Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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: 000-1527844

CAPITAL ART, INC.

(Exact name of registrant as specified in its charter)

Delaware		27-0746744
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

6445 South Tenaya Way, B-130 Las Vegas, Nevada	89113	702-722-6113
(Address of principal executive office)	(Zip Code)	(Registrant’s telephone number, Including area code)

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. o 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). o Yes x 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.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒

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

As of January 14, 2016, the registrant had outstanding 325,341,224 shares of common stock, 0.0001 par value.

CAPITAL ART, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2015

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial statements (unaudited)	4

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

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and March 31, 2014 (unaudited)	5

	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2015 and, 2014 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and March 31, 2014 (unaudited)	7

	Notes to the Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	23

Item 4.	Controls and Procedures	23


PART II – OTHER INFORMATION		24

Item 6.	Exhibits	24

SIGNATURES		25

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations and market trends and expectations. The words “expect,” “believe,” “plan,” “intend,” “estimate,” “anticipate,” “propose,” “seek” and similar words and variations thereof, when used, are intended to specifically identify forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties, including but not limited to those set forth in our Form 10, as amended, filed with the SEC pursuant to Rule 12(b) under the Securities Act of 1934. Our plans and objectives are based, in part, on assumptions involving the continued expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We do not undertake any obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

The terms the “Company”, “we,” “us,” “our” “Capital Art” or “CAPA”, and derivatives thereof, as used herein refer to Capital Art, Inc., a Delaware corporation.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL ART, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2015 and December 31, 2014

(UNAUDITED)

	3/31/2015			12/31/2014
ASSETS

Current Assets:
Cash	$	196,153		$	340,523
Accounts receivable		8,918			13,691
Inventory		55,923			59,034
Stock subscription receivable		91,000			300,000
Due from related parties		105,043			93,316
Prepaid expenses and other		21,142			9,613
Total current assets		478,179			816,177

Archival images, and property and equipment, net		3,301,105			3,341,552

Security deposits		6,356			6,356
TOTAL ASSETS	$	3,785,640		$	4,164,085
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	51,156		$	108,694
Accrued liabilities		461,689			650,031
Due to related parties		28,878			64,274
Short-term notes payable to related parties		41,000			41,000
Total current liabilities		582,723			863,999

Related party note payable		100,000			100,000
Total liabilities		682,723			963,999

Commitments and contingencies

Shareholders’ equity:
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; none issued and outstanding at March 31, 2015 and December 31, 2014		–			–
Common stock, $0.0001 par value; 450,000,000 shares authorized; 313,993,283 and 311,973,283 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively		31,399			31,197
Additional paid-in capital		3,340,759			3,239,961
Common stock subscribed		300,000			300,000
Retained deficit		(569,241	)		(371,072	)
Total Shareholders’ equity		3,102,917			3,200,086
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,785,640		$	4,164,085

The accompanying notes are an integral part of the condensed consolidated financial statements.

CAPITAL ART, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	For the Three Months Ended March 31,
	2015			2014

Revenues	$	341,242		$	101,068

Cost of revenues		73,898			39,077
Gross profit		267,344			61,991

Operating expenses:
Product development, sales and marketing		153,075			9,562
General and administrative		215,024			34,953
Depreciation expense		93,200			17,267
Total operating expenses		461,299			61,782

(Loss) income from operations		(193,955	)		209

Other income (expense):
Interest income and other income		656			–
Interest expense		(4,870	)		(786	)
Total other income (expense)		(4,214	)		(786	)

Loss before income taxes		(198,169	)		(577	)

Income taxes		–			–

Net loss	$	(198,169	)	$	(577	)

Basic and diluted loss per common share	$	–		$	–

Weight average basic and diluted shares outstanding		313,050,616			256,400,226

The accompanying notes are an integral part of the condensed consolidated financial statements.

CAPITAL ART, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

MARCH 31, 2015 and MARCH 31, 2014

(UNaudited)

		Common Stock			Additional Paid-in		Common Stock		Retained Earnings			Total Shareholders'
	Shares		Amount		Capital		Subscribed		(Deficit)			Equity



BALANCE DECEMBER 31, 2013		256,400,226	$	25,640	$	466,865	$	–	$	9,255		$	501,760

Net loss		–		–		–		–		(577	)		(577	)

BALANCE MARCH 31, 2014		256,400,226	$	25,640	$	466,865	$	–	$	8,678		$	501,183


BALANCE DECEMBER 31, 2014		311,973,283	$	31,197	$	3,239,961	$	300,000	$	(371,072	)	$	3,200,086

Common shares issued for services		200,000		20		9,980		–		–			10,000
Common shares issued for cash		1,820,000		182		90,818		–		–			91,000
Net loss		–		–		–				(198,169	)		(198,169	)

BALANCE MARCH 31, 2015		313,993,283	$	31,399	$	3,340,759	$	300,000	$	(569,241	)	$	3,102,917

The accompanying notes are an integral part of the condensed consolidated financial statements.

CAPITAL ART, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(198,169	)	$	(577	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		93,200			17,267
Stock-based and other compensation to non-employees		10,000			–
Loss on sale of property included in cost of sales		2,942			–
Changes in assets and liabilities:
Accounts receivable		4,773			(12,211	)
Inventory		3,111			6,962
Prepaid expenses and other		(11,529	)		1,221
Accounts payable		(57,538	)		(19,227	)
Accrued liabilities		(188,342	)		9,360
Net cash (used in) provided by operating activities		(341,552	)		2,795

Cash flows from investing activities:
Purchase of archival images, property and equipment		(55,695	)		(16,055	)
Net cash used in investing activities		(55,695	)		(16,055	)

Cash flows from financing activities:
Short-term advances to related parties		(11,727	)		(22,106	)
(Repayment) or short-term advances from related parties		(35,396	)		20,235
Proceeds from sale of common stock		91,000			–
Proceeds from settlement of common stock subscription		209,000			–
Net cash provided by (used in) financing activities		252,877			(1,871	)

Net decrease in cash		(144,370	)		(15,131	)

Cash at beginning of year		340,523			20,919

Cash at end of period	$	196,153		$	5,788

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	847		$	786

NON-CASH FINANCING ACTIVITIES:
Stock based-compensation to non-employees	$	10,000		$	–

The accompanying notes are an integral part of the condensed consolidated financial statements.

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in the condensed consolidated financial statements for the three months ended March 31, 2015 should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10 filed with the SEC pursuant to Rule 12(b) under the Securities Act of 1934.

The condensed consolidated balance sheet as of December 31, 2014, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.

The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2015.

The accompanying condensed consolidated financial statements represent the results of operations, financial position and cash flows of Capital Art, Inc. (formerly Move Star News, LLC), and its 100% owned subsidiary Capital Art, LLC for the three months ended March 31, 2015 and 2014.

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 also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during that reporting period. Actual results could differ from those estimates.

Reverse Merger

On October 8, 2014, Capital Art, Inc. (“CAPA”) a Delaware Corporation and Capital Art, LLC, a California Limited Liability Company and wholly owned subsidiary of Capital Art, Inc. (collectively “CAPA” or “pre-merger CAPA”), CAPA entered into an Asset Purchase Agreement with Movie Star News, LLC. (“MSN”), a Nevada Limited Liability Company. The Agreement was effectively a contract to merge the three companies to combine assets of rare images. Refer to the consolidated financial statements and accompanying notes as of December 31, 2014.

The following unaudited pro forma information is presented to reflect the operations of the Company as if the reverse merger had been completed on January 1, 2015 and 2014, respectively:

	For the Three Months Ended March 31,
(Unaudited)	2015			2014

Supplement pro forma combined results of operations:

Net sales	$	341,242		$	136,680
Net loss		(198,170	)		(328,998	)
Basic and diluted loss per common share	$	–		$	–

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Going Concern

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the condensed consolidated financial statements are issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has not generated sufficient revenues from product sales to provide sufficient cash flows to enable the Company to finance its operations internally. As of March 31, 2015 the Company had $196,153 cash on hand. At March 31, 2015 the Company has a retained deficit of $569,241. For the three months ended March 31, 2015 the Company had a net loss of $198,169 and cash used in operations of $341,552. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Over the next twelve months the Company intends to invest its working capital resources in sales and marketing in order to increase the distribution and demand for its products. If the Company fails to generate sufficient revenue and obtain additional capital to continue at its expected level of operations, the Company may be forced to scale back or discontinue its sales and marketing efforts. However, there is no guarantee the Company will generate sufficient revenues or raise capital to continue operations.

Inventory

The Company’s inventory is comprised of rare photos of movie stars and other famous people. Direct labor and raw material costs associated with the process of making the photos available for sale are also included in inventory at cost. These costs are expensed to cost of sales pro-ratably as sold.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In such situations, long-lived assets are considered impaired when future undiscounted cash flows resulting the use of the asset and its eventual disposition are less than the asset’s carrying amount. In such situations, the asset is written down to the present value of the estimated future cash flows. Factors that are considered when evaluating long-lived assets for impairment include a current expectation that it is more likely than not that the long-lived asset will be sold significantly before the end of its useful life, a significant decrease in the market price of the long-lived asset, and a change in the extent of manner in which the long-lived asset is being used. Based on management’s assessment there were no impairments at March 31, 2015 and December 31, 2014.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 – Revenues from Contracts with Customers, which introduces a new five-step framework for revenue recognition. The core principle of the standard is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled for those goods or services. The ASU also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The standard, as amended in ASU No. 2015-14, is effective for annual reporting periods after December 15, 2017. Management does not believe the adoption of ASU No. 2014-09 will have a material impact on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements–Going Concern, (Subtopic 204-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires management to evaluate each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU No. 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Management does not believe the adoption of ASU No. 2014-15 will have a material effect on the consolidated financial statements.

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU No. 2015-11 clarifies that inventory should be held at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price, less the estimated costs to complete, dispose and transport such inventory. ASU No. 2015-11 will be effective for fiscal years and interim periods beginning after December 15, 2016. ASU No. 2015-11 is required to be applied prospectively and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement–Period Adjustments. The amendments in ASU No. 2015-16 require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in ASU No. 2015-16 require that an acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in ASU No. 2015-16 require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been reported in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for financial statements issued for annual periods beginning after December 15, 2015, including interim periods within those fiscal years. Management does not believe the adoption of ASU No. 2015-16 will have a material effect on the Company’s consolidated financial statements

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740), Balance Sheet Classification of Deferred Tax. ASU No. 2015-17 was issued by the FASB as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments of ASU 2015-17. ASU No, 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016. Management does not believe the adoption of ASU No. 2015-17 will have a material effect on the Company’s consolidated financial statements.

Basic and Diluted Income and Loss per Share

The Company computes income and loss per share in accordance with ASC 260 - Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the condensed consolidated statements of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is antidilutive. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive.

A reconciliation of weighted-average basic shares outstanding to weighted-average diluted shares outstanding follows:

	For the three months ended March 31,
	2015		2014

Basic weighted average common shares outstanding		313,050,616		256,400,226

Effect of dilutive securities		–		–

Diluted weighted average common and potential common shares outstanding		313,050,616		256,400,226

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company is required to reserve and keep available of its authorized, but unissued shares of common stock an amount sufficient to effect shares due in connection with the Stock Purchase Agreement and Stock-Based Compensation to Non-Employees. As of March 31, 2015, shares reserved for future issuance comprised of the following:

	Shares
	Reserved
Shares subscribed in connection with Stock Purchase Agreement		6,000,000
Shares to be issued to consultants		5,035,000
Shares to be issued to Frank Worth Estate		200,000
		11,235,000

These shares were excluded from the calculation of diluted earnings per share as their effect was anti-dilutive.

ARCHIVAL IMAGES, AND PROPERTY AND EQUIPMENT

Archival images, and property and equipment as of March 31, 2015 and December 31, 2014 comprise of the following:

	March 31,			December 31,			Estimated
	2015			2014			Useful Lives
Frank Worth Collection	$	2,770,000		$	2,770,000			10 years
Other archival images		692,984			676,215			10 years
Leasehold improvements		12,446			12,446			7 years
Computer and other equipment		48,350			40,204			3 – 5 years
Furniture and fixtures		83,666			56,416			7 years
		3,607,446			3,555,281
Less accumulated deprecation		(306,341	)		(213,729	)
Total archival images, property and equipment, net	$	3,301,105		$	3,341,552

FRANK WORTH COLLECTION

On November 12, 2014, the Frank Worth Estate agreed to accept $155,000 and 200,000 common shares, with a fair value of $0.05 per share ($10,000), of the Company’s common stock in exchange for sole and exclusive, world-wide, royalty free rights to all negatives, prints, products and other materials the Company possesses including the use of the Frank Worth seal, Frank Worth’s name, likeness, publications and biography plus merchandising and selling rights. $30,000 due under the agreement for royalties was paid in January 2015. The remainder of $125,000 and 200,000 ($10,000) shares of common stock are due and payable on or before May 31, 2015. See Note 10 – Subsequent Events.

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

ACCRUED LIABILITIES

Accrued liabilities at March 31, 2015 and December 31, 2014 comprise of the following:

	March 31,		December 31,
	2015		2014
Accrued payroll and related	$	6,954	$	8,242
Accrued management fee due to related party		5,781		5,781
Due to Frank Worth Estate		135,000		135,000
Interest payable to related parties		1,776		748
Due to consultant for website development		56,500		–
Accrued royalties due to Frank Worth Estate		–		30,000
Stock-based compensation due to non-employees		151,250		126,250
Fair value of limited edition prints due to consultant		–		250,000
Contingent liability for taxes assumed in reverse merger		91,000		91,000
Other		13,428		3,010
Total accrued liabilities	$	461,689	$	650,031

On August 15, 2014, pre-merger CAPA entered into a four-month agreement for strategic management services with a consultant. In connection with the agreement, the consultant is to receive compensation of 5,500,000 shares of the Company’s common stock (See Note 8 – Shareholders’ Equity) and limited edition photographs for aggregate retail fair value of $250,000. The Company evaluated the transaction under the guidance in ASC 845-Nonmonetary Transactions. ASC 845 requires fair value of nonmonetary exchanges be recorded based on fair value inherent in the transaction. The Company determined the aggregate retail fair value of the prints totaling $250,000 represented the fair value of the reciprocal transfer between the Company and the consultant. The prints were earned upon execution of the agreement, and were delivered in March 2015, and included in revenues in the Company’s unaudited condensed consolidated statement of operations as of March 31, 2015.

In connection with the reverse merger on October 8, 2014, the Company determined a liability contingency for income taxes existed as of the merger date. The liability is to be reimbursed by a related party of pre-merger CAPA. This contingency has been accounted in accordance with ASC 805, which states that a liability from a contingency recognized as of the acquisition date is in the scope of ASC 450 – Contingencies, is not acquired or assumed in a business combination, shall continue to be recognized by the acquirer at its acquisition-date fair value. As of March 31, 2015 and December 31, 2014, contingent liability for income taxes totaled $91,000 which has been accounted for in accrued liabilities and due from related party.

On January 2, 2015 the Company entered into a fixed price agreement with a consultant for website development services for total contract price of $193,000 payable in cash of $40,000 and 510,000 shares of the Company’s common stock with a stated fair value of $0.30 per share. As of March 31, 2015, 188,333 shares of common stock with fair value of $56,500 were earned by the consultant, but unissued, which is included in accrued liabilities in the unaudited condensed consolidated balance sheets.

NOTES PAYABLE TO RELATED PARTIES

On August 1, 2013 the Company entered into an unsecured promissory note agreement with related party Dino Satallante for $100,000. The loan bears interest at 5%. The loan matured on July 14, 2014 and was extended to July 31, 2016. As of March 31, 2015 and December 31, 2014, $100,000 was outstanding under the unsecured promissory note agreement. Interest expense for the three months ended March 31, 2015 and 2014 was $1,260 and $786, respectively.

Effective September 11, 2014 the Company entered into two separate unsecured promissory note agreements for $20,500 each with two related parties, Dreamstar and Dino Satallante, both beneficial interest shareholders of the Company, for working capital purposes. The loans bear interest at 6% per annum and mature on September 10, 2015. See Note 10 – Subsequent Events. At March 31, 2015, $20,500 and $20,500 was outstanding to Dino Satallante and Dreamstar, respectively. Total interest expense in connection with the two unsecured promissory note agreements for the three months ended March 31, 2015 was $615.

As of March 31, 2015 and December 31, 2014, interest payable in connection with the unsecured promissory note agreements with related parties was $1,776 and $748, respectively, and is included in accrued liabilities in the Company’s condensed consolidated balance sheets.

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

RELATED PARTY TRANSACTIONS

Due From/To Related Parties

The following table summarizes amounts due to the Company from related parties for funds advanced by the Company on behalf of related parties and funds advanced from related parties for short-term working capital purposes as of March 31, 2015 and December 31, 2014. These amounts have been included in the condensed consolidated balance sheets as current assets due from related parties and current liabilities due to related parties, respectively, and are due on demand.

	March 31,		December 31,
	2015		2014
Due from related parties:
Dino Satallante, beneficial interest shareholder	$	1,350	$	1,350
Sam Battistone, beneficial interest shareholder		966		966
ICONZ Art, LLC, beneficial interest shareholder		9,347		–
Stuart Scheinman, President of the Company and beneficial interest shareholder		2,380		–
Klaus Moeller, related party of pre-merger CAPA and beneficial interest shareholder		91,000		91,000
Total due from related parties	$	105,043	$	93,316

Due to related parties:
ICONZ Art, LLC, beneficial interest shareholder	$	–	$	2,014
Klaus Moeller, related party of pre-merger CAPA		521		4,562
MSN Holding Co., beneficial interest shareholder		28,272		28,272
Premier Collectibles, beneficial interest shareholder		85		85
Stuart Scheinman, President of the Company and beneficial interest shareholder		–		29,341
Total due to related parties	$	28,878	$	64,274

SHAREHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue up to 50,000,000 shares of preferred stock authorized with a par value of $0.001. The Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by the Company’s stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, and conversion rights. As of March 31, 2015, there were no shares of Preferred Stock were issued and outstanding.

Stock Purchase Agreement

On August 14, 2014 pre-merger CAPA entered into a Stock Purchase Agreement with an investor for sale of 20,000,000 of the Company’s common stock at $0.05 per share, for total of $1,000,000 payable in installments in August 2014 through December 31, 2014. As of December 31, 2014, 6,000,000 ($300,000) common shares remained outstanding under the terms of the agreement, which has been included in the condensed consolidated balance sheets in current assets – stock subscription receivable and equity – common stock subscribed. As of March 31, 2015, $209,000 was received in connection with the agreement, resulting in $91,000 outstanding as of March 31, 2015, which is included in the condensed consolidated balance sheets in current assets – stock subscription receivable. No shares were issued under the stock purchase agreement during the three months ended March 31, 2015. See Note 10 – Subsequent Events.

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Private Placement

In March 2015, the former president of pre-merger CAPA closed a private placement comprising of individuals related to the former president for 1,820,000 shares of common stock at a $0.05 per share for aggregate proceeds of $91,000.

In connection with the private placement, the former president received 200,000 shares of the Company’s common stock in lieu of cash for payment of finder’s fee total stock-based compensation of $10,000 based on fair value of the Company’s common stock of $0.05 per share.

Stock-based and Other Compensation to Non-Employees

On February 1, 2014, pre-merger CAPA executed a consulting agreement for services. The agreement specifies issuance of 500,000 shares of common stock at execution of the agreement and 3,500,000 shares upon introduction of a strategic business partner. As of March 31, 2015 and December 31, 2014 875,000 shares of common stock with a fair value of $43,750 were unissued and included in accrued liabilities in the Company’s condensed consolidated balance sheets.

On August 15, 2014, pre-merger CAPA entered into a four-month agreement for strategic management services with a consultant. In connection with the agreement, the consultant is to receive compensation of 5,500,000 shares of the Company’s common stock payable in four equal installments. As of March 31, 2015 and December 31, 2014, 1,650,000 shares of common stock with a fair value of $82,500 were unissued and included in accrued liabilities in the Company’s condensed consolidated balance sheets.

On January 1, 2015 the Company entered in a 12-month agreement for non-exclusive investment banking advisory services for total consideration of 2,000,000 shares of the Company’s common stock, with a fair value determined by the Company of $0.05 per share, for total of $100,000 to be recognized pro-ratably over 12-months in accordance with ASC 718 – Compensation: Stock Compensation. The shares were payable within 14 days of the effective date of the agreement and deemed earned in full upon execution of the agreement. For the three months ended March 31, 2015, the Company recorded $25,000 in connection with the fair value of the common shares for the three months ended March 31, 2015, which is included in general and administrative in the Company’s condensed consolidated statements of operations as of March 31, 2015. The shares were issued in May 2015. The agreement may be renewed for an addition 12-month term whereby the Company at its discretion shall pay the investment banking advisor $400,000 cash or an equivalent amount in the Company’s common stock based upon the thirty day volume weighted average price for thirty trading days prior to renewal.

Concentrations of Credit Risk and Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.

The Company’s cash balances are placed at financial institutions, which at times, may exceed federally insured limits. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash.

On August 15, 2014, pre-merger CAPA entered into a four-month agreement for strategic management services with a consultant. In connection with the agreement, the consultant is to receive compensation limited edition photographs for aggregate retail fair value of $250,000. The Company evaluated the transaction under the guidance in ASC 845-Nonmonetary Transactions. ASC 845 requires fair value of nonmonetary exchanges be recorded based on fair value inherent in the transaction. The Company determined the aggregate retail fair value of the prints totaling $250,000 represented the fair value of the reciprocal transfer between the Company and the consultant. See Note 5 – Accrued Liabilities. The Company delivered the limited edition prints to the consultant in March 2015, which accounted for 73% of total revenues for the three months ended March 31, 2015. No other distributor or customer accounted for over 10% of total sales for the three months ended March 31, 2015 and 2014.

Accounts receivable balances as of March 31, 2015 and 2014 were not material to the Company’s condensed consolidated financial statements. There is significant financial risk associated with a dependence upon a small number of distributors and customers which could have an adverse effect on the Company’s future consolidated financial statements if these distributors or customers were to leave. The Company’s intends to continue its investment in sales and marketing in order to increase distribution and demand for its products and adding content to its product lines, along with adding additional channels of distribution.

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10.

SUBSEQUENT EVENTS

Management has evaluated subsequent events, as defined by ASC 855, Subsequent Events, through the date on which the financial statements were available to be issued.

Asset Purchase Agreement

On July 22, 2015, the Company entered into an Asset Purchase Agreement with Globe Photos, Inc. (“Globe”), a New York corporation, for purchase of substantially all of the assets, which principally comprises of photographer contracts granting the Company the right to exploit copyrights, digital and tangible photographs, and related copyrights and trademarks, of Globe Photo for total purchase price of $400,000 payable in $250,000 cash and $150,000 common stock of the Company.

Per the agreement, $180,000 in cash shall be held in reserve by the Company against Globe’s full performance and compliance with all terms of the agreement. This amount is to be released to Globe at the rate of $10,000 per month beginning August 22, 2015.

The Common stock is to be transferred to Globe sixty (60) days after closing subject to satisfaction of successful termination of certain subagent agreements by Globe. The seller retained these certain subagent agreements, but was not able to successfully terminate these agreements. As such, the amount payable in common stock of the Company was reduced by $30,000, thereby reducing the total purchase price of the assets acquired from $400,000 to $370,000. Under the terms of the Agreement the Company issued 352,941 shares of its common stock based on the closing price of the Company’s common shares as traded on the OTC market on the measurement date July 22, 2015 of $0.34 per share for total of $120,000.

The Company evaluated the Asset Purchase Agreement in accordance with ASC 805 – Business Combinations which notes the threshold requirements of a business combination that includes the expanded definition of a “business” and defines elements that are to be present to be determined whether an acquisition of a business occurred. No “activities” of Globe were acquired. Instead, the Company obtained control of a set of inputs (the acquired assets). Thus the Company determined agreement is an acquisition of assets, not an acquisition of a business in accordance with ASC 805.

As a form of liquidity protection, Globe shall have limited put options in connection with the common stock beginning eighteen (18) months after the closing date, whereas the Company shall have up to fifteen (15) successive monthly options, with no less than thirty (30) days notice for each, which requires the Company to repurchase from Globe up to 1/15^th of the shares of common stock in Globe’s possession that were granted in connection with the agreement, at a price per share equity to the market price per share ($0.34) on the effective date of the original share transfer to Globe. The exercise of any put option is not conditioned upon exercise of any prior put option.

Stock Purchase Agreement

On August 14, 2014 pre-merger CAPA entered into a Stock Purchase Agreement with an investor for sale of 20,000,000 of the Company’s common stock at $0.05 per share, for total of $1,000,000 payable in installments in August 2014 through December 31, 2014. See Note 8 – Shareholders’ Equity. In June 2015 the agreement was paid in full and the Company issued 6,000,000 shares of common stock when the remaining $91,000 was received in connection with the outstanding stock subscription receivable.

Frank Worth Collection

On November 12, 2014, the Frank Worth Estate agreed to accept $155,000 and 200,000 common shares, with a fair value of $0.05 per share ($10,000), of the Company’s common stock, $30,000 payable on execution and the remainder payable on or before May 31, 2015. See Note 4 – Frank Worth Collection. As of the date the condensed consolidated financial statements have been issued, the remaining balance of $125,000 and 200,000 shares of the Company’s common stock have been held by the Company until a dispute between the Estate and an unrelated third party of the Company is settled. The Company has no involvement in the dispute

CAPITAL ART, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note Payable

On September 28, 2015, the Company entered into an unsecured promissory note agreement for working capital purposes with an unrelated party for total proceeds of $150,000. The note matures on September 28, 2016. Interest accrues at the rate of 10% per annum and is payable monthly beginning October 28, 2016.

Notes Payable to Related Parties

Effective July 21, 2015, the Company entered into a promissory note agreement with related party Dino Satallante, a beneficial interest shareholder of the Company, for total proceeds of $160,000. The Company utilized $80,000 of the proceeds for payments due in connection with the Globe Photo assets acquired. The remainder of the proceeds was used for working capital purposes. The note matures on July 20, 2016, with monthly interest only payments commencing beginning August 20, 2015 at the rate of 12% per annum. The note is secured by the Globe Photo Assets. Per the terms of the agreement the Company incurred loan fees totaling $8,000 to be amortized over the term of the loan.

Consulting and Distributor Agreements

On June 9, 2015 the Company entered into a management consulting agreement for total monthly compensation of $17,500. In addition the consultant received 300,000 shares of common stock at fair value of $0.05 per share, for total $15,000.

On May 11, 2015 the Company entered into an exclusive marketing agreement with a distributor to distribute the Company’s vintage original fine art prints to fine art dealers and collector auction houses, as well as private third party collectors. Under the terms of the agreement the distributor is to receive 50% of the gross receipts from sales generated by the distributor.

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

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. See “Forward Looking Statements” on page 2 of this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.

Our consolidated financial statements included elsewhere in this report have been prepared assuming that we will continue as a going concern. Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the condensed consolidated financial statements are issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has not generated sufficient revenues from product sales to provide sufficient cash flows to enable the Company to finance its operations internally. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Over the next twelve months the Company intends to invest its working capital resources in sales and marketing in order to increase the distribution and demand for its products. If the Company fails to generate sufficient revenue and obtain additional capital to continue at its expected level of operations, the Company may be forced to scale back or discontinue its sales and marketing efforts. However, there is no guarantee the Company will generate sufficient revenues or raise capital to continue operations.

Business Overview

The Company sells and manages classic and contemporary, limited edition photographic images and reproductions, with a focus on iconic celebrity images, by acquiring ownership or rights to collections of rare iconic negatives and photographs. The Company also makes available images for publications and merchandizing by third parties. The Company intends to become the largest repository of archival pop culture photography in the online world. To this end, the Company has been and continues to search for photographic archives. The market is unknown and has not been tested, making this business similar to a start-up business. These archives may be purchased outright or the Company may enter into reproduction or licensing agreements with the owners of the archives. These opportunities are typically (1) photographers who are looking to monetize their archives, or (2) media companies that are either seeking to dispose of the archive or seeking a method to derive revenues from the archive. These opportunities exist both in the United States and abroad and the Company continues to search for value wherever it may be geographically located. However, the Company’s ability to acquire such depository is dependent on its ability to raise additional capital in order to have funds to make such acquisitions.

Such photographic assets are the basis for the Company’s competitive advantage and the company takes steps to protect such assets, including but not limited to maintaining insurance to protect against loss or theft of more than 5 times the actual value.

Significant Transaction

On July 22, 2015, the Company entered into an Asset Purchase Agreement with Globe Photos, Inc. (“Globe”), a New York corporation, for purchase of substantially all of the assets of Globe for total purchase price of $400,000 payable $250,000 in cash and $150,000 in common stock of the Company at said market price . The common stock was to be transferred to Globe sixty (60) days after closing subject to satisfaction of successful termination of certain subagent agreements by Globe, which occurred on one deal and not the other resulting in a reduction of $30,000 less in stock, resulting in a final 352,941 shares ($120k of stock at $0.34/share). Per the agreement $180,000 in cash shall be held in reserve by the Company against Globe’s full performance and compliance with all terms of the agreement. This amount is to be released to Globe at the rate of $10,000 per month beginning August 22, 2015.

Sales and Distribution

The Company sells its photographic images and reproductions through third-party galleries, art consultants, interior decorators and directly to consumers. The Company also reproduces mass quantities of different photographs from its collection and sells through third party on-line retailers. For the twelve months ended December 31, 2014, through on-line retailer’s sales accounted for 94% of total revenues. The Company is continuing to pursue contracts to diversify revenues, and to develop its own website as a site for retail clients to purchase our prints but also as a portal for our interior decorator, third party gallery and charity partners. The downside is that there are a limited number of interior decorators, galleries and charity partners, which produce higher revenues than on-line sales, and while the Company is actively pursuing such contracts, its success will depend upon its ability to obtain such contracts for sales and also upon its ability to acquire a larger depository.

Intellectual Property

Most of our collection of iconic photographic images were acquired and are owned by the Company. A small percentage of the images in our collection are obtained through reproduction or licensing agreements, wherein we pay a royalty based on the percentage of revenues we receive from the use of the licensed images.

Results of Operations

Our business is in its early stages and consequently our financial results are difficult to compare from one period to the next. We expect such period-to-period differences to continue to be significant over the next several quarters, until we have a number of full years of operations.

Results of Operations

Three Month Period Ended March 31, 2015 Compared to March 31, 2014

Our summary results are presented below:

	Three Months Ended March 31,
	2015			2014			Change			% Change
Revenues	$	341,242		$	101,068		$	240,174			237.64%
Cost of revenues		73,898			39,077			34,821			89.11%
Gross profit (loss)		267,344			61,991			205,353			331.26%
Operating expenses		461,299			61,782			399,517			646.66%

(Loss) income from operations		(193,955	)		209			(194,164	)		92,901.91%

Interest income (expense), net		(4,214	)		(786	)		(3,428	)		436.13%

Net loss	$	(198,169	)	$	(577	)	$	(197,592	)		34,244.89%

Basic and diluted loss per common share	$	–		$	–

Weighted average basic and diluted shares outstanding		313,050,616			256,400,226

Revenues.

Revenues for the Company by principal revenue category were as follows:

	Three Months Ended March 31,
	2015		2014		Change		% Change
Licensing fees	$	3,165	$	–	$	3,165		100.00%

Print sales		338,077		101,068		237,009		234.50%
Total revenues	$	341,242	$	101,068	$	240,174		237.64%

The Company derives its revenues from sales of its classic and contemporary limited edition photographic images and reproductions, with a focus on iconic celebrity images, through specialized fine art dealers and distributors, which includes, but is not limited to, third-party galleries, art consultants, and interior decorators, or directly to end consumers.

On August 15, 2014, pre-merger CAPA entered into a four-month agreement for strategic management services with a consultant. In connection with the agreement, the consultant received compensation of limited edition photographs for an aggregate retail fair value of $250,000, which accounted for 73% of total revenues for the three months ended March 31, 2015. The Company evaluated the transaction under the guidance in ASC 845-Nonmonetary Transactions. ASC 845 requires fair value of nonmonetary exchanges be recorded based on fair value inherent in the transaction. The Company determined the aggregate retail fair value of the prints totaling $250,000 represented the fair value of the reciprocal transfer between the Company and the consultant. No other distributor or customer accounted for over 10% of total sales for the three months ended March 31, 2015 and 2014.

As part of increasing its product offerings, the Company has been and continues to search for photographic archives that are undervalued by the market. These archives may be acquired outright or the Company may enter into representation or consignment agreements with the owners of the archives. These opportunities are typically (1) aging photographers who are looking to monetize their archive while still alive via a single large transaction, or (2) media companies that have aggregated assets (or rights to assets) and are seeking to dispose of the archive or a partner who can help them grow cash flows related to the archive. These opportunities exist both in the United States and abroad and the Company continues to search for value wherever it may be geographically located. As part of this initiative, on July 22, 2015, the Company acquired substantially all of the assets of Globe Photo.

However, there is no guarantee the Company will generate sufficient revenues to continue operations. The Company estimates it will need approximately $1,000,000 in annual revenues to continue operations at its current operating level, without consideration given to investment in new sales and marketing channels. For the immediate future the Company plans to achieve this revenue target by ramping up fees earned from licensing imagery to media companies growing a network of global sales agents.

Cost of Revenues.

Cost of revenues for the Company were as follows:

	Three Months Ended March 31,
	2015		2014		Change			% Change
Prints, framing and related costs	$	37,832	$	8,642	$	29,190			337.77%
Selling and auction fees		10,171		17,907		(7,736	)		(43.20%	)

Cost of fulfillment and shipping		25,895		12,528		13,367			106.70%
Total cost of revenues	$	73,898	$	39,077	$	34,821			89.11%

Cost of revenues increased $34,821 (89.11%) to $73,898 for the three months ended March 31, 2015 compared to $39,077 for the same period in 2014.

Gross profit as a percentage of total revenues was 78.34% and 61.34% for the three months ended March 31, 2015 and 2014. The Company’s gross profit mix as a percentage of total revenues for the three months ended March 31, 2015 compared to the same period in 2014 are not comparable due to added payroll costs associated with fulfillment labor. Cost of sales mix will vary depending on the Company’s revenue mix. During the three months ended March 31, 2015 compared to the same period in 2014 gross profit as a percentage of revenues increased due to costs associated with the limited edition photographs for an aggregate retail fair value of $250,000 delivered to the consultant in March 2015. See Note 9 of the Condensed Notes to Consolidated Financial Statements.

As the Company works with various channels to distribute its product, it continues to negotiate deals to reduce its overall fulfillment costs.

Prints, framing and related costs comprise of product cost associated with the Company’s sales of its classic and contemporary limited edition photographic images, costs associated with reproduction of archival images for sale, framing and other related costs. For the three months ended March 31, 2015 costs associated with prints, framing and related costs increased $29,190 to $37,832 (337.77%) from $8,642 during the same three month period in 2014. This increase was primarily due to the limited edition photographs delivered to the consultant in March 2015.

Total selling and auction fees associated with the sales of the Company’s prints and fine art on the World Wide Web for the three months ended March 31, 2015 and 2014 was $10,171 and $17,907, respectively. Selling and auction fees will vary depending on the online or auction house fee structure.

Operating Expenses.

Operating expenses consisting marketing and sales expenses, general and administrative costs, and depreciation expense, increased $399,518 for the three month period ended March 31, 2015 compared to the same period in 2014, respectively. On October 8, 2014 the Company entered into a reverse merger transaction. See Note 1 of the Condensed Notes to the Consolidated Financial Statements. The operating expenses presented for the three months ended March 31, 2014 represent Movie Star News, LLC that operated as a private company prior to the reverse merger transaction, as compared to the combined company presented for the three months ended March 31, 2015.

	Three Months Ended March 31,
	2015		2014		Change		% Change
Product development, sales and marketing	$	153,075	$	9,562	$	143,513		1,500.87%
General and administrative		215,024		34,953		180,071		515.18%
Depreciation expense		93,200		17,267		75,933		439.76%
Total costs and operating expenses	$	461,299	$	61,782	$	399,517		646.66%

Product development, sales and marketing expenses increased $143,513 (1,500.87%) to $153,075 for the three months ending March 31, 2015 compared to $9,562 for the same period in 2014. Product development, sales and marketing expenses primarily comprises of costs associated with website development costs, sales and marketing salaries, as well as other expenses associated with marketing and related services and the Company continues investing its working capital resources in sales and marketing in order to increase distribution and demand for its products and adding content to product lines, along with adding additional channels of distribution.

General and administrative expenses increased $180,071 (515.18%) to $215,024 for the three months ending March 31, 2015 compared to $34,953 in the same period 2014. The increase for the three months ended March 31, 2015 compared to 2014 comprise primarily of costs associated with the reverse merger, legal and accounting fees ($89,000); costs associated with investor relations, including fees, expenses and stock compensation ($55,000); and management consultants, administrative payroll and related costs ($19,000). The remainder of the increase is primarily due to general administrative expenses and increased costs associated with the Company’s facilities, insurance and other supplies during the three months ending March 31, 2015 compared to the same period in 2014.

For the three months ended March 31, 2015, general and administrative costs as a percentage of total revenues increased 28% to 63% compared to 35% for the same period in 2014. The significant change in general and administrative costs for the three months ended March 31, 2015 compared to 2014 is primarily due to increase general and administrative costs associated with accounting, audit and legal fees, investor relations and added personnel cost as a result of the reverse merger transaction that occurred on October 8, 2014. See Note 1 of the Condensed Notes to the Consolidated Financial Statements.

Depreciation expense increased $75,933 (439.76%) to $93,200 for the three months ended March 31, 2015 from $17,267 in the same period 2014. The Company records archival images, and property and equipment at cost for purchases over $500. Archival images, property and equipment are depreciated using the straight-line method over the estimated useful lives ranging from three to ten years. The Company capitalizes direct costs associated with improvements to archival images, and property and equipment in accordance with ASC 360 – Property, Plant, and Equipment. Leasehold improvements are amortized on a straight-line basis over the shorter of their useful life or the term of the related lease. The increase in depreciation expense for the three months ended March 31, 2015 compared to the same period in 2014 is primarily due to depreciation of the Company’s archival images, comprising primarily of the Frank Worth Collection acquired in the reverse merger transaction entered into on October 8, 2014.

Interest Expense.

Interest expense primarily resulted from related party interest expense and interest on revolving credit cards.

	Three Months Ended March 31,
	2015		2014		Change		% Change
Interest expense – related parties	$	1,875	$	786	$	1,089		138.55%
Other interest expense, net		2,995		–		2,995		100.00%
Total interest expense, net	$	4,870	$	786	$	4,084		519.59%

Liquidity and Capital Resources

Three Months Ended March 3, 2015 Compared to March 31, 2014:

Cash totaled $196,153 and $101,068 at March 31, 2015 and 2014, respectively. The change in cash is as follows:

	Three Months Ended March 31,
	2015			2014			Change
Cash (used in) provided by operating activities	$	(341,552	)	$	2,795		$	(344,347	)
Cash used in investing activities		(55,695	)		(16,055	)		(39,640	)
Cash provided by (used in) financing activities		252,877			(1,871	)		254,748
Net decrease in cash	$	(144,370	)	$	(15,131	)	$	(129,239	)

Operating Activities

Net cash used in operations for the three months ended March 31, 2015 was $341,552. During the three months ended March 31, 2015, the Company recorded a net loss of $198,169, which included non-cash charges of $93,200 for depreciation and amortization and $10,000 for stock-based compensation to non-employees. During the three months ended March 31, 2015 accounts receivable and inventory increased $4,773 and $3,111, respectively, while prepaid expenses and other, accounts payable, and accrued liabilities decreased $11,529, $57,538 and $188,342, respectively. During the three months ended March 31, 2014 inventory, prepaid expenses and other, and accrued liabilities increased $6,962, $1,221 and $9,360, respectively, while accounts receivable and accounts payable decreased $12,211 and $19,227, respectively.

Investing Activities

Purchases of archival images, property and equipment was $55,695 for the three months ended March 31, 2015, compared to $16,055 for the same period 2014. The Company expects to continue its commitment to its capital expenditures for the next 12 months at the same level.

Financing Activities

During the three months ended March 31, 2015, net cash provided by financing activities were $252,877, which comprise of proceeds from sale of common stock and settlement of stock subscription receivable of $91,000 and $209,000, respectively, which was offset by short term advances to related parties $11,727 and repayment of short-term advances received from related parties $35,396.

Liquidity

As of March 31, 2015, the Company’s principal source of liquidity consisted of $196,153 in cash. The Company has a working capital deficit, defined as net current assets minus net current liabilities, of $104,544 as of March 31, 2015. The Company has incurred significant operating losses and negative cash flow. The Company’s ability to continue operations and fund its expenditures is dependent on the Company’s ability to secure additional financing. The Company is actively pursuing such additional sources of financing. However, there are no assurances that the Company will be successful.

A reconciliation of weighted-average basic shares outstanding to weighted-average diluted shares outstanding follows:

	Three Months Ended March 31,
	2015		2014

Basic weighted average common shares outstanding		313,050,616		256,400,226

Effect of dilutive securities		–		–

Diluted weighted average common and potential common shares outstanding		313,050,616		256,400,226

The Company is required to reserve and keep available of its authorized, but unissued shares of common stock an amount sufficient to effect shares due in connection with the Stock Purchase Agreement and Stock-Based Compensation to Non-Employees. As of March 31, shares reserved for future issuance comprised of the following:

	Shares
	Reserved
Shares subscribed in connection with Stock Purchase Agreement		6,000,000
Shares to be issued to consultants		5,035,000
Shares to be issued to Frank Worth Estate		200,000
		11,235,000

These shares were excluded from the calculation of diluted earnings per share as their effect was anti-dilutive.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures. The Company's management, with the participation of the chief executive officer and the chief financial officer, has been assessing its internal controls to identify areas that need improvement, and as part of this process has retained new outside auditors, outside securities counsel, and is in the process of restructuring management, all with emphasis on improving financial reporting and accounting procedures. As the Company starts to report and operate as a reporting company, new procedures have become and will continue to be implemented to ensure compliance, and as part of such procedures, the Company will continue to assess its intended controls. Failure to implement these changes to the Company’s internal controls, or any changes as necessary to maintain an effective system of internal controls, could result in misleading or inadequate financial reports and failure to comply with applicable securities laws as well as cause investors to lose confidence in the Company’s reported financial information. Any such loss of confidence would have a significant negative effect on the value of the Company’s stock.

(b)

Changes in Internal Control over Financial Reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II – OTHER INFORMATION

Item 6. Exhibits

Exhibit Number	Description
3.01	Certificate of Incorporation, dated September 20, 2004
3.02	Certificate of Amendment to Certificate of Incorporation, dated December 2, 2004
3.03	Certificate of Amendment to Certificate of Incorporation, dated February 11, 2005
3.04	Certificate of Amendment to Certificate of Incorporation, dated April 30, 2007
3.05	Certificate of Amendment to Certificate of Incorporation, dated December 7, 2009
3.06	Certificate of Amendment to Certificate of Incorporation, dated April 28, 2011
3.07	Bylaws
10.01	Promissory Note Issued to K. Moeller, dated September 15, 2009
10.02	Amendment to Promissory Note Issued to K. Moeller, dated September 15, 2011
10.03	Amendment to Promissory Note Issued to K. Moeller, dated September 14, 2013
10.04	Membership Interest Purchase Agreement by and between the Members of Capital Art, LLC and Gleeworks, Inc., dated April 25, 2011
10.05	Memorandum of Understanding by and between the Estate of Frank Worth and Capital Art, Inc., dated October 10, 2011
10.06	Photographic Reproduction and Marketing Rights Agreement by and between Capital Art, Inc. and the Estate of Frank Worth, dated November 18, 2011
10.07	Purchase Agreement by and among Capital Art, Inc., International Images Ltd. and Birchley Limited, dated December 21, 2011
10.08	Deed of Variation by and among Capital Art, Inc., International Images Ltd. and Birchley Limited, dated February 28, 2013
10.09	Form of Securities Purchase Agreement (10% Convertible Debentures)
10.10	Form of 10% Convertible Debenture (Expiring December 2015)
10.11	Asset Purchase Agreement by and between Capital Art, Inc. and Movie Star News, LLC, dated October 8, 2014
10.12	Asset Purchase Agreement, between Globe Photos, Inc. and Capital Art, Inc., effective July 22, 2015
21	Subsidiaries
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS	XBRL Instances Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

* Filed herewith

SIGNATURES

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

Date: January 21, 2016

	CAPITAL ART, INC.

	By:	/s/ Sean Goodchild
		Sean Goodchild
		Chief Executive Officer

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sean Goodchild, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Capital Art, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 21, 2016

	/s/ Sean Goodchild
	Sean Goodchild
	CHIEF EXECUTIVE OFFICER
	(PRINCIPAL EXECUTIVE OFFICER )

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David Morton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Capital Art, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 21, 2016

	/s/ David Morton
	David Morton
	CHIEF FINANCIAL OFFICER
	(PRINCIPAL FINANCIAL OFFICER )

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capital Art, Inc. (the “Registrant”) on Form 10-Q for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof, I, Sean Goodchild, Chief Executive Officer, and David Morton, Chief Financial officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. Based on my knowledge, the Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations.


Dated: January 21, 2016	/s/ Sean Goodchild
	Sean Goodchild
	Chief Executive Officer


Dated: January 21, 2016	/s/ David Morton
	David Morton
	Chief Financial Officer

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2015	Jan. 14, 2016
Document And Entity Information
Entity Registrant Name	Capital Art, Inc.
Entity Central Index Key	0001527844
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		325,341,224
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2015	Dec. 31, 2014
Current Assets:
Cash	$ 196,153	$ 340,523
Accounts receivable	8,918	13,691
Inventory	55,923	59,034
Stock subscription receivable	91,000	300,000
Due from related parties	105,043	93,316
Prepaid expenses and other	21,142	9,613
Total current assets	478,179	816,177
Archival images, and property and equipment, net	3,301,105	3,341,552
Security deposits	6,356	6,356
TOTAL ASSETS	3,785,640	4,164,085
Current Liabilities:
Accounts payable	51,156	108,694
Accrued liabilities	461,689	650,031
Due to related parties	28,878	64,274
Short-term notes payable to related parties	41,000	41,000
Total current liabilities	582,723	863,999
Related party notes payable	100,000	100,000
Total liabilities	$ 682,723	$ 963,999
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; none issued and outstanding at March 31, 2015 and December 31, 2014	$ 0	$ 0
Common stock, $0.0001 par value; 450,000,000 shares authorized; 313,993,283 and 311,973,283 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	31,399	31,197
Additional paid-in capital	3,340,759	3,239,961
Common stock subscribed	300,000	300,000
Retained deficit	(569,241)	(371,072)
Total Shareholders' equity	3,102,917	3,200,086
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 3,785,640	$ 4,164,085

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ .0001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ .0001
Common stock, shares authorized	450,000,000	450,000,000
Common stock, shares issued	313,993,283	311,973,283
Common stock, shares outstanding	313,993,283	311,973,283

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Revenues	$ 341,242	$ 101,068
Cost of revenues	73,898	39,077
Gross profit	267,344	61,991
Operating expenses:
Product development, sales and marketing	153,075	9,562
General and administrative	215,024	34,953
Depreciation expense	93,200	17,267
Total operating expenses	461,299	61,782
(Loss) income from operations	(193,955)	209
Other income (expense):
Interest income and other income	656	0
Interest expense	(4,870)	(786)
Total other income (expense)	(4,214)	(786)
Loss before income taxes	(198,169)	(577)
Income taxes	0	0
Net loss	$ (198,169)	$ (577)
Basic and diluted loss per common share	$ 0.00	$ 0.00
Weighted average basic and diluted shares outstanding	313,050,616	256,400,226

Condensed Consolidated Statement of Changes in Shareholders' Equity - USD ($)	Common Stock	Additional Paid-In Capital	Common Stock Subscribed	Retained Earnings / Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2013	256,400,226
Beginning balance, value at Dec. 31, 2013	$ 25,640	$ 466,865	$ 0	$ 9,255	$ 501,760
Net loss				(577)	(577)
Ending balance, shares at Mar. 31, 2014	256,400,226
Ending balance, value at Mar. 31, 2014	$ 25,640	466,865	0	8,678	501,183
Beginning balance, shares at Dec. 31, 2013	256,400,226
Beginning balance, value at Dec. 31, 2013	$ 25,640	466,865	0	9,255	501,760
Ending balance, shares at Dec. 31, 2014	311,973,283
Ending balance, value at Dec. 31, 2014	$ 31,197	3,239,961	300,000	(371,072)	3,200,086
Common shares issued for services, shares	200,000
Common shares issued for services, value	$ 20	9,980			10,000
Common shares issued for cash, shares	1,820,000
Common shares issued for cash, value	$ 182	90,818			91,000
Net loss				(198,169)	(198,169)
Ending balance, shares at Mar. 31, 2015	313,993,283
Ending balance, value at Mar. 31, 2015	$ 31,399	$ 3,340,759	$ 300,000	$ (569,241)	$ 3,102,917

Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net loss	$ (198,169)	$ (577)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	93,200	17,267
Stock-based and other compensation to non-employees	10,000	0
Loss on sale of property included in cost of sales	2,942	0
Changes in assets and liabilities:
Accounts receivable	4,773	(12,211)
Inventory	3,111	6,962
Prepaid expenses and other	(11,529)	1,221
Accounts payable	(57,538)	(19,227)
Accrued liabilities	(188,342)	9,360
Net cash (used in) provided by operating activities	(341,552)	2,795
Cash flows from investing activities:
Purchase of archival images, property and equipment	(55,695)	(16,055)
Net cash used in investing activities	(55,695)	(16,055)
Cash flows from financing activities:
Short-term advances to related parties	(11,727)	(22,106)
(Repayment) or short-term advances from related parties	(35,396)	20,235
Proceeds from sale of common stock	91,000	0
Proceeds from settlement of common stock subscription	209,000	0
Net cash provided by (used in) financing activities	252,877	(1,871)
Net decrease in cash	(144,370)	(15,131)
Cash at beginning of year	340,523	20,919
Cash at end of period	196,153	5,788
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	847	786
NONCASH INVESTING & FINANCING ACTIVITIES:
Stock based-compensation to non-employees	$ 10,000	$ 0

1. Basis of Presentation and Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Reverse Merger

The following unaudited pro forma information is presented to reflect the operations of the Company as if the reverse merger had been completed on January 1, 2015 and 2014, respectively:

	For the Three Months Ended March 31,
(Unaudited)	2015			2014

Supplement pro forma combined results of operations:

Net sales	$	341,242		$	136,680
Net loss		(198,170	)		(328,998	)
Basic and diluted loss per common share	$	–		$	–

Going Concern

Inventory

Impairment of Long-Lived Assets

Recent Accounting Pronouncements

2. Basic and Diluted Income and Loss Per Share

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Basic and Diluted Income and Loss Per Share

A reconciliation of weighted-average basic shares outstanding to weighted-average diluted shares outstanding follows:

	For the three months ended March 31,
	2015		2014

Basic weighted average common shares outstanding		313,050,616		256,400,226

Effect of dilutive securities		–		–

Diluted weighted average common and potential common shares outstanding		313,050,616		256,400,226

	Shares
	Reserved
Shares subscribed in connection with Stock Purchase Agreement		6,000,000
Shares to be issued to consultants		5,035,000
Shares to be issued to Frank Worth Estate		200,000
		11,235,000

These shares were excluded from the calculation of diluted earnings per share as their effect was anti-dilutive.

3. Archival Images, and Property and Equipment

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

Archival Images, and Property and Equipment

Archival images, and property and equipment as of March 31, 2015 and December 31, 2014 comprise of the following:

	March 31,			December 31,			Estimated
	2015			2014			Useful Lives
Frank Worth Collection	$	2,770,000		$	2,770,000			10 years
Other archival images		692,984			676,215			10 years
Leasehold improvements		12,446			12,446			7 years
Computer and other equipment		48,350			40,204			3 – 5 years
Furniture and fixtures		83,666			56,416			7 years
		3,607,446			3,555,281
Less accumulated deprecation		(306,341	)		(213,729	)
Total archival images, property and equipment, net	$	3,301,105		$	3,341,552

4. Frank Worth Collection

3 Months Ended

Mar. 31, 2015

Investments, All Other Investments [Abstract]

Frank Worth Collection

5. Accrued Liabilities

3 Months Ended

Mar. 31, 2015

Payables and Accruals [Abstract]

Accrued Liabilities

Accrued liabilities at March 31, 2015 and December 31, 2014 comprise of the following:

	March 31,		December 31,
	2015		2014
Accrued payroll and related	$	6,954	$	8,242
Accrued management fee due to related party		5,781		5,781
Due to Frank Worth Estate		135,000		135,000
Interest payable to related parties		1,776		748
Due to consultant for website development		56,500		–
Accrued royalties due to Frank Worth Estate		–		30,000
Stock-based compensation due to non-employees		151,250		126,250
Fair value of limited edition prints due to consultant		–		250,000
Contingent liability for taxes assumed in reverse merger		91,000		91,000
Other		13,428		3,010
Total accrued liabilities	$	461,689	$	650,031

6. Notes Payable to Related Parties

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Notes Payable to Related Parties

7. Related Party Transactions

3 Months Ended

Mar. 31, 2015

Related Party Transactions

Due From/To Related Parties

	March 31,		December 31,
	2015		2014
Due from related parties:
Dino Satallante, beneficial interest shareholder	$	1,350	$	1,350
Sam Battistone, beneficial interest shareholder		966		966
ICONZ Art, LLC, beneficial interest shareholder		9,347		–
Stuart Scheinman, President of the Company and beneficial interest shareholder		2,380		–
Klaus Moeller, related party of pre-merger CAPA and beneficial interest shareholder		91,000		91,000
Total due from related parties	$	105,043	$	93,316

Due to related parties:
ICONZ Art, LLC, beneficial interest shareholder	$	–	$	2,014
Klaus Moeller, related party of pre-merger CAPA		521		4,562
MSN Holding Co., beneficial interest shareholder		28,272		28,272
Premier Collectibles, beneficial interest shareholder		85		85
Stuart Scheinman, President of the Company and beneficial interest shareholder		–		29,341
Total due to related parties	$	28,878	$	64,274

8. Shareholders' Equity

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Shareholders' Equity

Preferred Stock

Stock Purchase Agreement

Private Placement

Stock-based and Other Compensation to Non-Employees

On August 15, 2014, pre-merger CAPA entered into a four-month agreement for strategic management services with a consultant. In connection with the agreement, the consultant is to receive compensation of 5,500,000 shares of the Company’s common stock payable in four equal installments. As of March 31, 2015 and December 31, 2014, 1,650,000 shares of common stock with a fair value of $82,500 were unissued and included in accrued liabilities in the Company’s condensed consolidated balance sheets.

9. Concentrations of Credit Risk and Financial Instruments

3 Months Ended

Mar. 31, 2015

Risks and Uncertainties [Abstract]

Concentrations of Credit Risk and Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.

On August 15, 2014, pre-merger CAPA entered into a four-month agreement for strategic management services with a consultant. In connection with the agreement, the consultant is to receive compensation limited edition photographs for aggregate retail fair value of $250,000. The Company evaluated the transaction under the guidance in ASC 845-Nonmonetary Transactions. ASC 845 requires fair value of nonmonetary exchanges be recorded based on fair value inherent in the transaction. The Company determined the aggregate retail fair value of the prints totaling $250,000 represented the fair value of the reciprocal transfer between the Company and the consultant. See Note 5 – Accrued Liabilities. The Company delivered the limited edition prints to the consultant in March 2015, which accounted for 73% of total revenues for the three months ended March 31, 2015. No other distributor or customer accounted for over 10% of total sales for the three months ended March 31, 2015 and 2014.

10. Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

Subsequent Events

Management has evaluated subsequent events, as defined by ASC 855, Subsequent Events, through the date on which the financial statements were available to be issued.

Asset Purchase Agreement

Stock Purchase Agreement

On August 14, 2014 pre-merger CAPA entered into a Stock Purchase Agreement with an investor for sale of 20,000,000 of the Company’s common stock at $0.05 per share, for total of $1,000,000 payable in installments in August 2014 through December 31, 2014. See Note 8 – Shareholders’ Equity. In June 2015 the agreement was paid in full and the Company issued 6,000,000 shares of common stock when the remaining $91,000 was received in connection with the outstanding stock subscription receivable.

Frank Worth Collection

Note Payable

Notes Payable to Related Parties

Consulting and Distributor Agreements

1. Basis of Presentation and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Basis of Presentation

Reverse Merger

Reverse Merger

The following unaudited pro forma information is presented to reflect the operations of the Company as if the reverse merger had been completed on January 1, 2015 and 2014, respectively:

	For the Three Months Ended March 31,
(Unaudited)	2015			2014

Supplement pro forma combined results of operations:

Net sales	$	341,242		$	136,680
Net loss		(198,170	)		(328,998	)
Basic and diluted loss per common share	$	–		$	–

Going Concern

Going Concern

Inventory

Inventory

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Recent Accounting Pronouncements

Recent Accounting Pronouncements

1. Basis of Presentation and Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Pro forma information

	For the Three Months Ended March 31,
(Unaudited)	2015			2014

Supplement pro forma combined results of operations:

Net sales	$	341,242		$	136,680
Net loss		(198,170	)		(328,998	)
Basic and diluted loss per common share	$	–		$	–

2. Basic and Diluted Income and Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Schedule of weighted average shares outstanding

	For the three months ended March 31,
	2015		2014

Basic weighted average common shares outstanding		313,050,616		256,400,226

Effect of dilutive securities		–		–

Diluted weighted average common and potential common shares outstanding		313,050,616		256,400,226

Schedule of shares reserved for future issuance

	Shares
	Reserved
Shares subscribed in connection with Stock Purchase Agreement		6,000,000
Shares to be issued to consultants		5,035,000
Shares to be issued to Frank Worth Estate		200,000
		11,235,000

3. Archival Images, and Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

Schedule of archival images, property and equipment

	March 31,		December 31,
	2015		2014
Accrued payroll and related	$	6,954	$	8,242
Accrued management fee due to related party		5,781		5,781
Due to Frank Worth Estate		135,000		135,000
Interest payable to related parties		1,776		748
Due to consultant for website development		56,500		–
Accrued royalties due to Frank Worth Estate		–		30,000
Stock-based compensation due to non-employees		151,250		126,250
Fair value of limited edition prints due to consultant		–		250,000
Contingent liability for taxes assumed in reverse merger		91,000		91,000
Other		13,428		3,010
Total accrued liabilities	$	461,689	$	650,031

5. Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2015

Payables and Accruals [Abstract]

Schedule of accrued liabilties

	March 31,		December 31,
	2015		2014
Accrued payroll and related	$	6,954	$	8,242
Accrued management fee due to related party		5,781		5,781
Due to Frank Worth Estate		135,000		135,000
Interest payable to related parties		1,776		748
Due to consultant for website development		56,500		–
Accrued royalties due to Frank Worth Estate		–		30,000
Stock-based compensation due to non-employees		151,250		126,250
Fair value of limited edition prints due to consultant		–		250,000
Contingent liability for taxes assumed in reverse merger		91,000		91,000
Other		13,428		3,010
Total accrued liabilities	$	461,689	$	650,031

7. Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of related party transactions

	March 31,		December 31,
	2015		2014
Due from related parties:
Dino Satallante, beneficial interest shareholder	$	1,350	$	1,350
Sam Battistone, beneficial interest shareholder		966		966
ICONZ Art, LLC, beneficial interest shareholder		9,347		–
Stuart Scheinman, President of the Company and beneficial interest shareholder		2,380		–
Klaus Moeller, related party of pre-merger CAPA and beneficial interest shareholder		91,000		91,000
Total due from related parties	$	105,043	$	93,316

Due to related parties:
ICONZ Art, LLC, beneficial interest shareholder	$	–	$	2,014
Klaus Moeller, related party of pre-merger CAPA		521		4,562
MSN Holding Co., beneficial interest shareholder		28,272		28,272
Premier Collectibles, beneficial interest shareholder		85		85
Stuart Scheinman, President of the Company and beneficial interest shareholder		–		29,341
Total due to related parties	$	28,878	$	64,274

1. Basis of Presentation (Details) - USD ($)	3 Months Ended
1. Basis of Presentation (Details) - USD ($)	Mar. 31, 2015	Mar. 31, 2014
Business Acquisition, Pro Forma Information [Abstract]
Pro forma net sales	$ 341,242	$ 136,680
Pro forma net loss	$ (198,170)	$ (328,998)
Pro forma basic and diluted loss per common share	$ 0.00	$ 0.00

1. Basis of Presentation (Details Narrative) - USD ($)	3 Months Ended
1. Basis of Presentation (Details Narrative) - USD ($)	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Accounting Policies [Abstract]
Cash	$ 196,153	$ 5,788	$ 340,523	$ 20,919
Retained deficit	(569,241)		$ (371,072)
Net loss	(198,169)	(577)
Cash used in operations	$ (341,552)	$ 2,795

2. Basic and Diluted Income and Loss Per Share (Details - shares) - shares	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Accounting Policies [Abstract]
Basic weighed average common shares outstanding	313,050,616	256,400,226
Effect of dilutive securities	0	0
Diluted weighted average common and potential common shares outstanding	313,050,616	256,400,226

2. Basic and Diluted Income and Loss Per Share (Details)	3 Months Ended
	Mar. 31, 2015 shares
Antidilutive shares not included in per share calculation	11,235,000
Shares subscribed in connection with Stock Purchase Agreement
Antidilutive shares not included in per share calculation	6,000,000
Shares to be issued to consultants
Antidilutive shares not included in per share calculation	5,035,000
Shares to be issued to Frank Worth Estate
Antidilutive shares not included in per share calculation	200,000

3. Archival Images, and Property and Equipment (Details) - USD ($)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Property and equipment gross	$ 3,607,446	$ 3,555,281
Less accumulated deprecation	(306,341)	(213,729)
Total archival images, property and equipment, net	3,301,105	3,341,552
Leasehold Improvements
Property and equipment gross	$ 12,446	12,446
Estimated useful lives	7 years
Computer and other equipment
Property and equipment gross	$ 48,350	40,204
Estimated useful lives	3-5 years
Furniture and fixtures
Property and equipment gross	$ 83,666	56,416
Estimated useful lives	7 years
Frank Worth Collection
Property and equipment gross	$ 2,770,000	2,770,000
Estimated useful lives	10 years
Other archival images
Property and equipment gross	$ 692,984	$ 676,215
Estimated useful lives	10 years

4. Frank Worth Collection (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
4. Frank Worth Collection (Details Narrative) - USD ($)	Mar. 31, 2015	Dec. 31, 2014
Royalties paid	$ 30,000
Frank Worth Collection
Common shares issued in connection with acquisition, shares		200,000
Common shares issued in connection with acquisition, value		$ 10,000
Cash paid for acquisition		$ 155,000

5. Accrued Liabilities (Details) - USD ($)	Mar. 31, 2015	Dec. 31, 2014
Payables and Accruals [Abstract]
Accrued payroll and related	$ 6,954	$ 8,242
Accrued management fee due to related party	5,781	5,781
Due to Frank Worth Estate	135,000	135,000
Interest payable to related parties	1,776	748
Due to consultants for website development	56,500	0
Accrued royalties due to Frank Worth Estate	0	30,000
Stock-based compensation due to non-employees	151,250	126,250
Fair value of limited edition prints due to consultant	0	250,000
Contingent liability for taxes assumed in reverse merger	91,000	91,000
Other	13,428	3,010
Total accrued liabilities	$ 461,689	$ 650,031

5. Accrued Liabilities (Details Narrative)	3 Months Ended
5. Accrued Liabilities (Details Narrative)	Mar. 31, 2015 USD ($) shares
Stock issued for services, value	$ 10,000
Consultant
Stock issued for services, shares \| shares	188,333
Stock issued for services, value	$ 56,500

6. Notes Payable to Related Parties (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Unsecured Debt
Interest payable	$ 1,776		$ 748
Dino Satallante \| Unsecured Debt [Member]
Debt maturity date	Jul. 31, 2016
Debt interest rate	5.00%
Interest expense	$ 1,260	$ 786
Note payable related party	100,000		$ 100,000
Dino Satallante \| Unsecured Debt -2 [Member]
Debt interest rate			6.00%
Interest expense	615
Note payable related party	20,500		$ 20,500
Dreamstar \| Unsecured Debt -2 [Member]
Interest expense	615
Note payable related party	$ 20,500

7. Related Party Transactions (Details) - USD ($)	Mar. 31, 2015	Dec. 31, 2014
Due from related parties	$ 105,043	$ 93,316
Due to related parties	28,878	64,274
Dino Satallante
Due from related parties	1,350	1,350
Sam Battistone
Due from related parties	966	966
ICONZ Art, LLC
Due from related parties	9,347	0
Due to related parties	0	2,014
Scheinman
Due from related parties	2,380	0
Due to related parties	0	29,341
Klaus Moeller
Due from related parties	91,000	91,000
Due to related parties	521	4,562
MSN Holding Co.
Due to related parties	28,272	28,272
Premier Collectibles
Due to related parties	$ 85	$ 85

8. Shareholders' Equity (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
8. Shareholders' Equity (Details Narrative) - USD ($)	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Stock subscription receivable	$ 91,000		$ 300,000
Proceeds from sale of stock	209,000	$ 0
Common shares issued for cash, value	91,000
Common shares issued for services, value	10,000
Private Placement
Stock subscription receivable	91,000
Proceeds from sale of stock	$ 209,000
Private Placement \| Former President
Common shares issued for cash, shares	1,820,000
Common shares issued for cash, value	$ 91,000
Common shares issued to related party for finder's fee, shares	200,000
Common shares issued to related party for finder's fee, value	$ 10,000
Consulting agreement
Common stock to be issued for services, shares	875,000		875,000
Common stock to be issued for services, value	$ 43,750		$ 43,750
Management Services
Common stock to be issued for services, shares	1,650,000		1,650,000
Common stock to be issued for services, value	$ 82,500		$ 82,500
Investment banking advisory services
Common shares issued for services, shares	2,000,000
Common shares issued for services, value	$ 25,000
Website development services
Common stock to be issued for services, shares	188,333
Common stock to be issued for services, value	$ 56,500

9. Concentrations of Credit Risk (Details Narrative)	3 Months Ended
9. Concentrations of Credit Risk (Details Narrative)	Mar. 31, 2015
Accounts receivable [Member] \| One distributor
Concentration risk percentage	73.00%

Boards:

Quotes:

Boards

News

Market Data

Markets

Discover

GBPT

Latest GBPT Messages

Loading Messages....

Capital Art, Inc. News

Loading Messages....

Your Recent History