UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended: June 30, 2015
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from:
Commission
file number 000-55097
RIGHTSCORP,
INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
33-1219445 |
(State
or other jurisdiction of
incorporation
or organization) |
|
(I.R.S.
Employer
Identification
No.) |
|
|
|
3100
Donald Douglas Loop North
Santa
Monica, CA |
|
90405 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Issuer’s
telephone number: (310) 751-7510
(Former
name, former address and former fiscal year, if changed since last report)
Indicate
by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the
proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer |
[ ] |
|
Accelerated
filer |
[ ] |
|
Non-accelerated
filer
|
[ ] |
|
Smaller
reporting company |
[X] |
|
(Do not check
if a smaller reporting company) |
|
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As
of August 14, 2015, the issuer had 92,896,421 shares of its common stock, $0.001 par value per share, outstanding.
TABLE
OF CONTENTS
PART
I: FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
Rightscorp,
Inc.
Consolidated
Balance Sheets
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
(Unaudited) | | |
| |
Assets | |
| | | |
| | |
Cash | |
$ | 266,871 | | |
$ | 1,666,914 | |
Prepaid expenses | |
| 101,061 | | |
| 190,346 | |
Total Current Assets | |
| 367,932 | | |
| 1,857,260 | |
Other Assets | |
| | | |
| | |
Fixed assets, net | |
| 190,769 | | |
| 240,272 | |
Intangible assets, net | |
| 8,450 | | |
| 16,900 | |
Total Assets | |
$ | 567,151 | | |
$ | 2,114,432 | |
| |
| | | |
| | |
Liabilities
and Stockholders’ Deficit | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 1,150,245 | | |
$ | 564,579 | |
Convertible notes payable, net of discount of $0 and $0 | |
| - | | |
| 10,000 | |
Notes payable | |
| 14,663 | | |
| 43,988 | |
Derivative liabilities | |
| 2,462,299 | | |
| 2,419,087 | |
Total Current
Liabilities | |
| 3,627,207 | | |
| 3,037,654 | |
Total Liabilities | |
| 3,627,207 | | |
| 3,037,654 | |
| |
| | | |
| | |
Stockholders’ Deficit: | |
| | | |
| | |
Preferred stock, $.001 par value; 10,000,000 shares authorized; null shares
issued and outstanding | |
| - | | |
| - | |
Common stock, $.001 par value; 250,000,000 shares authorized; 92,896,421
and 89,896,421shares issued and outstanding, respectively | |
| 92,896 | | |
| 89,896 | |
Common stock to be issued | |
| 50,000 | | |
| 50,000 | |
Additional paid in capital | |
| 6,586,454 | | |
| 6,030,259 | |
Accumulated deficit | |
| (9,789,406 | ) | |
| (7,093,377 | ) |
Total stockholders’ deficit | |
| (3,060,056 | ) | |
| (923,222 | ) |
Total Liabilities
and Stockholders’ Deficit | |
$ | 567,151 | | |
$ | 2,114,432 | |
See
accompanying notes to consolidated financial statements
Rightscorp,
Inc.
Consolidated
Statements of Operations
(Unaudited)
| |
Three Months Ended | | |
Three Months Ended | | |
Six Months Ended | | |
Six Months Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | |
Revenue | |
$ | 233,816 | | |
$ | 251,481 | | |
$ | 541,720 | | |
$ | 440,414 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Copyright holder fees | |
| 116,908 | | |
| 125,740 | | |
| 270,860 | | |
| 220,207 | |
General and administrative | |
| 1,798,071 | | |
| 832,334 | | |
| 2,850,938 | | |
| 1,524,349 | |
Sales and marketing | |
| 12,747 | | |
| 24,248 | | |
| 14,244 | | |
| 55,556 | |
Depreciation and amortization | |
| 28,597 | | |
| 12,758 | | |
| 57,953 | | |
| 24,357 | |
Total operating expenses | |
| 1,956,323 | | |
| 995,080 | | |
| 3,193,995 | | |
| 1,824,469 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (1,722,507 | ) | |
| (743,599 | ) | |
| (2,652,275 | ) | |
| (1,384,055 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Income (expenses): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (244 | ) | |
| (10,640 | ) | |
| (542 | ) | |
| (21,226 | ) |
Loss on valuation of derivative | |
| (1,095,269 | ) | |
| - | | |
| (43,212 | ) | |
| - | |
Total other income (expenses) | |
| (1,095,513 | ) | |
| (10,640 | ) | |
| (43,754 | ) | |
| (21,226 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income (Loss) before income taxes | |
| (2,818,020 | ) | |
| (754,239 | ) | |
| (2,696,029 | ) | |
| (1,405,281 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | (2,818,020 | ) | |
$ | (754,239 | ) | |
$ | (2,696,029 | ) | |
$ | (1,405,281 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss)
per share - basic and diluted | |
$ | (0.03 | ) | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.02 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares
- basic | |
| 90,753,564 | | |
| 71,921,185 | | |
| 90,327,360 | | |
| 70,504,426 | |
See
accompanying notes to consolidated financial statements
Rightscorp,
Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
| |
Six Months Ended | | |
Six Months Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
Cash Flows from Operating Activities | |
| | | |
| | |
Net loss | |
$ | (2,696,029 | ) | |
$ | (1,405,282 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and Amortization | |
| 57,953 | | |
| 24,357 | |
Common stock issued for service | |
| - | | |
| 214,510 | |
Stock Compensation Expense | |
| 395,000 | | |
| - | |
Warrants and Options issued for service & compensation | |
| 164,195 | | |
| 15,838 | |
Loss on derivative liabilities valuation | |
| 43,212 | | |
| - | |
Amortization of discount on convertible debt | |
| - | | |
| 10,791 | |
(Increase)/Decrease in prepaid expense | |
| 89,285 | | |
| 10,135 | |
Increase/(Decrease) in accounts payable and accrued
liabilities | |
| 585,666 | | |
| (26,728 | ) |
Net cash used in operating activities | |
| (1,360,718 | ) | |
| (1,156,379 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Purchases of equipment and furniture | |
| - | | |
| (33,312 | ) |
Net cash used in investing activities | |
| - | | |
| (33,312 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Repayment of convertible notes | |
| (10,000 | ) | |
| - | |
Common stock to be issued for cash | |
| - | | |
| 1,896,574 | |
Proceeds from the exercise of warrants | |
| - | | |
| 24,367 | |
Payments on note payable | |
| (29,325 | ) | |
| - | |
Net cash provided (used) by financing activities | |
| (39,325 | ) | |
| 1,920,941 | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| (1,400,043 | ) | |
| 731,250 | |
| |
| | | |
| | |
Cash, beginning of period | |
| 1,666,914 | | |
| 36,331 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 266,871 | | |
$ | 767,581 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Cash paid during the period for interest | |
$ | - | | |
$ | - | |
Cash paid during the period for income taxes | |
$ | - | | |
$ | - | |
Non-Cash Investing & Financing Disclosure | |
| | | |
| | |
Stock issued for conventional debt | |
$ | - | | |
$ | 3,500 | |
Stock issued for convertible debt: accrued interest | |
$ | - | | |
$ | 729 | |
Stock issued for subscription payable | |
$ | - | | |
$ | 5,000 | |
See
accompanying notes to consolidated financial statements
Rightscorp,
Inc.
Notes
to Consolidated Financial Statements
Note
1 – Nature of the Business
Rightscorp,
Inc., a Nevada corporation (the “Company”) was organized under the laws of the State of Nevada on April 9, 2010, and
its fiscal year end is December 31. The Company is the parent company of Rightscorp, Inc., a Delaware corporation formed on January
20, 2011 (“Rightscorp Delaware”). The acquisition of Rightscorp Delaware (completed on October 25, 2013) is treated
as a reverse acquisition, and the business of Rightscorp Delaware became the business of the Company.
The
Company has developed products and intellectual property rights relating to providing data and analytics regarding copyright infringement
on the Internet. The Company is dedicated to the vision that digital creative works should be protected economically so that the
next generation of great music, movies, video games and software can be made and their creators can prosper. The Company has a
patent-pending, proprietary method for gathering and analyzing infringement data and for solving copyright infringement by collecting
payments from illegal downloaders via notifications sent to their ISP’s.
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation
The
financial statements as of June 30, 2015 reflect all adjustments which, in the opinion of management, are necessary to fairly
state the Company’s financial position and the results of its operations for the periods presented in accordance with the
accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
Operating Results for the six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2015.
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts
have been reclassified from prior periods to properly reflect the nature of the accounts and to conform to current period presentation.
The
information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report
on Form 10-K for the fiscal year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission on March 10, 2015.
Principles
of Consolidation
The
financial statements include the accounts of Rightscorp Inc., and its wholly-owned subsidiary Rightscorp Delaware. All intercompany
balances and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent
liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value of Financial Instruments
Disclosures
about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in our consolidated
balance sheet, where it is practicable to estimate that value. As of June 30, 2015, the amounts reported for cash, accrued liabilities
and accrued interest approximated fair value because of their short maturities.
In
accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” we measure certain financial instruments
at fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance
with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.
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. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
These tiers include:
|
● |
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
|
|
|
|
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as
quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that
are not active; and |
|
|
|
|
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value
drivers are unobservable. |
Recent
Accounting Pronouncements
There
are no recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect
on its financial position, results of operations, or cash flows.
Going
Concern
The
Company’s financial statements are prepared using accounting principles generally accepted in the United States of America
applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course
of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to
allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company
obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. If the Company
is unable to obtain adequate capital it could be forced to cease operations. Accordingly, these factors raise substantial doubt
as to the Company’s ability to continue as a going concern.
In
order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the
Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include
raising additional capital through borrowing and sales of common stock. However, management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans.
The
accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue
as a going concern.
Note
3 – Fixed Assets and Intangible Assets
As
of June 30, 2015 and December 31, 2014, fixed assets and intangible assets consisted of the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
Furniture and equipment | |
$ | 312,756 | | |
$ | 312,756 | |
Less accumulated depreciation | |
| (121,987 | ) | |
| (72,484 | ) |
Fixed assets,
net | |
$ | 190,769 | | |
$ | 240,272 | |
| |
June 30, 2015 | | |
December 31, 2014 | |
Intangible assets | |
$ | 84,500 | | |
$ | 84,500 | |
Less accumulated depreciation | |
| (76,050 | ) | |
| (67,600 | ) |
Intangible assets,
net | |
$ | 8,450 | | |
$ | 16,900 | |
Depreciation
and amortization expense for the three and six months ended June 30, 2015 was $28,597 and $57,953, respectively. Depreciation
and amortization expense for the three and six months ended June 30, 2014 was $12,758 and $24,357, respectively. Annual amortization
expense will be $16,900 per year through 2015.
Note
4 – Accounts Payable and Accrued Liabilities
As
of June 30, 2015 and December 31, 2014, accounts payable and accrued liabilities consisted of the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
Accrued payroll | |
$ | 106,146 | | |
$ | 91,673 | |
Accrued legal fees | |
| 694,102 | | |
| 219,912 | |
Accrued interest | |
| - | | |
| 1,263 | |
Other | |
| 349,997 | | |
| 251,731 | |
Total | |
$ | 1,150,245 | | |
$ | 564,579 | |
Note
5 – Convertible Notes Payable
Between
January 3, 2013 and October 2, 2013, the Company entered into convertible notes with external parties for use as operating capital.
The convertible notes payable agreements required the Company to repay the principal, together with 10% annual interest by the
maturity date of the notes ranging between October 2, 2013 and July 2, 2014. The notes were secured and matured nine months from
the issuance date. The notes were convertible into shares of common stock at a conversion price of $0.1276 per share. During the
six months ended June 30, 2015, the Company repaid $10,000 of principal and $1,304 of interest on a convertible note.
In
connection with the issuance of these notes, the Company issued warrants that were recorded as a debt discount at an initial aggregate
value of $131,927. The value of these warrants, along with the value of previously issued warrants, was fully amortized during
the six months ended June 30, 2015, resulting in a final debt discount balance of $0 as of June 30, 2015.
The
Company evaluated these convertible notes for derivatives and determined that they do not qualify for derivative treatment.
As
of June 30, 2015 and December 31, 2014 outstanding convertible notes payable consisted of the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
Convertible Note Issued on 9/26/13 | |
| | | |
| | |
Original Principal: $10,000.00 | |
| | | |
| | |
Interest Rate: 10% | |
| | | |
| | |
Maturity Date: 6/26/14 | |
| | | |
| | |
Conversion price amended to $0.1276 on 10/4/13 | |
$ | - | | |
$ | 10,000 | |
| |
| | | |
| | |
Total Outstanding Convertible Notes Payable | |
| - | | |
| 10,000 | |
Less Debt Discount | |
| - | | |
| - | |
| |
$ | - | | |
$ | 10,000 | |
As
of June 30, 2015, the annual maturities of outstanding convertible notes were $0 for the year ending December 31, 2015.
Note
6 – Derivative Liability
The
Company adopted ASC 815 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s
own stock. The exercise price of the newly issued and outstanding warrants are subject to “reset” provisions in the
event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise
price or conversion price lower than the exercise price of these warrants. If these provisions are triggered, the exercise price
of the warrant will be reduced. As a result, the Company has determined that the exercise feature is not considered to be solely
indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company
has bifurcated the exercise feature of the warrants and recorded a derivative liability.
ASC
815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize
any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at
fair value on a recurring basis is its derivative liability associated with warrants.
At
origination, the Company valued the conversion features using the following assumptions: stock price of $0.315 and annualized
volatility of 121%. The Company determined that at origination the liability related to the warrants issued was $3,192,314 which
was $222,242 greater than the transaction value and was expensed at the time of origination.
At
June 30, 2015, the Company revalued the conversion features using the following assumptions: stock price of $0.151 and annualized
volatility of 278%, and determined that, during the six months ended June 30, 2015, the Company’s derivative liability increased
by $43,212 to $2,462,299. The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation
during the three and six months period.
Note
7 – Capital Stock
The
total number of shares of all classes of capital stock, which the Company is authorized to issue, is 260,000,000 shares, consisting
of 250,000,000 shares of common stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par value $.001 per
share. The Board of Directors of the Company is authorized to provide for the issuance of shares of preferred stock in one or
more series and to establish from time to time the number of shares to be included in each series and to fix the designation,
powers, preferences and relative, participating, optional or other special rights, if any, if each series and the qualifications,
limitations and restrictions thereof.
During
the six months ended June 30, 2015, we issued 1,000,000 shares of our common stock for services valued at $159,000.
During
the six months ended June 30, 2015, we issued 2,000,000 shares of our common stock to our CFO valued at $236,000.
As
of June 30, 2015, the Company had 92,896,421 shares of common stock issued and outstanding.
Note
8 – Stock Options and Warrants
Stock
Options
On
August 18, 2014, the Company granted 359,988 options with an exercise price of $0.38 per share under the 2014 Incentive Stock
Plan. On June 5, 2015, the Company reduced an exercised price of 290,000 options to $0.25. The Company revalued 290,000 options
on June 4 and June 5, 2015, using the Black-Scholes fair value option-pricing model. The difference in values will be expensed
over the remaining vesting term on a straight-line basis. The Company used the following weighted average assumptions:
| |
June 4, 2015 | | |
June 5, 2015 | |
Expected term (years) | |
| 9.21 | | |
| 9.21 | |
Expected volatility | |
| 207 | % | |
| 207 | % |
Risk-free interest rate | |
| 2.31 | % | |
| 2.41 | % |
Dividend yield | |
| 0 | % | |
| 0 | % |
On
June 5, 2015, the Company granted 220,000 options with an exercise price of $0.25 per share under the 2014 Incentive Stock Plan.
Stock-based
compensation expense related to vested options was $25,571 during six months ended June 30, 2015. The company determined the value
of share-based compensation using the Black-Scholes fair value option-pricing model using the following weighted average assumptions
for options granted during the six months ended June 30, 2015:
| |
June 30, 2015 | |
Expected term (years) | |
| 9.14 | |
Expected volatility | |
| 132 | % |
Risk-free interest rate | |
| 0 | |
Dividend yield | |
| 0 | % |
The stock
option activity for the six months ended June 30, 2015 is as follows:
| | |
Number
of Options | | |
Weighted
Average
Exercise Price | | |
Weighted
Average Remaining
Contractual Term | |
Balance
outstanding, December 31, 2014 | | |
| 359,988 | | |
$ | 0.25 | | |
| 9.64 | |
Granted | | |
| 220,000 | | |
$ | 0.25 | | |
| 9.94 | |
Exercised | | |
| - | | |
$ | - | | |
| - | |
Forfeited | | |
| - | | |
$ | - | | |
| - | |
Expired | | |
| - | | |
$ | - | | |
| - | |
Balance
outstanding, June 30, 2015 | | |
| 579,988 | | |
$ | 0.25 | | |
| 9.44 | |
Exercisable,
June 30, 2015 | | |
| 193,328 | | |
$ | 0.25 | | |
| 9.44 | |
Warrants
During
the six months ended June 30, 2015, we issued warrants to purchase 150,000 shares of common stock, to board advisors with an exercise
price of $0.25 per share.
During
the six months ended June 30, 2015, we issued warrants to purchase 3,000,000 shares of common stock, to our CFO with an exercise
price of $0.25 per share.
Using
the Black-Scholes method, warrants vested during the six months ended June 30, 2015 were valued at $138,624. The following weighted-average
assumptions were used in the Black-Scholes calculation:
| |
June 30, 2015 | |
Expected term (years) | |
| 4.24 | |
Expected volatility | |
| 278 | % |
Risk-free interest rate | |
| 1.63 | % |
Dividend yield | |
| 0 | % |
A
summary of the Company’s warrant activity during the six months ended June 30, 2015 is presented below:
| | |
Number
of Warrants | | |
Weighted
Average
Exercise Price | | |
Weighted
Average Remaining
Contractual Term | |
Balance outstanding, December
31, 2014 | | |
| 22,450,140 | | |
$ | 0.26 | | |
| 4.03 | |
Granted | | |
| 3,150,000 | | |
$ | 0.25 | | |
| 4.91 | |
Exercised | | |
| - | | |
$ | - | | |
| - | |
Expired | | |
| (1,710,000 | ) | |
$ | 0.75 | | |
| - | |
Balance outstanding,
June 30, 2015 | | |
| 23,890,140 | | |
$ | 0.22 | | |
| 3.98 | |
Exercisable, June
30, 2015 | | |
| 21,890,140 | | |
$ | 0.22 | | |
| 3.89 | |
Note
9 – Commitments & Contingencies
Since
May 31, 2012 the Company leases its office space on a month-to-month basis at a fixed rate of $2,600 per month.
Note
10 – Fair Value Measurements
Liabilities
measured at fair value on a recurring basis are as follows at June 30, 2015:
| |
| | |
Fair Value
Measurements Using | |
| |
Total Fair | | |
Quoted prices in | | |
Significant other | | |
Significant | |
| |
Value at | | |
active markets | | |
observable inputs | | |
Unobservable inputs | |
Description | |
June 30, 2014 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | | |
| | | |
| | | |
| | |
Derivative liability (1) | |
$ | (2,462,299 | ) | |
$ | - | | |
$ | - | | |
$ | (2,462,299 | ) |
(1)
The ending derivative value is calculated using the Black Scholes model.
Note
11 – Subsequent Events
None.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The
following discussion and analysis of the results of operations and financial condition of Rightscorp, Inc. (the “Company”,
“we”, “us” or “our”) should be read in conjunction with the financial statements of Rightscorp,
Inc., and the notes to those financial statements that are included elsewhere in this Form 10-Q. This discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and
intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements
as a result of a number of factors, including those set forth under the Risk Factors and Business sections in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 10,
2015. Words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,”
“should,” “could,” and similar expressions are used to identify forward-looking statements.
Overview
Our
company was organized under the laws of the State of Nevada on April 9, 2010, and our fiscal year end is December 31. Our company
is the parent company of Rightscorp, Inc. a Delaware corporation formed on January 20, 2011 (“Rightscorp Delaware”).
The acquisition of Rightscorp Delaware was treated as a reverse acquisition, and the business of Rightscorp Delaware became the
business of our company.
We
have developed products and intellectual property rights relating to providing data and analytics regarding copyright infringement
on the Internet. We are dedicated to the vision that digital creative works should be protected economically so that the next
generation of great music, movies, video games and software can be made and their creators can prosper. We have a patent-pending,
proprietary method for gathering and analyzing infringement data and for solving copyright infringement by collecting payments
from illegal downloaders via notifications sent to their ISPs. Rightscorp has closed more than 230,000 cases of copyright infringement
to date.
Results
of Operations
Three
months ended June 30, 2015 compared to three months ended June 30, 2014
Revenue
We
generate revenues by retaining a portion of the settlement payments we receive from copyright infringers. Our customers, the copyright
holders, benefit from our service as we share a portion of the settlement with them. This helps them recapture the revenues they
lost when their copyrighted material was illegally copied and distributed. For the three months ended June 30, 2015 we generated
revenues of $233,816, a decrease of $17,665 or 7% as compared to $251,481 for the three months ended June 30, 2014. The decrease
in revenues was due to a disproportionate amount of time being spent by the Company supporting clients in legal matters.
Payments
to Copyright Holders
In
return for the right to pursue copyright infringers, we pay the copyright holders a percentage of the revenue collected based
on agreements with them entered prior to our notices being sent to infringers. For the three months ended June 30, 2015 we paid
$116,908 to copyright holders, or approximately 50% of collected revenues. For the three months ended June 30, 2014 we paid $125,740
to copyright holders, also approximately 50% of revenues.
Operating
Expenses
Sales
and marketing costs were $12,747 for the three months ended June 30, 2015 compared to $24,248 for the three months ended June
30, 2014, a decrease of $11,501. The decrease was due to our growing market presence and reputation with the copyright holders
and the benefits we can provide to them.
Legal
fees related to various matters as discussed further in Part II, Item 1, Legal Proceedings totaled $579,780 for the three months
ended June 30, 2015, compared to $122,190 for the three months ended June 30, 2014, related to certain legal actions taken against
the Company. Total wage and related expenses for the three months ended June 30, 2015 were $674,885, of which $378,841 were non-cash
charges related to the issuance of restricted common stock, options and warrants related for services. This represents an increase
of $390,490 over for the three months ended June 30, 2014. We also had non-cash charges of $159,000 related to the issuance of
restricted common stock for consulting fees.
Our
total general and administrative expenses for the three months ended June 30, 2015 was $1,798,071, of which $537,841 was non-cash
expenses as noted above.
Non-cash
expense: Depreciation and Amortization
Depreciation
and amortization expenses were $28,597 during the three months ended June 30, 2015, an increase of $15,839, as compared to $12,758
for the three months ended June 30, 2014.
Non-cash
expense: Interest
Interest
expense totaled $244 during the three months ended June 30, 2015, a decrease from $10,640 in the three months ended June 30, 2014,
due to decreased interest owed on convertible notes used to finance our operations.
Non-cash
expense: Loss on Derivative
We
had a loss on derivative liability of $1,095,269 during the three months ended June 30, 2015, compared to zero for the three months
ended June 30, 2014.
As
a result of the foregoing, during the three months ended June 30, 2015, we recorded a net loss of $2,818,020 compared to $754,239
for the three months ended June 30, 2014. Of this amount, $1,661,951 was related to non-cash expenses during the three months
ended June 30, 2015.
Six
months ended June 30, 2015 compared to six months ended June 30, 2014
Revenue
We
generated revenues of $541,720 during the six months ended June 30, 2015, an increase of $101,306 or 23% as compared to $440,414
for the six months ended June 30, 2014. This increase in revenue was driven by an increase in the number of copyrights ingested
into our system for which we have contracts to detect infringements of, from approximately 100,000 on June 30, 2014 to approximately
308,000 on June 30, 2015.
Payments
to Copyright Holders
In
return for the right to pursue copyright infringers, we pay the copyright holders a percentage of the revenue collected based
on agreements with them entered prior to our notices being sent to infringers. For the six months ended June 30, 2015 we paid
$270,860 to copyright holders, or approximately 50% of collected revenues. For the six months June 30, 2014 we paid $220,207 to
copyright holders, also approximately 50% of revenues.
Operating
Expenses
Sales
and marketing costs were $14,244 for the six months ended June 30, 2015 compared to $55,556 for the six months ended June 30,
2014, a decrease of $41,312. The decrease was due to our growing market presence and reputation with the copyright holders and
the benefits we can provide to them.
Legal
fees related to various matters as discussed further in Part II, Item 1, Legal Proceedings totaled $762,323 for the six months
ended June 30, 2015, compared to $236,432 for the six months ended June 30, 2014, related to certain legal actions taken against
the Company. Total wage and related expenses for the six months ended June 30, 2015 were $1,009,958, of which $388,283 were non-cash
charges related to the issuance of restricted common stock, options and warrants related for services. This represents an increase
of $484,215 over for the six months ended June 30, 2014. We also had non-cash charges of $170,910 related to the issuance of restricted
common stock for consulting fees.
Our
total general and administrative expenses for the six months ended June 30, 2015 was $2,850,938, of which $559,193 was non-cash
expenses as noted above.
Non-cash
expense: Depreciation and Amortization
Depreciation
and amortization expenses were $57,953 during the six months ended June 30, 2015, an increase of $33,596, as compared to $24,357
for the six months ended June 30, 2014.
Non-cash
expense: Interest
Interest
expense totaled $542 during the six months ended June 30, 2015, a decrease from $21,226 in the six months ended June 30, 2014,
due to decreased interest owed on convertible notes used to finance our operations.
Non-cash
expense: Loss on Derivative
We
had a loss on derivative liability of $43,212 during the six months ended June 30, 2015, compared to zero for the six months ended
June 30, 2014.
As
a result of the foregoing, during the six months ended June 30, 2015, we recorded a net loss of $2,696,029 compared to a net loss
of $1,405,281 for the six months ended June 30, 2014. Of this amount, $660,900 was related to non-cash expenses during the three
months ended June 30, 2015.
Liquidity
and Capital Resources
As
of June 30, 2015 we had cash of $266,871, which we estimate will be sufficient to sustain our operations for one to two months.
We expect that we will require an additional $1,800,000 to operate the Company over the next 12 months. We anticipate that $275,000
in needed capital will come from the remaining amounts available from the $2.0 million financing transaction entered into with
Hartford Equity, Inc. Our revenues continue to increase on a year over year basis, which generates cash flow reducing the need
for financing. It is possible that the Company could become cash flow positive from operations in 2016 no longer requiring financing
to cash required for operations.
Our
current cash requirements are significant based upon our plan to develop our intellectual property and grow our business. Beyond
the financing transactions entered into with Hartford Equity Inc., we may in the future use debt and equity financing to fund
operations, as we look to expand and fund development of our products and services. Changes in our operating plans, increased
expenses, acquisitions, or other events, may cause us to seek additional financing sooner than anticipated. There are no assurances
that we will be able to raise such required working capital on favorable terms, or that such working capital will be available
on any terms when needed. The terms of such additional financing may result in substantial dilution to existing shareholders.
Any failure to secure additional financing may force the Company to modify its business plan. In addition, we cannot be assured
of profitability in the future.
We
had cash of $266,871 and $1,666,914 at June 30, 2015 and December 31, 2014, respectively.
Operating
Activities
During
the six months ended June 30, 2015, we used $1,360,718 of cash in operating activities. Non-cash adjustments included $57,953
related to depreciation and amortization, $395,000 for stock compensation expense $164,195 for options and warrants issued for
services, $43,212 related to loss on derivative liabilities, and net changes in operating assets and liabilities of $674,951.
During
the six months ended June 30, 2014, we used $1,156,379 of cash in operating activities. Non-cash adjustments included $24,357
related to depreciation and amortization, $214,510 for common stock issued for services, $15,838 for options and warrants issued
for services, $10,791 related to amortization of discount on convertible debt, and net changes in operating assets and liabilities
of $16,593.
Investing
Activities
During
the six months ended June 30, 2014, we acquired equipment in the aggregate amount of $33,312 related to office operations.
Financing
Activities
During
the six months ended June 30, 2015, we used $39,325 of cash in financing activities. We used $10,000 to repay convertible notes,
and $29,325 in payments on note payable. During the six months ended June 30, 2014, financing activities provided $1,920,941.
We received $24,367 in proceeds from the exercise of warrants and $1,896,574 in proceeds from common stock issued for cash.
Critical
Accounting Policies and Estimates
The
discussion and analysis of its financial condition and results of operations is based upon the Company’s unaudited condensed
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires it to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. On an on-going basis, the Company evaluates its critical accounting policies and estimates.
The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions. The Company’s critical accounting policies and estimates are discussed in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2014.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As
a smaller reporting company, the Company is not required to provide this disclosure.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating
the disclosure controls and procedures, management recognizes 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 is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures
were designed to provide reasonable assurance that the controls and procedures would meet their objectives.
As
required by SEC Rule 13a-15(b), our management carried out an evaluation, with the participation of our Chief Executive and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of
the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were not effective at the reasonable assurance level.
A
material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing
Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected. Management has identified the following three
material weaknesses in our disclosure controls and procedures:
1.
We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls
over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure
to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures
and has concluded that the control deficiency that resulted represented a material weakness.
2.
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size
and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to
the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed
by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our
disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3.
We do not have sufficient procedures in place to ensure that accounts are reconciled correctly in a timely manner. This includes
the consideration of complex accounting issues such as derivative valuations. Management has evaluated the impact of our failure
to have the accounts reconciled correctly and has concluded that this represents a material weakness.
To
address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial
statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows
for the periods presented.
Changes
in Internal Controls
On
June 20, 2015, the Board of Directors appointed Cecil Bond Kyte as its Chief Financial Officer.
There
were no other changes in our internal control over financial reporting during the quarter ended June 30, 2015 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART
II: OTHER INFORMATION
ITEM
1 - LEGAL PROCEEDINGS
We are involved in the
following legal proceedings.
John Blaha v. Rightscorp, Inc.,
Federal Distrcit Court, C.D. Cal. (Original Complaint Filed November 21, 2014; First Amended Complaint Filed March 9, 2015).
Nature of Matter:
This matter presently seeks relief for alleged violations of the Telephone Consumer Protection Act (47 U.S.C. § 227). The
action is brought on behalf of the individual named plaintiff as well as on behalf of a putative nationwide classes.
Progress of Matter
to Date: This matter was previously captioned with Karen J. Reif and Isaac Nesmith as lead plaintiffs. On March 9, 2015, plaintiff
filed a First Amended Complaint replacing the lead plaintiffs, dropping their second and third causes of action for Violations
of the Fair Debt Collection Practices Act (15 U.S.C. § 1692, et seq.) and Violations of the Rosenthal Fair Debt Collection
Practices Act (Cal. Civ. Code § 1788 et seq.) (and dropping associated putative class claims), and naming BMG Rights Management
(US) LLC and Warner Bros. Entertainment Inc. as additional defendants.
The First Amended Complaint
also contained a cause of action for Abuse of Process. In response to the Abuse of Process claim, defendants brought a special
motion to strike the claim under California’s anti-SLAPP statute. Defendants’ anti-SLAPP motion was granted on May
8, 2015. Pursuant to the Court’s May 8, 2015 Order, the Abuse of Process claim (and associated putative class claim) was
stricken from the case and plaintiff was ordered to pay defendants’ attorney’s fees incurred in bringing the anti-SLAPP
motion.
At the outset of the matter,
the parties agreed to an extension for plaintiff to bring a motion for class certification with respect to their class allegations
to allow the parties time to determine which claims would survive defendants’ motions to strike and to allow sufficient
time to conduct discovery necessary to determine whether class treatment is warranted.
On June 1, 2015, the parties
agreed to participate in a mediation to determine whether the matter could be resolved without further litigation and filed a
joint motion requesting that the matter be stayed pending the conclusion of mediation in August 2015. The Court granted the motion
and stayed all proceedings through August 17, 2015, so that the parties can participate in a mediation. The Court also extended
Plaintiff’s deadline to move for class certification to October 19, 2015.
“Response to
Matter: The Company has defeated three of the four claims asserted in the original complaint. The Company filed an answer
in response to the First Amended Complaint on June 8, 2015, contending that the remaining TCPA claim is without merit. Should
mediation prove unsuccessful, the Company will mount a vigorous defense to plaintiff’s first cause of action for violations
of the TCPA.
Evaluation: No
discovery has been conducted in this matter. There is a mediation scheduled for August 17, 2015.
Melissa Brown and
Ben Jenkins v. Rightscorp, Inc., Federal Distrcit Court, M.D. Ga. (Complaint Filed February 17, 2015).
Nature of Matter:
This matter asserts causes of action for (1) Violations of the Telephone Consumer Protection Act (47 U.S.C. § 227, et seq.)
and (2) Knowing and Willful Violations of the Telephone Consumer Protection Act (47 U.S.C. § 227, et seq.).
Progress of Matter
to Date: The Complaint has been filed and served. On April 10, 2015, the Company has filed a motion to stay the action until
the California Court decides whether the TCPA Class should be certified in order to prevent duplicative efforts and discovery
costs for both parties, but the motion was denied on June 9, 2015. An initial scheduling conference has been set.
Response to Matter:
An answer to the Complaint was filed on May 8, 2015, wherein the Company denied all of the material allegations of the Complaint.
The parties are to submit a joint Rule 26 Report by August 24, 2015. No discovery has been conducted in the matter, to date.
Evaluation: No
discovery has yet been conducted in this matter. As a result, we are unable to provide an evaluation of the likelihood of an unfavorable
result or a range of damages.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
● |
During
the three months ended June 30, 2015, we issued 1,000,000 shares of our common stock for services valued at $159,000. |
|
|
|
|
● |
During
the three months ended June 30, 2015, we issued 2,000,000 shares of our common stock to our CFO valued at $236,000. |
|
|
|
|
● |
During
the three months ended June 30, 2015, we issued warrants to purchase 3,000,000 shares of common stock, to our CFO with an
exercise price of $0.25 per share. |
In
connection with the foregoing, we relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act
of 1933, as amended, for transactions not involving a public offering.
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4 - MINE SAFETY DISCLOSURES
None.
ITEM
5 - OTHER INFORMATION
None.
ITEM
6 - EXHIBITS
No. |
|
Description |
|
|
|
31.1* |
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2* |
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1* |
|
Certification
of Chief Executive Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002 |
|
|
|
32.2* |
|
Certification
of Chief Financial Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002 |
|
|
|
101.INS* |
|
XBRL Instance
Document |
101.SCH* |
|
XBRL Taxonomy
Extension Schema |
101.CAL* |
|
XBRL Taxonomy
Extension Calculation Linkbase |
101.DEF* |
|
XBRL Taxonomy
Extension Definition Linkbase |
101.LAB* |
|
XBRL Taxonomy
Extension Label Linkbase |
101.PRE* |
|
XBRL Taxonomy
Extension Presentation Linkbase |
* Filed
herewith.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
RIGHTSCORP,
INC. |
|
|
|
Dated: August
14, 2015 |
By: |
/s/
Christopher Sabec |
|
Name: |
Christopher Sabec |
|
Title: |
Chief Executive
Officer (principal executive officer) |
|
|
|
Dated: August
14, 2015 |
By: |
/s/
Cecil Bond Kyte |
|
Name: |
Cecil Bond Kyte |
|
Title: |
Chief Financial
Officer (principal financial and accounting officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(a)
OR 15D-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher Sabec, certify that:
1. I have reviewed this report on Form 10-Q of Rightscorp, Inc. for the period ending June 30, 2015;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting procedures;
(c) evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change
in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14, 2015
/s/ Christopher Sabec |
|
Christopher Sabec |
|
Chief Executive Officer |
|
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14(a)
OR 15D-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Cecil Bond Kyte, certify that:
1. I have reviewed this report on Form 10-Q of Rightscorp, Inc. for the period ending June 30, 2015;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting procedures;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s)
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14, 2015
/s/ Cecil Bond Kyte |
|
Cecil Bond Kyte |
|
Chief Financial Officer |
|
Exhibit 32.1
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the Quarterly Report on
Form 10-Q of Rightscorp, Inc. (the “Company”) for the period ended June 30, 2015, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Christopher Sabec, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
1. The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Christopher Sabec |
|
Christopher Sabec |
|
Chief Executive Officer |
|
Date: August 14, 2015
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the Quarterly Report on
Form 10-Q of Rightscorp, Inc. (the “Company”) for the period ended June 30, 2015, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Cecil Bond Kyte, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Cecil Bond Kyte |
|
Cecil Bond Kyte |
|
Chief Financial Officer |
|
Date: August 14, 2015
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