NightCulture, Inc. - FORM 10-Q

Attached files

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EX-32 - CERTIFICATION - NightCulture, Inc.	nght_ex32.htm
EX-31 - CERTIFICATION - NightCulture, Inc.	nght_ex31.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2016

¨ 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: 000-49648

NIGHTCULTURE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		73-1554122
(State of Incorporation)		(IRS Employer Identification No.)

6400 Richmond Avenue, Houston, TX		77057
(Address of Principal Executive Offices)		(Zip Code)

(832) 535-9070

(Registrant's Telephone Number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.

Large accelerated filer	¨	Accelerated filed	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August 10, 2016, the Registrant had 99,999,990 shares of common stock issued and outstanding.

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PART I – FINANCIAL INFORMATION

Item 1.	Financial Statement	3

	Unaudited Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	3

	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015	4

	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	15

Item 4.	Controls and Procedures	15

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity and Use of Proceeds	16

Item 3.	Default upon Senior Securities	16

Item 4.	Mine Safety Information	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

SIGNATURES		18

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENT

NIGHTCULTURE, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2016			December 31, 2015

ASSETS
Current assets:
Cash	$	128,925		$	13,865
Receivables		59,409			35,409
Inventory		49,027			2,640
Prepaid		9,056			--
Other current assets		5,978			3,258
Total current assets		252,395			55,172

Fixed assets, net of accumulated depreciation of $198,807 and $140,223, respectively		807,062			401,522
Intangible assets, net of accumulated amortization of $160,504 and $140,856, respectively		235,832			255,480
Other assets		1,150			--

Total assets	$	1,296,439		$	712,174

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expense	$	2,543,927		$	2,209,578
Deferred income		942			942
Accrued salary - related parties		170,685			170,685
Advances - related parties		--			1,190
Derivative liabilities		908,070			1,005,429
Notes payable		500,567			269,333
Short term capital lease obligations		98,254			31,731
Convertible debt		531,387			531,387
Total current liabilities		4,753,832			4,220,275

Long term liabilities:
Long term capital lease obligations		256,868			47,258
Total liabilities		5,010,700			4,267,533

Stockholders' deficit:
Preferred stock, $0.001 par value; 10,000,000 shares authorized 0 issued and outstanding		--			--
Common stock, $0.001 par value; 500,000,000 shares authorized 99,999,990 issued and outstanding		100,000			100,000
Additional paid-in capital		6,024,573			6,024,573
Accumulated deficit		(9,838,834	)		(9,679,932	)
Total stockholders' deficit		(3,714,261	)		(3,555,359	)

Total liabilities and stockholders' deficit	$	1,296,439		$	712,174

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

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NIGHTCULTURE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AS OF JUNE 30,

(Unaudited)

	Three Months Ended						Six Months Ended
	2016			2015			2016			2015

Revenue	$	2,325,139		$	2,295,735		$	3,790,138		$	3,465,819
Direct costs		1,983,506			1,740,448			2,718,565			2,426,779
Gross profit		341,633			555,287			1,071,573			1,039,040

Operating expenses:
Depreciation and amortization		39,026			27,441			78,232			54,885
General and administrative expenses		658,646			446,853			1,196,510			1,008,294
Total operating expenses		697,672			474,294			1,274,742			1,063,179

Income (loss) from operations		(322,143	)		80,993			(203,169	)		(24,139	)

Other income (expense)
Interest expense		(31,627	)		(59,689	)		(53,092	)		(113,369	)
Gain on change in fair value of derivative liabilities		73,260			(369,028	)		97,359			586,238
Total other income (expense)		41,633			(428,717	)		44,267			472,869

Net income (loss)	$	(314,406	)	$	(347,724	)	$	(158,902	)	$	448,730

Net income (loss) per share: Basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.01
Net income (loss) per share: Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding:
Basic		99,999,990			78,677,568			99,999,990			72,353,384
Diluted		99,999,990			78,677,568			99,999,990			205,557,793

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

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NIGHTCULTURE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30,
	2016			2015
Cash flows from operating activities:
Net income (loss)	$	(158,902	)	$	448,730
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		78,232			54,885
Amortization of debt discounts					67,985
Gain on change in fair value of derivative liabilities		(97,359	)		(586,238	)
Changes in operating assets and liabilities:
Accounts receivable		(24,000	)		(3,149	)
Inventory		(46,387	)		17,346
Accrued salaries to related parties		--			91,000
Other current assets		(11,776	)		--
Other assets		(1,150	)		--
Accounts payable and accrued expense		334,349			(34,132	)
Net cash provided by operating activities		73,007			56,427

Cash flows used in investing activities
Cash paid for fixed assets		(169,218	)		--
Net cash used in investing activities		(169,218	)		--

Cash flows from financing activities
Advances from related parties		--			50,000
Repayments of related party advances		(1,190	)		(17,857	)
Proceeds on notes payable		375,000			--
Repayments of notes payable		(143,766	)		--
Repayments of lease obligation		(18,773	)		(38,488	)
Net cash flows provided by (used in) financing activities		211,271			(6,345	)

Net increase (decrease) in cash		115,060			50,082
Cash – beginning of period		13,865			64,293
Cash – end of period	$	128,925		$	114,375

SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	39,762		$	34,853
Income taxes paid		--			--

NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock issued for related parties advances and accrued salary		--		$	380,375
Purchase of fixed assets through capital lease obligations	$	294,906			--

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

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NIGHTCULTURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization

NightCulture, Inc. (the "Company") is incorporated under the laws of the State of Nevada. The Company operates in the event promotion business.

The Company was originally incorporated as Texxon, Inc. on October 6, 1998, under the laws of the State of Oklahoma. From inception until 2011, the Company pursued various business plans under multiple names, made an acquisition pursuant to a share exchange and carried out multiple reverse stock splits. From March 2009 until July 31, 2011, the Company operated under the name XXX Acquisition Corp and conducted no operations other than seeking a business to acquire. Since completion of an exchange in July 2011, the Company has been engaged in the event promotion business. In August 2011, the Company changed its name to NightCulture, Inc. and carried out an 8-for-1 forward stock split. In May 2012, the Company acquired Stereo Live, a related event venue operator, as a wholly-owned subsidiary. In September 2012, the Company acquired the assets of Full Access, an event promotion operator in Dallas, Texas.

On January 30, 2016 the Company formed a wholly owned subsidiary Stereo Live Dallas, LLC. The Company was formed for the purpose of leasing a venue in Dallas, TX. The subsidiary is consolidated into the financials of the parent NightCulture, Inc.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end December 31, 2015 as reported on Form 10-K, have been omitted.

NOTE 2 – GOING CONCERN

As shown in the accompanying financial statements, the Company has negative working capital of $4,501,437 and an accumulated deficit of $9,838,834 as of June 30, 2016. The Company's ability to generate net income and positive cash flows is dependent on the ability to grow its operations as well as the ability to raise additional capital. Management is following strategic plans to accomplish these objectives, but success is not guaranteed. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

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NOTE 3 – DERIVATIVE INSTRUMENTS

During 2012 the Company issued instruments that require liability classification under ASC 815. These instruments are measured at fair value at the end of each reporting period.

As defined in FASB ASC 820, fair value is 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 (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The three levels of the fair value hierarchy are as follows:

Level 1 –		Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 –		Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 –		Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.

The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value as June 30, 2016 and December 31, 2015:

Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total
LIABILITIES:
Derivative liabilities as of June 30, 2016		--		--	$	908,070		908,070
Derivative liabilities as of December 31, 2015		--		--	$	1,005,429	$	1,005,429

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The below table represents the change in the fair value of the derivative liabilities during the six months ended June 30, 2016:

Fair value of derivatives, December 31, 2015	$	1,005,429
Change in fair value of derivative liability		(97,359	)
Fair value of derivatives, June 30, 2016	$	908,070

NOTE 4 – RELATED PARTY TRANSACTIONS

During the year ended December 31, 2015 the Company received a loan from a director of the Company of $50,000. The loan is payable over 42 weekly payments of $1,547.62 per week. The Company made payments of $1,190 towards the loan during the six months ended June 30, 2016. As of June 30, 2016 the loan was paid in full.

As of June 30, 2016 and December 31, 2015, the Company had accrued salaries owed to related parties of $170,685 and $170,685, respectively.

NOTE 5 – DEBT

Notes Payable

On September 1, 2015 the Company issued a note payable for $301,826 which matures on September 1, 2018. The note bears an interest rate of 5% per annum and is secured by the fixtures and equipment of the Company and guaranteed by the principals of the Company. Effective October 1 2015, the Company will make 36 monthly payments of $9,055.91, which includes principal and interest is payable to the note holder. The Company must maintain a debt coverage ratio of 1.25 to 1 on a trailing four quarter basis. The debt coverage ratio is defined as the net income of the Company less any gains or losses of derivatives divided by the principal and interest payments made or to be made during the period being measured. As of June 30, 2016, the Company is not in compliance with the debt coverage ratio requirement. When the note becomes in default, the interest rate will increase to the lesser of 18% per annum or the maximum rate permitted by law. During the six months ended June 30, 2016, the Company made $54,335 payment under the note, including $46,969 principal and $7,366 interest. As of June 30, 2016 the balance due on the note was $222,364, which was presented as short term notes payable on the face of balance sheets due to the Company's default on the debt coverage ratio.

On February 25, 2016 the Company's subsidiary, Stereo Live, opened a $200,000 Merchant loan with American Express. Under the terms of the loan Stereo Live paid an 8% loan fee and will repay the note at the rate of $18,000 per month for 12 months for total repayments of $216,000.The interest rate of the debt is 15% year per and the note is due by February 24, 2017. During the six months ended June 30, 2016, the Company paid $78,899 towards the principal and $6,312 in interest. As of June 30, 2016 the outstanding balance due on the note was $121,101.

On May 9, 2016 the Company's subsidiary, Stereo Live, opened a $175,000 Merchant loan with Money Works Direct. Under the terms of the loan Stereo Live will repay the note at the rate of $662.88 per day for total repayments of $211,750. During the six months ended June 30, 2016, the Company made $17,898 towards the principal and $3,759 in interest. As of June 30, 2016 the outstanding balance due on the note was $157,102.

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Convertible Debentures

On September 12, 2012 the Company issued $500,000 of convertible debentures maturing on September 11, 2015. The 2012 Debentures accrue interest at 5% per annum with a default rate of 12% per annum. The 2012 Debentures are convertible into common stock of the Company at 50% of the average closing price of the 20 day trading price ending prior to the date of conversion into the Company common stock. On December 28, 2015 the debenture was amended extending the maturity date to December 31, 2016. As of June 30, 2016 and December 31, 2015, the outstanding principal balance under this convertible debt was $531,287 and $531,287, respectively. See note 3 for derivative accounting.

Lease Obligations

On July 2, 2014, Stereo Live, a subsidiary of the Company, entered into credit line facility and three equipment leases. The terms of the credit facilities and leases are as follows:

	·	An equipment lease of $32,799.75 payable over 48 months at $1,024.47 per month for total payment of $49,174.56 including the principal amount of $32,799.75 and interest of $16,374.81.

	·	An equipment lease of $58,942 payable over 48 months at $1,780.05 per month for total payment of $85,442.40 including the principal amount of $58,942 and interest of $26,500.40;

	·	An equipment lease of $32,250 payable over 44 months at $1,092.23 per month for total payments of $48,058.12 including the principal amount of $32,250 and interest of $15,808.12.

On June 1, 2016 the Company's subsidiary, Stereo Live Dallas, entered into a lease arrangement with Colorwave. The terms of the lease are as follows:

An equipment lease of $294,906, payable over 48 months at the rate of $10,000 per month for 12 months and $8,472 for the following 36 months.

The Company had accounted for the above transactions under ASC 840 - 30 "Capital Leases". The Company has made payment of $18,773 toward the principal balance during the six months ended June 30, 2016. As of June 30, 2016 the balance due on the leases was $355,122, with $98,254 recorded as short term lease obligations and the balance of $256,868 recorded as long term lease obligations.

The note and the leases are personally guaranteed by principals of the Company.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

On March 1, 2016 a subsidiary of the Company (Stereo Live) sign a five year lease for a 14,000 square foot venue at 2711 Storey Dallas, TX. Under the terms of the lease the monthly cost including rent, taxes and insurance is approximately $14,600 per month. The lease is guaranteed by the officers and director for the first two years of the lease. The Company has a one year option to purchase the building.

During the six months period ended June 30, 2016, a major partner of the Company, SFX Entertainment (SFXEQ) filed for reorganization under Chapter 11 of the US bankruptcy code. The Company works with DDP producing multiple shows and festivals throughout the period. As of June 30, 2016 the Company is unable to assess the impact the bankruptcy filing may have on the Company's income and ability to promote large venues.

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NOTE 7 – WARRANTS

As of June 30, 2016, the Company had 25,000,000 warrants outstanding entitling the holder to purchase up to 25,000,000 shares of the Company common stock at 50% of the average closing price of the 20 day period ending one day prior to exercising the warrants. The warrant holder may exercise these warrants on or before December 31, 2016. See note 3 for derivative accounting.

The following table summarizes the warrant activity during the six months ended June 30, 2016:

					Weighted
			Weighted		Average
			Average		Remaining		Number of
			Exercise		Contract		Warrants		Intrinsic
	Warrants		Price		Life		Exercisable		Value
Outstanding and exercisable at December 31, 2015		25,000,000	$	0.002		1.00		25,000,000	$	57,500
Granted		--		--		--		--		--
Exercised		--		--		--		--		--
Forfeited or Cancelled		--		--		--		--		--
Outstanding and exercisable at June 30, 2016		25,000,000		0.004		0.50		25,000,000	$	117,000

NOTE 8 – LITIGATION

On October 21, 2014 a civil case # 2014-56915 was entered in the District Court in Harris County, Texas against Stereo Live. The complaint claims an individual served liquor by the staff of Stereo Live was involved in accident causing damages to the plaintiff who is seeking damages between $200,000 and $1,000,000. At the date of the incident, Stereo Live had enforce an insurance policy coving this incident with aggregate coverage of $2,000,000 and individual coverage up to $1,000,000 for such occurrence. The insurance company is defending the suit under the terms of the policy so the Company has not incurred or accrued any liability as it believes it is fully covered under the insurance policy. On January 29, 2016 the case was settled with no cost to the Company.

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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERTIONS

This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in our filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

Unless indicated otherwise, or the context otherwise requires, references in this report to "NightCulture," the "Company," "we," "us" and "our" or similar terms are to NightCulture, Inc.

Overview

Our principal line of business is promoting and producing, and selling merchandise at, live concerts and festivals, primarily in the Electronic Dance Music (EDM) genre and, since May 2012, hosting entertainment events at our Stereo Live venue. Since 2009, we have promoted and/or produced in excess of 600 live concerts. To date, we have organized events principally in Houston, San Antonio, Austin, Oklahoma City and Dallas.

Our revenues are principally derived from ticket sales to events that we promote and produce for which we typically receive a negotiated percentage of the ticket revenues. We typically act as agent for acts and recognize only our net share of revenues from ticket sales. In situations where we act as principal in promoting an event and take on the risks and rewards of such event we will recognize the gross revenues from ticket sales. We may also derive additional revenues associated with events that we promote and produce, including negotiated portions of revenues from merchandising, concessions and promotional opportunities.

We also derive revenues from venue rentals, beverage sales and other related fees and charges derived from operation of our Stereo Live venue.

We produce two music festivals per year, Something Wicked, a Halloween themed music festival in Houston, TX with attendance over 40,000 in 2014 and Something Wonderful, a spring themed music festival in Dallas, TX made its debut in 2015 with over 15,000 in attendance.

Our principal costs of generating revenues are direct costs associated with promotion and production of events, including, but not limited to, venue costs, advertising, ticketing agency costs and costs of event support personnel. With our acquisition of Stereo Live, our principal costs also include costs of beverage sales, venue lease expense and venue operating personnel.

Results of Operations

Revenue

Revenues for the three and six months ended June 30, 2016 was $2,325,139 and $3,790,138, compared to $$2,295,735 and $3,465,819 for the same period in 2015. The increase in revenues was attributable to an increase in the number of events produced during 2016.

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Direct Costs

Direct costs were $1,983,506 and $2,718,565 for the three and six months ended June 30, 2016 compared to $1,740,448 and $2,426,779 for the same period in 2015. As a percentage of revenues, direct costs for the six months periods ended June 30, 2016 were 72% compared to 70% for the same period in 2015. The change in direct cost as a percentage of sales was due to opening of a new venue in 2016.

General and Administrative Expenses

General and administrative expense for the three and six months ended June 30, 2016 was $658,646 and $1,196,510 compared to $446,853 and $1,008,294 for the same period in 2015. The increase in general and administrative expense for the three and six month period was attributable to increased venues, and increased show and other investments to support our planned growth initiatives.

Depreciation and Amortization

Depreciation and amortization expense incurred in the three and six month period ended June 30, 2016 was $39,026 and $78,232 compared to $27,441 and $54,885 for the same periods in 2015. The increase in depreciation and amortization expense for the six months was attributable to added assets purchased and leased during 2016 which were depreciated over the six months in 2016 versus 2015.

Other Income

Other income consists principally of interest expense and gain on changes in the value of derivative liability associated with outstanding warrants and convertible debt. Other income totaled of $41,633 and $44,267 for the three and six month period ended June 30, 2016 versus other expense of $428,717 and other income of $472,869 for the three and six months period in 2015. The change was mainly attributable to the change in fair value of derivative liabilities.

Net Income

The Company incurred a net loss of $314,406 and $158,902 for the three and six month period ended June 30, 2016 compared to net loss of $347,724 and net income of $448,730 for the periods in 2015. The fluctuation of derivative liability was the major contribution to the variations in the net income between periods.

Financial Condition

Cash, Cash Flows and Working Capital

At June 30, 2016, we had current assets of $252,395, current liabilities of $4,753,832 and a working capital deficit of $4,501,437 compared to current assets of $55,172 and current liabilities of $4,220,275 and a working capital deficit of $4,165,103 at December 31, 2015. Included in current liabilities and the working capital deficit for each period was our derivative liability which was $1,005,429 as of December 31, 2015 compared to $908,070 as of June 30, 2016, accounting for $97,359 of the decrease in current liabilities and working capital deficit.

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Net cash provided in operations for the six months ending June 30, 2016 was $73,007 compared to net cash provided of $56,427 for the same periods in 2015. The increase in cash provided in operations was principally attributable to the increase in accounts payable and accrued expense.

Net cash used in investing activities for the period ending June 30, 2016 was $169,218 compared to zero for the same period in 2015. The increase was mainly due to the purchase of fixed asset during the six months ended June 30, 2016 while there were no investing activities for the same periods in 2015.

Net cash provided by financing activities during the six months ended June 30, 2016 was $211,271 compared to net cash used of $6,345 for the same period in 2015. The financing activities included repayments of related party's advances of $1,190, repayment of debt for $143,766, offset by working capital loan of $375,000 during the six months ended June 30, 2016 compared to advances from related parties of $50,000 and repayment of loan payable and lease obligations of $56,345 for the same period in 2015.

Liquidity and Capital Resources

Our principal requirement for capital is to fund our operating deficits and growth initiatives and satisfy our contractual obligations and outstanding debt and payables.

We believe that we will be required to either improve profitability and operating cash flow or to borrow additional funds or otherwise secure additional financing, or both, to support our operations during the balance of 2016 and beyond. Except as described below regarding our equity line of credit, we do not presently have any commitments to provide financing, if needed, to support our operations.

Debt

Notes Payable

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Convertible Debentures

Lease Obligations

On July 2, 2014, Stereo Live, a subsidiary of the Company, entered into credit line facility and three equipment leases. The terms of the credit facilities and leases are as follows:

	·	An equipment lease of $32,799.75 payable over 48 months at $1,024.47 per month for total payment of $49,174.56 including the principal amount of $32,799.75 and interest of $16,374.81.

	·	An equipment lease of $58,942 payable over 48 months at $1,780.05 per month for total payment of $85,442.40 including the principal amount of $58,942 and interest of $26,500.40;

	·	An equipment lease of $32,250 payable over 44 months at $1,092.23 per month for total payments of $48,058.12 including the principal amount of $32,250 and interest of $15,808.12.

On June 1, 2016 the Company's subsidiary, Stereo Live Dallas, entered into a lease arrangement with Colorwave. The terms of the lease are as follows:

An equipment lease of $294,906, payable over 48 months at the rate of $10,000 per month for 12 months and $8,472 for the following 36 months.

The note and the leases are personally guaranteed by principals of the Company

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements or guarantees of third party obligations at June 30, 2016.

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Inflation

We believe that inflation has not had a significant impact on our operations since inception.

ITEM 3: QUANTITATIVE AND QUALITAIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 4: CONTROLS AND PROCEDURES

Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of June 30, 2016 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2016. Such conclusion reflects the identification of material weakness as follows: (1) lack of accounting proficiency of our chief executive officer who is our sole officer and our principal accounting officer which has resulted in a reliance on part-time outside consultants to perform substantially all of our accounting functions, (2) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function, and (3) lack of control procedures that include multiple levels of review. Until we are able to remedy these material weaknesses, we have engaged third party consultants and accounting firm to assist with financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

ITEM 1A: RISK FACTORS

There have been no material changes to NightCulture' risk factors as previously disclosed in our most recent 10-K filing for the year ending December 31, 2015.

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

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4: MINE SAFETY INFORMATION

None

ITEM 5: OTHER INFORMATION

None.

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ITEM 6: EXHIBITS

Exhibit No.		Description

31		Certification of CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		XBRL Interactive Data Files

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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.

	NIGHTCULTURE, INC.

Dated: August 10, 2016	By:	/s/ Michael Long
		Michael Long
		Chief Executive Officer (Acting Principal Financial and Accounting Officer and Duly Authorized Officer)

NightCulture, Inc. - FORM 10-Q - August 10, 2016

Attached files

NightCulture, Inc. Reports