Notes to Condensed Financial Statements
(Unaudited)
Note 1 – Basis of Presentation
The interim condensed financial statements
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.
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 financial statements
be read in conjunction with the financial statements of the Company for the year ended December 31, 2012 and notes thereto included
in the Company's 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.
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.
Cost Method of Accounting for Investments
Investee companies not accounted for under
the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method,
the Company’s share of the earnings or losses of such Investee companies is not included in the Balance Sheet or Statement
of Operations. However, impairment charges are recognized in the Statement of Operations. If circumstances suggest that the value
of the Investee Company has subsequently recovered, such recovery is not recorded. Impairment analysis on our investments which
are accounted for on the cost method of accounting resulted in complete impairment at December 31, 2012.
Revenue
Recognition
The Company recognizes revenue from its
internet television platform from internally generated products and from partnered merchants when the following criteria are met:
persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability
is reasonably assured. These criteria are met when the customers purchase a product or access a web-based video, the product or
web-based video has been electronically delivered to the purchaser and payment has been received. At that time, the Company's obligations
to the customer is substantially complete. The Company records the net amount it retains from the sale of items from its internet
television platform after paying any agreed upon percentage of the purchase price to the featured advertising merchant excluding
any applicable taxes. Revenue is recorded on a net basis because the Company is acting as an agent of the partnered merchant in
the transaction. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been
delivered or no refund will be required.
Network revenue consists of monthly network
broadcast subscription revenue, which is recognized over the period in which the subscription service is available. Broadcast television
advertising revenue is recognized when advertisements are aired. Video production revenue is recognized as digital video film is
completed and accepted by the customer and collection is reasonably assured.
Revenue
from the distribution
of domestic television series is recognized as earned using the following criteria:
|
|
·
|
Persuasive evidence of an arrangement
exists;
|
|
|
·
|
The show/episode is complete, and in accordance
with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery;
|
|
|
·
|
The license period has begun and the customer
can begin its exploitation, exhibition or sale;
|
|
|
·
|
The price to the customer is fixed and
determinable; and
|
|
|
·
|
Collectability is reasonably assured.
|
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Due to practical limitations applicable
to operating relationships with On-Demand networks, the Company has not considered collectability of advertising or television
license revenues to be reasonably assured, and accordingly, the Company has not recognize such revenue unless payment has been
received.
Audio/Video content licensing revenues
were recognized when the underlying royalties from the sales of the related products were earned. The Company recognized minimum
revenue guarantees, if any, ratably over the term of the license or as earned royalties based on actual sales of the related products,
if greater.
Deferred revenues consist of the following
at June 30, 2013 and December 31, 2012:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Deferred revenues on television pilot episodes
|
|
$
|
135,000
|
|
|
$
|
135,000
|
|
|
Deferred revenues on audio/video content licensing
|
|
|
–
|
|
|
|
–
|
|
|
Total deferred revenues
|
|
$
|
135,000
|
|
|
$
|
135,000
|
|
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.
Deferred
Television Costs
Deferred television costs as of June 30,
2013, included direct production and development costs stated at the lower of cost or net realizable value based on anticipated
revenue. Production overhead is not included as the Company outsources its production costs to third party vendors. Capitalized
television production costs for each pilot episode are to be expensed as revenues are recognized upon delivery and acceptance of
the completed pilot episodes using the individual-film-forecast-computation method for each television show produced.
Deferred television costs consist of the
following at June 30, 2013 and December 31, 2012:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Development and pre-production costs
|
|
$
|
–
|
|
|
$
|
–
|
|
|
In-production
|
|
|
68,264
|
|
|
|
68,264
|
|
|
Post production
|
|
|
48,190
|
|
|
|
48,190
|
|
|
Total deferred television costs
|
|
$
|
116,454
|
|
|
$
|
116,454
|
|
Due to practical limitations applicable
to monetizing our developed content over On-Demand networks, the Company has not considered collectability of advertising or television
license revenues to be reasonably assured, and accordingly, the Company has expensed production costs related to the development
of our On-Demand and internet-based content as incurred.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Recent Accounting Pronouncements
In July 2013, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11:
Presentation of an Unrecognized Tax Benefit When
a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.
The new guidance requires that
unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is
effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption
of the new provisions to have a material impact on our financial condition or results of operations.
In February 2013, FASB issued ASU No. 2013-02,
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
, to improve
the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially
excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive
income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive
income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in
the financial statements under U.S. GAAP. The new amendments will require an organization to:
|
|
-
|
Present (either on the face of the statement where net income is presented or in the notes) the
effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but
only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting
period; and
|
|
|
-
|
Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification
items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting
period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially
transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
|
The amendments apply to all public and
private companies that report items of other comprehensive income. Public companies are required to comply with these amendments
for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15,
2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact
on our financial position or results of operations.
In January 2013, the FASB issued ASU No.
2013-01,
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
, which clarifies
which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11.
The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed
unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope
of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while
still giving financial statement users sufficient information to analyze the most significant presentation differences between
financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in
this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected
to have a material impact on our financial position or results of operations.
Note 2 – Going Concern
As shown in the accompanying condensed
financial statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit of ($22,733,459),
and as of June 30, 2013, the Company’s current liabilities exceeded its current assets by $1,397,836 and its total liabilities
exceeded its total assets by $1,312,353. These factors raise substantial doubt about the Company’s ability to continue as
a going concern. Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking
additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving
profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern.
The financial statements do not include
any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going
concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded
asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as
a going concern.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Note 3 – Related Party
Officers
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 2,000,000 shares of restricted common stock to the Company’s CEO as payment on accrued
compensation. The total fair value of the common stock was $38,000 based on the closing price of the Company’s common stock
on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 1,294,066 shares of restricted common stock to the Company’s President of Programming
as payment on accrued compensation. The total fair value of the common stock was $24,587 based on the closing price of the Company’s
common stock on the date of grant.
On January 8, 2013, the Company’s
Board of Directors granted the issuance of 620,000 shares of restricted common stock to the Company’s CEO as payment on accrued
compensation. The total fair value of the common stock was $31,000 based on the closing price of the Company’s common stock
on the date of grant.
On January 8, 2013, the Company’s
Board of Directors granted the issuance of 760,000 shares of restricted common stock to the Company’s President of Programming
as payment on accrued compensation. The total fair value of the common stock was $38,000 based on the closing price of the Company’s
common stock on the date of grant.
Officer compensation expense was $73,265
and $85,450 at June 30, 2013 and 2012, respectively. The balance owed was $62,374 and $29,345 at June 30, 2013 and 2012, respectively.
Board of Directors
On May 1, 2013, the Company issued 150,000
shares of restricted common stock as a bonus for board services provided to one of our Directors. The total fair value of the common
stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued another
150,000 shares of restricted common stock as a bonus for board services provided to another one of our Directors. The total fair
value of the common stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company’s
Board of Directors granted 300,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $11,048.
On January 8, 2013, the Company’s
Board of Directors granted 100,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $3,683.
On January 8, 2013, the Company’s
Board of Directors granted 250,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $9,206.
Officer and Director Changes
On January 8, 2013, Mr. Jim Bates was appointed
to the Company’s Board of Directors. He subsequently resigned on June 3, 2013.
Note 4 – Fair Value of Financial
Instruments
Under FASB ASC 820-10-5, fair value is
defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value
hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under
GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required
for items measured at fair value.
Players Network
Notes to Condensed 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 June 30, 2013 and December 31, 2012:
|
|
|
Fair Value Measurements at June 30, 2013
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
590
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Total assets
|
|
|
590
|
|
|
|
–
|
|
|
|
–
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of discounts of $155,773
|
|
|
–
|
|
|
|
–
|
|
|
|
62,227
|
|
|
Short term debt
|
|
|
–
|
|
|
|
35,000
|
|
|
|
–
|
|
|
Derivative liability
|
|
|
–
|
|
|
|
–
|
|
|
|
448,099
|
|
|
Total liabilities
|
|
|
–
|
|
|
|
35,000
|
|
|
|
510,326
|
|
|
|
|
$
|
590
|
|
|
$
|
(35,000
|
)
|
|
$
|
(510,326
|
)
|
|
|
|
Fair Value Measurements at December 31, 2012
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,076
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Total assets
|
|
|
2,076
|
|
|
|
–
|
|
|
|
–
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of discounts of $196,092
|
|
|
–
|
|
|
|
–
|
|
|
|
19,408
|
|
|
Short term debt
|
|
|
–
|
|
|
|
35,000
|
|
|
|
–
|
|
|
Derivative liability
|
|
|
–
|
|
|
|
–
|
|
|
|
356,608
|
|
|
Total liabilities
|
|
|
–
|
|
|
|
35,000
|
|
|
|
376,016
|
|
|
|
|
$
|
2,076
|
|
|
$
|
(35,000
|
)
|
|
$
|
(376,016
|
)
|
There were no transfers of financial assets
or liabilities between Level 1, Level 2 and Level 3 inputs for the six months ended June 30, 2013 or the year ended December 31,
2012.
Note 5 – Investments
On May 11, 2011 we acquired a 10% interest
in ICI, and a 10% interest in ICB, Nevada entertainment companies that develop and operate a variety of entertainment shows in
the United States, primarily in casinos within Las Vegas, NV and Atlantic City, NJ. We acquired the interests in exchange for $25,499
that was in turn spent on the development of a promotional video that will be distributed on our website. In addition, we agreed
to pay a license fee of 20% of the adjusted gross revenues that we earn from the distribution and sales related to the promotional
video content. No such revenues have been earned to date.
On November 1, 2012, the Company elected
to convert a note receivable of $22,477, consisting of $20,000 of principal and $2,477 of interest receivable in exchange for an
additional 7.5% ownership interest in ICI, and 7.5% interest in ICB. The conversion resulted in a total ownership of 17.5% in both
entities as of November 1, 2012. Both the investments and the note receivable had been written off as impaired on December 31,
2011 due to valuation and collectability uncertainties, as a result the 17.5% investment in both entities are not on the balance
sheets as of June 30, 2013 and December 31, 2012.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Note 6 – Fixed Assets
Fixed assets consist of the following at
June 30, 2013 and December 31, 2012, respectively:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Office equipment
|
|
$
|
12,898
|
|
|
$
|
12,898
|
|
|
Website development costs
|
|
|
99,880
|
|
|
|
99,880
|
|
|
Furniture and fixtures
|
|
|
2,730
|
|
|
|
2,730
|
|
|
Less accumulated depreciation
|
|
|
(41,277
|
)
|
|
|
(29,804
|
)
|
|
|
|
$
|
74,231
|
|
|
$
|
85,704
|
|
During the six months ended June 30, 2012,
we realized a gain on the sale of assets in the amount of $5,250 from total proceeds of $10,162 received amongst two individuals
for the sale of fixed assets with a combined carrying value of $4,912.
Depreciation and amortization expense totaled
$11,473 and $11,473 for the six months ended June 30, 2013 and 2012, respectively.
Note 7 – Accrued Expenses
As of June 30, 2013 and December 31, 2012
accrued expenses included the following:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Customer Deposits
|
|
$
|
13,500
|
|
|
$
|
13,500
|
|
|
Accrued Payroll, Officers
|
|
|
40,037
|
|
|
|
68,808
|
|
|
Accrued Payroll and Payroll Taxes
|
|
|
135,234
|
|
|
|
135,234
|
|
|
Accrued Interest
|
|
|
13,785
|
|
|
|
7,897
|
|
|
|
|
$
|
202,556
|
|
|
$
|
225,439
|
|
Note 8 – Convertible Debentures
Convertible debentures consist of the following
at June 30, 2013 and December 31, 2012, respectively:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
On March 13, 2013, the Company received net proceeds of $25,000 in exchange for a non-interest bearing, unsecured convertible promissory note with a face value of $27,500 (“Second JMJ Note”), which matures on March 12, 2014, as part of a larger financing agreement that enables the Company to draw total proceeds of $400,000 at the discretion of the lender. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty five percent (65%) of the lowest trading price of the Company’s common stock over the twenty five (25) trading days prior to the conversion request date. The note carries a one-time twelve percent (12%) of principal interest charge if the note isn’t repaid within the first ninety (90) days, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company amortized the $2,500 original issuance discount over the life of the loan on the straight line method. The Company recognized an additional $178 and $-0- of interest expense on the discount during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The Company must at all times reserve at least 35 million shares of common stock for potential conversions.
|
|
$
|
27,500
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
Players Network
Notes to Condensed Financial Statements
(Unaudited)
|
Unsecured $32,500 convertible promissory note carries an 8% interest rate (“Fourth Asher Note”), matures on September 14, 2013. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty eight percent (58%) of the average of the three (3) lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $2,500 that is being amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $1,957 and $172 of interest expense related to these debt issuance costs during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The note holder elected to convert $15,000 of principal in exchange for 738,916 shares of common stock on June 19, 2013. The conversion was in accordance with the terms of the note; therefore no gain or loss has been recognized.
|
|
|
17,500
|
|
|
|
32,500
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 6, 2012, the Company received net proceeds of $27,000 in exchange for a non-interest bearing, unsecured convertible promissory note (“Dutchess Capital Note”) with a face value of $35,000 that matures on May 6, 2013. Upon an event of default, the face value is convertible into shares of common stock at the discretion of the note holder at a price equal to, the lesser of either (i) 60% of the lowest closing bid price during the twenty (20) trading days immediately preceding the Notice of Conversion or (ii) seven cents ($0.07) per share. On the ninetieth (90
th
) day following Closing, the Company shall make mandatory monthly payments to the Holder in the amount of one thousand ($1,000) per month. The Company paid a debt issuance cost of $3,050 and 73,000 shares of restricted stock with a fair market value of $5,110, based on the Company’s closing stock price on the date of grant, and $3,050 in cash. The debt issuance costs were amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $5,787 and $2,373 of interest expense related to these debt issuance costs during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The Company amortized the $5,000 original issuance discount over the life of the loan on the straight line method. The Company recognized an additional $3,500 and $1,500 of interest expense on the discount during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The principal and accrued interest was paid in full on March 15, 2012 out of the proceeds from the First JMJ Note and the convertible promissory note was canceled.
|
|
|
–
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured $37,500 convertible promissory note carries an 8% interest rate (“Third Asher Note”), matures on June 10, 2013. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the three (3) lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $2,500 that is being amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $1,453 and $1,047 of interest expense related to these debt issuance costs during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The note holder elected to convert $10,500, $12,000 and $15,000 of principal and $1,500 of accrued interest in exchange for 1,967,213, 1,973,684 and 2,400,000 shares of common stock on March 13, 2013, March 24, 2013 and April 12, 2013, respectively, and the note was converted in full. The conversions were in accordance with the terms of the note; therefore no gain or loss has been recognized.
|
|
|
–
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
Players Network
Notes to Condensed Financial Statements
(Unaudited)
|
Unsecured $50,000 convertible promissory note carries an 8% interest rate (“Continental Note”), matures on May 31, 2013. On April 30, 2013, Continental Equities, LLC sold and assigned the remaining principal and accrued interest with all rights and privileges in the original note without recourse to an individual investor who partnered with the Mother of our CEO. The note hereafter shall be referred to as the, (“Roberts Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 30% of the average of the three lowest reported daily sale or daily closing bid prices (whichever is the lower) for the Company’s common stock as reported on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded) during the thirty (30) trading days immediately preceding the Conversion Date, subject to adjustment as provided herein (including, without limitation, adjustment pursuant to Section 6), or a fixed conversion price of $0.001 per share, whichever is greater. Interest shall be due and payable, in arrears, on the last day of each month while any portion of the Principal Amount remains outstanding. The note carries a twenty two percent (16%) interest rate in the event of default. The Company paid a debt issuance cost of $1,500 that was amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $768 and $732 of interest expense related to these debt issuance costs during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The note holder elected to convert $10,000, $5,000, $10,000 and $25,000 of principal and $2,233 of accrued interest in exchange for 925,925, 657,894, 1,250,000 and 6,933,250 shares of common stock on March 1, 2013, March 25, 2013, April 3, 2013 and May 15, 2013, respectively, in accordance with the terms of the note; therefore no gain or loss has been recognized. In addition, 178,571 shares were issued in excess of the conversion terms of the note on April 3, 2013. The fair value of the common stock was $1,625 based on the closing price of the Company’s common stock on the date of grant, and was expensed as a loss on debt conversion.
|
|
|
–
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured $37,500 convertible promissory note carries an 8% interest rate (“Second Asher Note”), matures on April 12, 2013. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the three (3) lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $2,500 that was amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $924 and $1,576 of interest expense related to these debt issuance costs during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The note holder elected to convert a total of $15,000 of principal in exchange for 914,634 shares of common stock on February 5, 2013, and $22,500 of principal and $1,500 of accrued interest in exchange for 2,162,162 shares of common stock on February 19, 2013, and the note was converted in full. The conversions were in accordance with the terms of the note; therefore no gain or loss has been recognized.
|
|
|
–
|
|
|
|
37,500
|
|
|
|
|
|
|
|
|
|
|
|
Players Network
Notes to Condensed Financial Statements
(Unaudited)
|
Unsecured $58,000 convertible promissory note carries an 8% interest rate (“First Asher Note”), matures on February 7, 2013. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the three (3) lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid a debt issuance cost of $3,000 that was amortized on the straight line method, which approximates the effective interest method, over the life of the loan. The Company recognized $1,435 and $1,565 of interest expense related to these debt issuance costs during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The note holder elected to convert a total of $35,000 of principal in exchange for 1,287,878 shares of common stock during the year ended December 31, 2012. The remaining $23,000 of principal and $2,320 of accrued interest was converted in exchange for 1,233,703 shares of common stock during January of 2012, and the note was converted in full. The conversions were in accordance with the terms of the note; therefore no gain or loss has been recognized.
|
|
$
|
–
|
|
|
$
|
23,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible debenture
|
|
|
218,000
|
|
|
|
215,500
|
|
|
Less: unamortized debt discount
|
|
|
(155,773
|
)
|
|
|
(196,092
|
)
|
|
Convertible debenture
|
|
$
|
62,227
|
|
|
$
|
19,408
|
|
In accordance with ASC 470-20 Debt with
Conversion and Other Options, the Company recorded total discounts of $160,407 and $255,500 for the variable conversion feature
of the convertible debts incurred during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively.
The discounts, along with additional Original Issue Discounts of $8,500 and $5,000 during the six months ended June 30, 2013 and
the year ended December 31, 2012, respectively, are being amortized to interest expense over the term of the debentures using the
effective interest method. The Company recorded $209,226 and $-0- of interest expense pursuant to the amortization of the note
discounts during the six months ended June 30, 2013 and 2012, respectively.
The seven “Asher” 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.
Note 9 – Short Term Debt
Short-term debt consists of the following
at June 30, 2013 and December 31, 2012, respectively:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
4% unsecured debenture, due June 7, 2012. Currently in default.
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
Accrued interest on the above promissory
note totaled $2,192 and $1,492 at June 30, 2013 and December 31, 2012, respectively.
The following presents components of interest
expense by instrument type at June 30, 2013 and 2012, respectively:
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Interest on convertible debentures
|
|
$
|
13,252
|
|
|
$
|
507
|
|
|
Amortization of discount on convertible debentures
|
|
|
203,580
|
|
|
|
6,258
|
|
|
Amortization of debt issuance costs
|
|
|
16,203
|
|
|
|
–
|
|
|
Interest on short term debt
|
|
|
700
|
|
|
|
700
|
|
|
Accounts payable related finance charges
|
|
|
550
|
|
|
|
437
|
|
|
|
|
$
|
234,285
|
|
|
$
|
7,902
|
|
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Note 10 – Derivative Liabilities
As discussed in Note 8 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 recorded current derivative
liabilities of $448,099 and $356,608 at June 30, 2013
and December 31, 2012, respectively. The change in fair value of the derivative liabilities resulted in a loss of $191,817 and
$194,940 for the six months ended June 30, 2013 and 2012, respectively, which has been reported as other income (expense) in the
statements of operations. The loss of $191,817 for the six months ended June 30, 2013 consisted of a loss of $87,115 due to the
value in excess of the face value of the convertible notes, a gain of ($3,376) attributable to the fair value of preferred stock,
a gain of ($18,039) attributable to the fair value of warrants and a net loss in market value of $126,117 on the convertible notes.
The loss of $194,940 for the six months ended June 30, 2012 consisted of a loss of $31,118 due to the value in excess of the face
value of the convertible notes, a loss of $62,065 attributable to the fair value of warrants, a loss of $91,594 attributable to
the fair value of warrants and a net loss in market value of $10,163 on the convertible notes.
The following presents the derivative liability
value by instrument type at June 30, 2013 and December 31, 2012, respectively:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Convertible debentures
|
|
$
|
420,971
|
|
|
$
|
308,065
|
|
|
Common stock warrants
|
|
|
4,775
|
|
|
|
22,814
|
|
|
Convertible preferred stock
|
|
|
22,353
|
|
|
|
25,729
|
|
|
|
|
$
|
448,099
|
|
|
$
|
356,608
|
|
The following is a summary of changes in
the fair market value of the derivative liability during the
six months ended June 30, 2013 and the
year ended December 31, 2012
:
|
|
|
Derivative
|
|
|
|
|
Liability
|
|
|
|
|
Total
|
|
|
Balance, December 31, 2011
|
|
$
|
–
|
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
376,957
|
|
|
Increase in derivative value attributable to tainted warrants
|
|
|
64,230
|
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
(26,101
|
)
|
|
Debt conversions
|
|
|
(58,478
|
)
|
|
Balance, December 31, 2012
|
|
$
|
356,608
|
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
247,522
|
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
104,702
|
|
|
Debt conversions
|
|
|
(260,733
|
)
|
|
Balance, June 30, 2013
|
|
$
|
448,099
|
|
Key inputs and assumptions
used to value the convertible debentures and warrants issued during the six months ended June 30, 2013 and the year ended December
31, 2012:
|
|
·
|
Stock
prices
on all measurement dates were based on the fair market value and would fluctuate with projected volatility
.
|
|
|
·
|
The warrant exercise prices
ranged from $0.15 to $1.00
, exercisable over 2 to 3 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 holders would automatically convert
the note at the maximum of 3 times the conversion price if the Company was not in default.
|
|
|
·
|
The monthly trading volume would reflect
historical averages and would increase at 1% per month.
|
|
|
·
|
The Company would redeem the notes based
on availability of alternative financing, increasing 2% monthly to a maximum of 10%.
|
|
|
·
|
The holder would automatically convert
the note at maturity if the registration was effective and the Company was not in default.
|
|
|
·
|
The computed volatility was projected
based on historical volatility.
|
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Note 11 – Changes in Stockholders’
Equity (Deficit)
Convertible
Preferred Stock
The Company has designated 2,000,000 shares
of Series A convertible preferred stock (“Series A”) and 10,873,347 shares of Series B convertible preferred stock
(“Series B”), of which 2,000,000 shares and 4,349,339 shares are issued and outstanding, respectively, from the 25,000,000
shares authorized. A total of 12,126,653 shares remain undesignated. The Series A shares carry 25:1 preferential voting rights.
No preferred shares were issued during
the six months ended June 30, 2013.
Common Stock
The Company amended its Articles of Incorporation
on April 29, 2013 to increase the authorized shares of common stock from 150,000,000 shares to 600,000,000 shares, of which 99,865,775
shares were issued and outstanding and 286,058,934 shares were reserved as of June 30, 2013.
Common Stock Issuances for Debt Conversions
On June 19, 2013, the Company issued 738,916
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Fourth Asher Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On May 15, 2013, the Company issued 6,933,250
shares of common stock pursuant to the conversion of $27,733, consisting of $25,000 of outstanding principal and $2,733 of accrued
interest, on the Roberts Note (formerly the Continental Equities Note). The note was converted in accordance with the conversion
terms; therefore no gain or loss has been recognized.
On April 12, 2013, the Company issued 2,400,000
shares of common stock pursuant to the conversion of $12,000, consisting of $10,500 of outstanding principal and $1,500 of accrued
interest on the Third Asher Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
On April 3, 2013, the Company issued 1,428,571
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the Continental Equities Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized, other than 178,571 of the
shares that were issued in excess of the terms of conversion. As a result, a loss on conversion of $1,625 was recognized.
On March 25, 2013, the Company issued 657,894
shares of common stock pursuant to the conversion of $5,000 of outstanding principal on the Continental Equities Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 25, 2013, the Company issued 1,973,684
shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Third Asher Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 13, 2013, the Company issued 1,967,213
shares of common stock pursuant to the conversion of $12,000 of outstanding principal on the Third Asher Note. The note was converted
in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 1, 2013, the Company issued 925,925
shares of common stock pursuant to the conversion of $10,000 of outstanding principal on the Continental Equities Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On February 19, 2013, the Company issued
2,162,162 shares of common stock pursuant to the conversion of $24,000 of convertible debt, consisting of $22,500 of principal
and $1,500 of accrued and unpaid interest, on the Second Asher Note. The note was converted in accordance with the conversion 0terms;
therefore no gain or loss has been recognized.
On February 5, 2013, the Company issued
914,634 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the Second Asher Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On January 16, 2013, the Company issued
516,000 shares of common stock pursuant to the conversion of $10,320 of convertible debt, consisting of $8,000 of principal and
$2,320 of accrued and unpaid interest, on the First Asher Note. The note was converted in accordance with the conversion 0terms;
therefore no gain or loss has been recognized.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
On January 2, 2013, the Company issued
717,703 shares of common stock pursuant to the conversion of $15,000 of outstanding principal on the First Asher Note. The note
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances for Services
On June 3, 2013, the Company issued 175,000
shares of restricted common stock for administrative services provided by one of our employees. The total fair value of the common
stock was $5,250 based on the closing price of the Company’s common stock on the date of grant.
On June 3, 2013, the Company issued 1,000,000
shares of restricted common stock for video production services provided by one of our vendors. The total fair value of the common
stock was $30,000 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 2,000,000 shares of restricted common stock to the Company’s CEO as payment on accrued
compensation. The total fair value of the common stock was $38,000 based on the closing price of the Company’s common stock
on the date of grant.
On May 1, 2013, the Company’s Board
of Directors granted the issuance of 1,294,066 shares of restricted common stock to the Company’s President of Programming
as payment on accrued compensation. The total fair value of the common stock was $24,587 based on the closing price of the Company’s
common stock on the date of grant.
On May 1, 2013, the Company issued 150,000
shares of restricted common stock as a bonus for board services provided by one of our Directors. The total fair value of the common
stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued another
150,000 shares of restricted common stock as a bonus for board services provided by another one of our Directors. The total fair
value of the common stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued 675,000
S-8 shares of common stock for professional services provided. The total fair value of the common stock was $12,825 based on the
closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company granted 150,000
shares of restricted common stock to a consultant for website development services provided. The total fair value of the common
stock was $2,850 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company granted 300,000
shares of restricted common stock to a consultant for website development services provided. The total fair value of the common
stock was $5,700 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company granted 100,000
shares of restricted common stock to a consultant for business development services provided. The total fair value of the common
stock was $1,900 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued 50,000
shares of restricted common stock for consulting services provided by one of our Directors. The total fair value of the common
stock was $950 based on the closing price of the Company’s common stock on the date of grant.
On May 1, 2013, the Company issued 125,000
shares of restricted common stock for consulting services provided by one of our Directors. The total fair value of the common
stock was $2,375 based on the closing price of the Company’s common stock on the date of grant.
On March 13, 2013, the Company issued 600,000
S-8 shares of common stock for professional services provided. The total fair value of the common stock was $13,200 based on the
closing price of the Company’s common stock on the date of grant.
On February 19, 2013, the Company granted
200,000 shares of restricted common stock to a consultant for website development services provided. The total fair value of the
common stock was $4,400 based on the closing price of the Company’s common stock on the date of grant.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
On January 8, 2013, the Company issued
300,000 S-8 shares of common stock for professional services provided. The total fair value of the common stock was $15,000 based
on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company granted
50,000 shares of restricted common stock to a consultant for video production services provided. The total fair value of the common
stock was $2,500 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company granted
50,000 shares of restricted common stock to a consultant for Information Technology services provided. The total fair value of
the common stock was $2,500 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
150,000 shares of restricted common stock for consulting services provided by one of our Directors. The total fair value of the
common stock was $7,500 based on the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
620,000 shares of common stock to its CEO for unpaid compensation. The total fair value of the common stock was $31,000 based on
the closing price of the Company’s common stock on the date of grant.
On January 8, 2013, the Company issued
760,000 shares of common stock to its President of Programming for unpaid compensation. The total fair value of the common stock
was $38,000 based on the closing price of the Company’s common stock on the date of grant.
On January 7, 2013, the Company issued
142,000 shares of restricted common stock for professional services provided. The total fair value of the common stock was $5,680
based on the closing price of the Company’s common stock on the date of grant.
Note 12 – Warrants and Options
Options Granted
On January 8, 2013, the Company’s
Board of Directors granted 300,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $11,048.
On January 8, 2013, the Company’s
Board of Directors granted 100,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $3,683.
On January 8, 2013, the Company’s
Board of Directors granted 250,000 fully vested common stock options as compensation for service on the Board of Directors in 2013
to one of its directors. The options are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 177% and a call option value of $0.0368, was $9,206.
On January 8, 2013, the Company’s
Board of Directors granted 500,000 fully vested common stock options as compensation for services to a consultant. The options
are exercisable until January 8, 2017 at an exercise price of $0.08 per share. The estimated value using the Black-Scholes Pricing
Model, based on a volatility rate of 177% and a call option value of $0.0368, was $18,413.
Warrants Granted
No warrants were granted during the six
months ended June 30, 2013.
Options Expired
On January 9, 2013, a total of 750,000
options amongst five option holders expired.
On March 1, 2013, a total of 375,000 options
amongst four option holders expired.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
Warrants Expired
On various dates between March 1, 2013
and March 23, 2013, a total of 1,400,000 warrants expired.
On various dates between April 1, 2013
and June 10, 2013, a total of 1,360,000 warrants expired.
Options and Warrants Exercised
No options or warrants were exercised during
the six months ended June 30, 2013.
Note 13 – 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 six months ended June 30, 2013
and the year ended December 31, 2012, 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 June 30, 2013, the Company had approximately $14,530,000 of federal net operating losses. The net operating loss
carry forwards, if not utilized, will begin to expire in 2025.
The components of the Company’s deferred
tax asset are as follows:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
5,085,500
|
|
|
$
|
4,515,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
|
5,085,500
|
|
|
|
4,515,000
|
|
|
Less: Valuation allowance
|
|
|
(5,085,500
|
)
|
|
|
(4,515,000
|
)
|
|
Net deferred tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
Based on the available objective evidence,
including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets
will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets
at June 30, 2013 and December 31, 2012, 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:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Federal and state statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
Change in valuation allowance on deferred tax assets
|
|
|
(35
|
%)
|
|
|
(35
|
%)
|
In accordance with FASB ASC 740, the Company
has evaluated its tax positions and determined there are no uncertain tax positions.
Note 14 – Subsequent Events
Convertible Debentures
On July 30, 2013, the Company issued a
$25,500 convertible promissory note to Asher Enterprises, Inc. in exchange for net proceeds of $23,000. The unsecured $35,000 convertible
promissory note originated on July 30, 2013, carries an 8% interest rate (“Eighth Asher Note”), and matures on May
1, 2014. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price
equal to thirty five percent (35%) of the average of the three (3) lowest trading bid prices of the Company’s common stock
for the ninety (90) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the
event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company
paid a debt issuance cost of $2,500 that is being amortized on the straight line method, which approximates the effective interest
method, over the life of the loan.
Players Network
Notes to Condensed Financial Statements
(Unaudited)
On July 5, 2013, the Company and Dutchess
Opportunity Fund II, LP (“Dutchess”) amended the Investment Agreement dated November 7, 2012 to (1) set the Suspension
Price at one cent ($0.01) per share, and (2) clarify that the Investment Agreement cannot be assigned. As of the date of this filing,
the Company has not received any funds under this agreement.
Common Stock Offerings
On July 1, 2013, the Company sold 300,000
shares of its common stock and an equal number of warrants, exercisable at $0.08 per share over an eighteen month period pursuant
to a unit offering in exchange for total proceeds of $6,000. The proceeds received were allocated between the common stock and
warrants on a relative fair value basis.
Common Stock Issuances for Debt Conversions
On August 9, 2013, the Company issued 2,937,500
shares of common stock pursuant to the conversion of $18,800, consisting of $17,500 of outstanding principal and $1,300 of accrued
interest, on the Fourth Asher Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has
been recognized.
