fuboTV Inc. /FL - Quarter Report: 2015 September (Form 10-Q)

10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2015


☐	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: 000-55353

CAROLCO PICTURES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Florida	26-4330545
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)


1395 Brickell Avenue Suite 800, Miami, Florida	33131
(Address of Principal Executive Office)	(Zip Code)

(877) 535-1400

(Registrant’s Telephone Number, Including Area Code)

5550 Glades Road, Ste. 500, Boca Raton 33431

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)

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

As of November 16, 2015, there were 59,851,625 shares of the registrant’s common stock, par value $.0001 per share, outstanding.

Transitional Small Business Disclosure Format. Yes ☐ No ☒

CAROLCO PICTURES, INC.

INDEX


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014	4

	Condensed Consolidated Statements of Operations for the Three Months Ended and Nine Months Ended September 30, 2015 and 2014 (unaudited)	5

	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2015 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

Signatures		30

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this quarterly report on Form 10-Q. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this quarterly report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, as amended, for the fiscal year ended December 31, 2014, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report on Form 10-Q and in other reports that we file with the Securities and Exchange Commission (the “SEC”). You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this quarterly report on Form 10-Q, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Carolco Pictures, Inc.

Condensed Consolidated Balance Sheets


		September 30,		December 31,
		2015		2014
		(Unaudited)
ASSETS
Current Assets:
Cash	$	162,699	$	160,377
Accounts receivable		-		11,248
Deposit for project		250,000		-
Debt issuance costs		17,210		-
Prepaid expenses and other current assets		124,713		55,380
Total current assets		554,622		227,005
Computer Equipment
Computer equipment		14,866		12,217
Accumulated depreciation		(10,699)		(9,697)
Computer equipment, net		4,167		2,520
Other Assets
Goodwill		319,237		319,237
Total other assets		319,237		319,237
Total Assets	$	878,026	$	548,762

LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
Current Liabilities:
Accounts payable and other current liabilities	$	42,876	$	17,328
Accrued interest		5,576		7,292
Accrued interest - related party		11,650		-
Accrued payroll – related party		125,000		150,000
Deferred revenue		109,172		63,699
Advances from related parties		30,567		110,847
Note payable		47,258		20,340
Convertible notes payable, net of discount of $286,768		48,724		-
Convertible notes payable - related party		530,919		150,300
Derivative liabilities		1,286,966		-
Total current liabilities		2,238,708		519,806
Total liabilities		2,238,708		519,806

Commitments and contingencies

Stockholders’ Equity (Deficit):
Preferred stock, $.0001 par value; 50,000,000 shares authorized; none issued or outstanding at September 30, 2015 or December 31, 2014, respectively		-		-
Common stock, $.0001 par value; 350,000,000 shares authorized; 59,851,625 shares issued and outstanding at September 30, 2015 and 54,239,500 issued and outstanding at December 31, 2014, respectively		5,985		5,424
Additional paid-in capital		4,682,257		4,134,442
Common stock receivable		-		(8,015)
Accumulated deficit		(5,945,254)		(4,016,719)
Total Carolco Pictures stockholders’ equity (deficit)		(1,257,012)		115,132

Noncontrolling Interest in Subsidiaries
Noncontrolling interest - capital stock in consolidated subsidiaries		250		250
Noncontrolling interest - additional paid-in capital in consolidated subsidiaries		37,500		37,500
Noncontrolling interest - accumulated deficit in consolidated subsidiaries		(141,420)		(123,926)
Noncontrolling Interest in Subsidiaries		(103,670)		(86,176)
Total Equity (deficit)		(1,360,682)		28,956
Total liabilities and stockholders’ equity (deficit)	$	878,026	$	548,762

See accompanying notes to condensed consolidated financial statements

Carolco Pictures, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2015		2014		2015		2014
Revenue
Revenues	$	366,169	$	374,235	$	768,529	$	644,887
Total revenue		366,169		374,235		768,529		644,887

Cost of goods sold		286,147		212,425		623,381		385,215
Gross margin		80,022		161,810		145,148		259,672

Operating expenses
Compensation		39,623		605,149		427,519		2,107,540
Professional fees		71,395		39,239		361,251		519,665
General and administrative		36,889		27,284		265,329		119,315
Total operating expenses		147,907		671,672		1,054,099		2,746,520
Loss from operations		(67,885)		(509,862)		(908,951)		(2,486,848)
Other (income) expense
Interest expense		49,906		3,371		172,118		8,573
Change in fair value of derivative liabilities		(216,354)		-		(228,689)		-
Interest expense - related party		1,083,008		-		1,093,393		-
Bad debt recovery				(7,729)				(7,729)
Other (income) expense		-		-		256		(76,000)
Other (income) expense, net		916,560		(4,358)		1,037,078		(75,156)
Loss before income tax provision and non-controlling interest		(984,445)		(505,504)		(1,946,029)		(2,411,692)
Income tax provision
Net loss
Net loss before non-controlling interest		(984,445)		(505,504)		(1,946,029)		(2,411,692)
Net income (loss) attributable to non-controlling interest		4,931		11,653		(17,494)		(18,579)
Net loss attributable to Carolco Pictures stockholders	$	(989,376)	$	(517,157)	$	(1,928,535)	$	(2,393,113)

Net loss per common share - basic and diluted	$	(0.02)	$	(0.02)	$	(0.03)	$	($0.08)

Weighted-average common shares outstanding -basic and diluted		58,837,772		30,974,500		58,164,613		30,897,525

See accompanying notes to condensed consolidated financial statements

Carolco Pictures, Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

For the Nine Months Ended September 30, 2015

(Unaudited)


	Carolco Pictures, Inc. Stockholders’ Equity												Non-controlling Interest
	Common Shares,										Carolco
	$.0001 Par										Pictures, Inc.
	Value Per Share				Additional		Common				Stockholders’				Additional				Non		Total
	Shares				Paid-In		Stock		Accumulated		Equity		Common		Paid-In		Accumulated		Controlling		Equity
	Issued		Amount		Capital		Receivable		Deficit		(Deficit)		Stock		Capital		Deficit		Interest		(Deficit)

Balance January 1, 2015	54,239,500	$	5,424	$	4,134,442	$	(8,015)	$	(4,016,719)	$	115,132	$	250	$	37,500	$	(123,926)	$	(86,176)	$	28,956

Common stock issued for cash	3,555,500		355		194,810						195,165										195,165

Common stock issued for non-employee services	1,776,000		178		194,902						195,080										195,080

Warrant issued for non-employee services					8,631						8,631										8,631

Common stock issued in Unit Offering at $0.80 per Unit	30,625		3		24,497						24,500										24,500

Common stock issued in Unit Offering at $0.50 per Unit	250,000		25		124,975						125,000										125,000

Reduction in subscription receivable							8,015				8,015										8,015

Net loss									(1,928,535)		(1,928,535)						(17,494)		(17,494)		(1,946,029)

Balance Sept 30, 2015	59,851,625	$	5,985	$	4,682,257	$	-	$	(5,945,254)	$	(1,257,012)	$	250	$	37,500	$	(141,420)	$	(103,670)	$	(1,360,682)

See accompanying notes to condensed consolidated financial statements

Carolco Pictures, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Nine Months Ended September 30,
		2015		2014
Cash flows from operating activities:
Net loss before noncontrolling interest	$	(1,946,029)	$	(2,411,692)

Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liabilities		(228,689)
Amortization of debt discount and debt issuance cost		1,229,525
Depreciation expense		1,002		2,425
Share based compensation		195,080		2,251,735
Warrants issued for services		8,631
Write-off of subscription receivable		8,015

Changes in operating assets and liabilities:
Accounts receivable		11,248		(51,386)
Prepaid expenses and other current assets		(69,333)		(1,317)
Debt issuance cost		(17,210)
Accounts payable		25,548		(102,461)
Accrued interest		(1,716)
Accrued interest - related party		24,765
Accrued payroll – related party		(25,000)
Deferred revenue		45,473

Net cash used in operating activities		(738,690)		(107,774)

Cash flows from investing activities:
(Purchase) disposal of computer equipment		(2,649)		(1,203)
Investment in project		(250,000)		(50,000)

Net cash used in investing activities		(252,649)		(51,203)

Cash flows from financing activities:
Advances from (repayments to) related parties		(80,280)		50,000
Proceeds from note payable - related party		379,700		200,000
Repayment of note payable – related party		-		(1,548)
Proceeds from issuance of notes payable		26,918		-
Proceeds from issuance of convertible notes payable		322,658		-
Proceeds from private placements of common stock		195,165		40,000
Proceeds from sale of units of common stock and warrants		149,500
Contribution to capital				76,000

Net cash provided by financing activities		993,661		364,452

Net cash increase (decrease) in cash and cash equivalents		2,322		205,475
Cash and cash equivalents - beginning of period		160,377		135,612
Cash and cash equivalents - end of period	$	162,699	$	341,087

Supplemental disclosures of cash flow information:
Interest paid in cash	$	5,010	$	2,722
Taxes paid in cash	$	-	$	-

Non Cash Investing and Financing Activities
Common stock issued for services	$	195,080	$	2,251,735
Warrants issued for services	$	8,631	$	-
Legal services paid in stock	$	12,495	$	-
Debt discount due to convertible feature	$	286,768	$	-

See accompanying notes to condensed consolidated financial statements

Carolco Pictures Inc.

Notes to the Condensed Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Note 1 - Organization and Operations

Carolco Pictures, Inc. (f/k/a Brick Top Productions, Inc.)

Carolco Pictures, Inc. (formerly “Brick Top Productions, Inc” or the “Company”) was incorporated under the laws of the State of Florida on in February 2009 under the name “York Entertainment, Inc.” The Company changed its name to Brick Top Productions, Inc. in October 2010. In January 2015, the Company changed its name from Brick Top Productions, Inc. to Carolco Pictures, Inc. In addition, in January 2015, the Company changed its stock symbol from “BTOP” to “CRCO.”

Acquisition of a Majority Equity Interest of York Productions, LLC

York Productions, LLC (“York”) was organized under the laws of the State of Florida in October 2008. On June 1, 2010, the Company acquired 6,000 Class A units of York for $75,000, representing a 60% equity interest. York is currently inactive.

Formation of York Productions II, LLC

York Productions II, LLC (“York II”) was organized under the laws of the State of Florida in June 2013. The Company owns 6,000 Class A units of York II, representing a 60% equity interest. York II is currently inactive.

Acquisition of a Majority Equity Interest of S&G Holdings, Inc.

S&G Holdings, Inc., doing business as High Five Entertainment (“S&G”), was organized under the laws of the State of Tennessee in January 2005. On December 24, 2013, the Company acquired 75% of the issued and outstanding shares of common stock of S&G for $235,000 including $210,000 to the stockholders of S&G and $25,000 to a brokerage firm in connection with the acquisition. The Company also agreed to make a capital contribution of $100,000 to S&G at closing as well as an additional $365,000 capital contribution prior to September 2014.

S & G Holdings, Inc.

S & G Holdings, Inc. (“S&G”) was incorporated in Tennessee in January 2005. It was formed for the sole purpose of acquiring all of the assets, rights and properties of HFE Holdings, LLC, a limited liability company organized under the laws of the State of Tennessee (“HFE”). HFE produces programming for television and other media.

On December 31, 2004, S&G, an unincorporated company, completed the acquisition of HFE. The Company acquired the accounts receivable, inventories, prepaid expenses, contract rights, tangible and intangible property of HFE and 100% of the equity interest of High Five Television, LLC (“Television”), a limited liability company organized under the laws of the State of Tennessee. In connection with the consummation of the acquisition of HFE the Company agreed to pay (i) $18,800 in cash at closing and (ii) a royalty in the amount of $1,200,000; $81,200 of which was paid at closing and the remaining balance of $1,118,800 to be paid with (a) 3% of all gross billing to be paid quarterly based on the prior quarter’s receipts and (b) $6,500 as a royalty for one specific series. Television is inactive.

Note 2 - Summary of Significant Accounting Policies

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below.

Basis of presentation- Unaudited Interim Financial Information

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The condensed consolidated financial statements as of September 30, 2015 and for the nine month periods ended September 30, 2015 and 2014 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2015, and the results of operations for the three and nine month periods ended September 30, 2015 and 2014, the statement of shareholders’ equity (deficiency) for the nine months ended September 30, 2015 and the statements of cash flows for the nine month periods ended September 30, 2015 and 2014. The condensed consolidated results of operations for the nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet as of December 31, 2014 has been derived from the Company’s audited financial statements for the year ended December 31, 2014. Certain prior year balances have been reclassified to conform with the current year presentation. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with our audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2014 as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K/A which was filed on April 3, 2015.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business;

(ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

(iii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

(iv) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share warrants and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Principles of Consolidation

The Company applies the guidance of FASB Accounting Standards Codification (“ASC”) 810—Consolidation to determine whether and how to consolidate another entity. Pursuant to this guidance, with certain exceptions, all majority-owned or all entities in which a parent has a controlling financial interest shall be consolidated. Pursuant to ASC 810, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50% of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.

The Company’s consolidated subsidiaries are as follows:


Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition, if applicable)	Attributable interest
York Productions, LLC	The State of Florida	October 22, 2008 (June 1, 2010)	60%
York Productions II, LLC	The State of Florida	June 13, 2013	60%
S&G Holdings, Inc.	The State of Tennessee	January 4, 2005 (December 24, 2013)	75%

The consolidated financial statements include all accounts of the Company, S&G and York as of the reporting period ending date(s) and for the reporting period(s) then ended.

All inter-company balances and transactions have been eliminated in consolidation.

Business Combinations

The Company applies ASC 805—Business Combinations for transactions that represent business combinations to be accounted for under the acquisition method. Pursuant to ASC 805 in order for a transaction or other event to be considered as a business combination it is required that the assets acquired and liabilities assumed constitute a business. Upon determination of transactions representing business combinations the Company then (i) identifies the accounting acquirer; (ii) identifies and estimates the fair value of the identifiable tangible and intangible assets acquired, separately from goodwill; (iii) estimates the business enterprise value of the acquired entities; (iv) allocates the purchase price of acquired entities to the tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values at the date of acquisition. The excess of the liabilities assumed and the purchase price over the assets acquired was recorded as goodwill and the excess of the assets acquired over the liabilities assumed and the purchase price was recorded as a gain from bargain purchase.

Inherent Risk in the Estimates

Management makes estimates of fair values based upon assumptions believed to be reasonable. These estimates are based on historical experience and information obtained from the management of the acquired companies. Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from revenues, customer relationships, key management and market positions, assumptions about the period of time the acquired trade names will continue to be used in the Company’s combined portfolio of products and/or services, and discount rates used to establish fair value. These estimates are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

Fair Value of Financial Instruments

FASB ASC 820—Fair Value Measurements establishes a framework for measuring the fair value of financial instruments and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three levels of fair value hierarchy defined are as follows:


Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, deposit for project, debt issuance cost, prepaid expenses, accounts payable, accrued interest, deferred revenues and accrued payroll, approximate their fair values because of the short maturity of these instruments.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted ASC 360—Property, Plant and Equipment for its long-lived assets. The Company’s long-lived assets, which include computer equipment and goodwill are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

Management will periodically review the recoverability of the capitalized movie pilot costs. Management takes into consideration various information. If it is determined that a project or property will be abandoned, or its carrying value impaired, a provision will be made for any expected loss on the project or property.

The impairment charges, if any, is included in operating expenses in the accompanying statements of operations.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives of three (3) to five (5) years. Upon sale or retirement of computer equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

Capitalized Movie Pilot Costs - Film Property and Screenplay Rights

The Company capitalizes costs it incurs to buy film or transcripts that will later be marketed or be used in the production of films according to ASC 926—Entertainment – Films. The Company will begin to amortize capitalized film cost when a film is released and it begins to recognize revenue from the film.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the net assets at the date of acquisition. Under the provisions of ASC 350—Intangibles—Goodwill and Other, goodwill acquired in a business combination with indefinite useful lives are not amortized; rather, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired.

Derivatives/Liabilities

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible Notes), in accordance with ASC 815. The objective is to provide guidance for determining whether ran equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability with the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

The derivative liabilities result in a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market each quarter with the change in fair value recorded in the income statement. Unamortized discount is amortized to interest expense using the effective interest method over the life of the Convertible Note. If the Note is converted or the warrants are exercised, the derivative liability is released and recorded as additional paid in capital.

Related Parties

The Company follows the provisions of ASC 850—Related Party Transactions & Disclosures relating to the identification of related parties and disclosure of related party transactions.

Our financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows the guidance of ASC 450—Contingencies when accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Non-Controlling Interest

The Company reports the non-controlling interest in its majority owned subsidiaries in the consolidated balance sheets within the equity section, separately from the Company’s stockholders’ equity. Non-controlling interest represents the non-controlling interest holders’ proportionate share of the equity of the Company’s majority-owned subsidiaries. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. In addition to the aforementioned general policy, the following is the specific revenue recognition policy:

Revenues from the sale of programming for television and other media are recognized when

Persuasive evidence of an arrangement exists;

The show/episode is complete, and in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery;

The price to the customer is fixed and determinable; and

Collectability is reasonably assured.

Stock-Based Compensation for Obtaining Employee Services

The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of ASC 718—Stock-based Compensation. Accordingly, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. The expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC 718, a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the option and similar instruments.

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the option and similar instruments.

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of ASC 505-50.

Accordingly, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.

Pursuant to ASC paragraph 505-50, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50) depends on the specific facts and circumstances. Under the guidance, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

Consistent with ASC 505-50, share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty’s performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Deferred Tax Assets and Income Tax Provision

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns pursuant to the provisions of ASC 740—Income Taxes. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to the unrecognized tax liabilities or benefits pursuant to the provisions of ASC 740 for the three or nine month reporting periods ended September 30, 2015 or December 31, 2014, respectively.

Net Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.


Contingent shares issuance arrangement, warrants
	For the Reporting Period Ended September 30, 2015	For the Reporting Period Ended September 30, 2014
Warrant Shares	1,461,109	1,491,350
Convertible Notes Payable Shares	4,469,804	-
Total contingent share issuance arrangements or warrants	5,930,913	1,491,350

There were approximately 5,930,913 and 1,491,350 potentially outstanding dilutive common shares under the Treasury Stock Method for the reporting period ended September 30, 2015 and 2014, respectively. The potentially outstanding dilutive common shares under the Treasury Stock Method for the reporting period ended September 30, 2015 and 2014 were excluded from the diluted earnings per share calculation as they were anti-dilutive.

Subsequent Events

The Company will evaluate and disclose if indicated, subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Accounting Standards Update

In April 2015, the FASB issued the FASB Accounting Standards Update No. 2015-03 “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”).To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.

In August 2015, the FASB issued the FASB Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”).The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

Note 3 – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit at September 30, 2015 of ($5,945,254), a net loss of ($989,376) and net cash used in operating activities of ($721,480) for the reporting periods then ended. These conditions raise substantial doubt about its ability to continue as a going concern.

The Company is attempting to produce sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to produce sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds.

The audit report of our independent registered public accounting firm, dated March 31, 2015, included an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern.

The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 - Business Acquisitions

Acquisition of S&G Holdings, Inc.

On December 24, 2013, the Company acquired 75% of the issued and outstanding shares of common stock of S&G for $210,000. The Company also agreed to make a capital contribution of $100,000 to S&G at closing as well as an additional $365,000 capital contributions prior to September 2014. In addition, the Company paid $25,000 to a third party as commission for bringing in the acquisition.

Identification of the Accounting Acquirer

The Company used the existence of a controlling financial interest to identify the acquirer—the entity that obtains control of the acquiree in accordance with ASC 805 and identifies the acquisition date, which is the date on which it obtains control of the acquiree. The management of the Company specifically addressed (i) the ownership interest of each party after the acquisition; (ii) the members of the board of directors from both companies; and (iii) senior management from both companies and determined that Carolco Pictures Inc. was the accounting acquirer for the merger between Carolco Pictures Inc. and S&G.

Intangible Assets Identification, Estimated Fair Value and Useful Lives

The Company determined that there were no separate recognizable intangible assets that possessed economic value from S&G.

Business Enterprise Valuation

The Company determined that the business enterprise value of S&G approximates its net book value.

Allocation of Purchase Price

The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 by allocating the purchase price over the assets acquired, including intangible assets and liabilities assumed, based on their estimated fair values at the date of acquisition. The excess of the liabilities assumed and the purchase price over the net assets acquired was recorded as goodwill. The purchase price has been allocated to the assets and liabilities as follows:


Total assets acquired	$	42,457
Goodwill		319,237
Total liabilities assumed		(126,694)
Acquisition price	$	235,000

Note 5 – Deposit for Project

In April 2015, the Company entered into an agreement with Mr. Mario Kassar, the Chairman of the Company, initially providing the $250,000 in funding provided for future projects be allocated to the production of the Company’s “Audition” project.

Note 6 – Property and Equipment

Depreciation and amortization expense for the nine month periods ended September 30, 2015 and 2014 totaled $1,002 and $2,425, respectively.

Note 7 – Goodwill

Goodwill, stated at cost, less accumulated impairment consisted of the following:


		September 30, 2015		December 31, 2014
Acquisition of S&G
Goodwill	$	319,237	$	319,237
Accumulated impairment		-		-
	$	319,237	$	319,237

Impairment

The Company completed the annual impairment test of goodwill and determined that there was no impairment as the fair value of goodwill exceeded their carrying values at December 31, 2014.

Note 8 – Notes Payable

The Company maintains two lines of credit with local financial institutions. The lines carry a variable interest rate. The balance due on these lines of credit totaled $47,258 and $20,340 at September 30, 2015 and December 31, 2014, respectively.

Note 9- Convertible Notes Payable

On May 6, 2015, the Company issued an unsecured convertible promissory note in the principal amount of $91,242 to St. George Investments, LLC (the “Lender”). The note bears interest at 10% per annum and matures eleven months from the effective date of the agreement. Under the terms of the note, there was an original issue discount (“OID”) of $8,022 withheld at funding and the Company agreed to pay $3,000 to the Lender to cover the Lender’s legal fees and other transaction related costs. The Company recognized the OID as a note discount and the $3,000 fee as debt issuance costs. Both the note discount and issuance costs recognized in the transaction are being accreted to interest expense over the life of the note. In addition, the Company paid an $8,022 finders’ fee in the transaction which has been recorded in debt issuance costs and is being accreted to interest expense of the life of the note.

The Company may, at its option, prepay the note at 125% of the then outstanding balance.

The note is convertible by the Lender into common stock of the Company at the lesser of $0.45 per share or, in the event the Company’s market capitalization falls below $15 million, at a defined Lender conversion price.

On May 12, 2015, the Company issued a convertible promissory note in the principal amount of $104,000 to the Vis Viris Group, Inc. (“VVG”). The note bears interest at 8% per annum, increased to 22% in the event of default, and matures February 14, 2016. VVG deducted $2,000 from the proceeds to cover their legal and other transaction related costs which was recorded as debt issuance costs and is being accreted to interest expense over the life of the note.

The note is convertible by VVG into common stock of the Company through the later of the note maturity date or the payment of the defined amount in the event of default. The note carries a variable conversion price defined as 61% of the market price (representing a 39% discount), with market price being defined as the average of the lowest three trading days for the Company’s common stock during the 10 day period prior to the conversion date. The Company may, at its option, prepay the note, given three trading days’ notice at 109% to 134% of the then outstanding balance. The prepayment penalty is calculated based on the period of time the note was outstanding.

On June 22, 2015, the company issued a convertible promissory note in the amount of $87,750 to the Auctus Fund, LLC (“Auctus”). The note bears interest at 8% per annum, increased to 24% in the event of default, and matures on March 22, 2016. Auctus deducted $7,750 from the proceeds to cover their legal and other transaction related costs which were recorded as debt issuance costs and is being accreted to interest expense over the life of the note. In addition, the Company paid an $8,000 finders’ fee in this transaction which has been recorded in debt issuance costs and is being accreted to interest expense over the life of the note.

The note is convertible by Auctus into common stock of the Company through the later of the note maturity date or the payment of the defined default amount in the event of default. The note carries a variable conversion price defined as 50% of the market price (representing a 50% discount), with market price being defined as the lowest trading price of our common stock during the 25 trading day period prior to the conversion date.

On July 10, 2015, the Company issued a convertible promissory note in the principal amount of $52,500 to the Vis Viris Group, Inc. (“VVG”). The note bears interest at 8% per annum, increased to 22% in the event of default, and matures April 13, 2016. VVG deducted $1,250 from the proceeds to cover their legal related costs which were charged to interest expense.

On July 9, 2015, the Company issued five convertible promissory notes to the Company’s CEO in exchange for his existing promissory notes and related accrued interest. The convertible promissory notes were issued in the amounts of $188,597, $155,875, $102,042, $51,076 and $45,525 (the “replacement notes”). The replacement notes have a maturity of October 1, 2015 and an annual interest rate of 5% per annum. The noteholder has the right until the note(s) is fully paid, to convert any outstanding and unpaid principal portion of the note, and accrued interest, into fully paid and non-assessable shares of our common stock. The replacement notes have a conversion price of 50% of the lowest closing bid stock price over the last twenty days prior to conversion. The notes may not be prepaid.

The embedded conversion features, reset feature and redemption penalties in the foregoing notes should be accounted for as a derivative liability due to the redemption, full reset and conversion provision based on FASB guidance.

Convertible notes payable consisted of the following:


		09/30/2015		12/31/2014
Notes Face amount	$	335,492	$	-
Discount representing the derivative liability on conversion features		(330,660)		-
Accumulated amortization of discount of convertible notes payable (*)		43,592		-
Remaining discount		(286,768)		-
Convertible notes payable, net	$	48,724	$	-

(*) The discount is being amortized to interest expenses using the effective interest rate method over the life of the debt instruments.

Interest expense recognized under these note agreements totaled $34,279 and $148,528 for the three and nine month periods ended September 30, 2015, respectively.

Note 10- Derivative Liabilities

Derivative Analysis-Embedded conversion feature in convertible notes

In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase its common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

The Company’s derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock over the life of the option.

As of September 30, 2015, the Company’s derivative financial instruments are embedded derivatives associated with the Company’s convertible notes describe in Note # 9.

Valuation Methodology

The Company has utilized a third party valuation consultant to assist the Company to evaluate the fair value of the compound embedded derivatives using a multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. These models are based on future projections of the various potential outcomes.

The model analyzes the underlying economic factors that influence which of these events would occur, when they are likely to occur, and the specific terms that would be in effect at the time (i.e. interest rates, stock price, conversion price, etc.). Projections are then made on these underlying factors which lead to a set of potential scenarios. Probabilities are assigned to each of these scenarios over the remaining term of the note based on management projections. This lead to a cash flow projection over the life of the note and a probability associated with that cash flow. A discounted weighted average cash flow over the various scenarios is completed, and it is compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability at the date of valuation.

Valuation Assumptions

The existing derivative instruments are valued as of issuance and the quarters end 09/30/15. The following assumptions were used for the valuation of the derivative liability related to the Notes:

The notes convert with an initial conversion price of 50%-65% of the average or low of the 1-3 lowest bid out of the 10-25 previous days;

An event of default would occur 1% of the time, increasing 1.00% per month to a maximum of 10%;

The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range 109%-271%.

The company would not redeem the notes prior to maturity and would have no reset events; and The Holder would not automatically convert the note at the maximum of 2 times the fixed conversion price.

Risk free rates for the remaining term of the notes was in the range of 0.00% to 0.22%

Summary of the Changes in Fair Value of Level 3 Financial Liabilities

The table below provides a summary of the changes in the fair value of the derivative financial instruments and the changes in the fair value of the derivative financial instruments, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


		Fair Value Measurement Using Level 3 Inputs
		Derivative warrants Assets (Liability)		Total
Balance, January 1, 2015		-		-
Purchases, issuances and settlements		(1,515,655)		(1,515,655)
Transfers in and/or out of Level 3		-		-
Total gains or losses (realized/unrealized) included in:
Net income (loss)		228,689		228,689
Other comprehensive income (loss)		-		-
Balance, September 30, 2015	$	(1,286,966)	$	(1,286,966)

Note 11 - Related Party Transactions

Advances from related parties

From time to time, the former CEO of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.

Advances from the former CEO consisted of the following:


		September 30, 2015		December 31, 2014
Advances from former chairman, chief executive officer and stockholder	$	30,567	$	110,847
	$	30,567	$	110,847

Convertible Notes Payable - Related Party

On October 1, 2014, the Company’s former CEO loaned the Company $150,000, in consideration for which the Company issued to its former CEO a Promissory Note in the principal amount of $150,000, with interest at 5.0% per annum maturing on October 1, 2015, at which time a balloon payment of all outstanding principal and interest shall be due.

During the quarter ended March 31, 2015, the Company’s former CEO made a series of additional loans to the Company for working capital purposes totaling $335,000. In connection with these loans, the Company issued promissory notes with interest at 5% per annum maturing on October 1, 2015.

In April 2015, the Company’s former CEO made three additional advances to the Company for working capital purposes totaling $45,000. In connection with these loans, the Company issued a promissory note which bears interest at 5% per annum, maturing October 1, 2015.

On July 9, 2015, the Company issued five convertible promissory notes to the Company’s former CEO in exchange for his existing promissory notes and related accrued interest. The convertible promissory notes were issued in the amounts of $188,597, $155,875, $102,042, $51,076 and $45,525 (the “replacement notes”). The replacement notes have a maturity of October 1, 2015 and an annual interest rate of 5% per annum. The noteholder has the right until the note(s) is fully paid, to convert any outstanding and unpaid principal portion of the note, and accrued interest, into fully paid and non-assessable shares of our common stock. The replacement notes have a conversion price of 50% of the lowest closing bid stock price over the last twenty days prior to conversion. The notes may not be prepaid. Effective October 1, 2015, these notes were in default.

Convertible notes payable- related party consisted of the following:


		09/30/2015		12/31/2014
Notes Face amount	$	543,115	$	150,030
Discount representing the derivative liability on conversion features		(543,115)		-
Accumulated amortization of discount of convertible notes payable (*)		530,919		-
Remaining discount		0		-
Convertible notes payable, net	$	530,919	$	150,030

(*) The discount is being amortized to interest expenses using the effective interest rate method over the life of the debt instruments.

Interest expense recognized under these note agreements $1,083,008 and $1,093,393 for the three and nine month periods ended September 30, 2015, respectively.

Note 12 - Stockholders’ Equity (Deficit)

Shares Authorized

The Company is authorized to issue 400,000,000 shares, of which 50,000,000 shares are preferred stock, par value $0.0001 per share, and 350,000,000 shares are common stock, par value $0.0001 per share.

Sale of Common Stock or Equity Unit Inclusive of Common stock and Warrants

At September 30, 2015 and December 31, 2014, the Company had 59,851,625 and 54,239,500 shares issued and outstanding, respectively. Holders are entitled to one vote for each share of common stock held.

During the nine month period ended September 30, 2015, the Company sold 3,555,500 common shares for the cash amount of $195,165 at purchase prices ranging from $0.005 to $0.20 per share.

During February 2015, the Company sold 15,000 units at $0.80 per unit, for a total of $12,000. Each unit consisted of one share of common stock, one Class A warrant and one Class B warrant. The warrants are exercisable for two years from issuance at $3.00 and $6.00 per common share, respectively.

During March 2015, the Company sold an additional 12,500 units at $0.80 per unit and 250,000 units at $0.50 per unit for a combined total of $135,000. Each unit consisted of one share of common stock, one Class A warrant and one Class B warrant. The warrants are exercisable for two years from issuance at $3.00 and $6.00 per common share, respectively.

During April 2015, the Company sold 3,125 units at $0.80 per unit for a total of $2,500. Each unit consisted of one share of common stock, one Class A warrant and on Class B warrant. The warrants are exercisable for two years from issuance at $3.00 and $6.00 per share, respectively.

Stock-Based Compensation for Obtaining Employee Services

Effective as of February 13, 2015, the Company’s Board of Directors appointed Mario Kassar as the Chairman of the Board of Directors of the Company. In consideration for his services, the Company irrevocably issued 500,000 shares of the Company’s unregistered Common Stock, $0.0001 par value per share, and the option to purchase all or any part of 400,000 shares of the Company’s common stock at an exercise price of $1.00 per share, exercisable until 10 years after the Effective Date.

Under the provisions of ASC 505 and the terms of the agreement with Mr. Kassar, the measurement date was determined to be the contract date, with no vesting or forfeiture provisions or significant disincentives for non-performance. Accordingly, the fair value of the issuance of $0.08 per share based on market price, was charged to compensation expense on the effective date of the agreement.

In addition, the 400,000 options issued to Mr. Kassar were fair valued on the date of grant using the Black-Scholes option pricing valuation model. The fair value of the options granted totaled $8,631. Assumptions and inputs used included expected term of 10 years, risk-free interest rate of 1.68%, expected dividends of 0.00%, and volatility of 62.9%. The options fully vested on the grant date absent forfeiture or performance criteria. Accordingly, the entire fair value of the grant, based on a fair value of $0.02 per share was charged to compensation expense on the effective date of the agreement.

In April 2015, the Company entered into an agreement with Mr. Mario Kassar, the Chairman of our Board of Directors. The agreement addressed funding of the Company’s “Audition” film project and provided for the issuance of 100,000 common shares to Mr. Kassar under the terms of the agreement. Under the provisions of ASC 505 and the terms of the agreement, the measurement date was determined to be the contract date, with no vesting or forfeiture provisions or significant disincentives for non-performance. Accordingly, the fair value of the issuance of $0.08 per share based on market price, or $8,000, was charged to stock-based compensation on the effective date of the agreement.

Issuance of Common Stock to Parties Other Than Employees for Acquiring Goods or Services

From March 2015through July 2015, the Company entered into five investor relations related consulting agreements issuing 1,776,000 shares of common stock. Under the provisions of ASC 505 and the terms of the agreements, the measurement date was determined to be the contract date, with no vesting or forfeiture provisions or significant disincentives for non-performance. Accordingly, the fair value of the issuances totaling $195,080, was charged to expense on the effective date of the agreements.

Warrants Issued for Obtaining Employee Services

On January 10, 2014, the Company awarded S&G’s President a warrant to purchase 1,491,350 common shares with an exercise price at $0.01 per share expiring five years from the date of issuance.

The Warrant vested as follows: (i) on March 31, 2014, the right to exercise the Warrant and to receive 50% of the Warrant Shares vested; (ii) on June 30, 2014, the right to exercise the Warrant and to receive an additional 25% of the Warrant Shares vested; and (iii) on September 30, 2014, the right to exercise the Warrant and to receive the remaining 25% of the Warrant Shares vested.

The Company estimated the fair value of the stock warrants on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:


		January 10, 2014
Expected life (year) – Simplified method		5%
Expected volatility (*)		68.32%
Expected annual rate of quarterly dividends		0%
Risk-free interest rate(s)		0.77%

As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public companies listed on NYSE MKT and NASDAQ Capital Market within nutritional supplements industry which the Company plans to engage in to calculate the expected volatility. The Company calculated those five (5) comparable companies’ historical volatility over the expected life and averaged them as its expected volatility.

The estimated fair value of the stock warrant was $1,476,735 on the date of grant, which are initially recorded as additional paid-in capital and amortized ratably over the vesting period of 9 months to Compensation - officers.

Summary of the Company’s Stock Warrant Activities

The table below summarizes the Company’s stock warrant activities:


	Number of Warrant Shares	Exercise Price Per Share		Weighted Average Exercise Price		Fair Value at Date of Grant		Aggregate Intrinsic Value
January 10, 2014 Grant	1,491,350	$	0.01	$	0.01	$	1,476,735	$	402,665
February 13, 2015 Grant	400,000	$	1.00	$	1.00	$	8,631		-
February 2015 Unit Offering
Class A	15,000	$	3.00	$	3.00	$	598	$	–
Class B	15,000	$	6.00	$	6.00	$	113	$	–
March 2015 Unit Offering
Class A	262,500	$	3.00	$	3.00	$	2,624	$	–
Class B	262,500	$	6.00	$	6.00	$	381	$	–
April 2015 Unit Offering
Class A	3,125	$	3.00	$	3.00	$	-	$	-
Class B	3,125	$	6.00	$	6.00	$	-	$	-
Balance, September 30, 2015	2,452,600			$	1.19	$	1,709,900	$	402,665

The following table summarizes information concerning outstanding and exercisable warrants as of September 30, 2015:


		Warrants Outstanding				Warrants Exercisable
Range of Exercise Prices		Number Outstanding	Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Average Remaining Contractual Life (in years)	Weighted Average Exercise Price
$	0.01	1,491,350	3.28	$	0.01	1,491,350	3.28	$	0.01
$	1.00	400,000	9.37	$	1.00	400,000	9.37	$	1.00
$	3.00	280,625	1.42	$	3.00	280,625	1.42		3.00
$	6.00	280,625	1.42	$	6.00	280,625	1.42		6.00
		2,452,600	3.85	$	1.91	2,452,600	3.85	$	1.19

Note 13 - Commitments and Contingencies

Lease Agreements

Regus Management Group, LLC

On September 28, 2011, the Company entered into a lease agreement with Regus Management Group, LLC with a monthly base rent of $1,107. The term of the lease is effective from November 1, 2012 to October 31, 2013. The lease has not been renewed and is on a month to month basis.

Town Center Executive Suites

On April 1, 2014, the Company entered into a lease agreement with Town Center Executive Suites. The term of the lease is effective from April 1, 2014 to March 31, 2015. Following expiration of the initial term, the Company is on a month-to-month basis. The monthly rent base payment is $700.

S&G Holdings, Inc. – St. Cloud Partners

On February 1, 2014, the Company entered into a lease agreement with St. Cloud Partners. The term of the lease is effective February 1, 2014 to February 28, 2017. The monthly rent base payment is as follows:


2/1/2014	–	2/28/2015	$	2,847
3/1/2015	–	2/29/2016	$	2,932
3/1/2016	–	2/28/2017	$	3,020

Employment Agreements

Chief Executive Officer

On September 21, 2010, the Company entered into an employment agreement (“Employment Agreement”) with its chief executive officer (“CEO”), which requires that the CEO be paid an annual base salary of $150,000 for three (3) years from date of signing. Employee may extend the Employment Agreement for an additional three (3) years. The contract expired without being extended.

At September 30, 2015 and December 31, 2014, the Company had accrued $125,000 and $150,000, respectively, under the Employment Agreement. During our third fiscal quarter, the Company paid $25,000 to the CEO under this agreement. On October 1, 2011, the Company’s CEO agreed to waive future base salary under his Employment Agreement, until further notice, in an effort to reduce the Company’s operating expenses.

President, S&G Holdings, Inc.

On December 24, 2013, the Company entered into an employment agreement with Martin Fischer, the president of S&G. The agreement is for a five- year term, which may be renewed for an additional five years and requires an annual base salary of $144,000 for year 1, $151,200 for year 2, $158,760 for year 3, $166,698 for year 4 and $175,033 for year 5. The agreement also entitles the president to a cash bonus of up to $100,000 annually based on net income levels and a monthly $500 automobile allowance.

Chief Legal Officer

Effective as of July 14, 2014, the Company’s Board of Directors appointed Frank Esposito as the Company’s Chief Legal Officer. In consideration for his services, the Company entered into an agreement with Esposito, PLLC, d/b/a Esposito Partners, providing for base retainer payments of $5,000 per month. Mr. Esposito resigned his position in October 2015. See Note – Subsequent Events.

Note 14 – Subsequent Events

On October 5, 2015, Alexander Bafer, Carolco Pictures, Inc.’s controlling then shareholder, Chief Executive Officer and director (the “Seller”), entered into and closed separate and distinct Securities Purchase Agreements (the “Agreement”) with individual Purchasers (the “Purchasers”) whereby the Purchasers (individually) purchased in the aggregate from the Seller a total of 35,000,000 shares of the Company’s common stock.

On October 14, 2015 Mr. Martin Fisher resigned his position as director and on October 16, 2015, Mr. Alexander Bafer resigned his position as president and CEO of the Company. Following a resolutions by the Board of Directors, Sam Lupowitz was appointed President, CEO and CFO of the Company. During this period the members of the Board of Directors was modified to include a Board consisting of Sam Lupowitz, Joseph I. Emas, and Mario Kassar.

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

Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” are to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission.

Cautionary Statement Regarding Forward-Looking Statements

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014.

Overview

We were incorporated in Florida in 2009 under the name York Entertainment, Inc. In 2010, we changed our name to Brick Top Productions, Inc. In January 2015, we changed our name to Carolco Pictures, Inc.

We are an award winning feature film and television specials production company. We seek to finance, produce and distribute one or more television series and feature films to be licensed for exploitation in domestic and international theatrical, television, cable, home video and pay per view markets. Through our subsidiary, High Five Entertainment, we specialize in the development and presentation of quality television programming including series, specials, pilots, live events and award shows. We seek to combine modern business strategy with old-fashioned industry experience by bringing together highly trained relative newcomers and entertainment industry stalwarts to create low risk, high profit and artistically acclaimed feature film and television projects.

Recent Developments

On April 29, 2015, the Company entered into an agreement (the “Agreement”) with Mario Kassar, the Chairman of the Company’s Board of Directors, pursuant to which Mr. Kassar will utilize $250,000 of the Company’s funds for costs relating to the production of the film “Audition.” Pursuant to the terms of the Agreement, the Company engaged Mr. Kassar to render producing and sales services for each film in the “Rambo” franchise, “SMITE” franchise or other feature length motion picture property introduced to the Company by Mr. Kassar (each, a “Picture”) on the same terms as apply to “Audition,” except that the producing fee shall not be less than 10% of the budget of each Picture. In addition, the Company agreed to issue 100,000 shares of its common stock to Mr. Kassar, instead of paying Mr. Kassar the $100,000 payment that the Company was required to pay in April 2015 under the Agreement for Chairman of Board of Directors dated February 13, 2015 (the “Board Agreement”). Pursuant to the terms of the Agreement, the Company and Mr. Kassar agreed that the Company would pay Mr. Kassar $100,000 on or before May 17, 2015, and that such payment shall be the final payment due under the Board Agreement. The Company also agreed to pay Mr. Kassar 5% of the purchase price of any Carolco-produced feature length films in the “Rambo” franchise and all completed films or film libraries acquired by the Company with Mr. Kassar’s assistance and based on Mr. Kassar’s introduction to the Company of such completed films or film libraries. The terms of the Agreement also provide that the Company will pay Mr. Kassar a discretionary bonus in relation to his efforts in bringing projects and opportunities to the Company.

On October 5, 2015, Alexander Bafer, Carolco Pictures, Inc.’s then controlling shareholder, Chief Executive Officer and director (the “Seller”), entered into and closed separate and distinct Securities Purchase Agreements (the “Agreement”) with individual Purchasers. The Purchasers (individually) purchased in the aggregate from the Seller a total of 35,000,000 shares of the Company’s common stock.

On October 16, 2015, Mr. Alexander Bafer resigned his position as president and CEO of the Company. Following a resolutions by the Board of Directors, Sam Lupowitz was appointed President, CEO and CFO of the Company. During this period the members of the Board of Directors was modified to include a Board consisting of Sam Lupowitz, Joseph I. Emas, and Mario Kassar.

Mr. Bafer's rationale behind the execution of the overall transaction was to enhance shareholder value by bringing in an investor group which included a principal investor, Mr. Sam Lupowitz, and the business model developed by Mr. Lupowitz, a model designed to bring the "Carolco" brand - associated mainly with mega-successful motion picture franchises such as "Rambo" and "Terminator" - back to its former glory while attempting to offset much of the financial risk typically associated with production.

Mr. Lupowitz gained extensive feature-length motion picture production and worldwide distribution experience first working side by side for many years with one of the world's most prolific filmmakers, the late Menahem Golan of "Golan-Globus" and The Cannon Group, Inc. ("Cannon") fame. Cannon ultimately acquired one of Hollywood's seven major motion picture studios (Metro-Goldwyn, Mayer, Inc.) (a/k/a "MGM"). Further, Mr. Golan is credited by many for having invented "pre-sales", a term that refers to the pre-licensing of the distribution rights in and to motion pictures prior to their actual production (pursuant to Mr. Lupowitz' model, a technique the Company intends to use to offset financial risk).

Mario Kassar, co-founder of the original "Carolco" and producer of the first three installments of the "Rambo" franchise, two installments of the "Terminator" franchise, "Total Recall" and "Basic Instinct", as well as many other major motion pictures, remains as Carolco's chairman.

Results of Operations for the Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014


	Three Months Ended September 30,
	2015		2014
Revenue	$	366,169	$	374,235
Cost of goods sold	$	286,147		212,425
Operating expenses	$	147,907	$	671,672
Loss before income tax provision and non-controlling interest	$	(984,445)	$	(505,504)
Net income (loss) attributable to non-controlling interest	$	4,931	$	11,653
Net loss attributable to Carolco Pictures’ stockholders	$	(989,376)	$	(517,157)

Revenues for the three months ended September 30, 2015 and 2014 remained relatively constant between the periods totaling $366,169 and $374,235, respectively. The bulk of our revenue is derived from production services, including award programming, much of which is seasonal. Revenue recognition is deferred until product is delivered and accepted by our customers. Our future revenue plan is dependent, in part, on our ability to effectively market The Doorman pilot and close new viable acquisitions of film rights.

Cost of goods sold for the three months ended September 30, 2015 were $286,147, as compared to $212,425 for the three months ended September 30, 2014. Cost of goods sold consists primarily of direct production labor and production equipment rental. These costs increased approximately $74,000 between periods. This increase was attributable primarily to production labor as the Company increased staff in anticipation of future planned production projects.

Operating expenses for the three months ended September 30, 2015 totaled $147,907, compared to $671,672 for the three months ended September 30, 2014. The decrease of approximately $524,000 was primarily attributable to a sharp drop in compensation expenses recognized between the periods. Compensation expense recognized in the prior year reflected significant costs associated with stock based compensation expense recognized attributable to the Company’s acquisition of S&G Holdings, Inc. during the fourth quarter 2013.

The Company realized a loss before income tax provision and non-controlling interest of $984,445 for the three months ended September 30, 2015, compared to a loss before income tax provision and non-controlling interest of $505,504 for the three months ended September 30, 2014. The sharp increase is primarily due to the significant increase in compensation expense recognized in 2014 as discussed above, being more than offset by related party interest expense recognized in 2015 of approximately $1,083,000. The related party interest expense resulted from the issuance of convertible notes in exchanges of the existing promissory notes totaling $543,115, due the CEO which included embedded derivatives ultimately recognized in interest expense for the period.

Results of Operations for the Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014


	Nine Months Ended June 30,
	2015		2014
Revenue	$	768,529	$	644,887
Cost of goods sold	$	623,381	$	385,215
Operating expenses	$	1,054,099	$	2,746,520
Loss before income tax provision and non-controlling interest	$	(1,946,029)	$	(2,441,692)
Net loss attributable to non-controlling interest	$	(17,494)	$	(18,579)
Net loss attributable to Carolco Pictures’ stockholders	$	(1,928,535)	$	(2,393,113)

Revenues for the nine months ended September 30, 2015 totaled $768,529, as compared to $644,887 for the nine months ended September 30, 2014. The increase in revenue was due to an increase in demand for the Company’s production services, particularly in area of award presentation programming. The Company continues to focus much of its efforts in the area of productions related to televised awards programming where it believes it has the expertise to grow in this sector. Revenue recognition is deferred until product is delivered and accepted by our customers. Our future revenue plan is, in part, dependent on our ability to effectively market The Doorman pilot and close new viable acquisitions of film rights.

Cost of goods sold for the nine months ended September 30, 2015 totaled $623,381, as compared to $385,215 for the nine months ended September 30, 2014. Cost of goods sold consists primarily of direct production labor and production equipment rentals. These costs increased approximately $238,000 between periods. This increase was attributable in part a 19% increase in revenues and primarily to increases in production labor as the Company increased staff in anticipation of future planned production projects.

Operating expenses for the nine months ended September 30, 2015 totaled $1,054,099, compared to $2,746,520 for the nine months ended September 30, 2014. The sharp decrease of approximately $1,692,000 was primarily attributable to a reduction in compensation paid to executives in the form of common shares and warrants in the prior period. Compensation expenses totaled $349,525 for the nine months ended September 30, 2015, down from $2,107,540 for the same period of the preceding year, a reduction of approximately $1,759,000.

The Company has realized a loss before income tax provision and non-controlling interest of $1,946,029 for the nine months ended September 30, 2015, compared to a loss before income tax provision and non-controlling interest of $2,411,692 for the nine months ended September 30, 2014. The decrease is primarily due to the sharp decline in compensation expense as described above being offset by increase in interest expense recognized as a result of fair value recognition given to certain convertible notes as described previously.

Liquidity and Capital Resources


	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
Net Cash Used In Operating Activities	$	738,690	$	107,774
Net Cash Used In Investing Activities	$	252,649	$	51,203
Net Cash Provided by Financing Activities	$	993,661	$	364,452
Net Change in Cash	$	2,322	$	205,475

As of September 30, 2015, our assets totaled $878,026 and our liabilities totaled $2,238,708 and we had negative working capital of $1,684,086.

Pursuant to the terms of our employment agreement with Mr. Bafer, we are obligated to pay Mr. Bafer $150,000 per year. On October 1, 2011, Mr. Bafer agreed to waive future base salary under his employment agreement, until further notice, in an effort to reduce our operating expenses. Prior to that time, we did not have sufficient cash flows to make the required payments under the employment agreement and therefore, accrued all unpaid salary until such time we generate revenues from operations or raise additional capital through one or more financing transactions. Accrued salaries due Mr. Bafer totaled $125,000 and $150,000 at September 30, 2015 and December 31, 2014, respectively.

As part of the Company’s acquisition of S&G Holdings, Inc. (doing business as High Five Entertainment) (“S&G”) in December 2013, the Company entered into an executive employment agreement with Mr. Martin Fischer, pursuant to which Mr. Fischer will serve as S&G’s president for an initial term of five years with an initial base salary of $144,000. He will also be entitled to an annual bonus of up to $100,000 based on performance and a monthly car allowance of $500. In addition, the Company awarded Mr. Fischer an option to purchase 1,491,351 shares of common stock, exercisable at $0.01 per share, which vested throughout 2014.

We have suffered recurring losses from operations. The continuation of our company is dependent upon our attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have raised additional capital through equity offerings and loan transactions, and, in the short term, will seek to raise additional capital in such manners to fund our operations. We do not currently have any additional third party financing available in the form of loans, advances, or commitments. Our officers and shareholders have not made any written or oral agreement to provide us additional financing. There can be no assurance that we will be able to continue to raise capital on terms and conditions that are deemed acceptable to us.

Off-Balance Sheet Arrangements

As of September 30, 2015, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations liquidity, capital expenditures or capital resources.

Going Concern

Our Ability to Continue as a Going Concern

Our independent registered public accounting firm has issued its report dated March 31, 2015, in connection with the audit of our annual financial statements as of December 31, 2014, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 3 to the unaudited financial statements for the period ended September 30, 2015 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern.

The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Critical Accounting Policies

We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

Principles of Consolidation. The consolidated financial statements of Company include the accounts of Carolco Pictures, Inc. and its majority-owned subsidiaries, York Productions, LLC, York Productions II, LLC, and S&G Holdings, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Income Tax Provision. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns pursuant to the provisions of ASC 740—Income Taxes. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

Capitalized Movie Pilot Costs - Film Property and Screenplay Rights. The Company capitalizes costs it incurs to buy film or transcripts that will later be marketed or be used in the production of films according to ASC 926—Entertainment – Films. The Company will begin to amortize capitalized film cost when a film is released and it begins to recognize revenue from the film.

Non-Controlling Interest. The Company reports the non-controlling interest in its majority owned subsidiaries in the consolidated balance sheets within the equity section, separately from the Company’s stockholders’ equity. Non-controlling interest represents the non-controlling interest holders’ proportionate share of the equity of the Company’s majority-owned subsidiaries. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

(a)

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, 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 CEO and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our CEO and Principal Financial and Accounting Officer, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and Principal Financial and Accounting Officer, concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to the Company’s limited resources and limited number of employees. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and outsourced accounting professionals. As we grow, we expect to increase our number of employees, which, we believe, will enable us to implement adequate segregation of duties within the internal control framework.

(b)

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the fiscal quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us.

Item 1A. Risk Factors

Not applicable for smaller reporting companies.

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

During the nine month period ended September 30, 2015, the Company sold 3,555,500 common shares for $195,165 at purchase prices ranging from $0.005 to $0.20 per share.

During April 2015, the Company sold 5,000 units at $0.80 per unit for a total of $2,500. Each unit consisted of one share of common stock, one Class A warrant and on Class B warrant. The warrants are exercisable for two years from issuance at $3.00 and $6.00 per share, respectively.

In April 2015, the Company entered into an agreement with Mr. Mario Kassar, the Chairman of our Board of Directors. The agreement addressed funding of the Company’s “Audition” film project and provided for the issuance of 100,000 common shares to Mr. Kassar under the terms of the agreement. Under the provisions of ASC 505 and the terms of the agreement, the measurement date was determined to be the contract date, with no vesting or forfeiture provisions or significant disincentives for non-performance. Accordingly, the fair value of the issuance of $0.08 per share based on market price, was charged to stock-based compensation on the effective date of the agreement.

The foregoing securities were issued in reliance on Section 4(a) (2) and/or Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The shares were issued in private transactions to United States residents. The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration or an applicable exemption from the registration requirements. The shareholders acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits


Exhibit Number		Description
3.1(i)		Articles of Incorporation (incorporated by reference to Exhibit 3.1(i) to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011).
3.1(ii)		Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1(ii) to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011).
3.1(iii)		Amendment to Articles of Incorporation filed with the Secretary of State of Florida on December 31, 2014 (incorporated by reference to Exhibit 3.1(iii) to the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2015).
3.2		By-Laws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011).
4.1+		2014 Incentive Stock Plan (incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2015).
10.1+		Employment Agreement with Alexander Bafer (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011)
10.2		Production Services Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1/A (Commission File No. 333-176093) filed with the SEC on December 29, 2011).
10.3		Operating Agreement to York Productions, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1/A (Commission File No. 333-176093) filed with the SEC on December 29, 2011).
10.4		Stock Purchase Agreement between Brick Top Productions, Inc. and Martin Fischer dated December 24, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2013).
10.5+		Executive Employment Agreement between S&G Holdings, Inc. and Martin Fischer (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2013).
10.7+		Brick Top Chief Development Executive Services Agreement between Brick Top Productions, Inc. and Mario Kassar dated November 20, 2014 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2014).
10.8+		Brick Top Productions Executive Services Agreement between Brick Top Productions, Inc. and Harrison Smith and Felissa Rose dated December 15, 2014 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 17, 2014).
10.9		Debt Conversion Agreement dated as of December 29, 2014 between Brick Top Productions, Inc. and Alexander Bafer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 30, 2014).
10.10+		Agreement for Chairman of Board of Directors among Carolco Pictures, Inc., certain shareholders of the Company and Mario Kassar dated as of February 13, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 17, 2015).
10.11+		Agreement dated April 29, 2015, by and between Carolco Pictures, Inc. and Mario Kassar (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 4, 2015).
10.12		Promissory note dated May 6, 2015.
10.13		Promissory note dated May 12, 2015.
10.14		Promissory note dated June 22, 2015.
10.15*		Convertible promissory note. Alexander Bafer for $45,527, dated July 9, 2015
10.16*		Convertible promissory note, Alexander Bafer for $51,076 dated July 9, 2015
10.17*		Convertible promissory note, Alexander Bafer for $102,042 dated July 9, 2015
10.18*		Convertible promissory note, Alexander Bafer for $155,875 dated July 9, 2015
10.19*		Convertible promissory note, Alexander Bafer for $188,597 dated July 9, 2015
10.20*		Convertible promissory note, Vis Vires group, Inc. $52,500 dated July 10, 2015
31.1*		Section 302 Certificate of Chief Executive Officer and Chief Financial Officer
32.1*		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
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.

+ Management contract or compensatory plan or arrangement.

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.


		CAROLCO PICTURES, INC.

Date: November 16, 2015	By:	/s/ Sam Lupowitz
		Sam Lupowitz
		Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer)