments of $1,000,000 over the subsequent four-month period.
LCG
operated a California licensed commercial cannabis agricultural facility consisting of a 56,000 square foot commercial cannabis
agricultural facility at 25600 Encinal Road, Salinas, California. With LCG’s operations, we expected to realize the benefits
of increased efficiency, accountability, and productivity. As disclosed in Note 4, below, due to unanticipated operational and
reporting issues discovered following the closing, Players Michigan and LCG rescinded the transaction on December 31, 2018.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In
connection with the acquisition, LCG and the Company (through Players Michigan) entered into a Management Agreement, pursuant
to which the shareholder of LCG agreed to provide management services to the Company following closing. Pursuant to the agreement,
the seller was to be paid a percentage of net profits until the remaining purchase price was paid in full, as follows:
Percentage
of
|
|
Payment
|
Net
Profit
|
|
Period
|
30%
|
|
Between
Closing and payment in full of Installment 2
(1)
|
25%
|
|
Between
the payment in full of Installment 2 and payment in full of Installment 3
|
20%
|
|
Between
the payment in full of Installment 3 and payment in full of Installment 4
|
15%
|
|
Between
the payment in full of Installment 4 and payment in full of Installment 5
|
0%
|
|
From
and the payment in full of Installment 5 or, if earlier, the prepayment in full of the reaming unpaid portion of the Purchase
Price
|
|
(1)
|
Installment
number 2 was never paid, and the liability for these fees was terminated with the rescission agreement.
|
This
acquisition was accounted for as a business combination under the purchase method of accounting, given that substantially all
of the Company’s assets and ongoing operations were acquired. The purchase resulted in $1,250,314 of goodwill that was expensed
as an impairment due to the discontinued operations. According to the purchase method of accounting, the Company recognized the
identifiable assets acquired and liabilities assumed as follows:
|
|
May 24, 2018
|
|
Consideration:
|
|
|
|
|
Cash paid at closing
|
|
$
|
1,000,000
|
|
Seller financed short-term debt
(1)
|
|
|
4,000,000
|
|
Fair value of total consideration exchanged
|
|
$
|
5,000,000
|
|
|
|
|
|
|
Fair value of identifiable assets acquired assumed:
|
|
|
|
|
Cash
|
|
$
|
135,982
|
|
Inventory
|
|
|
3,516,000
|
|
Equipment and fixtures
|
|
|
97,704
|
|
Total fair value of assets assumed
|
|
|
3,749,686
|
|
Consideration paid in excess of fair value (Goodwill)
(2)
|
|
$
|
1,250,314
|
|
|
(1)
Consideration
was financed through short-term seller financed debt of $4,000,000 to be paid in monthly increments of $1,000,000 over the
subsequent four-month period, which was not paid and cancelled pursuant to a rescission agreement on December 31, 2018.
|
|
|
|
(2)
The consideration paid in excess of the net fair value of assets acquired and liabilities assumed has been recognized
as goodwill and impaired as a result of the subsequent rescission and discontinuance of operations.
|
Supplemental
pro forma results of operations of the combined entities could not be obtained due to the lack of financial record keeping.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
4 – Discontinued Operations
On
December 31, 2018, the Company agreed to a Release Agreement and Agreement to Rescind and Extinguish Asset Purchase Agreement
and Side Letter Agreement (“Rescission Agreement”) with respect to the transactions under the Asset Purchase Agreement
that had closed on May 24, 2018 disclosed in note 3 above. The Company decided to rescind the transaction primarily due to operational
and reporting issues it discovered following the closing, and decided to discontinue its operations in that location. Subsequently,
all of the assets, liabilities and operations of Players Michigan purchased from LCG were returned to LCG on December 31, 2018.
Pursuant to the rescission agreement, LCG paid PNTV $250,000, and agreed to pay another $350,000 upon the subsequent transaction
to any third party. In addition, LCG agreed to pay PNTV an additional 25% of the gross proceeds, less deductions for applicable
sales and/or any fair market investment banking commissions paid by LCG, of any sale in excess of $5,000,000, up to a maximum
value of $500,000. If LCG fails to close on a subsequent transaction and pay the applicable fees by April 1, 2019, LCG shall pay
PNTV a guaranteed payment of $50,000 per month until the total amount of $350,000 has been paid. A tax benefit was not recorded
on this loss due to limitations on current tax recognition. The results of operations from the Salinas business unit have been
retrospectively presented as losses from discontinued operations as presented below for the period from acquisition (May 24, 2018)
through September 30, 2018:
|
|
For the Period
|
|
|
|
from
|
|
|
|
May 24, 2018
|
|
|
|
through
|
|
|
|
September 30, 2018
|
|
|
|
|
|
Revenue:
|
|
$
|
2,330,707
|
|
Cost of goods sold
|
|
|
3,793,673
|
|
Gross profit
|
|
|
(1,462,966
|
)
|
|
|
|
|
|
Expenses:
|
|
|
|
|
General and administrative
|
|
|
670,557
|
|
Professional fees
|
|
|
347,202
|
|
Depreciation and amortization
|
|
|
5,105
|
|
Total operating expenses
|
|
|
1,022,864
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,485,830
|
)
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(2,485,830
|
)
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
carrying value of the assets and liabilities of the discontinued operations were comprised of the following at September 30, 2018:
|
|
September 30, 2018
|
|
|
|
|
|
Assets of discontinued business unit:
|
|
|
|
|
Cash
|
|
$
|
151,486
|
|
Accounts receivable
|
|
|
27,200
|
|
Other current assets
|
|
|
5,000
|
|
Inventory
|
|
|
576,292
|
|
Fixed assets, net
|
|
|
93,290
|
|
Total current assets held for sale
|
|
$
|
853,268
|
|
Liabilities of discontinued business unit:
|
|
|
|
|
Accounts payable
|
|
$
|
17,041
|
|
Accrued expenses
|
|
|
347,202
|
|
Short term debt owed to LCG
|
|
|
4,000,000
|
|
Total current liabilities held for sale
|
|
$
|
4,364,243
|
|
As
of September 30, 2018, we recognized an impairment loss of $1,250,314 on the goodwill derived from the acquisition in accordance
with the identified discontinued operations.
Note
5 – Related Party
Common
Stock Awarded for Services, Officers and Directors
On
July 11, 2018, the Company issued an aggregate total of 4,800,000 shares of common stock to the three board members for services
provided. The total fair value of the common stock was $191,040 based on the closing price of the Company’s common stock
on the date of grant.
On
July 11, 2018, the Company issued an additional 400,000 shares of common stock to one of its board members as a bonus for services
provided. The total fair value of the common stock was $15,920 based on the closing price of the Company’s common stock
on the date of grant.
On
July 11, 2018, the Company issued 3,000,000 shares of common stock to its CEO in satisfaction of unpaid compensation. The total
fair value of the common stock was $119,400 based on the closing price of the Company’s common stock on the date of grant.
On
January 1, 2018, pursuant to his employment agreement, our chief financial officer at that time earned $11,940 of compensation
that was required to be paid with 300,000 shares of our common stock based on the closing stock price on such date. The shares
were subsequently issued on July 11, 2018.
Note
6 – 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.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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, 2018 and December 31, 2017, respectively:
|
|
Fair Value Measurements at September 30, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
87,390
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
87,390
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of discounts of $1,353,075
|
|
|
-
|
|
|
|
-
|
|
|
|
408,003
|
|
Short term debt, net of discounts of $75,973
|
|
|
-
|
|
|
|
1,239,027
|
|
|
|
-
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
6,976,373
|
|
Total liabilities
|
|
|
-
|
|
|
|
1,239,027
|
|
|
|
7,384,376
|
|
|
|
$
|
87,390
|
|
|
$
|
(1,239,027
|
)
|
|
$
|
(7,384,376
|
)
|
|
|
Fair Value Measurements at December 31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
65,840
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
65,840
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of discounts of $790,621
|
|
|
-
|
|
|
|
-
|
|
|
|
374,679
|
|
Short term debt, net of discounts of $432,190
|
|
|
-
|
|
|
|
775,810
|
|
|
|
-
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
4,016,985
|
|
Total liabilities
|
|
|
-
|
|
|
|
775,810
|
|
|
|
4,391,664
|
|
|
|
$
|
65,840
|
|
|
$
|
(775,810
|
)
|
|
$
|
(4,391,664
|
)
|
There
were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the nine months ended September 30,
2018 and the year ended December 31, 2017.
Level
2 liabilities consisted of a total of $1,315,000 and $1,208,000 of short term, unsecured, promissory notes, net of discounts of
$75,973 and $432,190 as of September 30, 2018 and December 31, 2017, respectively. No fair value adjustment was necessary during
the nine months ended September 30, 2018 and the year ended December 31, 2017.
Level
3 liabilities consist of a total of $1,761,078 and $1,165,300 of convertible debentures, net of discounts of $1,353,075 and $790,621
as of September 30, 2018 and December 31, 2017, respectively, in addition to the related derivative liabilities of $6,976,373
and $4,016,985 at September 30, 2018 and December 31, 2017, respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
7 – Minority Interest
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 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, but they have not yet begun to generate significant
revenues. The minority interest’s net loss for the nine months ended September 30, 2018 was $135,306, and they have accumulated
a net loss of $536,952 as of September 30, 2018.
Note
8 – Other Current Assets
Other
current assets included the following as of September 30, 2018 and December 31, 2017, respectively:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Security deposits
|
|
$
|
92,900
|
|
|
$
|
52,100
|
|
Prepaid expenses
|
|
|
43,754
|
|
|
|
31,080
|
|
|
|
$
|
136,654
|
|
|
$
|
83,180
|
|
Note
9 – 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, 2018:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Raw materials
|
|
$
|
-
|
|
|
$
|
76,677
|
|
Finished goods
|
|
|
91,308
|
|
|
|
178,809
|
|
|
|
$
|
91,308
|
|
|
$
|
255,486
|
|
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.
Note
10 – Fixed Assets and Construction in Progress
Fixed
assets consist of the following at September 30, 2018 and December 31, 2017, respectively:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Office equipment
|
|
$
|
150,099
|
|
|
$
|
102,037
|
|
Website development costs
|
|
|
99,880
|
|
|
|
99,880
|
|
Furniture and fixtures
|
|
|
27,066
|
|
|
|
27,066
|
|
Leasehold improvements
|
|
|
373,842
|
|
|
|
373,842
|
|
Total
|
|
|
650,887
|
|
|
|
602,825
|
|
Less accumulated depreciation
|
|
|
(300,751
|
)
|
|
|
(206,370
|
)
|
Fixed assets, net
|
|
$
|
350,136
|
|
|
$
|
396,455
|
|
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 $595,641 and $408,812 at September 30, 2018 and December 31, 2017, respectively.
Depreciation
and amortization expense totaled $94,381 and $42,850 for the nine months ended September
30, 2018 and 2017, respectively.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
11 – Accrued Expenses
Accrued
expenses consisted of the following at September 30, 2018 and December 31, 2017, respectively:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Accrued Payroll, Officers
|
|
$
|
22,527
|
|
|
$
|
113,393
|
|
Accrued Payroll and Payroll Taxes
|
|
|
158,494
|
|
|
|
135,234
|
|
Accrued Interest
|
|
|
199,963
|
|
|
|
117,411
|
|
Refundable Advances
|
|
|
82,500
|
|
|
|
82,500
|
|
|
|
$
|
463,484
|
|
|
$
|
448,538
|
|
Note
12 – Convertible Debentures
Convertible
debentures consist of the following at September 30, 2018 and December 31, 2017, respectively:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
On July 13, 2018, the Company received net proceeds of $47,250 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $76,500 (“First BHP Note”), which matures on April 13, 2019. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the three (3) lowest closing bid traded prices of the Company’s common stock over the ten (10) trading days preceding the conversion date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance costs of $2,750 and 100,000 shares of common stock 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 12 million shares of common stock for potential conversions.
|
|
$
|
50,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On May 18, 2018, the Company received net proceeds of $1,100,000 in exchange for an unsecured convertible promissory note that carries a 12% interest rate with a face value of $1,100,000 (“First Grass Roots Investors Note”), which matures on May 18, 2019. The principal and interest are convertible into shares of common stock after 90 days at the discretion of the note holder at a price equal to 50% of the closing traded price if the average of the high and low trading price of the Company’s common stock is less than or equal to $0.15, 40% of the closing traded price if such average is more than $0.15 and less than $0.20, and 30% of the closing traded price if such average is more than $0.20. Interest is payable semi-annually. The note is currently in default.
|
|
|
1,100,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On May 8, 2018, the Company issued a $108,000 unsecured promissory note to JSJ Investments, Inc., bearing interest at a rate of 8% per annum, with a maturity date of May 8, 2019 in exchange for net proceeds of $103,000. The note is convertible at 70% of the lowest VWAP during the ten (10) trading days prior to the conversion request date. The note is currently in default.
|
|
|
108,000
|
|
|
|
-
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On May 1, 2018, the Company issued a (i) $240,000 unsecured promissory note to SBI Investments, LLC, bearing interest at a rate of 5% per annum, with a maturity date of February 1, 2019, and (ii) a Warrant exercisable until May 1, 2021 to purchase 1,000,000 shares of the Company’s common stock at a price of $0.10 per share, in exchange for net proceeds of $225,000. The note is convertible at 70% of the lowest VWAP during the fifteen (15) trading days prior to the conversion request date. The note is currently in default.
|
|
|
240,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On April 17, 2018, the Company issued a $38,500 unsecured promissory note to Jefferson Street Capital, LLC, bearing interest at a rate of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $35,000. The note is convertible at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request date. The note is currently in default.
|
|
|
38,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On April 17, 2018, the Company issued a $136,500 unsecured promissory note to BlueHawk Capital, LLC, bearing interest at a rate of 8% per annum, with a maturity date of January 19, 2019 in exchange for net proceeds of $125,000. The note is convertible at 70% of the average of the three lowest closing traded prices during the ten (10) trading days prior to the conversion request date. The note is currently in default.
|
|
|
136,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On February 13, 2018, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that carried a 10% interest rate with a face value of $122,400 (“Fifth Group 10 Note”), which matured on February 13, 2019. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that was amortized over the life of the loan on the straight-line method, which approximated the effective interest method. The Company was required to reserve at least 30 million shares of common stock for potential conversions. On September 11, 2018 the noteholder converted $129,300, consisting of $122,400 of principal and $6,900 of interest, in exchange for the issuance of 5,604,681 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On January 16, 2018, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that carried a 10% interest rate with a face value of $122,400 (“Fourth Group 10 Note”), which matured on January 16, 2019. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that was amortized over the life of the loan on the straight-line method, which approximated the effective interest method. The Company was required to reserve at least 30 million shares of common stock for potential conversions. On August 27, 2018 the noteholder converted $129,442, consisting of $122,400 of principal and $7,042 of interest, in exchange for the issuance of 5,610,836 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
-
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On December 15, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note that carries a 10% interest rate with a face value of $122,400 (“Third Group 10 Note”), which matured on December 15, 2018. The principal and interest were convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 that was amortized over the life of the loan on the straight-line method, which approximated the effective interest method. The Company was required to reserve at least 30 million shares of common stock for potential conversions. On various dates between June 26, 2018 and August 1, 2018, the noteholder converted a total of $122,400 of principal and $7,052 of interest in exchange for the issuance of 4,453,440 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
122,400
|
|
|
|
|
|
|
|
|
|
|
On November 8, 2017, the Company amended the two notes with Black Mountain Equities, Inc. (“First Black Mountain Note”) and Gemini Master Fund, Ltd. (“First Gemini Note”). The amended notes extended the maturity dates to December 9, 2017, increased the principal amount owed by $8,250 each, and established conversion features. The principal and interest became convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the lowest volume weighted average price (“VWAP”) over the fifteen (15) trading days preceding the conversion date, as limited to $40,000 of conversion during any 10-day trading period. The notes were originally entered into on May 8, 2017, 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 various dates between December 11, 2017 and April 17, 2018, the noteholders converted an aggregate $339,873, consisting of $316,500 of principal and $23,373 of interest, in exchange for the issuance of 6,875,717 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
266,500
|
|
|
|
|
|
|
|
|
|
|
On November 8, 2017, the Company issued a $200,000 promissory note (“Second Group 10 Note”) in exchange for the debt acquired from Rxmm, as note below. The new note matures on November 8, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the ten (10) trading days preceding the conversion date. The Company must at all times reserve at least 50 million shares of common stock for potential conversions. On various dates between December 6, 2017 and February 5, 2018, the noteholder converted $200,000 of principal in exchange for the issuance of 3,658,652 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
On November 7, 2017, the Company received net proceeds of $120,000 in exchange for an unsecured convertible promissory note with a face value of $122,400 (“First Group 10 Note”), which matures on November 7, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy percent (70%) of the average of the two lowest closing traded prices of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $2,400 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 50 million shares of common stock for potential conversions. On various dates between May 15, 2018 and May 30, 2018, the noteholders converted an aggregate $128,000, consisting of $122,400 of principal and $5,600 of interest, in exchange for the issuance of 4,378,352 shares. The note has been satisfied in full.
|
|
|
-
|
|
|
|
122,400
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On November 8, 2017, provisions within two notes with Black Mountain Equities, Inc. (“Second Black Mountain Note”) and Gemini Master Fund, Ltd. (“Second Gemini Note”) established conversion features. The principal and interest became convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent (75%) of the lowest traded price during the fifteen (15) trading days preceding the conversion date. The notes were originally entered into 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). On various dates between March 22, 2018 and May 30, 2018, the noteholders converted $167,657, consisting of $158,000 of principal and $9,657 of interest, in exchange for the issuance of 5,244,756 shares. The Second Gemini note has been satisfied in full, and $155,000 of cash was repaid on the Second Black Mountain leaving $3,000 of principal outstanding. The note is currently in default.
|
|
|
3,000
|
|
|
|
316,000
|
|
|
|
|
|
|
|
|
|
|
On October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $76,500 (“First Fourth Man Note”), which matures on October 27, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The Company paid total debt issuance costs of $3,500 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 June 1, 2018, a penalty of $15,300 was added to the principal balance of the note due to default provisions. On various dates between July 25, 2018 and August 28, 2018, the noteholder converted a total of $61,722 of principal in exchange for the issuance of 2,500,000 shares. The note is currently in default.
|
|
|
30,078
|
|
|
|
76,500
|
|
|
|
|
|
|
|
|
|
|
On October 27, 2017, the Company received net proceeds of $73,000 in exchange for an unsecured convertible promissory note that carries an 8% interest rate with a face value of $76,500 (“First Emunah Note”), which matures on October 27, 2018. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a price equal to seventy five percent (75%) of the lowest traded price of the Company’s common stock over the fifteen (15) trading days preceding the conversion date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance costs of $3,500 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 June 1, 2018, a penalty of $15,300 was added to the principal balance of the note due to default provisions. On various dates between July 25, 2018 and August 28, 2018, the noteholder converted a total of $79,067, consisting of $71,800 of principal and $7,267 of interest, in exchange for the issuance of 3,146,648 shares. The note is currently in default.
|
|
|
20,000
|
|
|
|
76,500
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 are 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. 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
|
|
|
1,761,078
|
|
|
|
1,165,300
|
|
Less: unamortized debt discounts
|
|
|
(1,353,075
|
)
|
|
|
(790,621
|
)
|
Convertible debentures
|
|
$
|
408,003
|
|
|
$
|
374,679
|
|
In
accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $1,850,449 and $1,004,335
for the variable conversion features of the convertible debts incurred during the nine months ended September 30, 2018 and the
year ended December 31, 2017. The discounts are being amortized to interest expense over the term of the debentures using the
effective interest method. The Company recorded $1,287,995 and $48,733 of interest expense pursuant to the amortization of the
note discounts during the nine months ended September 30, 2018 and 2017, respectively.
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 $113,983
and $12,804 for the nine months ended September 30, 2018 and 2017, respectively related to convertible debts.
Note
13 – Short Term Debt
Short-term
debt consists of the following at September 30, 2018 and December 31, 2017, respectively:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
On June 18, 2018, the Company received proceeds of $100,000 in exchange for an unsecured promissory note maturing on August 8, 2018, carrying a fixed interest amount of $5,000 (“First Irani Note”). The note is currently in default.
|
|
$
|
100,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On March 23, 2018, the Company received proceeds of $17,000 in exchange for an unsecured promissory note due on demand, carrying a fixed interest amount of $750. The Company repaid a total of $10,000 between March 29, 2018 and April 19, 2018.
|
|
|
7,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On December 28, 2017, the Company received net proceeds of $80,000 in exchange for an unsecured convertible promissory note that carries a 5% interest rate with a face value of $90,000 (“First RDP Note”), which matured on February 26, 2018. The Company is required to have fully paid all principal and accrued interest due and owing to SK L-58, LLC under the certain Promissory Note dated September 19, 2017 in the principal amount of $50,000, as shown below. The note carries an eighteen percent (18%) interest rate in the event of default. The Company paid total debt issuance cost of $10,000 that is being amortized over the life of the loan on the straight-line method, which approximates the effective interest method. In addition, the Note Holder was issued 10,000,000 warrants, exercisable at $0.03 per share over a period of four months, commencing on August 11, 2019. The warrants are cancellable in exchange for $1 if this note and the SK L-58, LLC note dated September 19, 2017 are repaid in full. This note is currently in default.
|
|
|
90,000
|
|
|
|
90,000
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 (32
nd
) month following an Event of Default. This note is currently in default.
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
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 31
st
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. The note is currently in default.
|
|
|
925,000
|
|
|
|
925,000
|
|
|
|
|
|
|
|
|
|
|
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 is in default and carries a default rate of 10% and remains outstanding.
|
|
|
143,000
|
|
|
|
143,000
|
|
|
|
|
|
|
|
|
|
|
Total short term debt
|
|
|
1,315,000
|
|
|
|
1,208,000
|
|
Less: unamortized debt discounts
|
|
|
(75,973
|
)
|
|
|
(432,190
|
)
|
Short term debt
|
|
$
|
1,239,027
|
|
|
$
|
775,810
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
Company recorded $346,217 and $626,506 of interest expense pursuant to the amortization of the note discounts during the nine
months ended September 30, 2018 and 2017, respectively.
The
Company recorded interest expense pursuant to the stated interest rate on the above promissory notes in the amount of $49,982
and $54,610 at September 30, 2018 and 2017, respectively.
The
following presents components of interest expense by instrument type at September 30, 2018 and 2017, respectively:
|
|
September
30, 2018
|
|
|
September
30, 2017
|
|
Interest on convertible
debentures
|
|
$
|
113,983
|
|
|
$
|
12,804
|
|
Amortization of debt discounts
|
|
|
1,634,212
|
|
|
|
675,239
|
|
Interest on short term debt
|
|
|
49,982
|
|
|
|
54,610
|
|
Accounts payable
related finance charges
|
|
|
1,596
|
|
|
|
2,395
|
|
|
|
$
|
1,799,773
|
|
|
$
|
419,915
|
|
Note
14 – Derivative Liabilities
As
discussed in Note 12 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 $6,976,373 and $9,530,296 at September
30, 2018 and December 31, 2017, respectively. The change in fair value of the derivative liabilities resulted in a gain of $3,252,688
and a loss of $528,633 for the nine months ended September 30, 2018 and 2017, respectively, which has been reported as other expense
in the statements of operations. The gain of $3,252,688 for the nine months ended September 30, 2018 consisted of a gain of $101,426
attributable to the value in excess of discounts on new warrants, a gain of $3,736,016 attributable to the fair value of warrants,
a loss of $625,240 on excess derivative value and a net gain in market value of $40,486 on the convertible notes. 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
following presents the derivative liability value by instrument type at September 30, 2018 and December 31, 2017, respectively:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Convertible debentures
|
|
$
|
2,368,170
|
|
|
$
|
1,033,644
|
|
Common stock
warrants
|
|
|
4,608,203
|
|
|
|
8,496,652
|
|
|
|
$
|
6,976,373
|
|
|
$
|
9,530,296
|
|
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
following is a summary of changes in the fair market value of the derivative liability during the nine months ended September
30, 2018 and the year ended December 31, 2017, respectively:
|
|
Derivative
|
|
|
|
Liability
|
|
|
|
Total
|
|
Balance, December 31, 2016
|
|
$
|
482,674
|
|
Increase in derivative
value attributable to issuance of convertible notes
|
|
|
956,320
|
|
Increase in derivative
value attributable to issuance of warrants
|
|
|
4,321,045
|
|
Change in fair market
value of derivative liabilities due to the mark to market adjustment
|
|
|
4,221,728
|
|
Debt
conversions and redemptions
|
|
|
(451,471
|
)
|
Balance, December
31, 2017
|
|
$
|
9,530,296
|
|
Increase in derivative
value attributable to issuance of convertible notes
|
|
|
2,415,539
|
|
Increase in derivative
value attributable to issuance of warrants
|
|
|
101,426
|
|
Change in fair market
value of derivative liabilities due to the mark to market adjustment
|
|
|
(3,877,928
|
)
|
Debt
conversions and redemptions
|
|
|
(1,192,960
|
)
|
Balance, September
30, 2018
|
|
$
|
6,976,373
|
|
Key
inputs and assumptions used to value the convertible debentures and warrants issued during the nine months ended September 30,
2018 and the year ended December 31, 2017:
|
●
|
Stock
prices on all measurement dates were based on the fair market value and would fluctuate with projected volatility.
|
|
●
|
The
projected volatility curve for each valuation period was based on the historical volatility of the Company in the range of
116% to 138%.
|
|
●
|
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 $3,439,887 to $2,188,776 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%.
|
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 678,072,453 shares were issued and outstanding and 206,605,359
shares were reserved as of the date of this filing.
Common
Stock Sales
On
September 24, 2018, the Company sold 1,000,000 units at $0.065 per unit, consisting of 1,000,000 shares of common stock and 1,000,000
warrants exercisable at $0.085 per share over the following 3 years to an individual investor for proceeds of $65,000. The shares
were subsequently issued on December 14, 2018.
On
June 29, 2018, the Company sold 1,021,000 units at $0.05 per unit, consisting of 1,021,000 shares of common stock and 1,021,000
warrants exercisable at $0.075 per share over the following 3 years to an individual investor for proceeds of $51,050.
On
March 12, 2018, the Company sold 333,333 units at $0.15 per unit, consisting of 333,333 shares of common stock and 666,700 warrants
exercisable at $0.15 per share over the following 3 years to an individual investor for proceeds of $50,000.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Common
Stock Issuances for Settlement of Trade Payables
On
June 1, 2018, the Superior Court of the State of California, County of Los Angeles, Central District, entered an order approving
the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended,
in accordance with the Settlement Agreement, in the matter entitled RAI Capital, LLC, Plaintiff (“RAI”), v. Players
Network, Inc., Defendant. RAI commenced the Action against the Company to recover $398,217 of past-due obligations and accounts
payable of the Company which RAI had purchased from certain vendors of the Company pursuant to the terms of separate receivable
purchase agreements between RAI and such vendors. The Order provided for the full and final settlement of the Action, whereby
the Company issued RAI 13,298,837 shares in settlement of $398,217 of outstanding payables. The total fair value of the common
stock was $743,405 based on the closing price of the Company’s common stock on the date of grant, resulting in a loss of
$345,188.
Common
Stock Issuances for Debt Conversions
On
September 12, 2018, the Company issued 993,789 shares of common stock pursuant to the conversion of $20,000 of outstanding principal
on the First Emunah Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
September 11, 2018, the Company issued 5,604,681 shares of common stock pursuant to the conversion of $129,300, consisting of
$122,400 of outstanding principal and $6,900 of unpaid interest, on the Fifth Group 10 Note. The note was converted in accordance
with the conversion terms; therefore, no gain or loss has been recognized.
On
August 28, 2018, the Company issued 1,500,000 shares of common stock pursuant to the conversion of $34,598 of outstanding principal
on the First Fourth Man Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
August 27, 2018, the Company issued 5,610,836 shares of common stock pursuant to the conversion of $129,442, consisting of $122,400
of outstanding principal and $7,042 of unpaid interest, on the Fourth Group 10 Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been recognized.
On
August 6, 2018, the Company issued 1,043,246 shares of common stock pursuant to the conversion of $28,736, consisting of $27,800
of outstanding principal and $936 of unpaid interest, on the First Emunah Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been recognized.
On
August 1, 2018, the Company issued 1,615,846 shares of common stock pursuant to the conversion of $44,452, consisting of $37,400
of outstanding principal and $7,052 of unpaid interest, on the Third Group 10 Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been recognized.
On
July 25, 2018, the Company issued 1,000,000 shares of common stock pursuant to the conversion of $27,125 of outstanding principal
on the First Fourth Man Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
July 18, 2018, the Company issued 1,290,084 shares of common stock pursuant to the conversion of $35,000 of outstanding principal
on the Third Group 10 Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
July 16, 2018, the Company issued 1,109,613 shares of common stock pursuant to the conversion of $30,331, consisting of $24,000
of outstanding principal and $6,331 of unpaid interest, on the First Emunah Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been recognized.
On
June 26, 2018, a noteholder elected to convert $50,000 of outstanding principal on the Third Group 10 Note in exchange for 1,547,508
shares of common stock. The shares were subsequently issued on July 3, 2018. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
May 30, 2018, the Company issued 2,591,362 shares of common stock pursuant to the conversion of $78,000, consisting of $72,400
of outstanding principal and $5,600 of unpaid interest, on the First Group 10 Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been recognized.
On
May 30, 2018, the Company issued 2,118,721 shares of common stock pursuant to the conversion of $61,973, consisting of $58,000
of outstanding principal and $3,973 of unpaid interest, on the Second Gemini Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been recognized.
On
May 15, 2018, the Company issued 1,786,990 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the First Group 10 Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
May 14, 2018, the Company issued 2,009,451 shares of common stock pursuant to the conversion of $53,205, consisting of $50,000
of outstanding principal and $3,205 of unpaid interest, on the Second Gemini Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been recognized.
On
April 17, 2018, the Company issued 707,156 shares of common stock pursuant to the conversion of $24,998, consisting of $13,250
of outstanding principal and $11,748 of unpaid interest, on the First Gemini Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been recognized.
On
March 22, 2018, the Company issued 1,116,584 shares of common stock pursuant to the conversion of $52,479, consisting of $50,000
of outstanding principal and $2,479 of unpaid interest, on the Second Gemini Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been recognized.
On
March 14, 2018, the Company issued 851,064 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
March 14, 2018, the Company issued 529,246 shares of common stock pursuant to the conversion of $24,875, consisting of $13,250
of outstanding principal and $11,625 of unpaid interest, on the First Black Mountain Note. The note was converted in accordance
with the conversion terms; therefore, no gain or loss has been recognized, and the note has been paid off in full.
On
February 20, 2018, the Company issued 801,603 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
February 7, 2018, the Company issued 809,716 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has
been recognized.
On
February 5, 2018, the Company issued 1,009,489 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
January 22, 2018, the Company issued 806,452 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Gemini Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
January 22, 2018, the Company issued 806,452 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has
been recognized.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
January 16, 2018, the Company issued 955,474 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
On
January 8, 2018, the Company issued 806,452 shares of common stock pursuant to the conversion of $40,000 of outstanding principal
on the First Black Mountain Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has
been recognized.
On
January 2, 2018, the Company issued 784,929 shares of common stock pursuant to the conversion of $50,000 of outstanding principal
on the Second Group 10 Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been
recognized.
Exercise
of Warrants
On
June 5, 2018, the holder of the Second Black Mountain Note exercised warrants to purchase 7,954,546 shares of common stock on
a cashless basis at $0.0264, resulting in the issuance of 4,389,180 shares.
On
May 31, 2018, the holder of the First Emunah Note exercised warrants to purchase 1,000,000 shares of common stock at $0.03535
per share for proceeds of $35,350.
On
March 28, 2018, a warrant holder exercised warrants to purchase 3,000,000 shares of common stock at $0.04 per share for proceeds
of $120,000. The shares were subsequently issued on April 30, 2018.
Common
Stock Awarded for Services
On
August 15, 2018, the Company issued a total of 1,950,000 shares of common stock to 4 consultants for services provided. The aggregate
fair value of the common stock was $77,025 based on the closing price of the Company’s common stock on the respective grant
dates.
On
July 13, 2018, the Company issued 100,000 shares of common stock as a loan origination fee on the First BHP Note. The total fair
value of the common stock was $4,100 based on the closing price of the Company’s common stock on the date of grant, and
is being amortized over the life of the Note.
On
July 11, 2018, the Company issued a total of 7,700,000 shares of common stock to 11 consultants for services provided. The aggregate
fair value of the common stock was $306,460 based on the closing price of the Company’s common stock on the respective grant
dates.
On
July 11, 2018, the Company issued an aggregate total of 4,800,000 shares of common stock to the three board members for services
provided. The total fair value of the common stock was $191,040 based on the closing price of the Company’s common stock
on the date of grant.
On
July 11, 2018, the Company issued an additional 400,000 shares of common stock to one of its board members as a bonus for services
provided. The total fair value of the common stock was $15,920 based on the closing price of the Company’s common stock
on the date of grant.
On
July 11, 2018, the Company issued 3,000,000 shares of common stock to its CEO in satisfaction of unpaid compensation. The total
fair value of the common stock was $119,400 based on the closing price of the Company’s common stock on the date of grant.
On
April 19, 2018, the Company awarded 500,000 shares of common stock to BlueHawk Capital, LLC pursuant to a consulting agreement.
The total fair value of the common stock was $29,000 based on the closing price of the Company’s common stock on the date
of grant. The Company subsequently issued the shares on July 11, 2018.
On
March 12, 2018, the Company issued a total of 350,000 shares of common stock to a consultant for services provided. The total
fair value of the common stock was $25,550 based on the closing price of the Company’s common stock on the date of grant.
The Company subsequently issued 300,000 shares on April 30, 2018 and the remaining 50,000 shares on September 10, 2018.
On
January 1, 2018, pursuant to his employment agreement, our chief financial officer at that time earned $11,940 of compensation
that was required to be paid with 300,000 shares of our common stock based on the closing stock price on such date. The shares
were subsequently issued on July 11, 2018.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
16 –
Options and Warrants
Warrants Granted
On September 24, 2018, the Company sold
1,000,000 units at $0.065 per unit, consisting of 1,000,000 shares of common stock and 1,000,000 warrants exercisable at $0.085
per share over the following 3 years, to an individual investor for proceeds of $65,000. The shares were subsequently issued on
December 14, 2018.
On
June 29, 2018, the Company sold 1,021,000 units at $0.05 per unit, consisting of 1,021,000 shares of common stock and 1,021,000
warrants exercisable at $0.075 per share over the following 3 years, to an individual investor for proceeds of $51,050. The shares
were subsequently issued on September 10, 2018.
On
June 1, 2018, a warrant holder was issued warrants to purchase 3,000,000 shares of common stock at $0.055 per share over the following
5 years as an inducement to exercise his warrants on March 28, 2018.
On
May 31, 2018, the holder of the First Emunah Note exercised warrants to purchase 1,000,000 shares of common stock at $0.03535
per share for proceeds of $35,350.
On
May 14, 2018, warrants issued to Black Mountain Equities, Inc. were adjusted pursuant to terms within their promissory note, resulting
in the issuance of an additional 6,454,545 warrants exercisable at $0.0264 over the remaining term, in addition to the repricing
of an aggregate 2,800,000 previously outstanding warrants to $0.0264 per share.
On
May 14, 2018, warrants issued to Gemini Master Fund, Ltd. were adjusted pursuant to terms within their promissory note, resulting
in the issuance of an additional 5,154,545 warrants exercisable at $0.0264 over the remaining term, in addition to the repricing
of an aggregate 2,800,000 previously outstanding warrants to $0.0264 per share.
On
May 1, 2018, the Company issued warrants exercisable until May 1, 2021 to purchase 1,000,000 shares of the Company’s common
at a price of $0.10 per share, in exchange for net proceeds of $225,000 pursuant to a convertible note offering to SBI Investments,
LLC.
On
April 17, 2018, class A and B warrants issued to Emunah Funding LLC and Fourth Man LLC were adjusted pursuant to terms within
their respective notes, resulting in the issuance of an additional 2,594,714 warrants exercisable at $0.03535 over the remaining
term, in addition to the repricing of an aggregate 6,528,340 previously outstanding warrants to $0.03535 per share. All of these
warrants were subsequently exchanged for two $75,000 convertible notes on October 15, 2018.
On
March 28, 2018, a warrant holder exercised warrants to purchase 3,000,000 shares of common stock at $0.04 per share for proceeds
of $120,000. The shares were subsequently issued on April 30, 2018.
On
March 12, 2018, the Company sold 333,333 units at $0.15 per unit, consisting of 333,333 shares of common stock and 333,333 warrants
exercisable at $0.15 per share over the following 3 years, to an individual investor for proceeds of $50,000. The shares were
subsequently issued on April 30, 2018
Warrants
Exercised
On
June 5, 2018, the holder of the Second Black Mountain Note exercised warrants to purchase 7,954,546 shares of common stock on
a cashless basis at $0.0264, resulting in the issuance of 4,389,180 shares.
On
March 28, 2018, a warrant holder exercised warrants to purchase 3,000,000 shares of common stock at $0.04 per share for proceeds
of $120,000. The shares have not yet been issued.
Options
Expired
On
February 20, 2018, a total of 8,000,000 options with a strike price of $0.04 per share expired.
On
June 1, 2018, a total of 3,000,000 options with a strike price of $0.08 per share expired.
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, 2018 and the year ended December 31, 2017, 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, 2018, the Company had approximately $23,177,000 of federal
net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2025.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
components of the Company’s deferred tax asset are as follows:
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
4,867,191
|
|
|
$
|
9,328,900
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation
allowance
|
|
|
4,867,191
|
|
|
|
9,328,900
|
|
Less:
Valuation allowance
|
|
|
(4,867,191
|
)
|
|
|
(9,328,900
|
)
|
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, 2018 and December 31, 2017, 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, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
Federal and state statutory
rate
|
|
|
21
|
%
|
|
|
35
|
%
|
Change in valuation allowance on deferred
tax assets
|
|
|
(21
|
)%
|
|
|
(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 $135,306 and $94,912 during the nine months ended September 30, 2018 and 2017, respectively. The net loss attributable
to the parent was and $791,448 and $555,168 during the nine months ended September 30, 2018 and 2017, respectively.
Note
19 – Subsequent Events
Rescission
of Salinas Acquisition
On
December 31, 2018, the Company and LCG Business Enterprises, LLC (“LCG”) agreed to rescind the May 24, 2018 purchase
of substantially all the assets of LCG, consisting primarily of a 56,000 square foot commercial cannabis agricultural facility
at 25600 Encinal Road, Salinas, California. The Company decided to rescind the transaction primarily due to operational and reporting
issues it discovered following the closing. Subsequently, all of the assets, liabilities and operations of this subsidiary were
returned to LCG on December 31, 2018.
Proposed
Jujuy, Argentina Joint Venture
In
October 2018, Green Leaf and the Province of Jujuy, Argentina (the “Province”) entered into a Memorandum of Understanding
that contemplates the formation of an entity jointly owned by the Province and Green Leaf that will cultivate, manufacture and
distribute cannabis and cannabis products on land provided to the joint venture by the Province. Pursuant to the Memorandum of
Understanding, among other things, Green Leaf will be responsible for providing the necessary funding for the development of the
project and the hiring and training of local personnel for the project, and the Province will provide all of the necessary permits
as well as the use of land in Jujuy, Argentina at no cost to the joint venture for a 99-year period. The Company’s management
believes this venture presents a significant opportunity for the Company and its stockholders, particularly given the favorable
agricultural climate in Jujuy, Argentina and the local cost of labor in that market. However, the Memorandum of Understanding
is subject to the negotiation and execution of definitive agreements, and there can be no assurance that the transactions contemplated
by Memorandum of Understanding will be effected.
Players
Network
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Convertible
Debt Financing
On
October 15, 2018, the Company issued an unsecured convertible promissory note that carries a 3% interest rate with a face value
of $75,000 (“Second Fourth Man Note”), which matures on October 15, 2019. The principal and interest are convertible
into shares of common stock at the discretion of the note holder at a price equal to seventy one percent (71%) of the three lowest
daily volume weighted average prices of the Company’s common stock over the ten (10) trading days preceding the conversion
date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note was issued in
exchange for the cancellation of warrants previously awarded on October 27, 2017, consisting of the class A warrant in respect
to the right to purchase 1,000,000 shares and the class B warrant to purchase 75,000 shares.
On
October 15, 2018, the Company issued an unsecured convertible promissory note that carries a 3% interest rate with a face value
of $75,000 (“Second Emunah Note”), which matures on October 15, 2019. The principal and interest are convertible into
shares of common stock at the discretion of the note holder at a price equal to seventy one percent (71%) of the three lowest
daily volume weighted average prices of the Company’s common stock over the ten (10) trading days preceding the conversion
date. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note was issued in
exchange for the cancellation of warrants previously awarded on October 27, 2017, consisting of the class A warrant in respect
to the right to purchase 1,000,000 shares and the class B warrant to purchase 75,000 shares.
Common
Stock Issued on Subscriptions Payable
On
December 14, 2018, a total of 1,000,000 shares were issued that have been classified as Subscriptions Payable on our financial
statements with respect to shares issued pursuant to a stock sale for $65,000 in the prior period.
Common
Stock Issuances for Debt Conversions
On
various dates between October 31, 2018 and January 9, 2019, the Company issued an aggregate 3,039,823 shares of common stock pursuant
to the conversion of $95,303, consisting of $95,000 of outstanding principal and $303 of interest, on convertible notes.
Common
Stock Sales
On
December 14, 2018, the Company sold 416,667 units at $0.06 per unit, consisting of 416,667 shares of common stock and 416,667
warrants exercisable at $0.12 per share over the following 3 years to an individual investor for proceeds of $25,000.
On
November 30, 2018, the Company sold 300,000 units at $0.05 per unit, consisting of 300,000 shares of common stock and 300,000
warrants exercisable at $0.08 per share over the following 3 years to an individual investor for proceeds of $15,000.
On
November 5, 2018, the Company sold 2,000,000 units at $0.06 per unit, consisting of 2,000,000 shares of common stock and 2,000,000
warrants exercisable at $0.12 per share over the following 3 years to an individual investor for proceeds of $120,000.
Exercise
of Warrants
On
December 19, 2018, a warrant holder exercised warrants to purchase 3,000,000 shares of common stock at $0.04 per share for proceeds
of $120,000.
Common
Stock Awarded for Services
On
various dates between October 1, 2018 and November 9, 2018, the Company issued a total of 5,650,000 shares of common stock to
11 consultants for services provided. The aggregate fair value of the common stock was $354,405 based on the closing price of
the Company’s common stock on the respective grant dates.