UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~March 3031, ~~2016~~2017

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

For the transition period from:

Commission file number 000-55097

RIGHTSCORP, INC.

(Exact name of registrant as specified in its charter)

Nevada		33-1219445
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3100 Donald Douglas Loop North Santa Monica, CA		90405
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number: (310) 751-7510

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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

As of ~~November~~May 147, ~~2016~~2017, the issuer had ~~123~~147,~~795~~403,~~314~~ 398 shares of its common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

		Page
	PART I - Financial Information
Item 1	Condensed Consolidated Financial Statements	F-21
	Condensed Consolidated Balance Sheets – As of September 30, 2016 (Unaudited) and December 31, 2015	F-2
	Condensed Consolidated Balance Sheets – As of March 31, 2017 (Unaudited) and December 31, 2016	F-1
	Condensed Consolidated Statements of Operations (Unaudited) - Three and nine months ended September 30, 2016 and 2015	F-3
	Condensed Consolidated Statements of Operations (Unaudited) - Three months ended March 31, 2017 and 2016	F-2
	Condensed Consolidated Statement of Stockholders’ Deficit (Unaudited) - nine months ended September 30, 2016	F-4
	Condensed Consolidated Statement of Stockholders’ Deficit (Unaudited) - Three months ended March 31, 2017	F-3
	Condensed Consolidated Statements of Cash Flows (Unaudited) - nine months ended September 30, 2016 and 2015	F-5
	Condensed Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2017 and 2016	F-4
	Notes to Condensed Consolidated Financial Statements – nine months ended September 30, 2016 and 2015	F-6
	Notes to Condensed Consolidated Financial Statements – Three months ended March 31, 2017 and 2016	F-5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3	Quantitative and Qualitative Disclosures About Market Risk	75
Item 4	Controls and Procedures	75
	Part II - Other Information	8
Item 1	Legal Proceedings	87
Item 1A	Risk Factors	87
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3	Default Upon Senior Securities	87
Item 4	Mine Safety Disclosures	87
Item 5	Other Information	87
Item 6	Exhibits	97
	Signatures	108

~~F-1~~2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Rightscorp, Inc.

Condensed Consolidated Balance Sheets

	September 30, 2016			December 31, 2015
	March 31, 2017			December 31, 2016
		(Unaudited)
Assets
Assets		~~(Unaudited)~~
Cash	$	62,~~653~~256		$	~~193~~5,~~014~~047
Prepaid expenses		3637,~~065~~336			~~100~~65,~~230~~073
Total Current Assets		4239,~~718~~592			~~293~~70,~~244~~120
Other Assets
Fixed assets, net		7435,~~878~~929			~~142~~54,~~520~~113
Total Assets	$	~~117~~75,~~596~~521		$	~~435~~124,~~764~~233
Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable and accrued liabilities	$	12,~~876~~011,~~453~~697		$	1,~~407~~885,~~864~~977
Notes payable		50,000			50,000
Derivative liabilities		~~348~~175,~~005~~577			1280,~~210,430~~316
Total Current Liabilities		2,~~274~~237,~~458~~274			2,~~618~~216,~~294~~293
Stockholders’ Deficit
Preferred stock, $.001 par value; 10,000,000 shares authorized; null shares issued and outstanding		-			-
Common stock, $.001 par value; 250,000,000 shares authorized; 123,795,314 and 107,215,314 shares issued and outstanding, respectively		123,795			107,215
Common stock, $.001 par value; 250,000,000 shares authorized; 135,463,171 and 127,463,171 shares issued and outstanding, respectively		135,463			127,463
Additional paid in capital		9,~~627~~994,~~985~~963			89,~~238~~664,~~199~~168
Accumulated deficit		(1112,~~908~~292,~~642~~179	)		(1011,~~527~~883,~~944~~691	)
Total stockholders’ deficit		(2,~~156~~161,~~862~~753	)		(2,~~182~~092,~~530~~060	)
Total Liabilities and Stockholders’ Deficit	$	~~117~~75,~~596~~521		$	~~435~~124,~~764~~233

See accompanying notes

F-21

Rightscorp, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended			Three Months Ended			~~Nine Months Ended~~			~~Nine Months Ended~~
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
	March 31, 2017			March 31, 2016
Revenue	$	~~139,834~~		$	~~215,196~~		$	~~354,160~~		$	~~756,916~~
Operating expenses:
Copyright settlement revenue	$	79,904		$	68,283
Copyright holder fees		69,143			107,598			174,878			378,458
Consulting revenue		81,666			-
Sales and marketing		337			5,396			2,371			19,640
Total revenue		161,570			68,283
General and administrative		386,865			1,116,589			1,939,982			3,967,527
Operating expenses:
Depreciation and amortization		22,337			28,537			67,643			86,490
Copyright holder fees		39,952			49,142
Total operating expenses		478,682			1,258,120			2,184,874			4,452,115
Sales and marketing		991			1,347
Loss from operations		(338,848	)		(1,042,924	)		(1,830,714	)		(3,695,199	)
General and administrative		614,586			961,105
Other income (expenses):
Depreciation and amortization		18,184			22,816
Interest expense		(17,789	)		(4,948	)		(17,789	)		(5,490	)
Total operating expenses		673,713			1,034,410
Change in fair value of derivative liabilities		(28,796	)		623,704			467,805			580,492
Loss from operations		(512,143	)		(966,127	)
Total other income (expenses)		(46,585	)		618,756			450,016			575,002
Other income (expenses):
Net loss	$	(385,433	)	$	(424,168	)	$	(1,380,698	)	$	(3,120,197	)
Interest expense		(1,084	)		-
Net loss per share – basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.03	)
Change in fair value of derivative liabilities		104,739			181,947
Weighted average common shares – basic and diluted		123,034,444			91,947,241			118,761,080			91,271,146
Total other income (expenses)		103,655			181,947
Net loss	$	(408,488	)	$	(784,180	)
Net loss per share – basic and diluted	$	(0.00	)	$	(0.01	)
Weighted average common shares – basic		132,529,838			113,808,721

See accompanying notes

F-32

Rightscorp, Inc.

Condensed Consolidated Statement of Stockholders’ Deficit

~~Nine~~For the three months ~~Ended~~ended ~~September~~March 3031, ~~2016~~2017

(Unaudited)

	Common stock				Additional Paid in		Accumulated			Total Stockholders’'
	Stock		Amount		Capital		Deficit			Deficit
Balance at December 31, 2015		107,215,314	$	107,215	$	8,238,199	$	(10,527,944	)	$	(2,182,530	)
Balance at December 31, 2016		127,463,171	$	127,463	$	9,664,168	$	(11,883,691	)	$	(2,092,060	)
Shares issued for cash		10,000,000		10,000		490,000		-			500,000
Fair value of shares issued for services		8,000,000		8,000		260,000		-			268,000
Shares issued for exercise of warrant		6,580,000		6,580		59,220		-			65,800
Fair value of stock-based compensation		-		-		70,795		-			70,795
Fair value of warrants issued with note payable		-		-		16,691		-			16,691
Net loss		-		-		-		(408,488	)		(408,488	)
Fair value of stock-based compensation		-		-		429,255		-			429,255
Balance at March 31, 2017 (Unaudited)		135,463,171	$	135,463	$	9,994,963	$	(12,292,179	)	$	(2,161,753	)
Extinguishment of derivative liability		-		-		394,620		-			394,620
Net loss		-		-		-		(1,380,698	)		(1,380,698	)
Balance at September 30, 2016		123,795,314	$	123,795	$	9,627,985	$	(11,908,642	)	$	(2,156,862	)

See accompanying notes

F-43

Rightscorp, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended			Nine Months Ended
	Three Months Ended			Three Months Ended
	September 30, 2016			September 30, 2015
	March 31, 2017			March 31, 2016
Cash Flows from Operating Activitiest
Cash Flows from Operating Activities
Net loss	$	(1408,~~380,698~~488	)	$	(3784,~~120,197~~180	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and Amortization		6718,~~642~~184			8622,~~490~~816
Fair value of stock-based compensation		429,255			714,882
Fair value of shares issued for services		268,000			-
Change in fair value of derivative liabilities		(467,805	)		(580,492	)
Fair value of stock-based compensation		70,795			368,570
Fair value of warrants issued with note payable		16,691			-
Change in fair value of derivative liabilities		(104,739	)		(181,947	)
Prepaid expense		6427,~~165~~737			~~112~~29,~~874~~336
Accounts payable and accrued liabilities		~~468~~125,~~589~~720			132,~~002,864~~735
Net cash used in operating activities		(~~802~~2,~~161~~791	)		(1512,~~783,579~~670	)
Cash Flows from Financing Activities
Repayment of convertible notes		-			(10,000	)
Proceeds from issuance of common stock		-			500,000
Payments on note payable		-			(43,988	)
Net cash provided by financing activities		-			500,000
Proceeds from issuance of common stock for cash		500,000			1,032,000
Net increase (decrease) in cash		(2,791	)		(12,670	)
Proceeds from issuance of notes payable		50,000			-
Cash, beginning of period		5,047			193,014
Exercise of warrant		65,800			-
Cash, end of period	$	2,256		$	180,344
Net cash provided by financing activities		615,800			978,012
Supplemental disclosure of cash flow information:
Net decrease in cash		(186,361	)		(805,567	)
Advances applied to accrued settlement	$	200,000		$	-
Cash, beginning of period		193,014			1,666,914
Cash, end of period	$	6,653		$	861,347
Supplemental Non-cash Financing and Investing Activities:
Extinguishment of derivative liabilities		394,620			-

See accompanying notes

F-54

Rightscorp, Inc.

Notes to Condensed Consolidated Financial Statements

Three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016

(Unaudited)

Note 1 – Nature of the Business and Summary of Significant Accounting Policies

Rightscorp, Inc., a Nevada corporation (the “Company”) was organized under the laws of the State of Nevada on April 9, 2010, and its fiscal year end is December 31. The Company is the parent company of Rightscorp, Inc., a Delaware corporation formed on January 20, 2011 (“Rightscorp Delaware”). On October 25, 2013, the Company acquired Rightscorp Delaware in a transaction treated as a reverse acquisition, and the business of Rightscorp Delaware became the business of the Company.

The Company has developed products and intellectual property rights relating to providing data and analytics regarding copyright infringement on the Internet. The Company is dedicated to the vision that digital creative works should be protected economically so that the next generation of great music, movies, video games and software can be made and their creators can prosper. The Company has a patent-pending, proprietary method for gathering and analyzing infringement data and for solving copyright infringement by collecting payments from illegal downloaders via notifications sent to their ISP’s.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. The condensed consolidated balance sheet at December 31, 2015, has been derived from the audited consolidated financial statements of that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Rightscorp, Inc.’s annual report on Form 10-K for the year ended December 31, 2015.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, the Company ~~incurred~~ incurred a net loss of $1408,~~380~~488,~~698,~~ and ~~used cash in operations of $802,161, and~~ at ~~September~~March 3031, ~~2016~~2017, the Company had a stockholders’ ~~deficiency~~ deficit of $2,~~156~~161,~~862~~753. These factors raise substantial doubt about the Company’s ability to continue as a going concern~~. In~~ ~~addition,~~within ~~the~~one ~~Company’s~~year ~~independent~~after ~~registered~~the ~~public~~date ~~accounting~~that ~~firm, in its report on~~ the ~~Company’s December 31, 2015~~ financial statements, ~~has~~are ~~expressed substantial doubt about the Company’s ability to continue as a going concern~~issued. The Company’s financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

OnAt ~~February~~March 2231, ~~2016~~2017, the Company ~~sold~~had tocash ~~accredited investors an aggregate~~ of 10$2,~~000,000~~256. ~~shares~~Effective ofApril ~~its~~26, ~~common~~2017, ~~stock~~the ~~and~~Company ~~warrants to~~sold ~~purchase 10~~2,~~000~~500,000 shares of common stock ~~for total proceeds of~~ at $~~500,000 (See Note 7)~~0.04 Atper ~~September~~share ~~30,~~price ~~2016,~~for ~~the~~an ~~Company had~~aggregate ~~cash~~purchase price of $6100,~~653~~000. Management believes that ~~our existing cash on hand and ongoing revenues will be sufficient to fund our operations through December 2016. Management believes that~~ the Company will need at least another $500,000 to $1,000,000 in 2017 to fund operations based on our current operating plans. Management’s plans to continue as a going concern include raising additional capital through borrowings and/or the sale of common stock. No assurance can be given that any future financing will be available or, if available, that itthey will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stock holders, in case of an equity financing.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017. The condensed consolidated balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at such date. For further information, refer to the consolidated financial statements and footnotes thereto included in Rightscorp, Inc.’s annual report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on April 14, 2017.

Principles of Consolidation

The financial statements include the accounts of Rightscorp Inc., and its wholly-owned subsidiary Rightscorp Delaware. Intercompany balances and transactions have been eliminated in consolidation.

F-6

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include accounting for potential liabilities, and the assumptions made in valuing share-based instruments issued for services, ~~and~~ derivative liabilities, and the valuation allowance for deferred income taxes. Actual results could differ from those estimates.

~~Revenue~~F-5

The Company provides a service to copyright owners under which copyright owners retain the Company to identify and collect settlement payments from Internet users who have infringed on their copyrights. Revenue is recognized when the Company collects a settlement fee which acts as a waiver of the infringement. Generally, the Company has agreed to remit 50% of such collections to the copyright holder. The Company also provides services to copyright holders. Service fee revenue is recognized when the service has been provided.Concentrations

For the three months ended March 31, 2017, one customer accounted for approximately 42% of our revenue. No other customers accounted for 10% or more of our revenue during the three months ended March 31, 2017 or 2016.

Stock-Based Compensation

The Company periodically grants stock options and warrants to employees and non-employees in non-capital raising transactions as compensation for services rendered. The Company accounts for stock option and stock warrant grants to employees based on the authoritative guidance provided by the Financial Accounting Standards Board where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and stock warrant grants to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

The fair value of the Company’s common stock option and warrant grants is estimated using a Black-Scholes-Merton option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton option pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton option pricing model could materially affect compensation expense recorded in future periods.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are 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 statements of operations. The Company uses a probability weighted average Black-Scholes-Merton model to value the derivative instruments. 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.

Fair Value of Financial Instruments

Under current accounting guidance, fair value is defined as the price at which an asset could be exchanged or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. A fair value hierarchy prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level 3 – Unobservable inputs based on the Company’s assumptions.

The Company is required to use observable market data if such data is available without undue cost and effort. As of ~~September~~March 3031, ~~2016,~~ 2017, the amounts reported for cash, accrued liabilities and accrued interest approximated fair value because of their short-term maturities.

~~Derivative~~At March 31, 2017 and December 31, 2016, derivative liabilities of $~~348~~175,~~005~~577 and $1280,~~210~~316,~~430~~ respectively, were valued using Level 2 inputs ~~as of September 30, 2016 and December 31, 2015, respectively~~.

F-7

Basic and diluted loss per share

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Potential common shares are excluded from the computation when their effect is anti-dilutive.

At ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016, the dilutive impact of outstanding stock options for ~~906~~5,~~666~~150,000 and ~~579~~970,~~990~~000 shares, respectively, and outstanding warrants for 4746,~~048~~718,~~890~~081 and 3453,~~810~~310,140 shares, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

F-6

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ~~ASU~~Under ASU 2014-09 ~~will~~, ~~require~~revenue ~~that~~is ~~companies~~recognized ~~recognize~~when ~~revenue~~a ~~based~~customer onobtains ~~the~~control ~~value~~ of ~~transferred~~promised goods or services asand ~~they~~is ~~occur~~recognized in ~~the~~an ~~contract.~~amount that ~~The~~reflects ~~ASU~~the ~~also~~consideration ~~will~~which ~~require~~the ~~additional~~entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure ~~about~~of the nature, amount, timing, and uncertainty of revenue and cash flows arising from ~~customer~~ contracts with customers. The FASB has recently issued ASU 2016-08, ~~including~~ASU ~~significant~~2016-10, ~~judgments~~ASU ~~and~~2016-11, ~~changes~~ASU in2016-12, ~~judgments~~ASU 2016-20, and ~~assets~~ASU ~~recognized~~2017-05, ~~from~~all ~~costs~~of ~~incurred~~which toclarify ~~obtain~~certain orimplementation ~~fulfill~~guidance awithin ~~contract~~ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. ~~Entities will~~The standard can be ~~able~~adopted toeither ~~transition~~retrospectively to ~~the~~each ~~standard~~prior ~~either~~reporting ~~retrospectively~~period presented (full retrospective method), or asretrospectively awith the cumulative- effect ~~adjustment~~of asinitially ofapplying the guidance recognized at the date of ~~adoption.~~initial application (the cumulative catch-up transition method). The Company is currently in the process of ~~evaluating~~analyzing the information necessary to determine the impact of ~~ASU~~adopting ~~2014-09~~this onnew ~~the~~guidance ~~Company’s~~on its financial ~~statements~~position, results of operations, and ~~disclosures~~cash flows. The Company will adopt the provisions of this statement in the first quarter of fiscal 2018.

In February 2016, the FASB issued ~~Accounting Standards Update (~~ASU) No. 2016-02, Leases. ~~ASU~~This ~~2016-02~~update ~~requires~~will arequire ~~lessee~~the torecognition ~~record~~ of a right -of -use asset and a corresponding lease liability, oninitially measured at the ~~balance~~present ~~sheet~~value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for ~~all~~annual ~~interim~~ and ~~annual~~interim reporting periods beginning after December 15, 2018. Early adoption is permitted. A ~~modified~~Upon ~~retrospective~~adoption, ~~transition~~leases ~~approach~~will isbe ~~required~~recognized ~~for lessees for capital~~ and ~~operating leases existing~~ measured at, ~~or entered into after,~~ the beginning of the earliest ~~comparative~~ period presented inusing ~~the~~a ~~financial~~modified ~~statements,~~retrospective ~~with certain practical expedients available~~approach. The Company is currently evaluating the ~~expected~~ impact ~~that~~of the ~~standard~~adoption ~~could~~of ~~have~~ASU 2016-02 on its financial statements and related disclosures.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Note 32 – Fixed Assets

As of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, fixed assets consisted of the following:

	September 30, 2016			December 31, 2015
	March 31, 2017			December 31, 2016
	~~(Unaudited)~~	(Unaudited)
Computer equipment and fixtures	$	312,756		$	312,756
Accumulated depreciation		(~~237~~276,~~878~~827	)		(~~170~~258,~~236~~643	)
Fixed assets, net	$	7435,~~878~~929		$	~~142~~54,~~520~~113

Depreciation and amortization expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 and ~~September~~March 3031, ~~2015~~2016 was $6718,~~643~~184 and $8622,~~490~~816, respectively.

~~F-8~~Note 3 – Accounts Payable and Accrued Liabilities

~~Note~~As 4of –March ~~Accounts~~31, ~~Payable~~2017 and ~~Accrued~~December ~~Liabilities~~31, 2016, accounts payable and accrued liabilities consisted of the following:

As of September 30, 2016 and December 31, 2015, accounts payable and accrued liabilities consisted of the following:

	March 31, 2017		December 31, 2016
		(Unaudited)
Accounts payable	$	896,734	$	862,860
Due to copyright holders		641,373		601,421
Accrued payroll		248,381		180,894
Insurance premium financing payable		25,209		40,802
Advance from BMG Rights Management		200,000		-
Accrued settlement		-		200,000
Total	$	2,011,697	$	1,885,977

	September 30, 2016		December 31, 2015
	(Unaudited)
Accounts payable	$	886,672	$	683,488
Due to copyright holders		564,089		414,688
Accrued settlement		200,000		200,000
Accrued payroll		225,692		62,908
Insurance premium financing payable		-		46,780
Total	$	1,876,453	$	1,407,864

In November 2014, the Company was named as defendant in a class action complaint (see Note 7). In August 2015 the Company reached a preliminary settlement in the matter and at December 31, 2015 and 2016, had accrued a settlement of $200,000 related to this, which was net of expected insurance proceeds of $250,000. In November 2016, the settlement was finalized and on January 7, 2017, BMG Rights Management (US) LLC (“BMG”) advanced the Company $200,000, which was used to pay off the settlement. The advance from BMG is to be applied to future billings from the Company to BMG for consulting services.

In November 2014, the Company was named as defendant in a class action complaint (see John Blaha v. Rightscorp, Inc in Note 8). In August 2015 the Company reached a preliminary settlement in the matter and at December 31, 2015 and September 30, 2016, has accrued a settlement of $200,000 related to this, which is net of expected insurance proceeds of $250,000 (see Note 8).F-7

Note 54 -– ~~Notes~~Derivative ~~Payable~~Liabilities

~~During~~At ~~the~~March ~~three~~31, ~~months~~2017 ~~ended~~and ~~September~~at 30December 31, 2016, athe ~~third-party~~Company ~~shareholder~~had ~~loaned~~warrants ~~the~~exercisable ~~Company~~into ~~$50~~9,212,000 ~~for~~shares ~~working~~of ~~capital~~common ~~purposes~~stock. The ~~$50,000~~warrants have isa ~~due~~term onof ~~demand,~~five ~~unsecured,~~years and ~~interest~~an exercise price as adjusted of $0.01 per share. The exercise price is subject to further adjustment if the Company issues securities at 4%a ~~per~~price ~~annum~~lower than the exercise price of these warrants (see Note 7).

~~The~~Pursuant ~~Company~~to ~~issued~~FASB ~~warrants~~authoritative toguidance ~~purchase~~on ~~500,000~~determining ~~shares~~whether ofan ~~common~~instrument (or embedded feature) is indexed to an entity’s own stock, ininstruments, ~~consideration~~which ofdo ~~the~~not ~~loans~~have ~~for~~fixed ~~$50~~settlement provisions,~~000~~ are deemed to be derivative instruments. The exercise price of the warrants did not have an fixed settlement provisions because their exercise ~~price~~prices ofcould ~~$0.02~~be ~~per~~lowered ~~share~~if ~~and~~the ~~expire~~Company issues securities at lower prices in 10the ~~years~~future. ~~The~~In accordance with the FASB authoritative guidance, the Company determined that the exercise ~~fair~~feature ~~value~~ of the warrants was ~~$16~~not considered to be indexed to the Company’s own stock,~~691~~ and ~~included~~bifurcated itthe asexercise feature of the warrants and recorded a ~~financing~~derivative ~~cost~~liability. inThe ~~interest~~derivative ~~expense~~liability ~~for~~is re-measured at the end of every reporting period ~~ended~~with ~~September~~the ~~30,~~change ~~2016~~in fair value reported in the statement of operations.

~~Note~~At 6December –31, ~~Derivative~~2016, ~~Liabilities~~the fair value of the derivative liabilities was $280,316. During the three months ended March 31, 2017, the fair value of the derivative liabilities decreased by $104,739. At March 31, 2017, the fair value of the derivative liabilities was $175,577.

InAt ~~September~~March ~~2014~~31, ~~the~~2017 ~~Company~~and ~~issued warrants exercisable into 17~~2016,~~892,000~~ ~~shares of common stock in relation to~~ the ~~sale~~fair ofvalue ~~11,928,000 shares~~ of ~~its~~the ~~common~~derivative ~~stock.~~liabilities ~~The~~was ~~warrants~~determined ~~had~~through ause ~~term~~ of ~~five years and an exercise price of $0.25 per share, subject to adjustment, as defined, if the Company issues securities at~~ a ~~price~~probability-weighted ~~lower than the exercise price of these warrants in the future (see Note~~Black-Scholes-Merton ~~7).~~valuation Atmodel ~~December~~based ~~31,~~on ~~2015, 15,792,000 of these warrants were outstanding. During~~ the ~~nine~~following ~~months ended September 30, 2016, 6,580,000 of these warrants were exercised, and at September 30, 2016, 9,212,000 of these warrants were outstanding.~~assumptions:

Pursuant to FASB authoritative guidance on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments, which do not have fixed settlement provisions, are deemed to be derivative instruments. The exercise price of the warrants issued in September 2014 did not have fixed settlement provisions because their exercise prices could be lowered if the Company issues securities at lower prices in the future. In accordance with the FASB authoritative guidance, the Company determined that the exercise feature of the warrants was not considered to be indexed to the Company’s own stock, and bifurcated the exercise feature of the warrants and recorded a derivative liability. The derivative liability is re-measured at the end of every reporting period with the change in fair value reported in the statement of operations.

	March 31, 2017			December 31, 2016
Expected volatility		209	%		172	%
Expected life		2.5 years			2.7 years
Risk-free interest rate		1.4	%		1.5	%
Expected dividend yield		0	%		0	%

AtThe ~~December~~expected ~~31,~~volatilities ~~2015,~~are ~~the~~based ~~fair~~on ~~value~~historical volatility of the ~~derivative~~Company’s ~~liabilities was $1,210,430~~stock. ~~During~~The ~~the~~expected ~~nine~~life ~~months~~of ~~ended~~the ~~September~~warrants ~~30,~~was ~~2016,~~based ~~6,580,000~~on ~~warrants~~the ~~accounted~~remaining ~~for~~term asof ~~derivative~~the ~~liabilities~~warrants. ~~were~~The ~~exercised~~risk-free ~~and~~interest asrates ~~such~~were ~~their~~based ~~corresponding~~on ~~fair~~rates ~~value~~established atby the ~~exercise~~Federal Reserve Bank. ~~date~~The ofexpected ~~$394,620~~dividend yield was ~~extinguished~~based ~~from~~on the ~~derivative~~fact ~~liabilities~~that ~~balance. During~~ the ~~nine~~Company ~~months~~has ~~ended~~not ~~September~~customarily ~~30,~~paid ~~2016,~~dividends ~~the fair~~in ~~value of~~ the ~~derivative~~past ~~liabilities decreased by $467,805,~~ and atdoes ~~September~~not expect ~~30,~~to ~~2016,~~pay ~~the~~dividends ~~fair~~in ~~value of~~ the ~~derivative liabilities was $348,005~~future.

AtNote ~~September~~5 ~~30,~~– ~~2016,~~Common the fair value of the derivative liabilities was determined through use of a probability-weighted Black-Scholes-Merton valuation model. At September 30, 2015, the fair value of the derivative liabilities was determined through use of a Black-Scholes-Merton option pricing model. At September 30, 2016 and December 31, 2015, fair values were based on the following assumptions:stock

	September 30, 2016			December 31, 2015
Expected volatility		152	%		274	%
Risk-free interest rate		0.9	%		1.0	%
Expected dividend yield		0	%		0	%
Expected life		3.0 years			4.5 years

On January 13, 2017, the Company issued 3,000,000 shares of common stock valued at $106,500 to a consultant for services rendered. The shares were valued at the market price of $0.0035 per share on the date the shares were granted. For the three months ended March 31, 2017, the total fair value of $106,500 is included in general and administrative expense.

~~The~~On ~~risk-free~~February ~~interest~~14, ~~rate~~2017, ~~was~~the ~~based~~Company onentered ~~rates~~into ~~established~~an byemployment ~~the~~agreement ~~Federal~~with ~~Reserve~~Cecil ~~Bank.~~Kyte, ~~The~~the ~~expected~~Company’s ~~life~~chief ofexecutive ~~the~~officer. As ~~exercise~~part ~~feature~~ of the ~~warrants~~employment ~~was~~agreement, ~~based~~the onCompany ~~the~~issued ~~remaining~~5,000,000 ~~term~~shares of ~~the~~common ~~warrants~~stock to Kyte valued at $161,500. The ~~expected~~shares were ~~dividend~~valued ~~yield~~at ~~was~~the ~~based~~market onprice ~~the~~of ~~fact~~$0.0032 ~~that~~per share on the ~~Company has~~date ~~not~~the ~~customarily~~shares ~~paid~~were ~~dividends~~granted. inFor the ~~past~~three ~~and~~months ~~does~~ended ~~not~~March ~~expect~~31, 2017, tothe ~~pay~~total ~~dividends~~fair value of $161,500 is included in ~~the~~general ~~future~~and administrative expense.

~~Note~~During 7the –three ~~Common~~months ~~Stock~~ended March 31, 2016, the Company sold an aggregate of 10,000,000 shares of its common stock at $0.05 per share and warrants to purchase 10,000,000 shares of its common stock for total gross proceeds of $500,000.

~~During~~Note ~~the~~6 ~~nine~~– ~~months~~Stock ~~ended~~Options ~~September 30, 2016, the Company sold units to accredited investors for an aggregate of 10,000,000 shares of its common stock at $0.05 per share~~ and ~~warrants to purchase 10,000,000 shares of its common stock for total gross proceeds of $500,000. The warrants have a term of three years and an exercise price of $0.10 per share.~~Warrants

During the nine months ended September 30, 2016, the Company issued 6,580,000 shares of its common stock upon the exercise of 6,580,000 warrants for gross proceeds of $65,800.

F-9

Note 8 – Stock Options and Warrants

Options

~~During~~On ~~the~~February ~~nine~~14, ~~months~~2017, ~~ended~~pursuant ~~September~~to ~~30,~~the ~~2016~~employment ~~and~~agreement ~~2015~~with the Company CEO, the Company ~~recorded~~granted ~~compensation~~options ~~costs~~to ofpurchase ~~$35~~5,~~777~~000,000 shares ~~and~~of ~~$25,571~~common instock ~~general~~with ~~and administrative~~an ~~expense,~~exercise ~~respectively,~~price ~~relating~~of $0.05 to the ~~vesting~~Company’s ~~of stock options~~CEO. AsOptions ofexercisable ~~September~~into 301, ~~2016~~000,000 ~~the~~shares ~~aggregate value~~ of common ~~unvested~~stock vested immediately and the options ~~was~~exercisable ~~$53~~into 4,~~939~~000,000 ~~which~~shares of common stock will ~~continue~~vest toover be48 ~~amortized~~months asbeginning on ~~compensation~~February ~~cost~~14, as2018. ~~the~~The ~~options~~fair ~~vest~~value ~~over~~of ~~terms~~these ~~ranging from~~options ~~one~~was determined to ~~three~~be ~~years~~$160,416 asusing ~~applicable.~~the Black-Scholes-Merton option-pricing model based on the following assumptions:

The stock option activity for the nine months ended September 30, 2016 is as follows:

	February 14, 2017
Expected volatility		173	%
Risk-free interest rate		2.47	%
Expected dividend yield		0	%
Expected life		10 years

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Balance outstanding, December 31, 2015		970,000	$	0.17		6.71
Granted		-		-		-
Exercised		-		-		-
Forfeited/expired		(63,334)	$	0.25		-
Balance outstanding, September 30, 2016		906,666	$	0.17		5.15
Exercisable, September 30, 2016		113,330	$	0.25		8.27

The expected volatility is based on historical volatility of the Company’s stock. The expected life of the options was based on the term of the options. The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future. For the three months ending March 31, 2016, the Company had no stock options requiring an assessment of value.

~~At September 30, 2016, the Company’s outstanding and exercisable options had no intrinsic value.~~F-8

During the three months ended March 31, 2017 and 2016, the Company recorded compensation costs of $38,203 and $11,942, respectively, relating to the vesting of stock options. As of March 31, 2017, the aggregate value of unvested options was $125,516, which will continue to be amortized as compensation cost as the options vest over terms ranging from one to four years, as applicable.

The stock option activity for the three months ended March 31, 2017 is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Balance outstanding, December 31, 2016		900,000		$	0.17		4.67
Granted		5,000,000			0.05		9.88
Exercised		-			-		-
Forfeited/expired		(750,000	)		0.15		-
Balance outstanding, March 31, 2017		5,150,000		$	0.06		9.83
Exercisable, March 31, 2017		1,113,332		$	0.07		9.68

At March 31, 2017, the Company’s outstanding and exercisable options had no intrinsic value.

Warrants

~~During~~On ~~the~~February ~~nine months ended September 30~~14, ~~2016~~2017, pursuant to the ~~Company~~employment ~~sold~~agreement ~~equity~~with ~~units~~the ~~that~~Company ~~included~~CEO, warrants exercisable into 103,000,000 ~~shares~~ shares of common stock issued to ~~accredited investors (see Note 7). In addition,~~ the Company’s ~~issued~~CEO ~~warrants~~in to2015 ~~purchase~~were ~~8,000,000~~deemed ~~shares~~fully ~~of common~~vested ~~stock~~and ~~with~~the an exercise price of ~~$0.15 per share for services. The fair value of~~ the ~~8,000,000~~ warrants ~~issued for services~~ was ~~determined~~reduced tofrom be $~~330,210~~0.25 ~~The~~per ~~Company~~share ~~recorded~~to $~~330,210~~0.05 inper ~~general~~share. ~~and~~The ~~administrative~~Company ~~expense since it~~ determined ~~that~~ the ~~award~~ isexpense arelated ~~certainty~~to ~~and the service performance and its future benefit are not assured in~~ this ~~arrangement.~~modification Inwas ~~addition~~$13, ~~during~~023 ~~the nine months ended September 30, 2016~~ and ~~2015,~~is ~~the~~included ~~Company recorded compensation costs of $120,973 and $138,624~~ in general and administrative expense~~, respectively, relating to the vesting of other stock warrants~~.

~~For~~On January 20, 2017, the ~~nine~~Company ~~months~~issued ~~ending~~warrants exercisable ~~September~~into 30350,000 ~~2016~~shares ~~and~~of ~~2015,~~common ~~the~~stock for services. The fair value of ~~warrant~~warrants ~~awards~~issued for services was ~~estimated~~determined ~~using~~to be $9,378. The Company recorded the ~~Black-Scholes-Merton option-pricing~~full ~~model~~$9,378 ~~with~~in general and administrative expense since it determined that the ~~following~~award ~~assumptions:~~is a certainty and the service performance and its future benefit are not assured in this arrangement.

	September 30, 2016			September 30, 2015
Expected volatility		121	%		254	%
Risk-free interest rate		1.08	%		1.5	%
Expected dividend yield		0	%		0	%
Expected life		3 years			5 years

For the three months ending March 31, 2017 and 2016, the fair value of warrant awards was estimated using the Black-Scholes-Merton option-pricing model with the following assumptions:

	March 31, 2017			March 31, 2016
Expected volatility		171	%		121	%
Risk-free interest rate		1.5	%		1.08	%
Expected dividend yield		0	%		0	%
Expected life		2.5 years			3 years

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected life of the exercise feature of the warrants was based on the remaining term of the warrants. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.

AsDuring ofthe ~~September~~three 30months ended March 31, 2017 and 2016, the ~~aggregate~~Company ~~value~~recorded ofcompensation ~~unvested~~costs ~~warrants~~of ~~was~~$10,191 and $~~294~~26,~~458~~410, ~~which~~respectively, relating ~~will~~to ~~continue~~the tovesting beof ~~amortized~~stock aswarrants. ~~compensation cost~~As asof March 31, 2017, the ~~warrants~~aggregate ~~vest~~value ~~over~~of ~~two~~unvested ~~years~~warrants was $0.

A summary of the Company’s warrant activity during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 is presented below:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Balance outstanding, December 31, 2015		35,310,140		$	0.09		3.21
Balance outstanding, December 31, 2016		46,958,072		$	0.11		2.13
Granted		18350,~~500,~~000			0.1201		2.4181
Exercised		~~(6,580,000~~-	)		~~0.01~~-		~~2,98~~-
Forfeited/expired		(~~181~~589,~~250~~991	)		0.09		-
Balance outstanding, September 30, 2016		47,048,890		$	0.11		2.38
Balance outstanding, March 31, 2017		46,718,081			0.10		1.92
Exercisable, September 30, 2016		46,048,890		$	0.11		4,73
Exercisable, March 31, 2017		46,718,081		$	0.10		1.92

At March 31, 2017, the Company’s outstanding warrants had an intrinsic value of $216,521.

F-9

Note 7 – Commitments & Contingencies

In 2015, the Company was named as a defendant in a legal proceeding. The plaintiffs sought relief for alleged violations of the Telephone Consumer Protection Act. In 2015, the parties agreed to mediate the dispute and reached a settlement in principal. A hearing regarding final approval of the settlement was held November 14, 2016 and a settlement was approved in which the Company agreed to pay plaintiffs $450,000. At December 31, 2016 and 2015, the Company had recorded a reserve for an estimated settlement of $200,000 related to this, which was net of insurance proceeds of $250,000, and on January 7, 2017, the accrued settlement of $200,000 was paid.

Note 8 – Subsequent Event

On April 10, 2017, the Company issued an aggregate of 7,940,227 shares of common stock to employees for services. The fair value of the shares was estimated to be $174,685 and will be expensed immediately.

On April 26, 2017, the Company issued an aggregate of 2,500,000 shares of common stock to an investor for a purchase price of $100,000, or $0.04 per share.

On April 27, 2017, the Company issued 1,500,000 shares of its common stock upon exercise of warrants at an exercise price of $0.01 per share for total proceeds of $15,000.

F-10

At September 30, 2016, the Company’s outstanding and exercisable warrants had an intrinsic value of $401,106.

Note 9 – Commitments & Contingencies

Legal proceeding

John Blaha v. Rightscorp, Inc , C.D. Cal. (Original Complaint Filed November 21, 2014; First Amended Complaint Filed March 9, 2015).

Nature of Matter: This matter seeks relief for alleged violations of the Telephone Consumer Protection Act (47 U.S.C. § 227). The action is brought on behalf of the individual named plaintiff as well as on behalf of a putative nationwide classes.

Progress of Matter to Date: This matter was previously captioned with Karen J. Reif and Isaac Nesmith as lead plaintiffs. On March 9, 2015, plaintiff filed a First Amended Complaint replacing the lead plaintiffs, dropping their second and third causes of action for Violations of the Fair Debt Collection Practices Act (15 U.S.C. § 1692, et seq.) and Violations of the Rosenthal Fair Debt Collection Practices Act (Cal. Civ. Code § 1788 et seq.) (and dropping associated putative class claims), and naming BMG Rights Management (US) LLC and Warner Bros. Entertainment Inc. as additional defendants.

The First Amended Complaint also contained a cause of action for Abuse of Process. In response to the Abuse of Process claim, defendants brought a special motion to strike the claim under California’s anti-SLAPP statute. Defendants’ anti-SLAPP motion was granted on May 8, 2015. Pursuant to the Court’s May 8, 2015 Order, the Abuse of Process claim (and associated putative class claim) was stricken from the case and plaintiff was ordered to pay defendants’ attorney’s fees incurred in bringing the anti-SLAPP motion.

Following the dismissal of Plaintiff’s Abuse of Process claim, the parties agreed to mediate the dispute and reached a settlement in principal. On June 24, 2016, the Court issued an order granting plaintiff’s motion for preliminary approval of class action settlement. On August 1, 2016, notice was sent to the class. A hearing regarding final approval of the settlement is set for November 14, 2016. The Company has recorded a reserve for the estimated settlement of $200,000 related to this, which is net of expected insurance proceeds of $250,000.

WINDSTREAM SERVICES, LLC Plaintiff V. BMG RIGHTS MANAGEMENT (US) LLC, et al. Defendant, S.D. NY. (Original Complaint Filed June 27, 2016).

Nature of Matter: This matter is a Civil action seeking declaratory relief under 17 U.S.C. §§ 101, et seq. and 28 U.S.C. §§ 2201, et seq. Rightscorp was named as an additional Defendant in this matter. Plaintiff is seeking declaratory relief that it is not liable for the copyright infringements of its customers.

Progress of Matter to Date: Company waived service of process on July 6, 2016. A pre-trial conference has yet to be scheduled. The Company believes the case is without merit.

F-11

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

The following discussion and analysis of the results of operations and financial condition of Rightscorp, Inc. (the “Company”, “we”, “us” or “our”) should be read in conjunction with the financial statements of Rightscorp, Inc., and the notes to those financial statements that are included elsewhere in this Form 10-Q. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Business sections in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016, filed with the Securities and Exchange Commission on ~~March~~April 3014, ~~2016~~2017. Words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

Overview

Our company was organized under the laws of the State of Nevada on April 9, 2010, and our fiscal year end is December 31. Our company is the parent company of Rightscorp, Inc. a Delaware corporation formed on January 20, 2011 (“Rightscorp Delaware”). The acquisition of Rightscorp Delaware was treated as a reverse acquisition, and the business of Rightscorp Delaware became the business of our company.

We have developed products and intellectual property rights relating to providing data and analytics regarding copyright infringement on the Internet. We are dedicated to the vision that digital creative works should be protected economically so that the next generation of great music, movies, video games and software can be made and their creators can prosper. We have a patent-pending, proprietary method for gathering and analyzing infringement data and for solving copyright infringement by collecting payments from illegal downloaders via notifications sent to their ISPs. Rightscorp has closed more than 230,000 cases of copyright infringement to date.

~~Three~~Recent ~~months ended September 30, 2016 compared to three months ended September 30, 2015~~Developments

Three months ended March 31, 2017 compared to three months ended March 31, 2016

Revenue

We generated copyright settlement revenues of $~~139~~79,~~834~~904 during the three months ended ~~September~~March 3031, ~~2016~~2017, aan ~~decrease~~increase of $7511,~~362~~621 or 3517% as compared to $~~215~~68,~~196~~ 283 for the three months ended ~~September~~March 3031, ~~2015~~2016. Management believes that the decrease in revenues was due to: a) changes in the filesharing software intended to defeat detection of copyrights being illegally distributed, b) less forwarding of the Company’s notices by ISPs and c) the shutting down of some filesharing network infrastructure.

During the three months ended March 31, 2017, we generated revenues of $81,666 from consulting services rendered under service arrangements with prominent trade organizations. Under the agreements, the Company is providing certain data and consultation regarding copyright infringements on such organizations’ respective properties. During the three months ended March 31, 2016, we had no consulting services revenue.

Operating Expenses

Copyright Holder Fees

In return for the right to pursue copyright infringers, we pay the copyright holders a percentage of the revenue we collect, in accordance with our representation agreements with our clients entered into prior to our notices being sent to infringers. For the three months ended ~~September~~March 3031, ~~2016~~2017 we accrued $6939,~~143~~952 due to copyright holders. For the three months ended ~~September~~March 3031, ~~2015~~2016 we ~~accrued~~ accrued $~~107~~49,~~598~~142 to copyright holders.

Sales and Marketing

Sales and marketing expenses consist primarily of advertising and marketing and consulting expenses. Sales and marketing costs were $~~337~~991 for the three months ended ~~September~~March 3031, ~~2016~~2017 compared to $51,~~396~~347 for the three months ended ~~September~~March 3031, ~~2015~~2016, a decrease of $~~5,059~~356.

General and administrative

General and administrative expenses consist primarily of salaries and related expenses for our management and personnel, and professional fees, such as accounting, consulting and legal. Legal fees related to various matters as discussed further in Part II, Item 1, Legal Proceedings totaled $68,161 for the three months ended September 30, 2016, compared to $318,211 for the three months ended September 30, 2015. Total wage and related expenses for the three months ended ~~September~~March 3031, ~~2016~~2017 were $~~294~~415,~~262~~230, of which $53338,~~968~~ 795 were non-cash charges related to the issuance and vesting of common stock, options and warrants issued for services. ~~The~~There ~~total~~were legal fees of $137,304 related to various matters for the three months ended March 31, 2016. Total decrease in general and administrative expenses was $~~729~~346,~~724~~519 over the three months ended ~~September~~March 3031, ~~2015~~2016. Our total general and ~~administrative~~ administrative expenses for the three months ended ~~September~~March 3031, ~~2016~~2017 were $~~386~~614,~~865~~586.

Depreciation and Amortization

Depreciation and amortization expenses were $2218,~~337~~184 during the three months ended ~~September~~March 3031, ~~2016~~2017, a decrease of $64,~~200~~632, as compared to $2822,~~537~~ 816 for the three months ended ~~September~~March 3031, ~~2015~~2016.

Interest

Interest expense totaled $171,~~789~~084 during the three months ended ~~September~~March 3031, ~~2016~~2017, compared to $~~4,948~~0 in the three months ended ~~September 30~~March 31, ~~2015~~2016.

Change in fair value of Derivative

We had a change in the fair value of derivative liabilities income of $~~(28~~104,~~796)~~739 during the three months ended ~~September~~March 3031, ~~2016~~2017, ~~compared~~ compared to $~~623~~181,~~704~~947 for the three months ended ~~September~~March 3031, ~~2015~~2016.

Net loss

As a result of the foregoing, during the three months ended ~~September~~March 3031, ~~2016~~2017, we recorded a net loss of ($~~385~~408,~~433)~~488 compared to a net ~~loss~~ Loss of ($~~424~~784,~~168)~~180 for the three months ended ~~September~~March 3031, ~~2015~~2016.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

Revenue

We generated revenues of $354,160 during the nine months ended September 30, 2016, a decrease of $402,756 or 53% as compared to $756,916 for the nine months ended September 30, 2015. Management believes that the decrease in revenues was due to: a) changes in the filesharing software intended to defeat detection of copyrights being illegally distributed, b) less forwarding of the Company’s notices by ISPs and c) the shutting down of some filesharing network infrastructure.

Operating Expenses

In return for the right to pursue copyright infringers, we pay the copyright holders a percentage of the revenue we collect, in accordance with our representation agreements with our clients entered into prior to our notices being sent to infringers. For the nine months ended September 30, 2016 we accrued $174,878 due to copyright holders. For the nine months ended September 30, 2015 we accrued $378,458 to copyright holders.

Sales and Marketing

Sales and marketing expenses consist primarily of advertising and marketing and consulting expenses. Sales and marketing costs were $2,371 for the nine months ended September 30, 2016 compared to $19,640 for the nine months ended September 30, 2015, a decrease of $17,269.

General and administrative

General and administrative expenses consist primarily of salaries and related expenses for our management and personnel, and professional fees, such as accounting, consulting and legal. Legal fees related to various matters as discussed further in Part II, Item 1, Legal Proceedings totaled $280,794 for the nine months ended September 30, 2016, compared to $1,080,534 for the nine months ended September 30, 2015. Consulting expenses for the nine months ended September 30, 2016, were $3,367, compared to $315,275 for the nine months ended September 30, 2015, a decrease of $311,908. Total wage and related expenses for the nine months ended September 30, 2016 were $1,280,959, of which $484,450 were non-cash charges related to the issuance and vesting of options and warrants issued for services. The total decrease in general and administrative expenses was $2,027,545 over the nine months ended September 30, 2015. Our total general and administrative expenses for the nine months ended September 30, 2016 were $1,939,982.

Depreciation and Amortization

Depreciation and amortization expenses were $67,643 during the nine months ended September 30, 2016, a decrease of $18,847, as compared to $86,490 for the nine months ended September 30, 2015.

Interest

Interest expense totaled $17,789 during the nine months ended September 30, 2016, compared to $5,490 in the nine months ended September 30, 2015.

Change in fair value of Derivative

We had a change in the fair value of derivative liabilities income of $467,805 during the nine months ended September 30, 2016, compared to $580,492 for the nine months ended September 30, 2015.

Net loss

As a result of the foregoing, during the nine months ended September 30, 2016, we recorded a net loss of ($1,380,698) compared to a net loss of ($3,120,197) for the nine months ended September 30, 2015.

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, the Company ~~incurred~~ incurred a net loss of $1408,~~380~~488,~~698,~~ ~~used cash in operations of $802,161,~~ and at ~~September~~March 3031, ~~2016~~2017, the Company had a stockholders’ ~~deficiency~~ deficit of $2,~~156~~161,~~862~~753. These factors raise substantial doubt about the Company’s ability to continue as a going concern~~. In~~ ~~addition,~~within ~~the~~one year ~~Company’s~~after ~~independent registered public accounting firm, in its report on~~ the ~~Company’s~~date ~~December 31,~~that ~~2015~~ financial statements, ~~has~~are ~~expressed substantial doubt about the Company’s ability to continue as a going concern~~issued. The Company’s financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

At ~~September~~March 3031, ~~2016~~2017, the Company had cash ~~on hand~~ of $62,~~653~~256. OnEffective ~~February~~April 2226, ~~2016~~2017, the Company sold ~~to accredited investors an aggregate of 10~~2,~~000~~500,000 shares of ~~its~~ common stock ~~and warrants to purchase 10,000,000 shares of common stock for total proceeds~~ ofat $~~500,000~~0.04 Atper ~~September~~share ~~30,~~for ~~2016,~~an ~~the~~aggregate ~~Company~~purchase ~~had~~price ~~cash~~ of $6100,~~653~~000. Management believes that ~~our existing cash on hand and ongoing revenues will be sufficient to fund our operations through December 2016. Management believes that~~ the Company will need at least ~~another~~ another $500,000 to $1,000,000 in 2017 to fund operations based on our current operating plans. Management’s plans to continue as as a going concern include raising additional capital through borrowings and/or the sale of common stock. No assurance can be ~~given~~ given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. ~~Even~~ Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our ~~stockholders~~stock holders, in case of an equity financing.

Operating Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, we used $~~802~~2,~~161~~791 of cash in operating activities. Non-cash adjustments included $6718,~~643 related~~184 related to depreciation and amortization, $~~429~~338,~~255~~795 for stock ~~based~~ compensation expense, $~~467~~104,~~805~~739 related change in fair value of derivative liabilities, and net changes in operating assets and liabilities of $~~532~~153,~~754~~457.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, we used $1512,~~783,579~~670 of cash in operating activities. Non-cash adjustments included $8622,~~490~~816 related to depreciation and amortization, $~~559~~368,~~195~~570 for stock ~~based~~ compensation expense, $~~580~~181,~~492~~947 related to ~~change~~gain inon ~~fair value of~~ derivative liabilities, and net changes in operating assets and liabilities of $~~674~~62,~~951~~071.

Financing Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, we ~~received~~had ~~$615,800~~no ~~of cash in financing activities, including $500,000 in~~ proceeds ~~from~~ ~~issuance of common stock, $50,000 in proceeds~~ from ~~issuance~~financing ~~of notes payable, and $65,800 in proceeds from exercise of warrants for cash~~activities.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, we ~~used $978,012 of cash in financing activities. We~~ received $1500,~~032,~~000 in proceeds from issuance of common stock. ~~We used $10,000 to repay convertible notes, and $43,988 in payments on note payable.~~

Critical Accounting Policies and Estimates

The Company prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company’s condensed consolidated financial statements.

Revenue

~~The~~Copyright ~~Company provides a service to copyright owners under which copyright owners retain the Company to identify and collect~~ settlement ~~payments~~ from Internet users who have infringed on their copyrights. Revenue is recognized when the Company collects a settlement fee which acts as a waiver of the infringement. Generally, the Company has agreed to remit 50% of such collections to the copyright holder.revenue

The Company provides a service to copyright owners under which copyright owners retain the Company to identify and collect settlement payments from Internet users who have infringed on their copyrights. Revenue is recognized when the Company collects a fee from an infringer which acts as a settlement of the infringement liability. Generally, the Company has agreed to remit 50% of such collections to the copyright holder. The Company also provides services to copyright holders. Service fee revenue is recognized when the service has been provided.

Consulting revenue

Revenue is recognized in the period services are rendered and earned under service arrangements with clients where service fees are fixed or determinable and collectability is reasonably assured.

Stock-Based Compensation

The fair value of the Company’s common stock option and warrant grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

Derivative Financial Instruments

Recent Accounting Pronouncements

See Footnote 21 of the condensed consolidated financial statements for a discussion of recently issued accounting standards.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, the Company is not required to provide this disclosure.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives.

As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, with the participation of our Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.5

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended ~~September~~March 3031, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

~~We are involved in the following legal proceeding~~None.

John Blaha v. Rightscorp, Inc., C.D. Cal. (Original Complaint Filed November 21, 2014; First Amended Complaint Filed March 9, 2015).

WINDSTREAM SERVICES, LLC Plaintiff V. BMG RIGHTS MANAGEMENT (US) LLC, et al. Defendant, S.D. NY. (Original Complaint Filed June 27, 2016).

Progress of Matter to Date: Company waived service of process on July 6, 2016. A pre-trial conference has yet to be scheduled. The Company believes the case is without merit.

ITEM 1A. RISK FACTORS.

Not required for a smaller reporting company.

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

During the three months ended ~~September~~March 3031, ~~2016~~2017, the Company issued 13,000,000 shares of common stock ~~upon~~to ~~exercise~~a ofconsultant ~~warrants~~for ~~with an exercise price of $0~~services.~~01.~~

In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

No.		Description

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RIGHTSCORP, INC.
Dated: November 14, 2016	By:	/s/ Christopher Sabec
Dated: May 15, 2017	By:	/s/ Cecil Kyte
	Name:	Christopher Sabec
	Title:	Chief Executive Officer (principal executive officer)
Dated: November 14, 2016	By:	/s/ Cecil Kyte
	Name:	Cecil Kyte
	Title:	Chief Executive Officer and Chief Financial Officer (~~principal~~Principal ~~financial~~Executive, Financial and ~~accounting~~Accounting ~~officer~~Officer)

108

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