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: September 30, 2014
[ ] |
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
(Do
not check if a smaller reporting company) |
[ ]
|
|
Smaller
reporting company |
[X] |
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 November 12, 2014, the Company had 90,602,503 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
| |
September 30, 2014 | | |
December 31, 2013 | |
| |
(Unaudited) | | |
| |
Assets | |
| | | |
| | |
Assets | |
| | | |
| | |
Cash | |
$ | 2,646,388 | | |
$ | 36,331 | |
Prepaid expenses | |
| 355,316 | | |
| 19,639 | |
Total Current Assets | |
| 3,001,704 | | |
| 55,970 | |
Other Assets | |
| | | |
| | |
Fixed assets, net | |
| 106,325 | | |
| 56,453 | |
Intangible assets, net | |
| 21,125 | | |
| 33,800 | |
Total Assets | |
$ | 3,129,154 | | |
$ | 146,223 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Deficit | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 455,058 | | |
$ | 928,304 | |
Convertible notes payable, net of discount of $0 and $10,891 | |
| 60,000 | | |
| 202,609 | |
Derivative liabilities | |
| 3,208,473 | | |
| - | |
Total Current Liabilities | |
| 3,723,531 | | |
| 1,130,913 | |
Total Liabilities | |
| 3,723,531 | | |
| 1,130,913 | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $.001 par value; 10,000,000 shares authorized; no shares
issued and outstanding | |
| - | | |
| - | |
Common stock, $.001 par value; 250,000,000 shares authorized; 90,171,469
and 68,797,102 shares issued and outstanding, respectively | |
| 90,171 | | |
| 68,797 | |
Common stock to be issued | |
| - | | |
| 380,000 | |
Stock subscription payable | |
| (250,000 | ) | |
| - | |
Additional paid in capital | |
| 6,105,646 | | |
| 2,807,185 | |
Accumulated deficit | |
| (6,540,194 | ) | |
| (4,240,672 | ) |
Total stockholders’ deficit | |
| (594,377 | ) | |
| (984,690 | ) |
Total Liabilities and Stockholders’ Deficit | |
$ | 3,129,154 | | |
$ | 146,223 | |
See
accompanying notes to consolidated financial statements
Rightscorp,
Inc.
Consolidated
Statements of Operations
(Unaudited)
| |
Three Months Ended | | |
Three Months Ended | | |
Nine Months Ended | | |
Nine Months Ended | |
| |
September 30, 2014 | | |
September 30, 2013 | | |
September 30, 2014 | | |
September 30, 2013 | |
Revenue | |
$ | 248,387 | | |
$ | 64,949 | | |
$ | 688,801 | | |
$ | 166,875 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Copyright holder fees | |
| 124,194 | | |
| 32,474 | | |
| 344,401 | | |
| 83,437 | |
General and administrative | |
| 913,151 | | |
| 445,502 | | |
| 2,437,500 | | |
| 1,093,363 | |
Sales and marketing | |
| 16,872 | | |
| 25,242 | | |
| 72,428 | | |
| 67,960 | |
Depreciation and amortization | |
| 14,951 | | |
| 8,010 | | |
| 39,308 | | |
| 23,552 | |
Total operating expenses | |
| 1,069,168 | | |
| 511,228 | | |
| 2,893,637 | | |
| 1,268,312 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (820,781 | ) | |
| (446,279 | ) | |
| (2,204,836 | ) | |
| (1,101,437 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other expenses: | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (5,009 | ) | |
| (72,519 | ) | |
| (26,235 | ) | |
| (212,656 | ) |
Gain on Settlements | |
| 169,950 | | |
| - | | |
| 169,950 | | |
| - | |
Loss on derivative liability | |
| (238,401 | ) | |
| - | | |
| (238,401 | ) | |
| - | |
Total other expenses | |
| (73,460 | ) | |
| (72,519 | ) | |
| (94,686 | ) | |
| (212,656 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations before income taxes | |
| (894,241 | ) | |
| (518,798 | ) | |
| (2,299,522 | ) | |
| (1,314,093 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (894,241 | ) | |
$ | (518,798 | ) | |
$ | (2,299,522 | ) | |
$ | (1,314,093 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share – basic and diluted | |
| (0.01 | ) | |
$ | (0.01 | ) | |
| (0.03 | ) | |
| (0.02 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares – basic and diluted | |
| 77,246,760 | | |
| 60,513,010 | | |
| 72,792,882 | | |
| 60,284,914 | |
See
accompanying notes to consolidated financial statements
Rightscorp,
Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
| |
Nine Months Ended | | |
Nine Months Ended | |
| |
September 30, 2014 | | |
September 30, 2013 | |
Cash Flows from Operating Activities | |
| | | |
| | |
Net loss | |
$ | (2,299,522 | ) | |
$ | (1,314,093 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and Amortization | |
| 39,308 | | |
| 23,552 | |
Common stock issued for service | |
| 374,246 | | |
| 74,324 | |
Stock compensation expense | |
| 40,205 | | |
| - | |
Warrants issued for service & compensation | |
| - | | |
| 91,947 | |
Loss on derivative liabilities | |
| 238,401 | | |
| - | |
Gain on settlement | |
| (169,950 | ) | |
| - | |
Amortization of discount on convertible debt | |
| 10,891 | | |
| 150,034 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
(Increase)/Decrease in prepaid expense | |
| 9,764 | | |
| 3,893 | |
Decrease in other current asset | |
| - | | |
| 5,698 | |
Increase in accounts payable and accrued liabilities | |
| (52,881 | ) | |
| 331,160 | |
Accrued Interest | |
| (100,287 | ) | |
| - | |
Net cash used in operating activities | |
| (1,909,825 | ) | |
| (633,485 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Purchases of equipment and furniture | |
| (76,505 | ) | |
| (8,699 | ) |
Net cash used in investing activities | |
| (76,505 | ) | |
| (8,699 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Proceeds from convertible notes | |
| - | | |
| 484,980 | |
Repayment of convertible notes | |
| (100,000 | ) | |
| (80,000 | ) |
Proceeds from notes payable | |
| - | | |
| 150,000 | |
Common stock issued for cash | |
| 1,961,573 | | |
| - | |
Proceeds from sale of common stock and warrants | |
| 2,707,001 | | |
| - | |
Warrant conversion | |
| 27,813 | | |
| - | |
Proceeds from related party debt | |
| - | | |
| 200,000 | |
Net cash provided by financing activities | |
| 4,596,387 | | |
| 754,980 | |
| |
| | | |
| | |
Net increase in cash | |
| 2,610,057 | | |
| 112,796 | |
| |
| | | |
| | |
Cash, beginning of period | |
| 36,331 | | |
| 10,049 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 2,646,388 | | |
$ | 122,845 | |
| |
| | | |
| | |
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 | |
$ | 53,500 | | |
$ | - | |
Stock issued for convertible debt: accrued interest | |
$ | 729 | | |
| | |
Stock issued for subscription payable | |
$ | 250,000 | | |
$ | - | |
Warrants issued as discount on convertible debt | |
$ | - | | |
$ | 131,927 | |
Cashless exercise of warrant | |
$ | 335 | | |
$ | - | |
Stock issued for prepaid expense | |
$ | 585,177 | | |
$ | - | |
Extinguishment of related party debt | |
$ | 149,400 | | |
$ | - | |
Stock issued for common stock payable | |
$ | 380,000 | | |
$ | - | |
See
accompanying notes to consolidated financial statements
Rightscorp,
Inc.
Notes
to Consolidated Financial Statements
Note
1 – Nature of the Business
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 policing 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 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 September 30, 2014 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.
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.
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, 2013 filed with the U.S. Securities and Exchange Commission on March 25, 2014.
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 September 30, 2014, 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 had a cumulative net loss from inception (January 20, 2011) to September 30, 2014 of $6,540,194. 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 September 30, 2014 and December 31, 2013, fixed assets and intangible assets consisted of the following:
| |
September 30, 2014 | | |
December 31, 2013 | |
Furniture and equipment | |
$ | 158,854 | | |
$ | 82,349 | |
Less accumulated depreciation | |
| (52,529 | ) | |
| (25,896 | ) |
Fixed assets, net | |
$ | 106,325 | | |
$ | 56,453 | |
| |
| | | |
| | |
| |
September
30, 2014 | | |
December
31, 2013 | |
Intangible assets | |
| 84,500 | | |
| 84,500 | |
Less accumulated depreciation | |
| (63,375 | ) | |
| (50,700 | ) |
Intangible assets, net | |
$ | 21,125 | | |
$ | 33,800 | |
Depreciation
and amortization expense for the nine months ended September 30, 2014 and September 30, 2013 was $39,308 and $23,552, respectively.
Annual amortization expense will be $16,900 per year through 2015.
Note
4 – Accounts Payable and Accrued Liabilities
As
of September 30, 2014 and December 31, 2013, accounts payable and accrued liabilities consisted of the following:
| |
September 30, 2014 | | |
December 31, 2013 | |
Accrued payroll | |
| 221,821 | | |
$ | 495,428 | |
Accrued legal fees | |
| 47,754 | | |
| 239,015 | |
Accrued interest | |
| 5,912 | | |
| 16,515 | |
Other | |
| 179,571 | | |
| 177,346 | |
Total | |
| 455,058 | | |
$ | 928,304 | |
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 require 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 are secured and mature nine months from
the issuance date. Until the maturity date, the holders may elect to convert the note in whole or in part into shares of common
stock at a conversion price of $0.1276 per share. During the nine months ended September 30, 2014, an aggregate of $100,000 of
principal and $25,219 of interest was repaid, and an aggregate of $53,500 of principal and $728 of interest was converted to 425,008
shares of restricted common stock.
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 nine months ended September 30, 2014, resulting in a final debt discount balance of $0 as of September 30, 2014.
The
Company evaluated these convertible notes for derivatives and determined that they do not qualify for derivative treatment.
As
of September 30, 2014 and December 31, 2013 outstanding convertible notes payable consisted of the following:
| |
September
30, 2014 | | |
December
31, 2013 | |
Convertible Note Issued on 8/6/12 | |
| | | |
| | |
Original Principal: $100,000 | |
| | | |
| | |
Interest Rate: 10% | |
| | | |
| | |
Maturity Date: 5/6/13, extended on a monthly basis per verbal contract | |
| | | |
| | |
Conversion price amended to $0.1276 on 10/4/13 | |
$ | 0 | | |
$ | 100,000 | |
| |
| | | |
| | |
Convertible Note Issued on 10/25/12 | |
| | | |
| | |
Original Principal: $50,000 | |
| | | |
| | |
Interest Rate: 10% | |
| | | |
| | |
Maturity Date: 7/25/13, extended on a monthly basis per verbal contract | |
| | | |
| | |
Conversion price amended to $0.1276 on 10/4/13 | |
| 0 | | |
| 50,000 | |
| |
| | | |
| | |
Convertible Note Issued on 11/29/12 | |
| | | |
| | |
Original Principal: $6,500 | |
| | | |
| | |
Interest Rate: 10% | |
| | | |
| | |
Maturity Date: 8/29/13, extended on a monthly basis per verbal contract | |
| | | |
| | |
Conversion price amended to $0.1276 on 10/4/13 | |
| 0 | | |
| 3,500 | |
| |
| | | |
| | |
Convertible Note Issued on 9/26/13 | |
| | | |
| | |
Original Principal: $10,000 | |
| | | |
| | |
Interest Rate: 10% | |
| | | |
| | |
Maturity Date: 6/26/14 | |
| | | |
| | |
Conversion price amended to $0.1276 on 10/4/13 | |
| 10,000 | | |
| 10,000 | |
| |
| | | |
| | |
Convertible Note Issued on 10/2/13 | |
| | | |
| | |
Original Principal: $50,000 | |
| | | |
| | |
Interest Rate: 10% | |
| | | |
| | |
Maturity Date: 7/2/14 | |
| | | |
| | |
Conversion price amended to $0.1276 on 10/4/13 | |
| 50,000 | | |
| 50,000 | |
| |
| | | |
| | |
Total Outstanding Convertible Notes Payable | |
| 60,000 | | |
| 213,500 | |
Less Debt Discount | |
| 0 | | |
| 10,891 | |
| |
$ | 60,000 | | |
$ | 202,609 | |
As
of September 30, 2014, the annual maturities of outstanding convertible notes were $60,000 for the year ending December 31, 2014.
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 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 that
was $222,242 greater than the transaction value and was expensed at the time of orginination.
At
September 30, 2014, the Company revalued the conversion features using the following assumptions: stock price of $0.32 and annualized
volatility of 120%, and determined that, during the nine months ended September 30, 2014, the Company’s derivative liability
increased by $16,159 to $3,208,473. The Company recognized a corresponding loss on derivative liability in conjunction with this
revaluation during the three and nine 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 (the “Common Stock”), and 10,000,000 shares of preferred
stock, par value $.001 per share (the “Preferred Stock”). 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 nine months ended September 30, 2014, we entered into a securities purchase agreement (the “March 2014 Purchase Agreement”)
with Seaside 88, LP (“Seaside”), pursuant to which we agreed to sell, and Seaside agreed to purchase, up to 7,000,000
shares of common stock, in closings to be held monthly over a one-year period, subject to certain conditions. The initial closing
under the March 2014 Purchase Agreement, pursuant to which we sold to Seaside 835,530 shares of common stock at a purchase price
of $0.374 per share for total proceeds of $312,488, occurred on March 7, 2014.
The
parties agreed that subsequent closings under the March 2014 Purchase Agreement will occur on a monthly basis over a one-year
period, subject to certain conditions. We agreed to sell to Seaside, at each subsequent closing, 10% of the total number of shares
of our common stock traded during the 20 trading days immediately preceding such closing, at a purchase price per share equal
to the lower of (a) the average of the high and low trading prices of the common stock for the 5 consecutive trading days immediately
prior to a closing date, multiplied by 0.50 and (b) the average of the high and low trading prices of the common stock for the
trading day immediately prior to a closing date, multiplied by 0.55, provided that, no monthly closing will occur if the purchase
price for such closing would be lower than $0.25 per share (the “Floor”). The failure to have a subsequent closing
due to failure to meet the Floor will not impact any other subsequent closing. Seaside agreed not to engage in any short sales
of our common stock while it holds any shares purchased under the March 2014 Purchase Agreement. The Company has the right to
terminate the March 2014 Purchase Agreement at any time by providing written notice to Seaside. Pursuant to two subsequent closings
since the initial closing, we issued 1,145,740 shares of common stock to Seaside for total proceeds of $333,135.
During
the nine months ended September 30, 2014, we entered into a consulting agreement with an investment bank. We agreed to issue up
to 300,000 shares of common stock in exchange for services per the consulting agreement. Upon execution of the agreement, we issued
75,000 shares of common stock for prepaid services at $0.73 per share. The agreement was cancelled on May 1, 2014. We are not
obligated to issue any more shares under the consulting agreement.
During
the nine months ended September 30, 2014, we entered into a unit subscription agreement with certain accredited investors for
the sale of Units (the “Unit Offering”), with each Unit consisting of ten thousand shares of common stock and warrants
to purchase fifteen thousand shares of Common Stock. The purchase price was $2,500 per Unit with a minimum investment of ten units.
The Company initially sold an aggregate of 1,060.8 Units in this offering and received aggregate gross proceeds of $2,652,000.
The warrants are exercisable commencing on the closing date of September 24, 2014, carry an exercise price of $0.25 per share
and are exercisable for a period of five years. Subsequent to September 24, 2014, an additional investment by two other investors
was made, in which the Company received gross proceeds of $55,000 and issued an additional twenty-two Units. As of September 30,
2014, the Company had received a fully executed subscription agreement for an additional $275,000 from two additional investors
for the purchase of an additional 110 Units. Following receipt of the funds therefor, the aggregate gross proceeds received by
the Company was $2,982,000 in consideration for the issuance of an aggregate of 1,192.8 Units. The Company also granted to the
investors, in the event that it issues any shares of common stock or securities exercisable for, or convertible into, shares of
common stock within eighteen months after the closing date, the right to participate in up to an amount of the subsequent financing
such that such investor’s beneficial ownership of the Company on a fully diluted basis immediately following such subsequent
financing would not be less than its beneficial ownership of the Company solely based on such investor’s investment in the
Unit Offering on the same terms, conditions and price provided for in the subsequent financing.
During
the nine months ended September 30, 2014, we issued 656,802 shares of common stock upon exercise for warrants at an exercise price
of $0.0862 per share for total proceeds of $27,766.
During
the nine months ended September 30, 2014, we issued 425,008 shares of common stock to note holders in note conversions at $0.1276
per share. At the time of conversion, the notes were valued at $54,228 for outstanding principal and interest owed.
During
the nine months ended September 30, 2014, we issued 1,530,000 shares of common stock to multiple investors at $0.25 per share
for total proceeds of $382,500.
During
the nine months ended September 30, 2014, we issued 2,442,000 shares of our common stock to Hartford Equity at $0.50 per share
for total proceeds of $1,221,000.
In
connection with the reverse acquisition completed on October 25, 2013, $80,000 of debt was assumed by Hartford Equity in exchange
for 160,000 shares of common stock. As of September 30, 2014, all of the 160,000 shares have been issued.
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.
Stock-based
compensation expense related to vested options was $24,367 during nine months ended September 30, 2014. 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 nine months ended September 30, 2014:
| |
September 30, 2014 | |
Expected term (years) | |
| 9.89 | |
Expected volatility | |
| 98 | % |
Risk-free interest rate | |
| 0 | |
Dividend yield | |
| 0 | % |
The stock
option activity for the nine months ended September 30, 2014 is as follows:
| |
Options
of Warrants | | |
Weighted
Average Exercise
Price | | |
Weighted
Average Remaining Contractual Term | |
Balance outstanding, December 31, 2013 | |
| - | | |
$ | - | | |
| - | |
Granted | |
| 359,988 | | |
| 0.38 | | |
| 9.89 | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| - | | |
| - | |
Balance outstanding, September 30, 2014 | |
| 359,988 | | |
$ | 0.38 | | |
| 9.89 | |
Exercisable, September 30, 2014 | |
| 64,999 | | |
$ | 0.38 | | |
| 9.89 | |
Warrants
During
the nine months ended September 30, 2014, we issued warrants to purchase 17,942,000 shares of common stock, including 50,000 warrants
issued to an employee with an exercise price of $0.61 per share and 17,892,000 warrants to multiple investors with an exercise
price of $0.25 per share.
Using
the Black-Scholes method, warrants issued during the nine months ended September 30, 2014 were valued at $4,356,245. The following
weighted-average assumptions were used in the Black-Scholes calculation:
| |
September 30, 2014 | |
Expected term (years) | |
| 5 | |
Expected volatility | |
| 98-140 | % |
Risk-free interest rate | |
| 1.66-1.82
| % |
Dividend yield | |
| 0 | % |
A
summary of the Company’s warrant activity during the nine months ended September 30, 2014 is presented below:
| |
Number
of Warrants | | |
Weighted
Average Exercise
Price | | |
Weighted
Average Remaining Contractual
Term | |
Balance outstanding, December 31, 2013 | |
| 7,022,703 | | |
$ | 0.65 | | |
| 4.80 | |
Granted | |
| 17,942,000 | | |
| 0.25 | | |
| 4.98 | |
Exercised | |
| (720,645 | ) | |
| 0.09 | | |
| 2.85 | |
Forfeited | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| - | | |
| - | |
Balance outstanding, September 30, 2014 | |
| 24,244,058 | | |
$ | 0.25 | | |
| 4.31 | |
Exercisable, September 30, 2014 | |
| 24,244,058 | | |
$ | 0.25 | | |
| 4.31 | |
During the nine months ended September 30,
2014, we recognized stock compensation of $15,838.
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 September 30, 2014:
| |
| |
| 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) | |
$ | (3,208,473 | ) |
| $ |
- |
| $ |
- | |
$ | (3,208,473 | ) |
(1)
The derivative is calculated using the multinomial lattice and scenario model.
Note
11 – Subsequent Events
Subsequent
to the end of the period we issued 431,034 shares of common stock shares to a note holder in note conversions at $0.1276 per share.
At the time of conversion, the note was valued at $55,000 for outstanding principal and interest owed.
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”) for the nine months ended September 30, 2014 and 2013, 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, 2013, filed with the Securities and Exchange Commission on March 25, 2014. 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
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 policing 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 solving copyright infringement by collecting payments from illegal downloaders via notifications sent to their ISP’s.
Results
of Operations
Three
Months ended September 30, 2014 Compared To Three Months ended September 30, 2013
We
generated revenues of $248,387 during the three months ended September 30, 2014, an increase of $183,438 or 282% as compared to
$64,949 for the three months ended September 30, 2013. 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 21,000 on September 30, 2013
to approximately 160,000 on September 30, 2014. For the three months ended September 30, 2014 the demands on our computer
systems due to increase in copyrights ingested exceeded their capacity. Upon our receipt of the additional financing (see “Financing
Activities”), we placed orders for additional equipment and bandwidth to meet these demands. In the quarter, management
was also focused on the capital raise as opposed to revenue growth.
We
incurred operating expenses of $1,069,168 during the three months ended September 30, 2014, an increase of $557,940 as compared
to $511,228 for the three months ended September 30, 2013. We pay copyright holders a percentage of the revenue we collect. This
increase was due to increased payroll expenses and fees paid to copyright holders in the period. General and administrative expenses
were $913,151 for the three months ended September 30, 2014, compared to $445,502 for the three months ended September 30, 2013,
an increase of $467,649 due to increased wages expenses, professional and investment banking fees, and travel and other expenses
related to securing financing. Sales and marketing costs were $16,872 for the three months ended September 30, 2014 compared to
$25,242 for the three months ended September 30, 2013, a decrease of $8,370. Depreciation and amortization expenses were $14,951
during the three months ended September 30, 2014, an increase of $6,941, as compared to $8,010 for the three months ended September
30, 2013.
Interest
expense totaled $5,009 during the three months ended September 30, 2014, a decrease of $67,510 from the three months ended September
30, 2013, due to decreased interest owed on convertible notes used to finance our operations. We had a loss on derivative liability
of $238,401 during the three months ended September 30, 2014. We also had a gain on settlement of $169,950 during the three months
ended September 30, 2014.
As
a result of the foregoing, during the three months ended September 30, 2014, we recorded a net loss of $894,241 compared to $518,798
for the three months ended September 30, 2013.
Nine
months ended September 30, 2014 Compared To Nine months ended September 30, 2013
We
generated revenues of $688,801 during the nine months ended September 30, 2014, an increase of $521,926 or 313% as compared to
$166,875 for the nine months ended September 30, 2013. 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 21,000 on September 30, 2013
to approximately 160,000 on September 30, 2014.
We
incurred operating expenses of $2,893,637 during the nine months ended September 30, 2014, an increase of $1,625,325, as compared
to $1,268,312 for the nine months ended September 30, 2013. We pay copyright holders a percentage of the revenue we collect. This
increase was due to increased payroll expenses and fees paid to copyright holders in the period. General and administrative expenses
were $2,437,500 for the nine months ended September 30, 2014, compared to $1,093,363 for the nine months ended September 30, 2013,
an increase of $1,344,137 due to increased wages expenses, professional and investment banking fees, and travel and other expenses
related to securing financing. Sales and marketing costs were $344,401 for the nine months ended September 30, 2014 compared to
$83,437 for the nine months ended September 30, 2013, an increase of $260,966 due to increased presence at industry conferences
to meet potential clients. Depreciation and amortization expenses were $39,308 during the nine months ended September 30, 2014,
an increase of $15,756, as compared to $23,552 for the nine months ended September 30, 2013.
Interest
expense totaled $26,235 during the nine months ended September 30, 2014, a decrease of $186,421 from the nine months ended September
30, 2013, due to decreased interest owed on convertible notes used to finance our operations. We had a loss on derivative liability
of $238,401 during the nine months ended September 30, 2014.We also had a gain on settlement of $169,950 during the nine months
ended September 30, 2014.
As
a result of the foregoing, during the nine months ended September 30, 2014, we recorded a net loss of $2,299,522 compared to $1,314,093
for the nine months ended September 30, 2013.
Liquidity
and Capital Resources
As
of September 30, 2014 we had cash and equivalents of $2,646,388. We expect that we will require $2,200,000 to operate the Company
over the next 12 months. Our revenues continue to increase, which generate cashflow reducing the need for financing.
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. and Seaside 88, 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 and 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 and equivalents of $2,646,388 and $36,331 at September 30, 2014 and December 31, 2013, respectively.
Operating
Activities
During
the nine months ended September 30, 2014, we used $1,909,825 of cash in operating activities. Non-cash adjustments included $39,308
related to the depreciation and amortization, $374,246 for common stock issued for services, gain on settlement of $169,950, loss
on derivative liabilities of $238,401, stock compensation of $40,205, $10,891 related to amortization of discount on convertible
debt, and net changes in operating assets and liabilities of $213,067.
During
the nine months ended September 30, 2013, we used $633,485 of cash in operating activities. Non-cash adjustments included $23,552
related to the depreciation and amortization, $74,324 for common stock issued for services, $91,947 warrants issued for services,
$150,034 related to amortization of discount on convertible debt, and net changes in operating assets and liabilities of $340,751.
Investing
Activities
During
the nine months ended September 30, 2014, we acquired equipment in the aggregate amount of $76,505 related to office operations.
During the nine months ended September 30, 2013, we acquired equipment in the aggregate amount of $8,699 related to office operations.
Financing
Activities
Financing
activities provided $4,596,387 to us during the nine months ended September 30, 2014. We received $1,961,573 in proceeds from
common stock issued for cash, and $27,813 in proceeds from warrant conversion, and $2,707,001 in proceeds from sale of common
stock with warrants. We also used $100,000 to repay a convertible note. During the nine months ended September 30, 2013, financing
activities provided $754,980. We received $150,000 in proceeds from notes payable, $484,980 in proceeds from convertible notes,
and $200,000 in proceeds from related party debt. We also used $80,000 to repay convertible notes.
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, 2013.
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 two 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.
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
There
were no changes in our internal control over financial reporting during the quarter ended September 30, 2014 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
None.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unless
otherwise noted, the issuances noted below are all considered exempt from registration by reason of Section 4(a)(2) of the Securities
Act of 1933, as amended, for transactions not involving a public offering.
During
the three months ended September 30, 2014, the Company issued 1,794,287 shares of common stock for services.
During
the three months ended September 30, 2014, we issued 39,974 shares of common stock upon warrant exercises at a price of $0.0862
per share.
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:
November 14, 2014 |
By: |
/s/
Christopher Sabec |
|
Name: |
Christopher Sabec |
|
Title: |
Chief Executive
Officer (principal executive officer) |
|
|
|
Dated:
November 14, 2014 |
By: |
/s/
Robert Steele |
|
Name: |
Robert Steele |
|
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 September 30, 2014;
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:
November 14, 2014
/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, Robert
Steele, certify that:
1.
I have reviewed this report on Form 10-Q of Rightscorp, Inc. for the period ending September 30, 2014;
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:
November 14, 2014
/s/
Robert Steele |
|
Robert Steele |
|
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 September
30, 2014, 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:
November 14, 2014
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 September
30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Steele,
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/
Robert Steele |
|
Robert Steele |
|
Chief Financial
Officer |
|
Date:
November 14, 2014
Rightscorp (PK) (USOTC:RIHT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Rightscorp (PK) (USOTC:RIHT)
Historical Stock Chart
From Jul 2023 to Jul 2024