10-Q 1 f10q0916_incaptainc.htm QUARTERLY REPORT

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR

 THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR

 THE TRANSITION PERIOD FROM ______________ TO ______________

 

COMMISSION FILE NUMBER: 000-29113

 

INCAPTA INC.

(Exact Name of Company as Specified in its Charter)

 

Nevada   47-3903460
(State or Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)  

Identification No.)

 

 

1950 Fifth Avenue, Suite 100, San Diego, California   92101
(Address of Principal Executive Offices)   (Zip Code)

 

(619) 798-9284

(Company’s Telephone Number)

 

 

 

(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) been subject to such filing requirements for the past 90 days: Yes ☒   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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐.

 

Indicate by check mark 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 ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act: Yes ☐    No ☒.

 

As of September 30, 2016, the Company had 106,517,609 shares of common stock issued and outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS 

 

      PAGE
       
PART I – FINANCIAL INFORMATION  
       
  Item 1. financial statements 1 
       
    CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2016 (UNAUDITED) AND DECEMBER 31, 2015 1
       
    CONSOLIDATED StatementS of operations (UNAUDITED) FOR THE THREE AND NINE months ENDED SEPTEMBER 30, 2016 and SEPTEMBER 30, 2015 3
       
    CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND SEPTEMBER 30, 2015 5
       
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 7
       
  ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS of FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
     
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22
     
  ITEM 4. CONTROLS AND PROCEDURES 22
   
PART II – other information  
   
  ITEM 1. LEGAL PROCEEDINGS 23
     
  ITEM 1A. RISK FACTORS 23
     
  ITEM 2. UNREGISTERED SALES OF EQUITY  SECURITIES AND USE OF PROCEEDS 23
     
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES 23
     
  ITEM 4. MINE SAFETY DISCLOSURES 23
     
  ITEM 5. OTHER INFORMATION 23
     
  item 6. EXHIBITS 23
     
SIGNATURE 24

 

  
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2016   2015 
   (unaudited)     
ASSETS
Current Assets:        
Cash  $24,292   $1,790 
Accounts receivable   8,874    -- 
Prepaid expenses   --    1,384,137 
Total current assets   33,166    1,385,927 
           
Other assets:          
Furniture and equipment   2,996    4,370 
Total assets  $36,162   $1,390,297 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
           
Current Liabilities:          
Accounts payable  $190,843   $30,826 
Accrued interest   36,614    16,691 
Due to officer   7,843    8,441 
Convertible notes payable - related party, net of discount of $33 and $19,887   59,566    31,325 
Convertible notes payable, net of discount of $74,962 and $0   9,566    -- 

 

 1 
 

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

CONSOLIDATED BALANCE SHEETS

(continued)

 

   September 30,   December 31, 
   2016   2015 
   (unaudited)     
         
Loan payable   25,000    25,000 
Derivative liability   178,380    50,276 
Total current liabilities   507,812    162,559 
           
Stockholders’ equity (deficit)          
Common stock, $0.001 par value; 890,000,000 shares authorized,  106,517,609 and 3,809 shares issued and outstanding as of September 30, 2016 and December 31, 2015 (1), respectively   106,518    4 
Series B common stock, $0.001 par value, 100,000,000 shares authorized,  no shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively   --    -- 
Preferred stock, $0.001 par value, 10,000,000 shares authorized,  1 and 1 shares issued and outstanding as of September 30, 2016 and December 31, 2015 (2), respectively    --    -- 
Additional paid-in capital   133,634,003    110,321,088 
Stock subscription receivable   (810,895)   -- 
Accumulated equity (deficit)   (133,401,276)   (109,093,354)
Total stockholders’ equity (deficit)   (471,650)   1,227,738 
Total liabilities and stockholders’ equity (deficit)     $36,162   $1,390,297 

 

(1)    The number of issued and outstanding shares of common stock reflects the amount immediately after a 3,000 to 1 reverse split of the Company’s common stock that was effective on April 27, 2015, and a 19,000 to 1 reverse split of the Company’s common stock that was effective on August 8, 2016.

 

(2)    The number of issued and outstanding shares of preferred stock reflects the amount immediately after a 4,700 to 1 reverse split of the Company’s preferred stock that was effective on August 8, 2016.

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 2 
 

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2016   2015   2016   2015 
                 
Net sales  $3,155   $14,812   $35,803   $28,522 
                     
Costs and expenses:                    
General and administrative   16,067,625    681,679    21,749,750    752,463 
Acquisition contingency   --    --    2,280,331    -- 
Total costs and expenses   16,067,625    681,679    24,030,081    752,463 
Loss from operations   16,064,470    (666,867)   (23,994,278)   (723,941)
                     
Other income (expense)                    
Interest and financing costs   (173,281)   (5,055)   (418,918)   (10,886)
Change in value of derivative liability   7,577    --    105,274    -- 
Total other income (expense)   (165,704)   (5,055)   (313,644)   (10,886)
                     
Loss before provision for income taxes   16,230,174    (671,922)   (24,307,922)   (734,827)
                     
Provision for income taxes   --    --    --    -- 
                     
Net loss   16,230,174    (671,922)   (24,307,922)   (734,827)
                     
Preferred stock dividend   --    --    95,400    -- 

 

 3 
 

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(continued)

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2016   2015   2016   2015 
Net loss attributed to common stockholders  $(16,230,174)  $(671,922)  $(24,403,322)  $(734,827)
                     
Weighted average shares outstanding (1):                    
Basic   60,067,108    450    20,172,462    254 
Diluted   60,067,108    450    20,172,462    254 
                     
Loss per share                    
Basic  $(0.27)  $(1,493.18)  $(1.21)  $(2,897.99)
Diluted  $(0.27)  $(1,493.18))  $(1.21)  $(2,897.99)

 

(1)    The number of shares of common stock reflects the amount immediately after a 3,000 to 1 reverse split of the Company’s common stock that was effective on April 27, 2015, and a 19,000 to 1 reverse split of the Company’s common stock that was effective on August 8, 2016.

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 4 
 

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Nine Months Ended
September 30,		 
   2016   2015 
         
Cash flows from operating activities:        
Net loss  $(24,307,922)  $(734,827)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   1,374    78,208 
Common stock issued for services   4,075,653    522,652 
Common stock issued for acquisition contingency   2,280,331    -- 
Financing costs   183,930    -- 
Amortization of debt discounts   153,658    -- 
Change in value of derivative liability   (105,274)   -- 
Fair value of stock options   15,925,010    -- 
Write-off of debt   --    13,258 
Loss in share issuance   --    68,600 
Change in current assets and liabilities:          
Accounts receivable   (8,874)   (6,134)
Prepaid consulting fees   1,384,137    165,818 
Accounts payable   210,878    (119,956)
Accrued interest   19,923    10,889 
Due to officer   --    5,146 
Net cash used in operating activities   (187,176)   3,654 
           
Cash flows from financing activities:          
Proceeds from loan payable   --    25,000 
Proceeds from stock subscription receivable   164,105    -- 
Proceeds from convertible notes payable   141,882    -- 
Repayment of due to officer   (598)   -- 
Repayment of convertible notes payable   (95,711)   -- 
Net cash provided by financing activities   209,678    25,000 
           
Net increase in cash   22,502    28,654 
           
Cash, at beginning of period   1,790    -- 

 

 5 
 

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(continued)

 

   Nine Months Ended
September 30,		 
   2016   2015 
         
Cash at end of period  $24,292   $28,654 
           
Cash paid for:          
Interest  $--   $-- 
Income taxes  $--   $-- 

 

Supplemental disclosure of non-cash financing activities:    
Beneficial conversion feature  $208,766   $-- 
Debt issued for accounts payable  $50,861   $-- 
Common stock issued for debt  $20,140   $-- 
Furniture and equipment for due to officer  $--   $5,743 
Shares issued for debt  $--   $44,500 
Asset purchase  $--   $2,534,453 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 6 
 

 

INCAPTA, INC.

(formerly known as TBC Global News Network, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – NATURE OF BUSINESS

 

The accompanying unaudited consolidated condensed financial statements of InCapta, Inc. (formerly known as TBC Global News Network, Inc.), a Nevada corporation (“Company”), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) that are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC. The results for the nine months ended September 30, 2016, are not necessarily indicative of the results to be expected for the year ending December 31, 2016.

 

All common stock share numbers reflect a 1,000 to 1 reverse split of the Company’s common stock effective on September 6, 2007, a 10,000 to 1 reverse split of the common stock effective on April 9, 2009, a 3,000 to 1 reverse split of the common stock effective on April 27, 2015, and a 19,000 to 1 reverse split of the common stock effective on August 8, 2016.

 

In November 2008, the Company halted its previous operations of providing online movie rentals (also referred to as a “DVD”) and video game rentals to subscribers through its Internet website, gameznflix.com.

 

On May 7, 2009, the Company filed a Certificate of Amendment to Articles of Incorporation with the Nevada Secretary of State. This amendment changed the name of the Company to TBC Global News Network, Inc. This corporate action had previously been approved by consent of a majority of the outstanding shares of common stock of the Company. As of July 30, 2009, the new trading symbol for the Company is “TGLN.”

 

During the first quarter of 2010, the Company ceased its prior operations of producing video news, business profiles, and television advertisements.

 

On March 19, 2010, the Company entered into a Purchase and Sale Agreement with Sterling Yacht Sales, Inc., and it stockholders, Glenn W. McMachen, Sr., and Arlene McMachen. However, since the buyers breached this agreement the transaction was rescinded, and therefore no consolidation is required.

 

From August 2010 until August 2014, the Company did not operate. Upon assuming the positions as a director and officer of the Company in August 2014, Mr. John Fleming commenced operations of the Company as a consultant and also seeking opportunities for the Company.

 

 7 
 

 

On August 15, 2014, Mr. McMachen, the Company’s sole board member, and chief executive officer, president, and secretary/treasurer of the Company, appointed John Fleming as a new member of the Company’s board of directors. Mr. McMachen then resigned from all positions with the Company. Mr. Fleming was then appointed as the Company’s executive officer, president, and secretary/treasurer. Mr. Fleming will serve in these positions until the next annual meeting of stockholders or until their successors are duly elected and have qualified.

 

On April 27, 2015, the Company completed a 3,000 to 1 reverse split of its issued and outstanding shares of common stock and on August 8, 2016 completed a 19,000 to 1 reverse split of its issued and outstanding shares of common stock. All shares and per share information in the accompanying financial statements has been retroactively restated to reflect these two reverse stock splits.

 

On September 3, 2015, the Company completed an acquisition agreement (“Acquisition Agreement”) under which the Company acquired all of the equity interests of Stimulating Software, LLC, a Florida limited liability company, the acquisition of all the common stock of Inner Four, Inc., a Florida corporation, and all of the common and preferred stock of Play Celebrity Games, Inc., a Delaware corporation.

 

Effective on October 21, 2015, the Company filed a Certificate of Amendment with the Nevada Secretary of State to change its name from “TBC Global News Network, Inc.” to “InCapta, Inc.”

  

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

The summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

 

 8 
 

 

Revenue Recognition.

 

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. The Company is not a counter party for trades executed through its trading platform and telephone transaction system and, instead, recognizes revenue to the extent of the flat-fee commission it receives on each trade processed for its agents and their customers.

 

The Company recognizes revenue using four sources: Media consulting, to online television clients, monthly fees for online cloud television networks, website store revenue sharing and revenue sharing of membership fees with clients.

 

Cash and Cash Equivalents.

 

The Company maintains cash balances in non-interest-bearing accounts that currently do not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of nine months or less are considered to be cash equivalents. As of September 30, 2016 and December 31, 2015, there was cash of $24,292 and $1,790, respectively, and no cash equivalents.

 

Prepaid Expenses.

 

Prepaid expenses consist primarily of common stock issued to consultants for services that will be performed over the terms of the consulting agreements not to exceed 12 months. The value of the common stock issued for services was based on the market price of the Company’s common stock at the date of issuance. The common stock issued to consultants is fully vested at the date of issuance. Prepaid expenses at September 30, 2016 and December 31, 2015 were $0 and $1,384,137, respectively.

 

Stock Subscription Receivable.

 

During the nine months ended September 30, 2016, the holder of a stock option exercised this option into 6,500,000 free trading shares of common stock in exchange for a note payable to the Company in the amount of $975,000, of which $164,105 has been paid. The remaining balance of $810,895 is recorded as a stock subscription receivable and is presented in the accompanying financials statements as a contra-equity account.

 

Income Taxes.

 

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

 9 
 

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

  

Impairment of Long-Lived Assets.

 

In accordance with ASC Topic 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. At December 31, 2015, the Company evaluated its long-lived assets and determined that they had been impaired and took a charge to earnings of $4,478,142.

 

Net Loss Per Share.

 

Basic net loss per share is computed by dividing net loss by the weighted-average number of outstanding shares of common stock during the period. Diluted net loss per share is computed by dividing the weighted-average number of outstanding shares of common stock, including any potential common shares outstanding during the period, when the potential shares are dilutive. Potential common shares consist primarily of incremental shares issuable upon the assumed exercise of stock options and warrants to purchase common stock using the treasury stock method. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive, as they were during 2016 and 2015. During the nine months ended September 30, 2016 and 2015, the number of potential common shares excluded from diluted weighted-average number of outstanding shares was 0 and 0, respectively.

 

Stock-Based Compensation.

 

Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by ASC Topic 718, “Share-Based Payment.”

 

 10 
 

 

Derivative Financial Instruments.

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2016 and December 31, 2015, the Company’s only derivative financial instrument were embedded conversion feature associated with convertible debentures due to certain provisions that allow for a change in the conversion price and a warrant that to contains certain provisions that allow for a change in the exercise price if securities are issued at a price per share below the exercise price.

  

Recent Pronouncements.

 

In January 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-01 (Subtopic 225-20), “Income Statement - Extraordinary and Unusual Items.” ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. As a result, an entity will no longer be required to segregate extraordinary items from the results of ordinary operations, to separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or to disclose income taxes and earnings-per-share data applicable to an extraordinary item. However, ASU 2015-01 will still retain the presentation and disclosure guidance for items that are unusual in nature and occur infrequently. ASU 2015-01 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-01 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.

 

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.

 

In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805)”. Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.

 

 11 
 

 

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes.” The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as non-current on the balance sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not anticipate the adoption of this ASU will have a significant impact on its consolidated financial position, results of operations, or cash flows.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements.

 

NOTE 3 – CONVERTIBLE NOTES PAYABLE, INCLUDING RELATED PARTY

 

Convertible notes payable at September 30, 2016 and December 31, 2015 consist of the following:

 

   September 30,   December 31, 
   2016   2015 
Convertible notes to stockholder due on various dates through August 24, 2016; interest at 4%; convertible in shares of common stock at 90% of the Company’s stock price at date of conversion. ($58,599 in default at September 30, 2016)  $59,599   $51,212 
Convertible note to investor due on February 24, 2018; interest free for 90 days then at 12% thereafter; included an original issue discount of $2,778; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.   27,778    -- 

 

 12 
 

 

   September 30,   December 31, 
   2016   2015 
Convertible note to investor due on September 22, 2017; interest at 10%; included an original issue discount of $7,245; convertible in shares of common stock at 50% of the Company’s stock price at date of conversion.   56,750    -- 
    144,127    51,212 
Less debt discount   (74,995)   (19,887)
Convertible notes, net of discount  $69,132   $31,325 
           
Convertible notes payable - related party  $59,599   $51,212 
Less debt discount   (33)   (19,887)
Convertible notes - related party, net of discount  $59,566   $31,325 
           
Convertible notes payable - unrelated parties  $84,528   $-- 
Less debt discount   (74,962)   -- 
Convertible notes - unrelated parties, net of discount  $9,566   $-- 

 

During the nine months ended September 30, 2016, the Company issued convertible notes in the aggregate principal amount of $208,766. Due to the variable conversion price associated with these convertible notes, the Company has determined that the conversion feature is considered derivative liabilities. The embedded conversion feature was initially calculated to be $339,273, which is recorded as a derivative liability as of the date of issuance. In addition, for one the convertible notes the Company also issued 26 warrants with an exercise price of $950 subject to change if securities are issued at a price per share below the exercise price. This provision results in the warrant being a derivative liability. The derivative liability was first recorded as a debt discount up to the face amount of the convertible notes of $208,766, with the remainder being charge as a financing cost during the period. The debt discount is being amortized over the terms of the convertible notes. The Company recognized interest expense of $153,658 during the nine months ended September 30, 2016 related to the amortization of the debt discount.

 

NOTE 4 – SHORT TERM NOTE

 

On March 17, 2015, the Company entered into a promissory note with Peter Lambert for a loan of $25,000 that became due on June 15, 2015. The loan carries an interest at the rate of $55 per day. On June 12, 2015, the parties amended this promissory note so that the loan was extended and will accrue interest at $55 per day until this note is paid in full. As of September 30, 2016 and December 31, 2015, there was $31,124 and $16,136 interest accrued on the loan respectively.

 

 13 
 

 

NOTE 5 – DERIVATIVE LIABILITY

 

The convertible notes discussed in Note 3 have a conversion price that is variable based on a percentage of the Company’s stock price which results in this embedded conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability are recorded in the statement of operations under other income (expense).

 

The Company uses a weighted average Black-Scholes-Merton option-pricing model with the following assumptions to measure the fair value of derivative liability at September 30, 2016:

 

Stock price  $0.25 
Risk free rate   0.36-0.58%
Volatility   703%
Conversion price  $0.125–0.225 
Dividend rate   0%
Term (years)   0.01 to 1.4 

  

The following table represents the Company’s derivative liability activity for the period ended September 30, 2016:

 

Derivative liability balance, December 31, 2015  $50,276 
Issuance of derivative liability during the period ended September 30, 2016   366,173 
Underlying security converted into common stock   (132,795)
Change in derivative liability during the period ended September 30, 2016   (105,274)
      
Derivative liability balance, September 30, 2016  $178,380 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

Starting January, 1 2015 Mr. Fleming is accruing a consulting fee of $1,500 a month until the Company puts a formal contract in place. As of September 30, 2015, there is a balance of $6,305 in accounts payable. There is no written agreement for this consulting fee.

 

On March 31, 2015, Mr. Fleming transferred $5,743 of various office equipment and supplies to the Company.  The Company is carrying the balance due to Mr. Fleming under short-term liabilities and will reimburse Mr. Fleming during the current fiscal year. At September 30, 2016 and December 31, 2015, Mr. Fleming has a balance of $7,843 and $8,441, respectively, owed to him under “due to officers” for the transfer of assets, consulting fees and various out of pocket expenses.

 

On September 3, 2015, as part of the acquisition agreement, Mr. Fleming received no shares of Series A preferred stock and 174 restricted shares of common stock for consulting fees.

 

 14 
 

 

On September 3, 2015 the Company issued 1,338 restricted shares of common stock for the acquisition of all of the equity interests of Stimulating Software, LLC, a Florida limited liability company, the acquisition of all the common stock of Inner Four, Inc., a Florida corporation, and all of the common and preferred stock of Play Celebrity Games, Inc., a Delaware corporation. 837 of these shares were issued in the name of Chasin, LLC, a Delaware limited liability company (226 shares), Team AJ, LLC, a North Carolina limited liability company (226 shares), AF Trust Company, a Florida corporation (216 shares), and Kaptiva Group, LLC, a Florida limited liability company (168 shares). John Acunto controls the voting power and investment power of the shares owned by each of these companies.

 

On November 16, 2015 the Company issued 37 restricted shares of common stock to Mr. Acunto in payment of certain debts of the Company.

 

On December 14, 2015 the Company issued 1,053 restricted shares of common stock in connection with the September 3, 2015 acquisition agreement to Team AJ, LLC (676) and AF Trust Company (377).

 

On February 5, 2016, the Company issued 1,184 restricted shares of common stock in connection with the September 3, 2015 acquisition agreement to Team AJ, LLC.

 

As various times between August 5, 2015 and September 30, 2016, Mr. Acunto loaned the Company a total of $64,589 (which is set forth in convertible note payable). These notes bear interest at the rate of 4% per annum; $2,031 in interest has been accrued on these notes as of September 30, 2016. During the nine months ended September 30, 2016, $4,990 of these loans was repaid. The principal amount outstanding at September 30, 2016 was $59,559.

 

On August 9, 2016, the Company issued 100,000,000 restricted shares of common stock to Mr. Fleming, the Company’s President, for services rendered and to be rendered to the Company valued at $100,000.

 

NOTE 7 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the financial statements, the Company has no established source of revenue. This raises substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.

 

The Company’s activities to date have been supported by debt and equity financing. It has sustained losses in all previous reporting periods with an accumulated deficit of $133,401,276 as of September 30, 2016. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan. In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders.

 

 15 
 

 

NOTE 8 – COMMON STOCK

 

On April 27, 2015, the Company completed a 3,000 to 1 reverse split of its issued and outstanding shares of common stock and on August 8, 2016 completed a 19,000 to 1 reverse split of its issued and outstanding shares of common stock. All shares and per share information in the accompanying financial statements has been retroactively restated to reflect these two reverse stock splits.

 

During the nine months ended September 30, 2016, the Company issued shares of its common stock as follows:

 

●1,001 shares of common stock to consultants as compensation for services valued at $3,975,653. The value was based on the market price of the Company’s common stock at the date of issuance;

 

●1,202 shares of common stock under the September 3, 2015 acquisition agreement valued at $2,280,331. The value was based on the market price of the Company’s common stock at the date of issuance;

 

●3,784 shares of common stock for the conversion of $20,140 in debt;

 

●263 shares of common stock for financing costs valued at $10,500. The value was based on the market price of the Company’s common stock at the date of issuance;

 

●249 shares of common stock for the conversion of 0 shares of preferred stock; and

 

●100,000,000 shares of common stock to Mr. John Fleming as compensation for services rendered valued at $100,000. The value approximates the value of the services rendered was based on the par value of the Company’s common stock.

  

NOTE 9 – OPTIONS AND WARRANTS

 

Options.

 

The following is a summary of stock option activity:

 

       Weighted 
       Average 
   Options   Exercise 
   Outstanding   Price 
Outstanding, December 31, 2015   --    -- 
Granted   6,500,000   $0.15 
Forfeited   --    -- 
Exercised   (6,500,000)   0.15 
Outstanding, September 30, 2016   --    -- 
Exercisable, September 30, 2016   --    -- 

 

 16 
 

 

For options granted during 2016 where the exercise price was less than the stock price at the date of the grant, the weighted-average fair value of such options was $2.45 and the weighted-average exercise price of such options was $0.15.  No options were granted during 2016 where the exercise price was greater than the stock price or equal to the stock price at the date of grant.

 

The fair value of the stock options was expenses immediately as the options vested immediately. The Company recorded stock option expense of $15,925,010 during the nine months ended September 30, 2016.

 

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:

 

Risk-free interest rate  1.01%
Expected life of the options  .01 year
Expected volatility  703%
Expected dividend yield  0%

  

Warrants.

 

The following is a summary of warrant option activity:

 

           Weighted     
       Weighted   Average     
       Average   Remaining   Aggregate 
   Warrants   Exercise   Contractual   Intrinsic 
   Outstanding   Price   Life   Value 
Outstanding, December 31, 2015   26   $950.00    --          -- 
Granted   --    --    --    -- 
Forfeited   --    --    --    -- 
Exercised   --    --    --    -- 
Outstanding, September 30, 2016   26   $950.00    4.41   $-- 
Exercisable, September 30, 2016   26   $950.00    4.41   $-- 

  

The exercise price for warrants outstanding and exercisable at September 30, 2016 are as follows:

 

Outstanding and Exercisable 
Number of   Exercise 
Warrants   Price 
        
 26   $950.00 

 

 

Also see Note 3. 

 

 17 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following management’s discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with, our unaudited financial statements and related notes included elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Overview.

 

On September 3, 2015, the Company completed an Acquisition Agreement under which the Company acquired all of the equity interests of Stimulating Software, the acquisition of all the common stock of Inner Four, Inc., and all of the common and preferred stock of Play Celebrity Games, Inc.

 

On June 30, 2016, the Company closed these subsidiaries as the business model did not prove out as projected under the acquisition agreement.

 

The Company has redirected its efforts toward the cloud television market and has launched two cloud television networks, World Drone Recreation Aviators (wdra.tv and wdra.club) and Leading Edge Radio Network (leadingedgeradio.tv). Each network develops its own channel(s) content and works with the Company to ensure that their viewers receive it.

 

The Company continues development of its online movie channel which will feature video on demand and a 24 hour a day streaming internet TV station providing limited free content and a subscriber based business model along with potential revenue generating video on demand programming.

 

The online news and video news bureau in association with Leading Edge Radio Network is advancing on schedule and completion is expected by year-end. Leading Edge Radio TV continues developing a venue for new and experienced radio and TV broadcasters to host their own programs via Internet TV and radio through Mancuso Martin Productions. Leading Edge Radio Network and Mancuso Martin Productions continue strategic partnership opportunities involving radio, Internet TV and movies with the Company. The Company has also entered into discussions with Mancuso Martin Productions for screenplay properties through its production division that include seven screenplays featuring suspense thrillers, horror, comedy, romance and sports themed movies.

 

The Company has entered into preliminary discussions for the creation of a professional line of golf balls and golf equipment in order to facilitate long term objectives of the design of a professional line of golf balls, gloves, golf shoes and apparel which will be sold direct to consumer through a proprietary marketing program, eliminating the need for brick and mortar retailing and keeping the company overhead low.

 

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Results of Operations.

 

(a) Total Revenue.

 

The Company had revenue of $3,155 for the three months ended September 30, 2016 compared to $28,522 for the three months ended September 30, 2015, a decrease of $25,367 or approximately 89%. The Company had revenue of $35,803 for the nine months ended September 30, 2016 compared to $28,522 for the nine months ended September 30, 2015, an increase of $7,281 or approximately 25%. These changes are due to a change in the operation business of the Company.

 

(b) General and Administrative Expenses.

 

The Company had general and administrative expenses of $16,067,625 for the three months ended September 30, 2016 compared to $681,679 for the three months ended September 30, 2015, an increase of $15,385,946. The Company had general and administrative expenses of $21,749,750 for the nine months ended September 30, 2016 compared to $752,463 for the nine months ended September 30, 2015, an increase of $20,997,287. These increases were mainly due to extra expenses in bringing the Company reporting again, and incurring consulting expenses (including approximate $16,000,000 that was the charge related to the stock options granted).

 

(c) Net Loss.

 

The Company had a net loss of $16,230,174 for the three months ended September 30, 2016 compared to $671,922 for the three months ended September 30, 2015, an increase of $15,558,252. The Company had a net loss of $24,307,922 for the nine months ended September 30, 2016 compared to $734,827 for the nine months ended September 30, 2015, an increase of $23,573,095. This change was due to significant general and administrative expenses and acquisition contingency in 2016 compared to a 2015.

 

Operating Activities.

 

The net cash used in operating activities was $187,176 for the nine months ended September 30, 2016 compared to net cash provided by operating activities of $3,654 for the nine months ended September 30, 2015, a change of $190,830.  This change is attributed to many changes from period to period, including a large net loss, common stock issued for various items, and write-off of prepaid consulting fees.

 

Liquidity and Capital Resources.

 

As of September 30, 2016, the Company had total current assets of $33,166 and total current liabilities of $507,812, resulting in a working capital deficit of $474,646.  The cash and cash equivalents was $24,292 as of September 30, 2016.

 

 Net cash provided by financing activities was $209,678 for the nine months ended September 30, 2016 compared to $25,000 for the nine months ended September 30, 2015, an increase of $184,678 or approximately 739%. This increase resulted primarily from proceeds from stock issuances.

 

 19 
 

 

Whereas the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to it and/or that demand for equity/debt instruments will be sufficient to meet its capital needs, or that financing will be available on terms favorable to the Company. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

If funding is insufficient at any time in the future, the Company may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of planned product development and marketing efforts, any of which could have a negative impact on business and operating results. In addition, insufficient funding may have a material adverse effect on the Company’s financial condition, which could require it to:

 

● curtail operations significantly;

 

●sell significant assets;

 

●seek arrangements with strategic partners or other parties that may require the Company to relinquish significant rights to products, technologies or markets; or

 

●explore other strategic alternatives including a merger or sale of the Company.

 

To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Company’s operations. Regardless of whether cash assets prove to be inadequate to meet the Company’s operational needs, the Company may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing stockholders.

 

Inflation.

 

The impact of inflation on costs and the ability to pass on cost increases to the Company’s customers over time is dependent upon market conditions. The Company is not aware of any inflationary pressures that have had any significant impact on operations over the past quarter, and the Company does not anticipate that inflationary factors will have a significant impact on future operations.

 

Off-Balance Sheet Arrangements.

 

The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.

 

 20 
 

 

Critical Accounting Policies.

 

The SEC has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include: (a) use of estimates; and (b) net income (loss) per share. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financial statements.

 

(a) Use of Estimates.

 

The preparation of financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company bases its estimates on historical experience and on various other assumptions that is believed 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.

 

(b) Impairment of Long-Lived Assets.

 

In accordance with Accounting Standards Codification Topic 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. At December 31, 2015, the Company evaluated its long-lived assets and determined that they had been impaired and took a charge to earnings of $4,478,142.

 

Forward Looking Statements.

 

Information in this Form 10-Q contains “forward looking statements” within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended. When used in this Form 10-Q, the words “expects,” “anticipates,” “believes,” “plans,” “will” and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements regarding the adequacy of cash, expectations regarding net losses and cash flow, statements regarding growth, the need for future financing, dependence on personnel, and operating expenses.

 

 21 
 

 

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above as well as the risks set forth above under “Factors That May Affect Operating Results.” These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures.

 

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this report, the Company’s management carried out an evaluation, under the supervision and with the participation of the principal executive officer/principal financial officer, of disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon the evaluation, the principal executive officer/principal financial officer concluded that the Company’s disclosure controls and procedures were not effective at a reasonable assurance level to ensure that information required to be disclosed by it in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. In addition, the principal executive officer/principal financial officer concluded that the Company’s disclosure controls and procedures were not effective at a reasonable assurance level to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.

 

Inherent Limitations of Control Systems.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be or have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control Over Financial Reporting.

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 22 
 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

From time to time, the Company may become party to litigation or other legal proceedings that the Company considers to be a part of the ordinary course of the business. There are no material legal proceedings to report, except as outlined in the last Form 10-K. There are no changes to those legal proceedings as reported in that Form 10-K.

 

ITEM 1A. RISK FACTORS.

 

There have been no material changes in the risk factors as previously disclosed in response to Item 1A.of Part I of the Company’s latest Form 10-K.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

There were no unregistered sales of the Company’s equity securities during the three months ended September 30, 2016 that were not previously reported

 

There were no purchases of the Company’s common stock by the Company or its affiliates during the three months ended September 30, 2016.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

Exhibits included or incorporated by reference herein are set forth in the Exhibit Index.

 

 23 
 

 

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  InCapta, Inc.
     
Dated: November 14, 2016 By: /s/ John Fleming
    John Fleming, President

 

 24 
 

 

EXHIBIT INDEX

 

Number   Description
     
2.1   Agreement and Plan of Merger between the Company and Syconet.com, Inc., a Delaware corporation, dated December 1, 2001 (incorporated by reference to Exhibit 2.1 of the Form 10 filed on October 7, 2015).
     
2.2   Purchase and Sale Agreement between the Company, on the one hand, and Sterling Yacht Sales, Inc., Glenn W. McMachen, Sr., and Arlene McMachen, on the other hand, dated March 19, 2010 (incorporated by reference to Exhibit 2.2 of the Form 10 filed on October 7, 2015).
     
2.3   Acquisition Agreement between the Company, on the one hand, and John Fleming, John Swartz, Team AJ, LLC, and Chasin, LLC, on the other hand, dated September 3, 2015 (including Exhibit A (Option); Exhibit B-1 (Stock Option Agreement); Exhibit B-2 (Stock Option Agreement); Exhibit C (Amended Certificate of Designation); Exhibit D (Design and License Agreement); Exhibit E (Registration Rights Agreement); Schedule 1.3 (Excluded Assets); Schedule 2.1 (Excluded Applications); Schedule 4.6 (Capitalization of GameCo. Companies); Schedule 4.10 (Assets of GameCo. Companies); Schedule 4.13 (Material Contracts of GameCo. Companies); Schedule 4.16 (Employees and Compensation Plans); Schedule 5.6 (Capitalization of Play Celebrity); Schedule 5.10 (All Assets, Tangible and Intangible, of Play Celebrity); Schedule 5.13 (Material Contracts); Schedule 5.16 (Employees and Compensation Plans); Schedule 6.8(a); Schedule 6.8(b); Schedule 6.8(c); Schedule 6.11 (All Assets, Tangible and Intangible, of InCapta); Schedule 6.13 (Material Contracts); Schedule 6.16 (Employees and Compensation Plans) (incorporated by reference to Exhibit 2.3 of the Form 10 filed on October 7, 2015).
     
3.1   Articles of Incorporation, dated December 19, 2001 (incorporated by reference to Exhibit 3.1 of the Form 10 filed on October 7, 2015).
     
3.2   Certificate of Amendment to Articles of Incorporation, dated November 21, 2002 (incorporated by reference to Exhibit 3.2 of the Form 10 filed on October 7, 2015).
     
3.3   Certificate of Amendment to Articles of Incorporation, dated March 5, 2003 (incorporated by reference to Exhibit 3.3 of the Form 10 filed on October 7, 2015).
     
3.4   Certificate of Amendment to Articles of Incorporation, dated July 11, 2003 (incorporated by reference to Exhibit 3.4 of the Form 10 filed on October 7, 2015).
     
3.5   Certificate of Amendment to Articles of Incorporation, dated January 26, 2004 (incorporated by reference to Exhibit 3.5 of the Form 10 filed on October 7, 2015).

 

3.6   Certificate of Amendment to Articles of Incorporation, dated December 16, 2004 (incorporated by reference to Exhibit 3.6 of the Form 10 filed on October 7, 2015).
     
3.7   Certificate of Amendment to Articles of Incorporation, dated July 19, 2005 (incorporated by reference to Exhibit 3.7 of the Form 10 filed on October 7, 2015).
     
3.8   Certificate of Amendment to Articles of Incorporation, dated March 21, 2006 (incorporated by reference to Exhibit 3.8 of the Form 10 filed on October 7, 2015).
     
3.9   Certificate of Amendment to Articles of Incorporation, dated December 10, 2007 (incorporated by reference to Exhibit 3.9 of the Form 10 filed on October 7, 2015).
     
3.10   Certificate of Amendment to Articles of Incorporation, dated May 7, 2009 (incorporated by reference to Exhibit 3.10 of the Form 10 filed on October 7, 2015).
     
3.11   Certificate of Amendment to Articles of Incorporation, dated October 21, 2015 (incorporated by reference to Exhibit 3.11 of the Form 10/A filed on November 4, 2015).
     
3.12   Certificate of Amendment to Articles of Incorporation, dated December 21, 2015 (incorporated by reference to Exhibit 3.12 of the Form 10-K filed on June 8, 2016).
     
3.13   Bylaws (incorporated by reference to Exhibit 3.11 of the Form 10 filed on October 7, 2015).
     
4.1   Certificate of Designation (Series A Convertible Preferred Stock), dated April 23, 2008 (incorporated by reference to Exhibit 4.1 of the Form 10 filed on October 7, 2015).
     
4.2   Amended Certificate of Designation (Series A Convertible Preferred Stock), dated September 9, 2015 (incorporated by reference to Exhibit C of Exhibit 2.3 of the Form 10 filed on October 7, 2015).
     
10.1   Promissory Note issued by the Company to Peter Lambert, dated March 17, 2015 (incorporated by reference to Exhibit 10.1 of the Form 10 filed on October 7, 2015).

 

 25 
 

 

10.2   First Amendment to Promissory Note issued by the Company to Peter Lambert, dated June 12, 2015 (incorporated by reference to Exhibit 10.2 of the Form 10 filed on October 7, 2015).
     
10.3   Developer Agreement between Inner Four, Inc., Stimulating Software, LLC and Play Celebrity, Inc., and Apple, Inc., dated December 15, 2008 (Inner Four), November 7, 2014 (Stimulating Software), and October 12, 2015 (Play Celebrity) (incorporated by reference to Exhibit 10.3 of the Form 10/A filed on November 4, 2015).
     
10.4   Developer Distribution Agreement between Inner Four, Inc. and Stimulating Software, LLC, and Google, Inc., dated December 15, 2008 (Inner Four) and November 7, 2014 (Stimulating Software) (incorporated by reference to Exhibit 10.4 of the Form 10/A filed on November 4, 2015).
     
10.5   App Distribution and Services Agreement between Inner Four, Inc.  and Stimulating Software, LLC, and Amazon Digital Services, Inc., Amazon Media EU S.a.r.l., Amazon Services International, Inc., Amazon Servicos de Varejo do Brasil Ltda., Amazon.com Int’l Sales, Inc., and Amazon Australia Services, Inc., dated December 15, 2008 (Inner Four) and November 7, 2014 (Stimulating Software) (incorporated by reference to Exhibit 10.5 of the Form 10/A filed on November 4, 2015).
     
10.6   Consulting Services Agreement between the Company and John Swartz, dated September 1, 2015 (incorporated by reference to Exhibit 10.6 of the Form 10/A filed on December 4, 2015).
     
10.7   Consulting Services Agreement between the Company and Chad Antonson, dated November 1, 2015 (incorporated by reference to Exhibit 10.7 of the Form 10/A filed on December 4, 2015).
     
10.8   Blanket Marketing and Artists Participation Agreement between Celebrity Games Corp. (now known as Play Celebrity Games, Inc.), and Celebrity Games Software, LLC (now known as Stimulating Software, LLC), and TopFan, dated April 30, 2015 (incorporated by reference to Exhibit 10.8 of the Form 10/A filed on December 4, 2015).
     
10.9   Artist Participation Agreement between Play Celebrity Games, Inc. and Stimulating Software, LLC, and Marcus Cooper, dated July 28, 2015 (incorporated by reference to Exhibit 10.9 of the Form 10/A filed on December 4, 2015).

 

10.10   Securities Purchase Agreement between the Company and JMJ Financial, dated February 24, 2016 (incorporated by reference to Exhibit 10.10 of the Form 10-K filed on June 8, 2016).
     
10.11   Convertible Promissory Note issued by the Company to JMJ Financial, dated February 23, 2016 (incorporated by reference to Exhibit 10.11 of the Form 10-K filed on June 8, 2016).
     
10.12   Common Stock Purchase Warrant issued to JMJ Financial by the Company, dated February 24, 2016 (incorporated by reference to Exhibit 10.12 of the Form 10-K filed on June 8, 2016).
     
10.13   Securities Purchase Agreement between the Company and EMA Financial, LLC, dated February 11, 2016 (incorporated by reference to Exhibit 10.13 of the Form 10-K filed on June 8, 2016).
     
10.14   10% Convertible Note issued by the Company to EMA Financial, LLC, dated February 11, 2016 (incorporated by reference to Exhibit 10.14 of the Form 10-K filed on June 8, 2016).
     
10.15   Settlement Agreement and Stipulation between the Company and Rockwell Capital Partners, Inc., dated May 31, 2016 (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on June 9, 2016).
     
10.16   Form of Claim Purchase Agreement between the Company and Rockwell Capital Partners, Inc., dated May 31, 2016 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed on June 9, 2016)
     
31   Rule 13a-14(a)/15d-14(a) Certification of John Fleming (filed herewith).
     
32   Section 1350 Certification of John Fleming (filed herewith).

 

 

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