UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number 000-29363
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The Players Network
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(Exact name of registrant as specified in its charter)
Nevada 88-0343702
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4620 Polaris Avenue, Las Vegas, Nevada 89103
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (702) 895-8884
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
to be registered on which registered
None None
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.001 Per Share
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirement for the past 90 days. [X]Yes [ ]No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
Issuer's Revenue for its most recent fiscal year: $350,486.
The aggregate market value of voting stock held by non-affiliates of the
registrant was $ 1,758,883 (7,035,533 shares at $0.25 per share) as of March 31,
2004. The number of shares of Common Stock outstanding as of that date was
13,774195.
Transitional Small Business Disclosure Format: [ ] Yes [X]No
TABLE OF CONTENTS
TABLE OF CONTENTS
PART I
PAGE
Item 1. Description of Business.................................................................................1
Item 2. Description of Property.................................................................................3
Item 3. Legal Proceedings.......................................................................................3
PART II
Item 4. Submission of Matters to a Vote of Security Holders.....................................................3
Item 5. Market Price of and Dividends on the Registrant's Common Equity and Other Shareholder Matters...........3
Item 6. Management's Discussion and Analysis....................................................................5
Item 7. Financial Statements....................................................................................9
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................10
Item 8A. Controls and Procedures................................................................................10
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act. ...............................................................10
Item 10. Executive Compensation.................................................................................12
Item 11. Security Ownership of Certain Beneficial Owners and Management.........................................13
Item 12. Certain Relationships and Related Transactions.........................................................16
Item 13. Exhibits and Reports on Form 8-K.......................................................................16
Item 14. Principal Accountant Fees and Services.................................................................16
SIGNATURES
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This Annual Report contains statements that are forward-looking statements
within the meaning of the federal securities laws. These include statements
about our expectations, beliefs, intentions or strategies for the future, which
we indicate by words or phrases such as "anticipate," "expect," "intend,"
"plan," "will," "believe" and similar language. These statements involve known
and unknown risks, including those resulting from economic and market
conditions, the regulatory environment in which we operate, competitive
activities, and other business conditions, and are subject to uncertainties and
assumptions set forth elsewhere in this Annual Report. Our actual results may
differ materially from results anticipated in these forward-looking statements.
We base our forward-looking statements on information currently available to us,
and we assume no obligation to update these statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Players Network (herein referred to a PNTV) was incorporated under the laws
of the State of Nevada, on March 16, 1993. PNTV owns and operates a digital
24-hour gaming and entertainment network called "PLAYERS NETWORK" which
specializes in producing television programming to serve the gaming industry.
PNTV broadcasts its programming directly into the guestrooms of casino and
non-casino hotels on a customized private cable channel. The Company's format is
designed to educate new players and promote casino games and activities. The
Company's programming includes shows on basic gaming instruction, news, sports
and racing, entertainment and tournaments.
PNTV had operated solely as a television and video production company and
programming distributor. In 2001, PNTV expanded its programming to broadband,
and in 2003 into satellite television on the Dish Network. In 2003, PNTV signed
an agreement with Morningstar Entertainment, Inc. which distributes PNTV video
on CD's into mass merchandisers such as WalMart, Walgreens and Rite Aid.
Products and Services
PNTV has produced a series of gaming instructional video of how to play the
various games of chance that are available in most casinos around the world.
PNTV also operates a video production sound stage in Las Vegas, Nevada.
Distribution and Marketing
PNTV markets its closed-circuit Players Network television programs to hotel
casinos nationwide. PNTV now also offers the same programming to non-casino
hotels on a traditional advertising paid model. PNTV's programming is now also
broadcast nightly on the Men's Channel on the Dish Network.
Also in 2003, PNTV started to distribute its programming on CD's to mass
merchandisers such as Wal-Mart, Walgreens and Rite Aid.
Competition
PNTV is not aware of any other companies that currently offer specialized
services similar to the ones it provides within hotels and casinos. PNTV
believes that the hotels and casinos that currently provide guests with
instructional video gaming and entertainment services either produce such
products in-house or engage the services of video producers who do not
specialize in producing videos for the gaming industry. Unlike these other video
producers, PNTV has built a significant gaming video library, developed and
acquired market research studies to validate audience demand, owns digital
broadcast equipment and software and has aligned itself with a reserve of
writers, producers and directors who understand the casino industry.
Principal Suppliers
PNTV is not reliant on any one supplier for products or services.
1
Trademarks
The slogans "Everybody wants to be a player" and "The only game in town" are
registered trademarks of PNTV with the United States Patent and Trademark
Office. PNTV has received the trademark for "Players Network" and for the
service mark "Players Network."
Need for Governmental Approval
PNTV does not believe that any governmental approvals are required to sell its
products or services.
Cost of Research and Development
In the last two years PNTV has expended less than $20,000 in research and
development activities related to developing the new services and internet site,
including the purchase of certain computer hardware and software.
Employees
PNTV currently has three full time employees and three part time contractor.
Management will hire additional employees on an as needed basis. PNTV is not a
party to any collective bargaining agreement or labor union contract, nor has it
been subjected to any strikes or employment disruptions in its history.
ITEM 2. DESCRIPTION OF PROPERTY
The principal executive office of PNTV is located at 4620 Polaris Avenue, Las
Vegas, Nevada, 89103. PNTV leases approximately 8,500 square feet of combined
office space, soundstage, technical and administrative operations, and warehouse
space at these premises pursuant to a three year lease with a provision for a
three year extension. The monthly rent is $6,085
These properties are in good condition, well maintained and adequate for the
Company's current and immediately foreseeable operating needs. PNTV does not
have any policies regarding investments in real estate, securities or other
forms of property.
ITEM 3. LEGAL PROCEEDINGS
PNTV is not a party to any litigation that is described in Item 103 of
Regulation S-B.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market Price and Dividends
The Company's Common Stock is currently traded on the over the counter bulletin
board market (OB) under the symbol PNTV. The following table sets forth the high
and low sales prices for each quarter within the last two fiscal years.
2
Fiscal Year Ended December 31, 2002
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Quarter Ended High Sales Price Low Sales Price
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March 31, 2002 $ .20 $ .12
June 30, 2002 .15 .12
September 30, 2002 .27 .15
December 31, 2002 .20 .10
Fiscal Year Ended December 31, 2003
-----------------------------------
Quarter Ended High Sales Price Low Sales Price
------------- ---------------- ---------------
March 31, 2003 $ .81 $ .13
June 30, 2003 .40 .20
September 30, 2003 .36 .19
December 31, 2003 .21 .16
As of December 31, 2003, there were approximately 1,000 holders of record of the
Company's Common Stock. PNTV has not declared or paid any cash dividends on its
Common Stock during the past two fiscal years. The Company's board of directors
currently intends to retain all earnings for use in the Company's business for
the foreseeable future. Any future payment of dividends will depend on the
Company's results of operations, financial condition, cash requirements and
other factors deemed relevant by the Company's board of directors.
Recent Sales of Unregistered Securities
During the quarter ended December 31, 2003, the company issued 290,000 shares of
stock in exchange for services valued at $43,210. The issuance of these shares
is claimed to be exempt pursuant to Section 4(2) of the Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Overview
We produce television programming and videos related to gaming instruction and
information for hotel casinos on a private cable channel known as "PLAYERS
NETWORK." We also are a 24-hour digital web broadcaster featuring live and
previously recorded content. We are evolving from a subscription based model to
a traditional advertising based advertising model. Our programming is now
available in 16 non-casino properties in Las Vegas. Our programming is also now
on the "Dish Network" and is being sold on CDs and VHS tapes in mass
merchandisers such as Target and Walgreen.
At December 31, 2003, we had an accumulated operating deficit of approximately
$7,022,000 and stockholders' equity of $360,000.
We expect operating losses and negative operating cash flows to continue for at
least the next twelve months, because of expected additional costs and expenses
related to brand development; marketing and other promotional activities; hiring
of management, sales and other personnel; the expansion of infrastructure and
customer support services; strategic relationship development; and potential
acquisitions of related complementary businesses.
Liquidity and Capital Resources
Our principal source of operating capital has been provided by private sales of
our common stock and stockholder loans, as well as revenues from the operations.
At December 30, 2003, we had a negative working capital position of
approximately $248,000, of which $127,000 are amounts due to officers and
directors. In addition, $7,000 of current liabilities are deferred revenue,
which consists of monthly network services that are billed in advance and
installation charges that are amortized over the life of network contracts,.
Although the Company has experienced no revenue growth, this may not be
indicative of future operating results and there can be no assurance that it
will achieve or maintain profitability. Due to these factors, the Company
believes that period-to-period comparisons of its results of operations are not
necessarily a good indication of future performance. The results of operations
in some future periods may be below the expectations of analysts and investors.
We anticipate capital expenditures in excess of $100,000 to expand our operation
during the next twelve months. We believe that the current cash flows generated
from its revenues will not be sufficient to fund our anticipated expansion of
operations. We may require additional funding to finance our operations through
private sales and public debt or equity offerings. However, there is no
assurance that we can obtain such financing.
3
At December 31, 2003, we had three full time employees and three part time
consultants.
Recent Events:
In July 2003 we signed an agreement with Morningstar Entertainment Inc. to
distribute our videos to mass marketers such as Wal-Mart, Rite-Aid, and
Walgreens. Our videos began appearing in stores across North America in January
2004.
Results of Operations - Nine Months Ended December 30, 2003 and 2002
Revenues decreased 41% to $350,000 from $596,000 in 2003 versus 2002. PNTV had
$272,000 in Network and Television Advertising Revenue and $78,000 in Production
and Stage Revenue in 2003, compared to $393,000 in Network and Television
Advertising Revenue and $204,000 in Production and Stage Revenue in 2002. We are
changing our revenue model from one of paid subscription to a traditional cable
network model of revenues from the sale of advertisement. We are currently
installing new hotel clients using this model. We anticipate advertising
revenues to increase accordingly. In addition, we started to sell our videos
through mass market distributors and infomercials.
Video production expense increased 19% to $109,000 from $88,000 for 2003 and
2002, respectively. The increase is due the preparation of our existing video
for distribution through mass merchandisers and production for our show on the
Dish Network. However, we have had a reduction in production for our video
library over the past 12 months.
Selling and administrative expenses decreased 18% to $648,000 from $788,000 in
2003 and 2002, respectively. While selling, general and administrative expenses
decreased consulting expense decreased to $11,000 from $132,000, facilities rent
decreased from $61,000 to 72,000 and travel expenses decreased to $27,000 from
$46,000 for 2003 and 2002, respectively.
Depreciation and amortization decreased 22% to $334,000 from $430,000 in 2003
and 2002, respectively. This is due to our charging off production for our hotel
customers over the life of the network agreement as video production expense and
not amortizing this production. Our gaming instruction videos have long "shelf
life" and continue to be amortized over their estimated useful lives.
Interest expense decreased 66% to $9,000 from $26,000 for 2003 and 2002,
respectively, due to the shareholder loans converted into common stock in May
2002.
Impairment charges were $40,000 and $54,000 for 2003 and 2002, respectively.
Impairment charges are for assets that we determine are worth less than the
value recorded on our books.
4
Critical Accounting Policies
Video Library
Our Video Library consist of over 500 completed videos. The library consists of
gaming instruction which were produced at our own expense, videos produced for
gaming equipment manufacturers and videos produced for our network hotel
customers. For gaming instruction and equipment video, we record the cost of
production and amortize the cost over the estimated useful life (7 years). We
amortize hotel customer production over the life of the hotel network agreement,
which usually run 24 to 36 months. This policy recognizes that customized video
for hotel customers are subject to a shorter "shelf life" than gaming
instruction video. We review our library catalogue quarterly and determine which
videos are no longer of value. At December 31, 2003, we had a net carrying value
for our Video of $380,000.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. We wish to
advise readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements, including, but not limited to, the
following: our ability to meet our cash and working capital needs, our ability
to successfully market our product, and other risks detailed in our periodic
report filings with the Securities and Exchange Commission.
5
ITEM 7. FINANCIAL STATEMENTS
The financial statements required by this item appear at the end of this form
10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 8. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its Chief
Executive Officer/Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Within 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer/Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on the foregoing, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect the internal controls
subsequent to the date the Company completed its evaluation.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Executive Officers, Promoters and Control Persons
The Company's directors and executive officers, and their ages as of December
31, 2003 are as follows:
Name Age Position
Mark Bradley 40 Chief Executive Officer and Director
Peter Rona 57 Former Chairman and Director
Michael Berk 54 Director
Stephen Grogan 56 Chairman and Director
Darius Irani 71 Director
Dr. Joost Van Adelsberg 79 Director
Seth A. Horn 49 Chief Financial Officer
a. Terms of Directors
Mark Bradley has served as a director of PNTV since its inception in 1993. Peter
Rona served as a director of PNTV for three years and resigned on December 1,
2003. Dr. Joost Van Adelsberg and Darius Irani have served as directors of PNTV
for five years. Michael Berk and Stephen Grogan were appointed to the board of
directors in the year 2000. Stephen Grogan was elected Chairman on December 1,
2003. The directors of PNTV serve as such until the next annual meeting of the
stockholders and until their successors are elected and qualified.
6
b. Business Experience of the Directors and Executive Officers
Mark Bradley is the Company's founder and chief executive officer. Mr. Bradley
was a staff producer/ director at United Artists where he produced original
programming and television commercials. In 1985 he created the Real Estate
Broadcast Network that was the first 24-hour real estate channel. In 1993 he
founded Players Network. Mr. Bradley is a graduate of the Producers Program at
the University of California Los Angeles.
Peter Rona resigned as Chairman of the Board of Directors on December 1, 2003.
Mr. Rona was Chairman, President and Chief Executive Officer Networks North from
1985 to 2000. Networks North is a producer and programmer of interactive
television and internet entertainment. Mr. Rona has been President of Anor
Management Services, Ltd., a personal consulting and management company since
1973. He was also a director of NorBee Financial Services, Inc. Mr. Rona has a
BA from Sir Williams University in Montreal and Quebec.
Michael Berk is the creator and producer of the television show "Baywatch." Mr.
Berk has over 25 years of television and motion picture development, writing and
production experience.
Stephen Grogan is COO of Action Gaming Inc. an independent slot machine game
software developer.
Darius Irani is a member of the Board of the Directors of the Company. Mr. Irani
is the managing partner of DHIJ Management Company, a company that owns and
manages real estate income properties. From 1964 to 1992 Mr. Irani worked at
Allied Signal Aerospace Company ("Allied") in technical and management
capacities. Mr. Irani holds a Masters Degree in Electrical Engineering from the
University of Toronto.
Dr. Joost Van Adelsberg is a member of the Board of Directors of the Company.
Dr. Van Adelsberg is a medical doctor and currently has an active family
practice in California. Dr. Van Adelsberg is a clinical instructor at the
Department of Family Practice, School of Medicine at the University of
California at Los Angeles.
Seth Horn is the Company's chief financial officer. He has 25 years experience
in financial markets and corporate management, and is a certified public
accountant. Mr. Horn has a BA in accounting from Pennsylvania State University.
c. Family Relationships
There are no family relationships among directors, executive officers or persons
nominated or chosen by PNTV to become directors or executive officers.
d. Involvement in Certain Legal Proceedings
PNTV is not aware of any material legal proceedings that have occurred within
the past five years concerning any director, director nominee, promoter or
control person which involved a criminal conviction, a pending criminal
proceeding, a pending or concluded administrative or civil proceeding limiting
one's participation in the securities or banking industries, or a finding of
securities or commodities law violations. Moreover, no bankruptcy petition has
been filed by or against any business of which a director, director nominee,
promoter or control person was a general partner or executive officer either at
the time of such bankruptcy or within two years prior to that time.
7
e. Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires that the Company's officers and directors, and person who own
more than ten percent of a registered class of the Company's equity securities,
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and furnish the Company with copies of all such Section
16(a) forms. During the preparation of this Annual Report, the Company learned
that the reports required by Section 16(a) were not filed in connection with the
Company's securities issuances to its officers and directors during fiscal 2003
described in "Item 10. Executive Compensation - Standard Arrangements.".
f. Audit Committee
The Company's Board of Directors does not have a separately-designated standing
audit committee or a committee performing similar functions. The Company's
entire Board of Directors is acting as the Company's Audit Committee. The
Company's Board of Directors has determined that Stephen Grogan, the Chairman of
the Board, is an "audit committee financial expert," as defined by applicable by
Commission rules and regulations. Based on the definition of "independent"
applicable to audit committee members of Nasdaq-traded companies, the Company's
Board of Directors has further determined that Mr. Grogan is "independent."
g. Code of Ethics
On April 7, 2004, the Company adopted a Code of Ethics that applies to the
Company's principal executive officer, principal financial officer and principal
accounting officer. Anyone can obtain a copy of the Code of Ethics by contacting
the Company at the following address: 4620 Polaris Avenue Las Vegas, Nevada
89103, attention: Chief Executive Officer, telephone: (702) 895-8884. The first
such copy will be provided without charge. The Company will post any amendments
to the Code of Ethics, as well as any waivers that are required to be disclosed
by the rules of either the Securities and Exchange Commission or the National
Association of Dealers.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer for services in all capacities to the Company (no
other executive officer of the Company had total annual salary and bonus for the
fiscal years ended December 30, 2003, 2002, or 2001 exceeding $100,000) (for
purposes of this Item 10, the Chief Executive Officer of the Company is referred
to herein as the "Named Executive Officer").
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
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(a) (b) (c) (d) (e) (f) (g)
Name and Year Salary Bonus Other Annual Restricted Stock Securities Underlying
Principal Compensation Award(s) Options/ SARs (#)
Position
-----------------------------------------------------------------------------------------------------------------
Mark Bradley- 2003 $150,000 None None $2,250 0
CEO (1)
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2002 $150,000 None None $840 1,260
(2)
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2001 $89,054 None None $560 3,000
(3)
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(1) In fiscal 2003, Mark Bradley received cash salary in the amount of
$150,000; his other compensation included 15,000 shares of the Company's
Common Stock valued at $.15.
(2) In fiscal 2002, Mark Bradley received cash salary in the amount of
$150,000; his other compensation included 4,000 shares of the Company's
Common Stock valued at $.15 and 2,000 shares at $.12 per share; and 9,000
options at $.75. Share prices were based on the market closing price on
the date of issuance. Option value is based on the Black Scholes
calculation.
(3) In fiscal 2001, Mark Bradley received cash salary in the amount of
$89,054; his other compensation included 2,000 shares of the Company's
Common Stock valued at $.28 per share; and 3,000 options at $.75. Share
prices were based on the market closing price on the date of issuance.
Option value is based on the Black Scholes calculation.
Stock Option Grants
There were no stock option grants issued during the fiscal year ended December
31, 2003.
Option Exercises/Value of Unexercised Options
No stock options were exercised by the Named Executive Officer of the Company
during the fiscal year ended December 31, 2003. As of December 31, 2003, Mark
Bradley, the sole Named Executive Officer, had been granted options to acquire a
total of 3,000 shares of the Company's common stock. As of December 31, 2003,
all of these options were exercisable, but none of them were in-the-money. The
Company has not granted any SAR's of any kind.
Compensation Agreement with Key Personnel
The Company has entered into an employment agreement (the "Employment
Agreement") with Mark Bradley, a Director and the Chief Executive Officer of the
Company. The Employment Agreement has a term of five years and will expire in
accordance with its terms at the end of December 2005. The Employment Agreement
provides for Mr. Bradley to receive an annual base salary of $100,000 for the
first year of the agreement, $125,000 for the second year, and $150,000 for the
third, fourth and fifth years of the agreement, subject to annual cost of living
increases. Provided that an established criterion is met, Mr. Bradley is also
entitled to an Executive Producer Royalty of 10% of all royalties that the
Company receives from products developed by the Company under Mr. Bradley's
supervision and licensed to third parties. He is also entitled to participate in
any and all employee benefit plans ever established for the employees of the
Company. The Employment Agreement provides that, if Mr. Bradley's employment is
terminated without cause, Mr. Bradley will be entitled to continue to receive
his base salary then in effect for 36 months after such termination, as well as
the continuation of certain other benefits for various periods of time. Upon Mr.
Bradley's death, his designee is entitled to receive Mr. Bradley's base salary
then in effect for 12 months after such death. The Employment Agreement confers
upon Mr. Bradley a right of first refusal with respect to any proposed sale of
all or a substantial portion of the Company's assets. The Employment Agreement
does not contain a covenant not to compete preventing Mr. Bradley from competing
with the Company after the termination of the Employment Agreement.
The Company has also entered into a Performance Bonus and Warrants Agreement
(the "Bonus Agreement") with Mr. Bradley. The Bonus Agreement has a term of five
years and will expire in accordance with its terms at the end of December 2004.
The Bonus Agreement provides that the Company shall pay to Mr. Bradley cash
bonuses (on a fiscal year basis) based upon the Company's pre-tax net income
("PTNI") for a fiscal year. The amount of the bonus will be a percentage of PTNI
that depends on the level of PTNI. These percentages are set forth in the table
immediately below.
8
LEVEL OF PTNI PERCENTAGES OF PTNI
$ 501,000 - $1,000,000 2 1/2%
$1,001,000 - $1,500,000 3 1/2%
$1,501,000 - $2,000,000 4 1/2%
$2,001,000 - $2,500,000 5 1/2%
$2,501,000 - $3,000,000 6 1/2%
$3,000,000 and higher 7 1/2%
The Bonus Agreement also provides that the Company shall issue to Mr. Bradley on
the last day of each of fiscal 2000, 2001, 2002, 2003 and 2004 warrants to
purchase the Company's common stock. The warrants are to have an exercise period
of four years from the date of grant. The strike price of the warrants is to be
equal to 85% of the closing price of the Company's common stock averaged over
the 30 days preceding the grant (the "Average Closing Price"). The number of
warrants to be granted is determined by dividing (a) the amount of the cash
bonus due under the Bonus Agreement for the related fiscal year, by (b) the
Average Closing Price. In addition to the preceding, the Bonus Agreement
provides that the Company shall issue to Mr. Bradley shares of common stock and
warrants to purchase common stock based on $1.0 million increments of gross
revenues realized by the Company in any calendar quarter. Under this
arrangement, for each $1.0 million increment of gross revenues, Mr. Bradley is
to receive (i) a warrant exercisable for a term of three years to purchase
50,000 shares of common stock at a price per share equal to 85% of the closing
price of the common stock averaged over the 30 days preceding the end of the
related quarter, and (ii) 20,000 shares. As of the date of this Report, no bonus
has been paid, and no warrants have been issued, to Mr. Bradley under the Bonus
Agreement.
Standard Arrangements
Directors of the Company do not receive cash compensation for their services as
directors or members of committees of the Board of Directors, but were issued
3,000 shares of the Company's Common Stock for each meeting of the Board of the
Directors that such director attend for the during the fiscal year ended
December 31, 2003. In prior year the company's standard arrangements were 2,000
shares and 3,000 options of the Company's Common Stock for each meeting of the
Board of the Directors that such director attended. Although the exercise price
for the options granted can be determined annually, the Company had the practice
of setting the exercise price at $.75. The options are immediately exercisable
and remain so for a two-year exercise period that commenced on the date the
options were granted.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2004 information
regarding the beneficial ownership of Common Stock (i) by each stockholder who
is known by the Company to own beneficially in excess of 5% of the outstanding
Common Stock; (ii) by each director; (iii) by each executive officer; and (iv)
by all executive officers and directors as a group. Except as otherwise
indicated, all persons listed below have (i) sole voting power and investment
power with respect to their shares of Common Stock, except to the extent that
authority is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to their shares of Common Stock.
9
Title of Class Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class(1)
-------------- -------------------- --------------------- -----------
Common Stock Mark Bradley 3,632,022(2) 26.36%
4620 Polaris Avenue
Las Vegas, NV 89103
Common Stock Cede & Company 2,030,862 14.74%
P.O. Box 222
Bowling Green Station
New York, NY 10274
Common Stock Peter Rona 1,048,796(3) 7.61%
14 Meteor Dr.
Etobicoke, ON
MOW 1A4
Canada
Common Stock Joost Van Adelsberg 993,924 (4) 7.21%
1809 Via Visalia
Palos Verdes, CA 90274
Common Stock Richard Jaslow 821,766 5.97%
300 Fanunce Corner Road
North Dartmouth, MA
02747
Common Stock Action Gaming 717,946 5.21%
2116 Redbird Drive
Las Vegas, NV 89134
Common Stock Michael Berk 515,333(5) 3.70%
4620 Polaris Avenue
Las Vegas, NV 89103
Common Stock Darius Irani 578,587(6) 4.24%
1809 Via Visalia
Palos Verdes, CA 90274
Common Stock Seth Horn 226,000 1.64%
4652 Charnock Dr.
Irvine, CA 92604
Common Stock Stephen Grogan 96,000(7) *
2620 S. Maryland
Las Vegas, NV 89109
Common Stock Directors and Executive
Officers as a Group 7,096,662(8) 51.52%(9)
10
* Less than one percent (1%)
(1) This table is based on 13,774,195 shares of Common Stock outstanding on
December 31, 2003. If a person listed on this table has the right to
obtain additional shares of Common Stock within 60 days from December 31,
2003, the additional shares are deemed to be outstanding for the purpose
of computing the percentage of class owned by such person, but are not
deemed to be outstanding for the purpose of computing the percentage of
any other person.
(2) This figure includes: (a) 3,000 shares of Common Stock issuable upon the
exercise of currently exercisable stock options at a price of $.75 per
share (b) 25,000 shares held by his infant daughter.
(3) This figure includes 3,000 shares of Common Stock issuable upon the
exercise of currently exercisable stock options at a price of $.75 per
share.
(4) This figure includes 3,000 shares of Common Stock issuable upon the
exercise of currently exercisable stock options at a price of $.75 per
share.
(5) This figure includes 153,000 shares of Common Stock issuable upon the
exercise of currently exercisable at a price of $.75 per share.
(6) This figure includes 3,000 shares issuable upon the exercise of currently
exercisable stock options at a price of $.75 per share.
(7) This figure includes 3,000 shares issuable upon the exercise of currently
exercisable stock options at a price of $.75 per share and, (b) 15,000
shares held by his immediate family.
(8) This figure is based on the current number of shares of Common Stock that
each director and executive officer of PNTV owns plus the number of shares
of Common Stock that each director and executive officer has the right to
obtain within 60 days from December 31, 2003.
(9) This percentage was derived by dividing the number of shares determined by
footnote 8 by the sum of the number of shares of Common Stock outstanding
as of December 31, 2003 and the number of shares of Common Stock that each
executive officer and director had the right to obtain within 60 days from
December 31, 2003.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2002, the Company issued to Joost Van Adelsberg and Darius Irani
(respectively) 416,666 and 249,999 shares of the Company's common stock in
satisfaction of $50,000 and $30,000 (respectively) owed by the Company to them
by virtue of previous loans separately made by them to the Company. Messrs. Van
Adelsberg and Irani are both directors of the Company. The market price for the
Company's common stock at the time that these shares were issued was $.12, and
this price was used in computing the number of shares to be issued. The Company
no longer owes any loaned amounts to either of Messrs. Van Adelsberg and Irani.
During fiscal 2002, the Company issued to Mark Bradley and Michael Berk
(respectively) 664,683 and 312,500 shares of the Company's common stock in
satisfaction of $79,761 and $37,500 (respectively) owed by the Company to them
by virtue of accrued salaries. Messrs. Bradley and Berk are both directors of
the Company, and Mr. Bradley is the Chief Executive Officer of the Company. The
market price for the Company's common stock at the time that these shares were
issued was $.12, and this price was used in computing the number of shares to be
issued. The Company still owed $28,500 in accrued salary to Mr.. Bradley as of
October 31, 2002. The Company no longer owes any accrued salary to Mr. Berk.
During fiscal 2002, in consideration of services provided in connection with a
couple of Company transactions, the Company paid to Peter Rona, the Chairman of
the Company's Board of Directors, a cash fee in the amount of $20,000, and the
Company issued to Mr. Rona 850,000 shares of the Company's common stock. These
shares had a market value at that time of $90,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
11
(a) Documents filed as part of this report:
(i) Consolidated Financial Statements:
Report of Independent Auditors...............................................F-1
Consolidated Balance Sheets as of December 31, 2003.......................F-2
Consolidated Statements of Income for the years ended
December 31, 2003 and 2002.............................................F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2003 and 2002.............................................F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2003 and 2002.............................................F-5
Notes to Consolidate Financial Statements.................................F-6
(ii) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
(iii) Exhibits
The following exhibits are filed with this Annual Report or are
incorporated herein by reference:
Exhibit Title of Exhibit
Number
3.1 Articles of Incorporation*
3.2 Bylaws*
10.1 Agreement with IGT, Inc.*
10.2 Master Services Agreement with Station Casinos, Inc.**
10.3 Employment Agreement with Mark Bradley
10.5 Master Services Agreement with Trump Marina Hotel Casino
10.6 Stock Purchase Agreement with KO Ventures, LLC
16 Letter on change in certifying accountant***
31.1 Sarbanes Oxley Section 302 Certification
32.1 Sarbanes Oxley Section 906 Certification
* Incorporated by reference to the exhibits filed with the Registration
Statement on Form 10-SB, File No. 0-29363.
** Incorporated by reference to the exhibit to the amendment filed January
23, 2002 to the Quarterly Report on Form 10-QSB for the quarter ended June
30, 2001, File No. 0-29363
*** Incorporated by reference to the exhibit filed with the Report on Form 8-K
filed January 31, 2002, File No. 0-29363
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
12
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Malone & Bailey, PLLC, Certified Public Accountants, are the Company's
independent auditors to examine the financial statements of the Company for the
fiscal years ended December 31, 2002 and December 31, 2003. Malone & Bailey,
PLLC has performed the following services and has been paid the following fees
for these fiscal years.
Audit Fees
Malone & Bailey, PLLC was paid aggregate fees of approximately $19,660 for
the fiscal year ended December 31, 2002 and approximately $17,260 for the fiscal
year ended December 31, 2003 for professional services rendered for the audit of
the Company's annual financial statements and for the reviews of the financial
statements included in Company's quarterly reports on Form 10-QSB during these
fiscal years.
Audit-Related Fees
Malone & Bailey, PLLC was not paid any additional fees for the fiscal year
ended December 31, 2002 and December 31, 2003 for assurance and related services
reasonably related to the performance of the audit or review of the Company's
financial statements.
Tax Fees
Malone & Bailey, PLLC was not paid any aggregate fees for the fiscal years
ended December 31, 2002 and December 31, 2003 for professional services rendered
for tax compliance, tax advice and tax planning.
Other Fees
Malone & Bailey, PLLC was paid no other fees for professional services
during the fiscal years ended December 31, 2002 and December 31, 2003.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on behalf
by the undersigned, thereunto duly authorized.
Dated: April 13, 2004
The Players Network
By: /s/ Mark Bradley
-----------------------
Its: Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
13
Name Title Date
/S/ Mark Bradley Director & Chief Executive April 13, 2004
----------------
Mark Bradley Officer (Principal
Executive Officer)
/S/ Michael Berk Director April 13, 2004
------------------
Michael Berk
/S/ Stephen Grogan Chairman of the Board April 13, 2004
------------------
Stephen Grogan
/S/ Darius Irani Director April 13, 2004
------------------
Darius Irani
/S/ Joost Van Adelsberg Director April 13, 2004
-----------------------
Joost Van Adelsberg
/S/ Seth Horn Chief Financial Officer April 13, 2004
-------------
Seth Horn (Principal Financial Officer &
Principal Accounting Officer)
14
THE PLAYERS NETWORK
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 and 2002
2003 2002
------------ ------------
Revenues
Network $ 145,516 $ 370,629
Advertising and Television 127,285 22,265
Production 40,347 123,715
Stage and other 37,338 79,884
------------ ------------
Total revenues 350,486 596,493
------------ ------------
Operating expenses
Cost of production 109,052 87,588
Selling 20,823 5,811
General and administrative 627,260 782,332
Impairment 39,597 54,000
Bad debts 8,475 31,026
Depreciation and amortization 334,176 429,804
Interest expense 8,478 25,034
Gain on sale of assets (16,359) 0
Debt forgiveness (14,657)
Forfeited investor deposit (200,000) (150,000)
------------ ------------
Total expenses 931,502 1,250,938
------------ ------------
Net loss $ (581,016) $ (654,445)
============ ============
Basic and Diluted earnings (loss) per share ($0.04) ($0.06)
Weighted average shares outstanding 13,977,968 11,605,953
See accompanying summary of accounting policies and
notes to financial statements.
15
THE PLAYERS NETWORK
BALANCE SHEET
December 31, 2003
ASSETS
Current assets
Cash $ 6,799
Accounts receivable, net 30,358
Prepaid barter credits 5,000
Prepaid expenses and other current assets 2,559
-----------
Total current assets 44,716
Property and equipment,
net of $340,119 accumulated depreciation 219,036
Intangible assets
Video film library,
net of $1,434,647 accumulated amortization 379,816
Trademark and deposits,
net of $1,828 accumulated amortization 8,874
-----------
Total assets $ 652,442
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 174,042
Accrued expenses 4,930
Accrued officer salary 106,720
Deferred revenue 6,648
-----------
Total current liabilities 292,340
Total liabilities 292,340
-----------
Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares
authorized, 14,380,225 shares
issued and outstanding 14,380
Additional paid-in capital 7,367,674
Accumulated deficit (7,021,952)
-----------
Stockholders' equity 360,102
-----------
Total liabilities and stockholders' equity $ 652,442
===========
See accompanying summary of accounting policies and
notes to financial statements.
16
THE PLAYERS NETWORK
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2003 and 2002
2003 2002
--------- ---------
Cash flows from operating activities
Net loss ($581,016) ($654,445)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 334,176 429,804
Stock and options issued for services 69,600 153,940
Impairment 39,597 54,000
Net gain on assets sold (16,356) 0
Net change in unused barter credits 21,000 53
Net changes to:
Accounts receivable (23,783) 150
Other current assets (218) 12,764
Account payable 17,065 (45,174)
Accrued expenses 4,930 (7,177)
Accrued expenses due to stockholder 76,806 57,347
Deferred revenue (26,089) (21,665)
--------- ---------
Net cash provided by (used in) operating activities (84,288) (20,403)
--------- ---------
Cash flows used in investing activities
Purchase of property and equipment (2,750) (21,370)
Changes in trademarks and deposits 5,868 (7,238)
--------- ---------
Net cash used in investing activities 3,118 (28,608)
--------- ---------
Cash flows provided by financing activities
Stock purchase deposit 200,000 100,000
Proceeds from shareholder notes 70,000
Proceeds from the sale of assets 31,700
Payment on installment debt (23,541) (70,394)
--------- ---------
Net cash provided in financing activities 208,159 99,606
--------- ---------
Net increase (decrease) in cash 126,989 50,595
Cash at beginning of period 79,810 29,215
--------- ---------
Cash at end of period $ 206,799 $ 79,810
========= =========
Supplemental cash flow information
Interest paid $ 3,605 $ 25,034
Non-cash investing and financing activities
Proprety acquired by barter $ 0 $ 3,000
Notes payable exchanged for stock issued $ 0 $ 276,687
See accompanying summary of accounting policies and
notes to financial statements.
17
THE PLAYERS NETWORK
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balances, December 31, 2001 9,439,776 $ 9,440 $ 6,772,387 $(5,786,490) $ 995,337
Stock issued for cash 303,303 303 99,697 100,000
Stock issued for services 1,306,833 1,307 152,633 153,940
Stock issued at fair value to
stockholders in exch. for notes 2,305,614 2,306 274,380 276,686
Share adjustment 128,669 128 (128) 0
Net loss -- -- -- (654,445) (654,445)
----------- ----------- ----------- ----------- -----------
Balances, December 31, 2002 13,484,195 $ 13,484 $ 7,298,969 $(6,440,935) $ 871,518
Stock issued for services 290,000 290 69,310 69,600
Net loss -- -- -- (581,016) (581,016)
----------- ----------- ----------- ----------- -----------
Balances, December 31, 2003 13,774,195 $ 13,774 $ 7,368,279 $(7,021,951) $ 360,102
=========== =========== =========== =========== ===========
See accompanying summary of accounting policies and
notes to financial statements.
18
THE PLAYERS NETWORK
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Players Network (trading symbol "PNTV") was organized in Nevada on March 16,
1993. PNTV films, develops and markets both generic and customized (casino or
hotel specific) instructional and promotional videos and closed-circuit
broadcasting of those videos and other digital content specifically to the
gaming and hospitality industries.
Estimates:
Management uses estimates and assumptions in preparing financial statements in
accordance with accounting principles generally accepted in the United States of
America. Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could differ from those
estimates.
Revenue recognition:
Network revenue consists of monthly network broadcast subscription revenue which
is recognized as the service is performed. 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.
Stage rentals are recognized during the rental period.
Barter transactions:
PNTV records other barter transactions at the fair value of the non-monetary
asset exchanged. During 2003 and 2002, $0 and $36,000 in Stations Casino Hotel
expense allowances was recognized as revenues. At December 31, 2003, $8,703 of
prior year accrued benefits was written off because of the inability to use them
and $5,000 in unused such allowances from the prior year remained and is shown
as a current asset. All such amounts must be used by May 2004.
Property and equipment:
Property and equipment are carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. When assets
are retired or otherwise disposed of, the cost and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in that period. The cost of repairs and maintenance is charged to
operations as incurred and significant renewals or betterments are capitalized.
A summary is as follows:
Video filming and broadcast equipment 10 years $456,701
Computers and office equipment 3 - 10 years 74,185
Leasehold improvements 5 years 28,269
--------
559,155
Less: accumulated amortization (340,119)
--------
Total $219,036
========
19
Depreciation expense charged to operations was $59,808 and $73,790 for 2003 and
2002, respectively.
Video film library:
Video film library production costs which are expected to benefit future periods
are capitalized as incurred. Costs related to "generic" videos which include
gaming instructional videos not specific to any one establishment are
capitalized and amortized over a 7-year period, which approximate their
estimated useful lives. Costs related to "custom" videos produced to promote or
describe a particular establishment are capitalized and amortized over their
related contract terms, in proportion to the total one-time production and
monthly subscription revenues per period.
Amortization expense of $259,208 and $266,759 of generic video film library
costs incurred and capitalized in prior periods was charged to operations in
2003 and 2002, respectively. In addition, $71,696 and $62,588 of video film
production costs were directly expensed for 2003 and 2002, respectively.
Website:
PNTV capitalized certain costs incurred in 1999 - 2001 in the development of its
e-commerce web site, PNTVNETWORK.COM. These costs were being amortized on a
straight-line basis over a period of three years. Amortization expense for 2003
and 2002 was $15,160 and $89,255, respectively.
Other intangible assets:
PNTV has trademarked the name "PNTV Network", and the expression "Everyone wants
to be a player." Net trademark costs of $7,304 are not amortized in accordance
with FASB 142, because management considers such trademarks to have indefinite
lives.
Long-lived assets:
PNTV makes reviews for the potential impairment of long-lived assets and certain
identifiable intangibles, such as their video film library and website, whenever
events or changes in circumstances indicate that the carrying amounts of such
assets may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition are less than its carrying amount. There were impairment
losses of $39,597 and $0 for 2003 and 2002, respectively.
Income taxes:
PNTV applies the asset and liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using the enacted tax
rates in effect for the year in which those temporary differences are expected
to be recovered or settled. Here, a valuation allowance has been established for
the Net Operating Loss tax benefit until realization of these loss benefits is
reasonably assured.
20
Basic and diluted loss per share:
The basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding for the period. Diluted loss per
share is the same as basic loss per share because the assumed exercise of
potential common stock options would have an anti-dilutive effect.
Stock-based compensation:
Stock options issued to employees are accounted for using the intrinsic value
method. Stock warrants issued to other than employees are accounted for using
fair value by applying the Black-Scholes calculation methods.
Recent Accounting Pronouncements
Players does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on Players' results of operations,
financial position or cash flow.
Reclassifications:
Certain reclassifications have been made to the prior year financial statements
to conform to the current year presentation.
NOTE 2 - STOCKHOLDER NOTES PAYABLE AND ACCRUED OFFICER SALARIES
At December 31, 2003, accrued and unpaid officer salary was due of $106,720.
In May 2002, PNTV exchanged $159,425 in shareholder loans and $117,262 in
accrued compensation in exchange for 2,305,614 shares of common stock, at the
then-current market price of $.12 per share.
NOTE 3 - STOCKHOLDERS' EQUITY
In 2003, PNTV issued 290,000 shares of common stock in exchange for services
valued at the current trading price of $.24 per share or $69,600.
In 2002, PNTV issued 1,328,331 shares of common stock in exchange for
shareholder loans of $159,425; 977,283 shares in exchange for amounts due to an
officers and a director for $117,262; and 303,303 shares for $100,000.
Also in 2002, 128,669 shares are shown as issued to clear up a dispute regarding
shares issued to consultants in 1998 and recorded by both PNTV and its transfer
agent, but which PNTV showed as cancelled in 1998.
NOTE 4 - INCOME TAXES
Income taxes are not due since PNTV has had losses since inception. As of
December 31, 2003, PNTV had approximately $4,550,000, which expire in the years
2010 - 2023.
21
The components of deferred taxes are as follows:
2002 2002
----------- -----------
Deferred tax assets
Net operating loss carryforwards $ 1,547,000 $ 1,285,000
Less: valuation allowance (1,547,000) (1,285,000)
----------- -----------
Net deferred tax assets $ 0 $ 0
=========== ===========
NOTE 5 - COMMITMENTS
Effective January 1, 2000, PNTV entered into a five-year employment agreement
with its president, who is responsible for the day-to-day operations of PNTV's
business, the implementation of policies and creative direction of PNTV. The
agreement provides for a base salary of $100,000, with a $25,000 increase after
the first two years. As Executive Producer and Creator, the president will also
be entitled to a 10% fee on any Company royalties received on the production
content developed and produced by him, as specified in the agreement. Unpaid and
accrued salaries of approximately $106,720 were included in accrued expenses at
December 31, 2003.
NOTE 6 - STOCK OPTIONS AND WARRANTS
In 2003 and 2002, PNTV issued 0 and 54,000 stock options and warrants,
respectively, to officers, key employees, directors and outside consultants as
compensation and for services rendered.
PNTV uses the intrinsic value method of calculating compensation expense for
employees, as described and recommended by APB Opinion 25, and allowed by FASB
Statement 123. During 2003 and 2002, no compensation expense was recognized for
the issuance of options to employees, because no option prices were below market
prices at the date of grant.
During 2003 and 2002, PNTV issued no warrants to non-employees whose stock-based
compensation must be recorded at fair value pursuant to FASB Interpretation
Number 44.
Had compensation cost for PNTV's stock-based compensation plan for employees
been determined based on the fair value at the grant dates for awards under
those plans consistent with the Black-Scholes option-pricing model suggested by
FASB Statement 123, PNTV' net losses and loss per share would have been
increased to the pro forma amounts indicated below:
(in thousands) 2003 2002
------- -------
Net loss available for common shareholders
-As reported $ (581) $(654)
-Pro forma (581) (655)
Net loss per share -As reported $ (.04) $(.06)
-Pro forma (.04) (.06)
The weighted average fair value of the stock options granted during 2002 was
$.75. Variables used in the Black-Scholes option-pricing model for 2002 and 2001
include (1) 4.0% risk-free interest rate, (2) expected option life is the actual
remaining life of the options as of each year end, (3) expected volatility is
the actual historical stock price fluctuation volatility and (4) zero expected
dividends.
22
Summary information regarding options and warrants is as follows:
Weighted Weighted
average average
Options Share Price Warrants Share Price
--------- ---------- -------- -----------
Outstanding at
December 31, 2001 2,263,000 $ .77 350,000 $1.75
Year 2002:
Granted 54,000 .75
Expired (514,000) .75
-------- ----- --------- -----
Outstanding at
December 31, 2002 1,803,000 $ .78 350,000 $1.75
Year 2003:
Granted 0
Expired (1,335,000) 1.13 350,000 $1.75
-------- ----- --------- -----
Outstanding at
December 31, 2003 468,000 $ .49 0
======== ===== ========= =====
Options outstanding and exercisable as of December 31, 2003:
- - Outstanding - - Exercisable
Number Remaining Number
Exercise Price of Shares life of Shares
-------------- --------- --------- ----------
$ .35 300,000 2 years 300,000
.75 168,000 1 year 168,000
--------- ---------
468,000 468,000
========= =========
NOTE 7 - FORFEITED INVESTOR STOCK PURCHASE DEPOSITS
In March 2003, an investor approached PNTV with a merger proposal and gave PNTV
a $200,000 deposit for 606,060 shares as the first payment on the plan. The
transaction did not occur and this advance was forfeited since that investor did
not perform.
In fiscal 2002, an investor group which had proposed to acquire PNTV, forfeited
their deposit of $150,000, due to their inability to finance a transaction.
NOTE 8 - BARTER TRANSACTIONS
In connection with a subscription agreement with a hotel chain, PNTV received
$17,500 in 2003 of complimentary room and food services. During 2003 and 2002,
PNTV utilized approximately $3,000 and $28,000 respectively, in room and food
services. Because the amount utilized in 2003 was very small, all 2003 credits
were reversed and a write off of $8,703 in unused 2002 charges was made.
23
NOTE 9 - MAJOR CUSTOMERS
Sales to three and five customers were approximately 65% and 73% of total
revenues for 2003 and 2002, respectively. No other customers accounted for 10%
or more revenues in either year.
24