U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2015

OR

For the transition period from ______________ to ______________

Commission File Number: 000-49648

(832) 535-9070

(Registrant’s Telephone Number)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

As of May 15, 2015, the Registrant had 65,958,931 shares of common stock issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM: 1 FINANCIAL STATEMENT

NIGHTCULTURE, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

NIGHTCULTURE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

NIGHTCULTURE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

NIGHTCULTURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization

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

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

Financial Statements Presented

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end December 31, 2014 as reported on Form 10-K, have been omitted.

NOTE 2 – GOING CONCERN

As shown in the accompanying financial statements, the Company has a negative working capital of $1,840,207 and an accumulated deficit of $7,217,718, as of March 31, 2015. The Company’s ability to generate net income and positive cash flows is dependent on the ability to grow its operating entity as well as the ability to raise additional capital. Management is following strategic plans to accomplish these objectives, but success is not guaranteed. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

NOTE 3 – DERIVATIVE INSTRUMENTS

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

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

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

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as March 31, 2015 and December 31, 2014:

The below table represents the change in the fair value of the derivative liabilities during the three months ended March 31, 2015:

NOTE 4 – RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2015 the Company received a loan from a director of the Company of $50,000. The loan is payable over 42 weekly payments of $1,547.62 per week. The company has made payment of $2,381 toward the principal balance during the three months ended March 31, 2015. As of March 31, 2015 and December 31, 2014, total advances owed to related parties were $94,679 and $47,060, respectively. The advances other than the $50,000 loan bear no interest and are payable on demand.

As of March 31, 2015 and December 31, 2014, the Company had accrued salaries owed to related parties of $423,000 and $375,000, respectively.

NOTE 5 – DEBT

Convertible Debentures

On September 12, 2012 the Company issued $500,000 of convertible debentures maturing on September 11, 2015. The 2012 Debentures accrue interest at 5% per annum with a default rate of 12% per annum. The 2012 Debentures are convertible into common stock of the Company at 50% of the average closing price of the 20 day trading price ending prior to the date of conversion into the Company common stock. As of March 31, 2015 and December 31, 2014, the outstanding principal balance under this convertible debt was $421,260 and $421,260, respectively. The embedded conversion option in these convertible debentures was accounted for as a derivative liability (see Note 3). As of March 31, 2015 and December 31, 2014, the unamortized discount on these convertible notes associated with the derivative liability was $67,704 and $101,697, respectively. During the three months ended March 31, 2015, amortization of the discount totaled $33,993.

Lease Obligation

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

The Company had accounted for the above transaction under ASC 640 - 30 “Capital Leases”. The Company has made payment of $18,947 toward the principal balance during the three months ended March 31, 2015. As of March 31, 2015 the balance due on the leases was $117,633, with $49,843 is recorded as short term debt and the remaining balance of $67,790 is recorded as long term debt.

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

NOTE 6 - WARRANTS

As of March 31, 2015 the Company has 25,000,000 warrants outstanding entitling the holder to purchase up to 25,000,000 shares of the Company common stock at 50% of the average closing price of the 20 day period ending one day prior to exercising the warrants. The warrant holder may exercise these warrants on or before December 31, 2015.

The following table summarizes the warrant activity during the nine months ended March 31, 2015:

 NOTE 7– LITIGATION 

On October 21, 2014 a civil case # 2014-56915 was entered in the District Court in Harris County, Texas against Stereo Live. The complaint claims an individual served liquor by the staff of Stereo Live was involved in accident causing damages to the plaintiff who is seeking damages between $200,000 and $1,000,000. At the date of the incident, Stereo Live had enforce an insurance policy covering this incident with aggregate coverage of $2,000,000 and individual coverage up to $1,000,000 for such occurrence. The insurance company is defending the suit under the terms of the policy so the Company has not incurred or accrued any liability as it believes it is fully covered under the insurance policy.

NOTE 8 – SUBSEQUENT EVENTS

On April 27, 2015 the Company filed an information statement authorizing the Company through the approval of a majority of the shareholders to file amended articles of incorporation to increase the authorized shares of common stock from 100,000,000 to 500,000,000. As of this date the amended articles have not been filed.

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

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

On July 31, 2011, Night Culture, Inc., a Texas corporation (“Night Culture - Texas”), and its shareholders entered into a Share Exchange Agreement (the “Exchange”) with a public shell company, XXX Acquisition Corp. (“XXX Acquisition”) pursuant to which XXX Acquisition acquired all of the shares of Night Culture – Texas from its shareholders and the shareholders of Night Culture – Texas became the controlling shareholders of XXX Acquisition. Such Exchange caused Night Culture – Texas to become a wholly-owned subsidiary of XXX Acquisition. Subsequently, the name of XXX Acquisition was changed to NightCulture, Inc.

On May 21, 2012, the Company acquired from Michael Long and Surain Adyanthaya 100% ownership of Stereo Live, LLC, a Texas limited liability company (“Stereo Live”), in exchange for the issuance of one share of stock to each of Messrs. Long and Adyanthaya and the agreement of the Company to indemnify Messrs. Long and Adyanthaya against any obligations of Stereo Live that may have been guaranteed by those individuals. Stereo Live is the owner/operator of a live music venue located at 6400 Richmond Avenue, Houston, Texas. Messrs. Long and Adyanthaya are the principal shareholders of the Company.

On September 12, 2012 the Company purchased from two non-related parties Full Access a promotion and production business in the Dallas, Texas market. The Company paid the individuals an aggregate of $300,000 cash plus common stock of the Company valued at $290,000 at date of acquisition for a total purchase price of $590,000.

On January 30, 2014 the Company purchased the balance of the San Antonio market for $20,000.

Unless indicated otherwise, or the context otherwise requires, references in this report to “NightCulture,” the “Company,” “we,” “us” and “our” or similar terms are to NightCulture, Inc. (formerly XXX Acquisition) and its consolidated subsidiaries in reference to dates subsequent to the Exchange and to Night Culture – Texas in reference to dates prior to the Exchange.

Overview

Our principal line of business is promoting and producing, and selling merchandise at, live concerts, primarily in the Electronic Dance Music (EDM) genre and, since May 2012, hosting entertainment events at our Stereo Live venue. Since 2009, we have promoted and/or produced in excess of 200 live concerts. To date, we have organized events principally in Houston, San Antonio, Austin and Oklahoma City and, with the acquisition of Full Access, in Dallas.

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

Commencing with our acquisition of Stereo Live in May 2012, we also derive revenues from venue rentals, beverage sales and other related fees and charges derived from operation of our Stereo Live venue.

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

Results of Operations

Revenue

Revenues for the three months ended March 31, 2015 was $1,170,084 compared to $1,264,685 for the same periods in 2014. The decrease in revenues was attributable to lower concert participation.

Direct Costs

Direct costs were $686,331 for the three months ended March 31, 2015 compared to $716,125 for the same periods in 2014. As a percentage of revenues, direct costs for the three months period was 58.7% for the three months ended March 31, 2015 compared to 56.6% for the same periods in 2014. The change in direct cost as a percentage of sales was due to lower sales volume.

General and Administrative Expenses

General and administrative expense for the three months ended March 31, 2015 was $561,441 compared to $734,703 for the same periods in 2014. The decrease in general and administrative expense was attributable to flexible staffing, decreased salaries for related parties, lower administration and other investments to support our planned growth initiatives. The principal general and administrative expenses for the three months period were as follows:

Depreciation and Amortization

Depreciation and amortization expense incurred in the three month period ended March 31, 2015 was $27,444 compared to $10,993 for the same periods in 2014. The increase in depreciation and amortization expense was attributable to added assets purchased and leased during the third quarter of 2014.

Other Income (Expense)

Other income (expense) consists principally of interest expense and gain/ (loss) on changes in the value of derivative liability associated with outstanding warrants and convertible debt. Other income totaled $901,546 for the three month periods ended March 31, 2015 verses other expense of $700,800 for the same periods in 2014. The change was mainly attributable to the change in fair value of derivative liabilities creating a gain of $955,266 during the three month periods ended March 31, 2015 compared to a loss of $612,026 for the same periods in 2014.

Net Income (Loss)

The Company incurred a net income of $796,454 for the three month periods ended March 31, 2015 compared to net loss of $897,936 for the same periods in 2014. The net income for the three month periods ended March 31, 2015 includes a gain of $955,266 in fair value of its derivative. Net loss for the three month periods ended March 31, 2014 can be attributed the loss on derivative liability for $612,026.

Financial Condition

Cash, Cash Flows and Working Capital

At March 31, 2015, we had current assets of $46,709, current liabilities of $1,886,916 and a working capital deficit of $1,840,207 compared to current assets of $102,325 and current liabilities of $2,759,586 and a working capital deficit of $2,657,261 at December 31, 2014. The derivative liability was the largest liability in 2014 which was $1,437,676 as of December 31, 2014 compared to $482,410 as of March 31, 2015. Accounts payable and accrued expense decreased from $429,278 as of December 31, 2014 to $363,078 as of March 31, 2015. Advances from related parties also increased a net of $47,619 which included a loan of $50,000 form a director of the Company during the three months ended March 31, 2015 along with an increase in accrued salaries related parties from $375,000 as of December 31, 2014 to $423,000 as of March 31, 2015.

Net cash used in operations for the three months ending March 31, 2015 was $69,410 compared to net cash provided of $41,535 for the same periods in 2014. The decrease in cash provided by operations was principally attributable to the decrease in accounts payable and accrued expense, and gain in fair value of derivative liability.

Net cash used in investing activities for the period ending March 31, 2015 was $0 compared to 10,234 for the same period in 2014. The increase was mainly due to the purchase of $10,000 intangible asset during the three months ended March 31, 2014 while there were no investing activities for the same periods in 2015.

Net cash provided by financing activities during the three months ended March 31, 2015 was $28,672 compared to $24,173 for the same periods in 2014. The financing activities included advances of related parties net of $47,619 and also repayment of debt for $18,947 during the three months ended March 31, 2015 compared to repayment of a bank indebtedness of $15,010 and advances by related parties of $39,183 for the same periods in 2014.

Liquidity and Capital Resources

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

We believe that we will be required to either improve profitability and operating cash flow or to borrow additional funds or otherwise secure additional financing, or both, to support our operations during the balance of 2015 and beyond. Except as described below regarding our equity line of credit, we do not presently have any commitments to provide financing, if needed, to support our operations.

Debt

On September 12, 2012, we issued $500,000 of 2012 Debentures. The 2012 Debentures mature September 11, 2015 and accrue interest at 5% per annum with a default rate of 12% per annum. The 2012 Debentures are convertible into common stock of the Company at 50% of the average closing price of the 20 day trading price ending prior to the date of conversion into the Company common stock. As of March 31, 2015, the outstanding principal balance under this convertible debt was $421,260. As of March 31, 2015, the unamortized discount on these convertible notes associated with the derivative liability was $67,704.

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

As of March 31, 2015 the balance due on the leases was $117,633.

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

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements or guarantees of third party obligations at March 31, 2015.

Inflation

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

ITEM 3: QUANTITATIVE AND QUALITAIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 4: CONTROLS AND PROCEDURES

Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of March 31, 2015 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2015. Such conclusion reflects the identification of material weakness as follows: (1) lack of accounting proficiency of our chief executive officer who is our sole officer and our principal accounting officer which has resulted in a reliance on part-time outside consultants to perform substantially all of our accounting functions, (2) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function, and (3) lack of control procedures that include multiple levels of review. Until we are able to remedy these material weaknesses, we have engaged third party consultants and accounting firm to assist with financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

ITEM 1A: RISK FACTORS

There have been no material changes to NightCulture’ risk factors as previously disclosed in our most recent 10-K filing for the year ending December 31, 2014.

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

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4: MINE SAFETY INFORMATION

None

ITEM 5: OTHER INFORMATION

None.

ITEM 6: EXHIBITS

SIGNATURE

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

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