UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K10-K/A
Amendment No. 1
v
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 20152019
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-53462
VNUE, Inc. |
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(Exact name of registrant as specified in its charter) |
Nevada |
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(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) | |
104 W. | ||
New York, NY 10001 |
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(Address of Principal | (Registrant's Telephone Number, |
Securities registered pursuant to Section 12(b) of the Act: |
Securities Registered Pursuant to Section 12(b) of the Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o¨ No x
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.days Yes ox No x¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ox No x¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o¨ No x
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 definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o¨ No x
The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant at December 31, 2015by reference to the average bid and asked price of such common equity, as of June 30, 2019 was approximately $17,368,544.$472,373.
The number of shares of common stock of the registrant outstanding at December 31, 2015on May 13, 2020 was 640,202,937 shares. The number of shares of common stock of the registrant outstanding at November 30, 2016 was 646,901,2391,149,756,152 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
VNUE, INC.
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EXPLANATORY NOTE
Item 1. DescriptionThis Amendment No. 1 to our Annual Report on Form 10-K, for the year ended December 31, 2019, filed May 18, 2020 (the “Original Report”) is being filed to include the information below regarding our reliance the SEC’s conditional exemptive orders issued in response to the Covid-19 pandemic. With the exception of Businessthe additional disclosures set forth below, all disclosures contained in the Original Report are unchanged.
Forward-Looking StatementsVNUE, Inc. (the “Company”) filed the Original Report on Form 10-K on a delayed basis based on reliance on the Order of the Securities and Exchange Commission dated March 4, 2020, as modified March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934 modifying exemptions from the reporting and proxy delivery requirements for public companies (Release No. 34-22465).
This Amendment No 1 to the Original Report is being filed to clarify that the preparation of the Company’s Annual Report, including financial statements and completion of the auditing process, was delayed as a result of government-imposed quarantines, office closures and travel restrictions, which affected both the Company’s and its service provider’s personnel. Our office closing and quarantines have impacted our ability to both internally compile and complete our financial statements and to provide business records and to meet with auditors. Office staff has been forced to work remotely without access to the records kept in the Company’s offices. As a result of these government-imposed quarantines, office closings and travel restrictions, the Company’s accounting personnel and service providers experienced in processing certain of its accounting records and receipts required to complete the audit of the Company’s financial statements.
Presentation of Information
As used in this annual report, the terms “we”, “us”, “our” and the “Company” mean VNUE, Inc., a Nevada corporation, and its subsidiaries, unless the context requires otherwise. The term “VNUE” or “VNUE Washington” refers to our wholly-owned operating subsidiary, VNUE, Inc.
On May 29, 2015, the Company, known at that time as Tierra Grande Resources Inc., acquired VNUE Washington or VNUE, resulting in VNUE becoming our wholly-owned subsidiary, and the holders of VNUE acquiring the majority of our outstanding capital. The acquisition of VNUE Washington was treated as a reverse acquisition, with VNUE Washington deemed the accounting acquirer of the company, and VNUE, Inc. deemed the accounting acquiree under the acquisition method of accounting in accordance with Section 805-10-55 of the FASB Accounting Standards Codification.
On April 15, 2017, the Company effected a reverse stock split of the Company’s common stock at a ratio of 1 for 10 which became effective on the market as of August 7, 2017. All historically reported share amounts and related pricing herein have been adjusted to reflect this 1-for-10 reverse stock split.
Forward-Looking Statements
The statements in this annual report on Form 1-K, that are not reported financial results or other historical information are "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements appear in a number of different places in this report and can be identified by words such as "estimates"“estimates”, "projects"“projects”, "expects"“expects”, "intends"“intends”, "believes"“believes”, "plans"“plans”, or their negatives or other comparable words. Also, look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include, among others, statements regarding our business plans and availability of financing for our business. Some forward-looking statements that we may use include, without limitation, those statements that relate to:
· | Competition, | |
· | Market acceptance of our products, | |
· | Our ability to penetrate the market and continually innovate useful technologies, | |
· | Our ability to negotiate and enter into license agreements, | |
· | Our ability to raise capital, | |
· | Our ability to protect our intellectual property rights. |
You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to actual facts differing from the assumptions underlying our estimates. Some of these risks and assumptions include those set forth in reports and other documents we have filed with or furnished to the United States Securities and Exchange Commission ("SEC"(“SEC”). We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. UnlessExcept to the extent required by law, we do not assume anyundertake no obligation to update or revise any forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
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Presentation of Information
As used in this annual report, the terms "we", "us", "our" and the "Company" mean Vnue, Inc. and its subsidiaries, unless the context requires otherwise.
All dollar amounts in this annual report refer to US dollars unless otherwise indicated.PART I
OverviewItem 1. Description of Business
Overview
We wereare a music technology company, that offers a suite of products and services that monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music.
VNUE, Inc., was incorporated as a Nevada corporation on April 4, 2006.
Corporate History and Prior Business
Effective April 10, 2013,2006, under the Company changed its name from“ Buckingham Exploration Inc. to Tierra Grande Resources Inc. On August 9, 2010, the Company incorporated 0887717 B.C. Ltd., a wholly-owned subsidiary in British Columbia, Canada. On February 28, 2013, the Company acquired a 100% interest in Tierra Grande Resources, S.A.C. ("Tierra"), a company incorporated in Peru, in consideration for $10.
Prior to the Merger, our strategy had been to identify, acquire and advance mining assets that present near term cash-flow with the emphasis on creating early cash flow to enable the Company to consider other projects.
In July 2013, we entered into a Letter of Intent to acquire the Buldibuyo Gold Project in Peru, South America. We subsequently entered into an updated Letter of Intent to acquire the project in May 2014. It was our intention to acquire 100% of the gold project, which had produced high grade ore in the past, and had engaged in some due diligence to qualify expectations and timelines. However, despite the execution of the Letter of Intent and numerous attempts to accommodate the vendors, the vendors failed to deliver essential information to us required to conduct a thorough technical and legal due diligence on the project and associated holding companies and, accordingly, we terminated negotiations to acquire the project in July 2014.
The Company continued to review what we believed to be opportunities with potential in Peru through our strategic alliance with ExploAndes S.A.C. ("ExploAndes"). ExploAndes is a leading firm of geology consultants and project logistics managers located in Peru assisting in the identification, assessment and advancement of projects in South America. ExploAndes has a proven track record of delivering professional services to the South American mining industry from mineral project review and assessment to project management.
The Company also continued to review what we believed to be opportunities with potential in Australia through our strategic alliance with Mining Plus Pty Ltd ("Mining Plus"), a leading firm of mining and geoscience consultants with offices in Australia, Canada and Peru that assist in the identification, assessment and advancement of mining projects.
Given the Company’s then financial condition and its focus in Peru and Australia, its interests in the Dome, Byng and Tramp claims in Canada were not renewed. See our Annual Report on Form 10-K for the year ended May 31, 2014 for more information regarding our prior business.
Agreement and Plan of Merger
We entered into an Agreement and Plan of Merger (the "Merger Agreement"), on April 13, 2015 with VNUE, Inc., a company incorporated pursuant to the laws of the State of Washington ("VNUE"), and TGRI Merger Corp., a Nevada corporation and a wholly-owned subsidiary of the Company ("Merger Sub"). “
On May 29, 2015, Vnue, Inc. (formerlythe Company, known at that time as Tierra Grande Resources Inc.) ("TGRI"), closedacquired VNUE Washington or VNUE, resulting in VNUE becoming our wholly-owned operating subsidiary, and the Agreement and Planholders of Merger (the "Merger Agreement"), initially entered into on April 13, 2015 with Vnue Washington and allVNUE acquiring the majority of the stockholders of Vnue Washington.our outstanding capital stock. We also changed our name at that time to VNUE, Inc.
Upon closing of the Merger Agreement, a total of 507,629,872 shares of TGRI common stock were issued as follows: (i) all shares of Vnue Washington stock of any class or series issued and outstanding immediately prior to the closing of the Merger Agreement were automatically converted into and exchanged for an aggregate of 477,815,488 fully paid and non-assessable shares of TGRI common stock; and (ii) an aggregate of 29,814,384 shares of TGRI common stock were issued to Matheau J. W. Stout, Esq. as payment for services performed prior to and in connection with the Merger. The number of TGRI common shares issued to Vnue Washington's stockholders for the acquisition of all shares of Vnue Washington represented approximately 79.0% of the issued and outstanding common stock immediately after the closing of the Merger Agreement. The board of directors and the members of the management of TGRI resigned and the board of directors and the member of the management of Vnue Washington became the board of directors and the member of the management of the combined entities upon closing of the Merger Agreement.
As a result of the controlling financial interest of the former stockholders of Vnue Washington, for financial statement reporting purposes, the merger between TGRI and Vnue Washington was treated as a reverse acquisition, with Vnue Washington deemed the accounting acquirer and TGRI deemed the accounting acquiree under the acquisition method of accounting in accordance with Section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction in substance whereas the assets and liabilities of Vnue Washington (the accounting acquirer) are carried forward to TGRI (the legal acquirer and the reporting entity) at their carrying value before the combination and the equity structure (the number and type of equity interests issued) of Vnue Washington is being retroactively restated using the exchange ratio established in the Merger Agreement to reflect the number of shares of TGRI issued to effectuate the acquisition. The number of common shares issued and outstanding and the amount recognized as issued equity interests in the consolidated financial statements is determined by adding the number of common shares deemed issued and the issued equity interests of Vnue Washington immediately prior to the business combination to the unredeemed shares and the fair value of TGRI determined in accordance with the guidance in ASC Section 805-40-55 applicable to business combinations, i.e. the equity structure (the number and type of equity interests issued) in the consolidated financial statements immediately post the combination reflects the equity structure of TGRI, including the equity interests the legal parent issued to effect the combination.
A copy of the Merger Agreement was attached as Exhibit 10.1 to the Company’s 8-K filed on April 14, 2015. The description of the Merger Agreement herein is qualified by the terms of the full text of the agreement attached thereto and the terms thereof are incorporated herein by reference.
Overview of our Current Business
The live music and entertainment space are constantly searching for new monetization outlets. Music licensing and royalties are particular “hot button” issues in the industry. We believe that we have developed solutions that create new revenue streams, and simultaneously helps to protect the rights of the creators and will help ensure they are properly compensated. This benefits not only artists, labels, publishers, and live venues but the fans as well.
Through VNUE, Inc., our wholly ownedwholly-owned subsidiary, we now carry on business as a live entertainment music technology company which brings bands and fans together by capturing professional quality audio and video recordings of live performances and delivers the experience of a venue to your home and hand.
By streamlining the processes of curation, clearing, capturing, distribution and monetization of music performances, VNUE manages and simplifies the complexities of the music ecosystem.
VNUE produces and captures rich content through its Front of House mobile application and provides world-wide distribution and monetization of live concerts and other events throughthat offers a suite of mobile, web administration applications, allowing an artist to seamlessly deliverproducts and sell their live performances directly to the fans who attend their shows. services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music. Our two main product lines are:
· | Set.fm™ / DiscLive Network™ - Our consumer app platform that allows fans to purchase the concert they just experienced instantly on their mobile device, and “instant” physical collectible products are recorded and sold at shows and online through the company’s exclusive partner DiscLive Network™, the 17+-year pioneer in “instant live” recording. | |
· | Soundstr™ - Our technology which is a comprehensive music identification and rights management Cloud platform that, when fully deployed, can accurately track and audit public performances of music, creating a more comprehensive and transparent ecosystem for general music licensing and associated royalty payments, and will help to ensure the correct stakeholders are paid through the use of our “big data” collection. |
While VNUE will primarily be used in live music venues, weSet.fm™ and Soundstr™ are also branching into many other entertainment experiences such as comedy, plays, musicals, university lectures, professional demonstrationsproprietary marks of the Company, DiscLive, and panel discussions, as well as action sportsits related marks and religious events.
VNUE's business model is based onnames are not owned by the businessCompany and are owned or utilized by RockHouse Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to consumer VNUE software application, now in beta testing, as well as businessSet.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to business monetizationthem. Set.fm had been using its marks since 2014 prior to our acquisition of our back end rights clearing system software, which is currently in development with a projected beta some time during the first quarter 2017.assets.
We are a relatively new company and to date we have received no revenues from our operations.company. Our wholly-owned VNUE Inc., our wholly owned subsidiary only recently commenced operations in calendar year 2015 and we have undertaken onlymainly organizational activities and software application development. Our independent auditors have raised substantial doubts as to our ability to continue as a going concern without significant additional financing. Accordingly, for the foreseeable future, we will continue to be dependent on additional debt and equity financing in order to maintain our operations and continue with our development activities.
Acquisitions will be pursued where the Directors consider that there is clear value through the addition of expertise, customers, monetization potential or geographic footprint.
Our principal offices are located at 104 W. 29th Street, 11th Floor, New York, NY 10001. Our telephone number is 857-777-6190. The live music and entertainment space is constantly searching for new monetization outlets; VNUE has a solution that melds content and technology in almost any venue in the world. This befits not only artist, labels, publishers and live venues but the fan.833-937-5493.
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The History of VNUE
VNUE was founded in August of 2013 by Matthew Carona and Louis Mann with the vision of creating a collective network of connected venues that empower and assist bands, artist,artists, and entertainers to monetize their performance (audio & video) in the venue using mobile technologies. VNUE has developed its business and technology in tandem to enter into deals with venues, artists and labels across the United States using this initial launch strategy. The collective venue network effect, whereby each deal makes the offer more compelling to other potential customers, has been a key driver of VNUE’s growth to date. The initial focus of the business in early 2014 as a YouTube certified company, to create a Multi-Channel Network (MCN) specifically focused on live streaming and monetization of content through the google display network. VNUE’s first customer being the HipHopGods, a collective organization that manages hip-hop, rap, and emerging artists. Their initiative was to monetize all content across the digital and social landscape and create live streams through all HHG YouTube channels. Through VNUE’s current platform, network and services, HHG is working on unlocking new revenue streams. Through VNUE’s artist dashboard artists and publishers can simplify the processes of curation, clearing, capturing, distribution and monetization in venues and across the digital landscape.
In 2014, VNUE acquired Lively LLC a Seattle based music technology company and direct-to-fan mobile platform that brings artists, fans, and brands together by capturing the live performance. AsIn 2016, Zach Bair, CEO, took control of VNUE, and his team determined that the Lively IP, although valuable, had not been developed to the point where it could be deployed with major recording artist clients, and the decision was made to build and/or acquire other technologies which would help the company realize its goals. Bair and his team set out to immediately reset the company’s direction.
DiscLive™ Exclusive License
On July 10, 2017, our wholly-owned VNUE subsidiary entered into a resultLicensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) (DiscLive and related marks indicated herein are marks utilized by DiscLive and the Company disclaims rights to those names or marks) to formalize the terms of the acquisition,Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. This agreement provides VNUE with an exclusive license from DiscLive, for three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license for the foregoing rights. In exchange for the license, DiscLive receives a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services since the commencement of the agreement. DiscLive is controlled by our Chief Executive Officer.
Set.fm™ Acquisition
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc., whereby the Company acquired the assets of the digital live music distribution platform Set.fm™ from PledgeMusic (See Note 3 of the Consolidated Financial Statements herein). Set.fm™ allows us to record and sell live shows directly to fans’ mobile devices, uploading simultaneously with the artist’s performance, similar to the “instant live” physical distribution of DiscLive. The platform, which also features an innovative and easy-to-use DIY studio app, already boasts thousands of artists and tens of thousands of fans using it. VNUE has grown itsconducted updates and intends to continually update, the Set.fm™ platform, expandedto update and improve it, and has leveraged the platform for major label music clients and will continue to roll out additional functionality.
Soundstr™ Acquisition
On April 23, 2018, the Company entered into enabled venues and enhanced its platform offeringan agreement with MusicPlay Analytics, LLC (d/b/a Soundstr) (“Soundstr”) whereby the Company acquired the assets of Soundstr, a technology that aims to approve the monetization model and further evangelize the creationhelp businesses pay fairer music license fees based on actual music usage (see Note 3 of the collective network of connected venues that empower artists to create content and monetize it.Consolidated Financial Statements herein).
The Company intends to continually update the above technologies, funds, and resources permitting.
Markets and Opportunity
Our business has two main “end users” or revenue sources:
· | the “consumer” side of the business, where we leverage our team’s expertise in recording live shows and releasing experiential content to fans immediately afterward (the “instant live” model), which consists of DiscLive, and Set.fm™, and | |
· | the emerging market of Music Recognition Technology (MRT), which is a B2B model whereby we identify music being played in bars, restaurants, other businesses, and radio stations, and tracing that music back to the original songwriters so that we can ensure the correct stakeholders are being paid. This is the Soundstr cloud and hardware technology. Eventually, we envision this functionality being merged together. |
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Markets and OpportunityThe following sections are broken up accordingly.
It is estimated that there are over 400,000 Indie bands performing in the US domestic market alone,Set.fm™ & DiscLive™: “Instant Live Recording and while a handful of them will get produced under a label, even less will be big enough to attempt to utilize today’s current methods to capture and deliver live performance audio from a given show. Currently artist, bands and performers are missing a simple capture and immediate sell tool kit to deliver high quality audio and video to their fans for each of their live shows.Experiential Products”
VNUE’s goal firstDiscLive and foremost is to empower artists - not onlyset.fm™ provide fans with “instant” experiential content, so that they may walk out of a concert and take home their experience. The concert never ends with DiscLive and Set.fm™. With the increase in serving their fans, but generating a monetary footprint, which can fosterdigital media (and related piracy issues), music concerts and related media and merchandising and events (e.g. post-concert shows etc.) are becoming the continued creation of their art.primary driver in music revenues today.
VNUE intends to strategically align an economically viable in-house digital solution during a golden era of live music by creating a platformHow Instant Live Recording Works?
Teams follow tours and connected network that is extremely complexrecord major artists and resource-intensive. Through a suite of applicationsrelease high-quality products instantly via the set.fm™ mobile app and with a dashboard centered atDiscLive physical products (online and onsite), capturing the heartemotion of the software platform,moment and translating that to sales. Set.fm™ also offers “indie” artists a connected network of partners, labels, publishers, right management, artist, bandsfree “Set.fm Studio” app to record themselves and venuessell their music on our platform. DiscLive is the pioneer, and a range of advanced 3rd party distributors is created. VNUE allows distribution of content to all types of digital and social focused sitesCEO helmed that company since 2004, as well as EMI/Capitol Records version (2009-2012), called “Abbey Road Live”. Thousands of shows have been recorded all over the world and tens of thousands of products sold. Major artist clients (past and current) include Rob Thomas, Peter Frampton, King’s X, Bad Company, Slash, Seether, Devo, Blondie, and many others.
Size of the Instant Live Recording Market
According to Statistica, the global music business is currently valued at $51.5 billion. Within that market, live music revenue is projected to be over $31 billion by 2022, according to Pricewaterhouse Coopers. With sufficient capital that will be deployed into sales, marketing, and branding resources, we believe that we can capture between $50-$100 million annually within its own sandbox,three years with a rangeour experiential products.
Instant Live Recording
Revenue Model
Based on our team’s 17+ years of revenue modelsoperations (through DiscLive, Abbey Road Live when aligned with EMI, and centralized reportingSet.fm), thousands of shows recorded around the world, and data collection available to us, we believe that the artists, labelsaverage sales conversion is 15%, with product prices averaging $25. This means that at a show of 1000 people attending, based on previous statistics, 150 of those people would purchase one of our products. With just ten tours of 20 tour dates each, and publishers get to keep. By usingan audience of only 2,500 per show, the VNUE platform, artists are allowed to create,revenue potential is $1.875 million. We also market our products worldwide through our e-Commerce websites and distribute their shows while creating new revenue streams from digital sources. Fans are able to connect with their favorite performers inthrough the effective use of social networks. No assurance can be made that past results will be indicative of future results however, and a new way, discover new performancesnumber of economic and listen to and watch their live performances on their mobile devices, computer, gaming consoles, OTT services and connected home televisions.technological factors could adversely affect our consumer spending habits.
Serving multiple customers on one platform enables VNUE to cost-effectively invest significant amounts in innovation to drive continuous product iterations that evolve as digital technology evolves.Growth Potential for Instant Live Recording
Monetization and Business Model
In today’s social media world, fans want to be able to immediately share with their friendsThis is a model that is scaled through the fact they were at a concert and how great the performance was that they just attended. Fans do not want to wait for a post-tour, live show CD to be produced from some other show on the tour months after the fact. They want the performance they witnessed and they want it now. VNUE intends to provide the solution.
Artists, music industry executives, record labels, music publishers and live performance venues will access VNUE’s solution as a service, through which they are able to benefit from a rangeuse of different revenue models to optimize the value of their live and on-demand content across a majority of digital ecosystems. The Company’s primary revenue model is to take a share of the revenue from sales of concert performances both audio and video or audio separately. In addition, the revenue stream can also include an advertising or sponsorship component that was integrated into tours. This revenue share aligns business outcomes for all parties and means that costs are primarily baked into thetechnology, software, and delivery agent. Typical revenue shareshardware that we have specifically assembled to address our proprietary business practices which have been honed over the years, staffed with readily available contract personnel that we train specifically for our model. This does not age out. It is very much the “Ray Kroc” model, translated to music services, where the processes are expected to range from 15-60 percentrepeatable, and vary based on the level ofwe have an unbeatable product and service allocated to each artist, label, music publisher, and performance venue and the scale ofline. Since the business opportunity. Secondary revenue streams include fees for storage, usage, licensingis primarily built on relationships, our ability to scale is only limited by access to capital. Scaling the opportunity is as simple as accessing the capital to acquire the equipment and software upgrades (design or social advertising distribution). VNUE’s revenue share is reported as net revenue (i.e. gross transaction revenues minus any revenue share duecontract labor to third parties).cover more tours.
As a software-focused business, VNUE can take advantage of a single technology platform to continuously acquire users at low marginal cost leveraging artist promotion, in venue marketing and mobile notifications. Further automation and self-service tools are intended to allow VNUE to provide more advanced services to the industry and artist without adding significantly to the cost base or headcount.
VNUE intends to deliver a technology suite to accompany the publisher that allows them to source and then generate a wide swath of reports down to granular level in venue streams and conversions. VNUE looks to commercialize the in venue sales components that is currently missing and expand these efforts globally and embed live and on-demand content from the VNUE audience network efficiently and cost-effectively. These features, such as its real time audio sweating tools, are designed to significantly reduce the manual effort required to display music content and, therefore, increase the efficiency of content distribution and the revenue yield per performance sold.
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Products, Services and Intellectual PropertyBarriers to Entry & Obsolescence
The company’s cloud-based software platform, contains four major pieces of intellectual property, based on a full stack Amazon Web Services deployment on which we supportWe do not believe that our mobile app, our Cross Platform Desktop Player, our VNUE Front of House (FOH) (for capturing soundboard audio), and the Artist Admin Portal for digital rights clearing and management of all artists, shows, and content. This technology is based on current languages and technologies andinstant live recording business has been designed to be easily deployed and maintained. Currently, our software is being held as a proprietary trade secretany direct competitors at this time, and there are no current intentionsknown competitors to formally file documents with the United State PatentSet.fm immediate distribution platform. Currently, fans merely take poor quality videos and Trademark Office;audio recordings and just spread them (without obtaining intellectual property rights) on whatever social media they use. We believe, however, we may do sothat our team has the time-tested trust of the music industry and proprietary processes and trade secrets developed over a decade that creates substantial barriers to entry. Management has found that other companies have tried to enter the space in different formats but none have the industry trust, business processes and trade secrets that the Company has developed. We believe that because our focus is on creating experiential content, delivered instantly, in the future.manner in which the fan wants it (particularly digitally), our user base will continue to grow with repeat users. As the industry evolves, so will the manner in which concert-goers consume their content, and VNUE management believes that continued R&D and marketing are necessary to stay a step ahead.
VNUE’s Audio Manager is called Front of House. Sound Engineers atUnlike a music venue can use the Front of House application to capture performances for a band on any given nighttypical startup, Set.fm and immediately distribute digitally to patrons. The VNUE Front of House (FOH)DiscLive is a mobile audio capture/upload tool that allows the user to capturereal product offering with measurable results, recognized brands, and a stereo feed from a live performance, split it into individual tracks,leadership team with deep domain experience, execution, and upload m4a files of each track directly to the VNUE server for distribution through the VNUE Platform (Web, Mac, mobile applications). In addition, VNUE software associates the newly created live recording with its master track ID, automating publishing while the fans are still in the venue. Additionally, the system has an automated backend process anchored into a separate dashboard to handle the clearing and publishing aspects associated with the audio/video distribution and sale.relationships.
The Venue Artist Admin portal, an enterprise level content management system with administration features, allows VNUE to oversee all content and copyright clearances for artists, venues, labels and publishers. Each artist, label and publisher will receive a custom dashboard for their respective industry need.
Using VNUE’s suite of consumer focused products fans can relive a life-changing show from the night before, or catch up on their favorite band’s recent show on tour across the world. Shortly after a show’s conclusion, it is available for purchase on VNUE’s web, mac and mobile applications. In addition, 24 hours post show the audio and or video will also be syndicated for sale across our distribution network for all fans to enjoy.
Moments after the show is done, the Front of House compiles the file for sale at the venue. All of a sudden your phone buzzes with a notification from VNUE, telling you the venue you’re still standing in, is now and exclusively offering the audio or video for a price determined before the show.Soundstr™
VNUE partnersacquired the Soundstr technology in mid-2018. Soundstr™ is a patent-pending hardware/cloud-based Music Recognition Technology (MRT) platform that some have compared to the app “Shazam,” but which is focused on businesses such as radio stations, bars, restaurants, and other real-world scenarios that involve the public performance of music.
How Soundstr Works; PROs?
Anywhere that music is played in a public setting, such as radio stations, bars, restaurants, etc., it must be licensed by law. Royalties are required to be paid to the creators (songwriters, publishers) or rights holders when that music played in a public domain. Organizations called “Performing Rights Organizations,” a.k.a. PROs, are responsible for assessing and collecting royalties. Unfortunately, there has previously been no technology to accurately track and audit exactly what music is being played, and consequently, licensees have to agree to “blanket” agreements, which are usually expensive, and whereby any music that a PRO is responsible for would be licensed, if it is theoretically played. The problem with this scenario is that due to the lack of tracking technology, there is inherent inaccuracy in which stakeholders (usually writers and artists) are paid, and further to that, in some cases, only a fraction of that PRO’s catalog may be played. Additionally, these business venues are so significant in number and yet so spread out in terms of location that this becomes extremely difficult to monitor let alone collect and enforce. This creates a massive market shortfall and discrepancy of licensing fees that would otherwise be generated from these businesses.
Soundstr™ has been created to address this, streamline it, and eliminate errors in royalty allocation. Soundstr™ listens to music, records it, and uploads it to the Cloud, where it is processed for identification via artificial intelligence (AI) and other means. Once the music is identified, several industry-leading databases are accessed to assemble deep metadata, and further processing is accomplished to build our own deep, authoritative database so that VNUE can create an accurate audit record of what has been played, and help to ensure the correct stakeholders are paid - while at the same time encouraging unlicensed venues to become licensed, and through the use of data, giving businesses the ability to negotiate more competitive licensing fees. Eventually, our system will support direct licensing. This creates a win for everyone involved - writers, publishers, artists, to recordPROs, venues, and quickly deliver live shows to fans in studio-quality audio and video. Content is purchased and downloadedother stakeholders.
Size of the Soundstr™ Market
Based on FCC data, as of 2019 there are 15,330 radio stations in the app moments afterUSA, and over 44,000 worldwide (CIA, 2010). According to Statistica, there are over 700,000 bars, taverns and restaurants in the show so fans can stay connected toUS, and millions globally. Between the bandcombined segments there is more than $500 million potential in recurring revenue per year. There are even when they aren't looking up.more opportunities in various other verticals.
VNUE Artist Admin
Our Venue Artist Admin suite works this way: an artist signs up on www.vnue.com, uploads their tracks for the next show and then uses the FOH application for Audience Point of Sale for their Audio or Video recorded show. That is our definition of a "VNUE Enabled Artist". Our simple audio options let artists easily connect with their fans without losing quality. Using our Front of House software and a stereo audio interface (ex. Apogee Duet), artist can capture their live shows at any venue. The shows are then cleared, managed, and distributed through the VNUE Audience Platform and Artist Admin.
VNUE Admin
VNUE Admin is a collective network of connected Venues. Enabled with VNUE Front of House Technology, Customized Audience Admin Account and a content publishing hub made up of HD cameras and location based software to collect various points of consumer related data prior, during and post the performance. VNUE believes this is the definitive technology and product for live events, venues and music festivals.
Enabled Venues
The sound engineer or designated management at the venue will have access to a customized web administration system to align their bookings, artists, and revenue from in venue sales. We call these Venues, Enabled. VNUE partners directly with venues to give them the tools they need to record live shows. We invest upfront in audio and video capture equipment or sync with current video services at venues. An on-site promotional partnership with the venue encourages app downloads at the show for new members and repeat customers. The result is a cost effective customer acquisition model for Artists as well as VNUE.
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The VNUE PropositionSoundstr™ Revenue Model
VNUE providesSoundstr™ is a subscription model whereby radio stations and other businesses would “sign up” and subscribe for a monthly, annual, or other fees. This product line is currently is about 80% complete, with our hardware already 100% complete). Further development is required for additional automation. Each location will be charged an enterprise level solution to its partners throughinstallation fee and a software enabled service. The VNUE approach is focused on high quality content digital production and acquiring rights priormonthly automated subscription charge. In addition to the performance.subscription amount, we will also charge a percentage of the net savings from being able to reduce the licensing fees radio stations pay to PROs. For bars, restaurants, and other similar “brick and mortar” businesses we will likely charge a monthly fee, or it will be offered for free due to advertising revenue which will offset the monthly cost of the unit. Soundstr™ also has a built-in “beacon” technology to allow VNUE seeks to distribute backpush the aforementioned targeted advertising using geo-centric mobile applications. That revenue offsets the cost to publishers and work with licensing to increase revenue and build a long tail value proposition for every performance captured. VNUE provides customers with audience network information and support for distribution of content to all types of destination sites including content owner sites, platforms and the business network of music publishers, streaming music servicesowner and "over the top" devices. adds additional revenue to VNUE’s profit center.
Management believes its enterprise level solution drives the following benefits to customers:Growth Potential for Soundstr™
License Agreement with Universal Music Corp.Barriers to Entry & Obsolescence
On November 2, 2015,Currently the Company entered intoPROs “attempt” to fill the void only in part, by employing statistical data and guesswork which, we believe leaves no room for independents or new media. Accordingly, we are not aware of any direct competitors. This market, we believe, is “white hot” however, and we believe will quickly become competitive. There is a License Agreement with Universal Music Corp. ("Universal"). The License Agreement is effective September 8, 2015,great deal of interest in MRT, and has a term of Two (2) Years from the Effective Date. Under the terms of the License Agreement, Universal is grantingsome smaller startups in Europe have deployed technology to VNUE a non-exclusive, non-transferable, non-sub-licensable license to create and distribute content using certain Universal compositions, more specified in the Grant of Right’s section of the License Agreement.
The Company will then market and sell this content via the VNUE Service at certain agreed upon price points more specifically described in the Business Model and Price Points Section of the License Agreement, and the Company shall pay Universal royalties for each sale of the content as specified in the Royalty Rates section of the License Agreement.
In accordance with the Minimum Guarantee provision of the License Agreement, the Company was required to pay Universal a minimum first year fee of Fifty Thousand Dollars ($50,000)track DJ music (electronic), which is due within 10 daysonly a small subset of execution and a second year minimum fee of Fifty Thousand Dollars ($50,000), which is due upon the commencement of the second year of the Term. The Company paid the minimum first year fee of Fifty Thousand Dollars ($50,000)what we are able to Universal on November 10, 2015.capture (live, recorded, DJ, karaoke, radio, etc.).
Now thatWe have patent-pending technology, USPTO Application US 2017/0316089, “System and Method for Capturing, Archiving and Controlling Content in a Performance Venue,” which creates a significant barrier to entry, and we expect to file more IP protection as we are funded. Another barrier to entry is the Companyexecutive team, which has paidconsiderable success in the minimum first year fee to Universal, the Company’s plan is to continue raising capital through the sales of its common stock in order to complete the development of its VNUE Service. Once development of the VNUE Service is complete, the Company plans to concentrate on the marketing and sales of content created under the Licensing Agreement with Universal,domain, as well as identifying strategic opportunitiesdeep relationships. Because the system is predominantly Cloud-based, with othersoftware that evolves, we intend to continue to maintain and update the software to remain relevant and effective. Our hardware is tablet-based with some customized casing and components, and as technology continues to improve, our hardware will evolve as well, but will remain backward compatible. Additionally, as additional barriers to entry, we anticipate building open-architecture rack-mounted units, software plug-ins to compliment professional recording software and track internet radio, and in fact, we expect to combine Soundstr technology into Set.fm, so we can identify music industry leaders.
Competition
A number of musicstreaming services exist, but these services are not packaging the audio for a fan that is currently at the performance to purchase and enjoy immediately after the show. In addition, they are not providing services on a cost effective automated basis necessary to provide high quality audio recordings that is cost effective enough to be utilized by artists to cover all their individual shows. Our main competition is a small group, which includes set.FM, LoveLive, SoundHalo, and nugs.net. There are some competitors that do post show production audio through a very manual and delayed process that is not available to the fans for days if not weeks after the show, and their process is so costly that the artists have to pick and choose certain shows to cover. Others have attempted to capture live audio at shows and burn the show to a CD for distribution at the show, but again, this is a very costly and manual process that does not produce enough CDs fast enough at a given show to meet the demand. We believe the CD process does not scale effectively, and cannot efficiently cover every show in a tour. Nor does the CD process appear to have the capability to cover thousands of bands at once as every show requires a significant amount of equipment and manpower deployed at each show. Additionally, the idea of delivery media on a CD is antiquated and we believe the ability to deliver media on mobile devices is key to capturing today’s market audience. In addition, antiquated capture and delivery methods have an additional difficulty in that there is a complex back end process of clearing publishing and royalty rights which is difficult for the average band to navigate in order to produce and deliver live show audio to their fans. VNUE’s acquisition of the Lively software provides the technology for a comprehensive solution that addresses these concerns in one automated solution.
However, there can be no assurance that even if we are successful, we willrecording on-the-fly and eventually enable “instant” and seamless licensing. This new technology be able to compete effectively with the other companies in our industry. As we are a relatively small company, we face the same problems as other small companies in any industry, such as lack of available funds, established distribution channels or an established customer base. Our competitors may be substantially larger and better funded than us, and have significantly longer histories of operation and development than us. In addition, they may be able to provide more competitive products than we can and generally be able to respond more quickly to new or emerging technologies and changes in legislation and regulations relating to the industry. Additionally, our competitors may devote greater resources to the development, promotion and sale of their products or services than we do. Increased competition could also result in loss of key personnel, reduced margins or loss of market share, any of which could harm our business.protected through additional patent filings.
Key Business Strengths
Management believes that the key factors or features of our business that will contribute to VNUE’s success are:
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Expertise and experience in “Instant Live” Content Production and Distribution - VNUE’s team members have been involved in the business of instant live content since 2003. VNUE’s CEO pioneered this concept and commercialized it with the original DiscLive in 2004, and has continued over the years to develop the processes and methodologies used to gain trust and a competitive advantage in the music business. Due to this lengthy history, and trust by major labels, management companies, and related parties, VNUE should remain in a position of strength in terms of this model, and plans to continue to develop the model and introduce new innovative and immersive software features to fans.
Intellectual Property - VNUE has pending patents for our Soundstr™ technology, and expects to file more related patents around the Soundstr™ platform, as well as Set.fm™.
The Company has not filed any formal trademark applications relating to Set.fm™ or Soundstr™ with the United States US Patent and Trademark Office but has been using these marks openly since approximately fall 2017 and spring 2018 respectively, although both marks had been in use well before our acquisition of the assets.
We have patent-pending technology, USPTO Application US 2017/0316089, “System and Method for Capturing, Archiving and Controlling Content in a Performance Venue” which relates to our Soundstr™ technology.
Employees
We currently have two2 full-time orand 5 part-time employees. We also currently engage independent contractors in the areas of accounting, legal and auditing services, corporate finance, as well as marketing and business development. The remuneration paid to our officers and directors will be more completely described elsewhere in our audited financial statements. We expect to double the number of employees over the next 12 month12-month period. We do and will continue to outsource contract employment as needed.
Reports to Security Holders
We are subject to the reporting and other requirements of the Exchange Act and we intend to furnish our shareholdersshareholder's annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the Securities and Exchange Commission in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the Commission if they become necessary in the course of our company’s operations.
The public may read and copy any materials that we file with the SEC at the SEC'sSEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
Patents, Trademarks, Franchises, Royalty Agreements or Labor Contracts
As stated above we have no current planspatents pending for any registrations such asour Soundstr™ technology, and expect to file more patents and trademarks copyrights, franchises, concessions, royalty agreementsaround technology we are developing or labor contracts.have already developed, or plan to develop, funds permitting. We will continue to assess the need for any copyright, trademark, or patent applications on an ongoing basis.
Research and Development
We spent $550,262$12,404 on research and development activities during the year ended December 31, 2015,2019, primarily related to the development of our proprietary software and we anticipate that we will incur additional expensescosts on research and development over the next 12 months. Our planned expenditures on our operations are summarized under the section of this annual report entitled "Management’s“Management’s Discussion and Analysis of Financial Position and Results of Operations"Operations”.
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Subsidiaries
The Company consolidates the following subsidiaries and/or entities:
Name of consolidated |
| State or other jurisdiction of incorporation or organization |
| Date of incorporation or formation (date of acquisition/disposition, applicable) |
| Attributable | ||
|
| The State of Nevada |
| April 4, 2006 | 100 | % | ||
VNUE Inc. (VNUE Washington) | The State of Washington | October 16, 2014 |
| 100 | % | |||
|
| The State of Washington |
|
|
| 100 | % | |
|
|
|
|
| ||||
|
| The State of Washington |
| October 16, 2014 |
| 90 | % | |
|
| The State of Washington |
| October 16, 2014 |
| 89 | % |
VNUE LLC, VNUE Technology Inc. and VNUE Media Inc. are currently inactive.
The consolidated financial statements include the accounts of the subsidiaries/entities as of reporting periods end date and for the reporting periods then ended from their respective dates of incorporation/formation, acquisition, or disposition.
Environmental Laws
We believe that our operations do not have a material effect on the environment nor do environmental regulations have a material impact on our current operations.
Recent Developments
Impact of Current Coronavirus (COVID-19) Pandemic on the Company
While the COVID-19 pandemic had an affect on our ability to complete our financial statements in a timely manner we do not believe that it will have a material adverse effect on our business at this time as we are currently scheduled to roll out our products in third quarter of 2020. Nonetheless a material portion of our future set.fm and DiscLive business is dependent on success of public events and gatherings. In the event that quarantine and social distancing rules or even social fears continue through such time then we will be materially adversely affected, as these gatherings will see fewer attendees. However, as Soundstr is rolled out, we do not expect to have a materially adverse effect, as our devices will be rolled out to radio stations initially, which do not depend upon attendees.
Available Information
We are required to file periodic reports, proxy statements and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of these reports by accessing the SEC’s website at http://www.sec.gov. You may also send communications to our board of directors at VNUE Inc., Attention: Chief Executive Officer, 104 W. 29th Street, 11th Floor, New York, NY 10001.
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Not Applicable.
Item 1B. Unresolved Staff Comments
None.
Our corporate office is located at 104 W. 29th Street, 11thFloor, New York, NY 10001. Our telephone number is 857-777-6190.833.WE.R.LIVE. The office space is shared with other companies and entrepreneurs and we pay $1,300$1,000 per month for the use of the space on a month to month basis. We began the use of the office space in April 2015. We also lease a property in Memphis, TN, located at 5711 Raleigh LaGrange Road, Memphis, TN, 38134, for our distribution and fulfillment center, and equipment storage for recording and producing our live products. We have or lease no other real property.
From time to time, we may bebecome involved in litigationvarious lawsuits and legal proceedings relating to claims arising out of our operations in the normal course of business. Other than described herein, neitherHowever, as of the Company, nor its officers or directorsdate of this annual report, we are currently not involved in, or the subject of,with any pending legal proceedings or governmental actions the outcome of which, in management’s opinion, would be material to our financial condition or results of operations.claims.
On December 11, 2015, Hughes MediaNovember 27, 2018, Stout Law Group, Inc.P.A., the former counsel for the company and an affiliate of Matheau J. Stout, filed a lawsuit againstFederal Complaint in the United States District Court for the District of Maryland (Stout Law Group, PA, v. VNUE, Inc. in”, Civil Action No 1:18-CV-03614 JKB) for outstanding legal fees and other damages for work provided during the Superior Court2015 and 2016 fiscal years. The Complaint, as subsequently amended before submission of King County, Washington, under case number 15-2-30108-0. HMLG claimsan answer by the Company, alleged total damages of $130,552.78 for unpaid legal fees HMLG alleges are owed pursuant to an April 4, 2014 agreement with VNUE Washington, for legal work performed by HMLG for VNUE Washington prior to the Merger. The Complaint sets forth no legal basis for a lawsuit against VNUE, Inc. (Nevada)$160,842.76 and does not, in fact, sue VNUE Washington, HMLG’s former client.other remedies. The Company believes that VNUE, Inc. (Nevada) is notdenied any liability therein and after negotiation with the proper party for this lawsuit, and reserves all available defenses and counterclaims. Under Washington Superior Court rules, VNUE, Inc. (Nevada) if serviceplaintiff, the foregoing action was voluntarily dismissed on February 27, 2019 by the plaintiff. The Company has a recorded liability of process takes place outside of Washington, a defendant has Sixty (60) days from the date on which it was served the Complaint, to file a response setting forth its defenses. The lawsuit was amended by HMLG, and now includes VNUE Media, Inc. and VNUE Technology, Inc. as additional parties. On July 25, 2016, the court issued judgment awarding HLMG $133,482.12 with interest at a rate of 12% per annum. The judgment stipulated that $12,000 be paid within five days of the judgment and payments of $4,000 per month to start in October, 2016. The amount of the settlement has been recorded in accounts payable in the accompanying consolidated balance sheetapproximately $72,000 as of December 31, 2015.2019, and December 31, 2018, to Stout Law Group, S.A. for services rendered which are the subject of settlement negotiations.
Item 4. Mine Safety Disclosures
Not applicable.
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Market Information
There is a limited public market for our common shares. Our common shares arestock is quoted on the OTCMarketsPink Current Information tier of OTC Markets Group Inc. (“OTC Markets”) under the symbol "VNUE". Trading in stocks quoted on the OTCMarkets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTCMarkets securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTCMarkets securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTCMarkets issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
“VNUE.” Our common stock became eligible for quotation on the OTCMarketsOTC Markets on November 18, 2013. As of December 31, 2015, only a minimal amount of shares have traded on OTCMarkets.
Stockholders of Our Common Shares
The table below sets forth the high and low bid prices for our common stock on the OTCBB for the periods indicated. TheseAny over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-downmark-downs, or commissioncommissions, and may not necessarily represent actual transactions.
Period High Low October 1, 2015 – December 31, 2015 July 1, 2015– September 30, 2015 April 1, 2015 – June 30, 2015 January 1, 2015–March 31, 2015 October 1, 2014 – December 31, 2014 July 1, 2014– September 30, 2014 April 1, 2014 – June 30, 2014 January 1, 2014–March 31, 2014
($)
($)0.065 0.028 0.031 0.017 0.033 0.0045 0.0084 0.004 0.0072 0.004 0.0061 0.0043 0.0148 0.0061 0.015 0.0125
On December 31, 2015, the The closing price of our shares of common stock on the OTCBBPink Current Information on December 31, 2019, was $0.065.$ $0.0003 per share.
Holders
As of December 31, 2015, there wereMay 11, 2020 we had 1,149,756,152 shares of our common stock issued and outstanding held by approximately 260217 record holders of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record of our common stock.also does not include stockholders whose shares may be held in trust by other entities.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
1. We would not be able to pay our debts as they become due in the usual course of business; or 2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. |
We have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future.
Equity Compensation Plans
In April 2013, we adopted a 2012 Stock Incentive Plan (the "Plan"“Plan”). The purpose of the Plan is to promote the long-term success of our company and the creation of stockholder value by encouraging the attraction and retention of qualified employees and non-employee directors, encouraging them to focus on critical long-range objectives of our company and linking their interests directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for various types of incentive awards to participants. We believe it is important to have the flexibility to grant various types of equity awards to our employees so that we can react appropriately to the changing environment. NoWhile the Plan authorizes the issuance of up to 15,000,000 shares of our common stock, no securities have been issued under the Plan to date.
The Plan shall be administered by our Board until the appointment of an appropriate committee (the "Committee"“Committee”). The Committee has the discretion to determine the types and terms of awards made under the Plan. The Plan allows the Company to grant stock options; restricted stock rights; restricted stock; performance shares; performance share units; and stock appreciation rights to employees, officers, consultants to, and non-employee directors of, our company on the grant date of the award. The total number of shares subject to all awards under the Plan is fifteen million, subject to adjustment as provided in the Plan for stock splits, dividends, distributions, recapitalizations and other similar transactions or events. The maximum number of shares that may be granted to a participant in any year is three million. If any shares subject to an award are forfeited, expire, lapse, or otherwise terminate without the issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, lapse or termination, again be available for issuance under the Plan rules, other than for non-substantive amendments to the Plan. The Plan also sets out provisions relating to a change in control of the Company, the non-transferability of awards, the forfeiture and substitution of awards, as well as other provisions customary for plans of this type.
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Equity Compensation Plan Information
As of December 31, 2019 | ||||||||||||
Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights ($) | Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans | ||||||||||
Equity compensation plans not approved by shareholders | - | - | - | |||||||||
Equity compensation plans approved by shareholders | - | - | 15,000,000 | |||||||||
Total | - | - | 15,000,000 |
As of December 31, 2015 Number of Weighted- Equity compensation plans not approved by shareholders Equity compensation plans approved by shareholders Total
Common
Shares
Issued or to be
Issued Under
Equity
Compensation
Plans
Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
($)
Number of
Common
Shares
Remaining
Available
for Future
Issuance
Under Equity
Compensation
Plans- - - 0 - 15,000,000 0 - 15,000,000
On May 22, 2019, the Company issued 4,126,776 restricted shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) to various employees and service providers to compensate and reward them for past services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock will receive relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.
In connection with the Series A Designation, the Company authorized 5,000,000 shares of its restricted Series A Preferred Stock. Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders are also entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock shall have no liquidation or redemption rights.
The issuance of the Series A Preferred Stock was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) as the transaction that did not involve a public offering, and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
Recent Sales of Unregistered Securities
There are no previously unreported sales of our unregistered securities.During the year ended December 31, 2019, the Company entered into the following transactions:
· | Issued $540,810 in convertible notes. $175,000 of these notes had a fixed conversion price of $0.035. The remaining notes had variable conversion features ranging from 50%-58% of the lowest trading price for the prior 20 days. See Note 6. Convertible Notes. | |
· | issued 640,276,078 common shares valued at $959,290 for convertible note conversion. | |
· | issued 4,126,776 Series A Convertible Preferred shares valued at $590,129 for employee services | |
· | issued 11,428,571 shares valued at $30,857 for the settlement of account payable to a former officer | |
· | issued 541,912 common shares valued at $704 for the settlement of accounts payable | |
· | issued 15,057,143 common shares valued at $40,654 for the conversion of officers accrued payroll | |
· | issued 2,500,000 shares valued at $3,368 for services |
All the above securities issued were offered and issued in reliance upon the exemption from registration pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation S promulgated thereunder.
Item 6. Selected Financial Data
Not applicable.
The following discussion and analysis should be read in conjunction with our audited financial statements, including the notes thereto, appearing elsewhere in this annual report, as well as the section in this annual report entitled "Description“Description of Business"Business”. These financial statements have been prepared in accordance with U.S. GAAP and are presented in U.S. dollars.
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Cautionary Statement Regarding Forward-Looking Information
The statements in this registration statementannual report that are not reported financial results or other historical information are "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements appear in a number of different places in this report and can be identified by words such as "estimates"“estimates”, "projects"“projects”, "expects"“expects”, "intends"“intends”, "believes"“believes”, "plans"“plans”, or their negatives or other comparable words. Also look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include, among others, statements regarding our business plans and availability of financing for our business.
Among our forward-looking statements are those statements that relate to our plans, expenditures, and obligations. As we are a pre-revenue company we are completely dependent on capital raising activities in order to effectuate these plans or fulfill our capital obligations. Other forward-looking statements include those statements that relate to consumer acceptance of our products as well as music and entertainment industry acceptance of our services and revenue models and, our ability to implement this model.
You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to actual facts differing from the assumptions underlying our estimates. Some of these risks and assumptions include those set forth in reports and other documents we have filed with or furnished to the United States Securities and Exchange Commission ("SEC"(“SEC”). or may file from time to time. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
PresentationThe following discussion includes forward-looking statements about our business, financial condition, and results of Information
As usedoperations, including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Cautionary Note Regarding Forward-Looking Statements.” The following discussion should also be read in conjunction with our audited consolidated financial statements including the notes thereto appearing elsewhere in this quarterly report, the terms "we", "us", "our" and the "Company" mean VNUE, Inc. and its subsidiaries, unless the context requires otherwise.filing.
All dollar amounts in this quarterly report refer to US dollars unless otherwise indicated.
Overview
Following the Merger on May 29, 2015, we now carry on business as a live entertainment music servicetechnology company which brings bands and fans together by capturing professional quality audio and video recordings of live performances and delivers the experience of a venue to your home and hand.
By streamlining the processes of curation, clearing, capturing, distribution & monetization, VNUE manages and simplifies the complexities of the music ecosystem.
VNUE captures content through its Front of House mobile application and provides world-wide distribution and monetization throughthat offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music.
The company’s Set.fm™ consumer app platform allows fans to purchase the concert they just experienced instantly on their mobile web administration applications, allowingdevice, and “instant” physical collectible products are recorded and sold at shows and online through the company’s exclusive partner DiscLive Network™, the 15-year pioneer in “instant live” recording.
The company’s Soundstr™, technology is a comprehensive music identification and rights management Cloud platform that, when fully deployed, will accurately track and audit public performances of music, creating a more transparent ecosystem for general music licensing and associated royalty payments, and will help to ensure the correct stakeholders are paid through the use of our “big data” collection.
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In 2016, Zach Bair was appointed as CEO of the Company, and, after deliberation with management, the Company determined that the Lively IP previously owned by the Company, although not valueless, had not been developed to the point where it could be deployed with major recording artist clients, and the decision was made to build and/or acquire other technologies which would help the company realize its goals.
On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an artistexclusive license from DiscLive, for three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to seamlessly deliverthe DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive receives a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer.
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc., whereby the Company acquired acquire the assets of the digital live music distribution platform Set.fm from PledgeMusic (See Note 4 of the Consolidated Financial Statements herein). Set.fm is a do-it-yourself (DIY) platform that makes it easy for artists to record and sell their live performancesshows directly to thefans’ mobile devices, uploading simultaneously with their performance, and a platform which VNUE has already successfully utilized to record and sell digital content for major artists. The platform, which also features an innovative and easy-to-use studio app, already boasts thousands of artists and tens of thousands of fans who attend their shows.using it.
On April 23, 2018, the Company entered into an agreement with MusicPlay Analytics, LLC (d/b/a Soundstr) (“Soundstr”) whereby the Company acquired the assets of Soundstr, a technology that aims to help businesses pay fairer music license fees based on actual music usage (see Note 3 of the Consolidated Financial Statements herein).
Results of Operations
The following discussion and analysis of our results of operations and financial condition for the twelve months ended December 31, 20152019 should be read in conjunction with our audited consolidated financial statements and related notes included in this report. We are in the process of completing the development of our products and services and therefore do not have materialonly nominal revenues or income. Accordingly, we are completely dependent on our capital raising efforts in order to complete development and roll out our products.
Twelve Months Ended December 31, 20152019 Compared to Twelve Months Ended December 31, 20142018
Acquisition-Related Costs
Revenues
Our acquisition-related costsrevenues for the Twelve-Months Endedtwelve months ended December 31, 20152019 and 2018, amount to $206,161 and $82,881, respectively, an increase of $123,820, or approximately of approximately 148.7%. The increase in revenues in 2019 compared to 2018 is attributable to the use of the assets licensed from DiscLive discussed above.
Direct Costs of Revenues
Our direct costs of revenues for the twelve months ended December 31, 2019 and 2018, amounted to $906,462 compared$211,031 and $111,086, respectively. The increase in costs resulted from the aggressive “signing” of multiple artists to $0 for the Twelve-Months Ended December 31 2014 in connectionrecord their tours associated with the closinggenerating additional revenue, executing said tours, and awaiting recoup of the Merger on May 29, 2015. expenses through product sales. Each tour involves up-front costs such as raw materials, as well as travel expenses, etc., and as sales come through online, these costs are eventually recouped (in some cases they are recouped on-site).
SoftwareResearch and Development
Our softwareresearch and development expenses for the Twelve-Months Endedtwelve months ended December 31, 20152019 amounted to $550,262$12,404 compared to $97,514$12,369 for the Twelve-Months Endedtwelve months ended December 31, 2014. The increase represents the necessary development2018. We believe that R&D is a material portion of our softwarebusiness plan and if we are unable to raise sufficient capital or to implement a proper R&D program we will be adversely affected. As we continue to move forward, we expect to spend more on R&D due to our product roadmap and in further developing solutions that is the basis forwill invoke both consumer interest as well as further automation and usability of our products and services that we plan to offer as we implement our business plan.products.
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General and Administrative Expenses
Our general and administrative expenses for the Twelve-Months Endedtwelve months ended December 31, 20152019 and 2018, amounted to $2,400,578 compared to $158,819 for the Twelve-Months Ended December 31, 2014.$1,177,755 and $957,141, respectively. The increase in general and administrative expenses relative to lastthe prior year iswas due primarily to a non-cash stock based compensation charge of $590,129 in 2019 related to the increased salaries for full time personnel, contract labor and other expenses associated with the Merger.issuance of preferred stock.
Other (Income) Expenses, NetIntangible Asset Impairment
On December 31, 2019, we conducted an impairment analysis and although we believe that we will be able to generate revenues in the future from our Sounstr asset, based on the lack of any historical sales to date or lack of any pending contracts, we determined that we could not substantiate any anticipated future revenues, and determined that the remaining book value of the intangible of $132,397 should be impaired as of December 31, 2019.
During the year ended December 31, 2018, we evaluated our intangible assets and determined that $204,165 was impaired (see Note 3 of the Consolidated Financial Statements herein). No such transaction occurred in the prior year.
Other Income (Expenses), Net
We recorded net other expensesexpense, net for the Twelve-Months Endedtwelve months ended December 31, 20152019 of $144,461$72,671 compared to $130,415other expense, net of $1,154,398 for the Twelve-Months Endedtwelve months ended December 31, 2014.2018. The changesignificant decrease in other expense, net, other expensesin 2019 compared to 2018 levels was primarily due to an increase in income in the change in fair value of the derivative liability andof $727,897, a decrease in financing costs in 2019 of $110,000.732,888; offset by an increase in the loss on the extinguishment of debt of $373,481 in 2019.
Net Lossfrom Operations
As a result of the foregoing acquisition-relatedrevenues, direct costs softwareof revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net loss for the Twelve-Months Endedtwelve months ended December 31, 20152019 and 2018, was $4,267,263, compared to our net loss for the Twelve-Months Ended December 31, 2014 of $386,748.$1,400,098 and $2,356,278, respectively.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans.loans, including convertible debt. Our ability to raise capital in the form of equity or convertible debt will be hindered if and as our stock price decreases or we are required to increase our capitalization.
As of December 31, 2015,2019, we had cash and cash equivalents of $45,288.$52,096
We had negative cash flow from operating activities of $828,167$501,905 for the Twelve-Months Endedtwelve months ended December 31, 2015,2019, compared with negative cash flow from operating activities of $132,690$575,837 for the Twelve-Months Endedtwelve months ended December 31, 2014.2018. The increasedecrease in our negative cash flow forflows from operating activities for the period is primarily due to costs associated with the Merger, and reflects the Company’s expanded operations under the VNUE business model, which resulteddecreased operating losses, net of stock based compensation of $590,129 in significant payments to service providers and employees.
We had negativeno cash used from investing activity in either 2019 or 2018.
Cash flow provided by financing activities was $535,810 for the twelve months ended December 31, 2019 as compared to $583,750 for the twelve months ended December 31, 2018. The decrease in cash flow from investing activities of $52,037 for the Twelve-Months Ended December 31, 2015 due to an advance to a related party. We had negative cash flow from investing activities of $150,000 for the Twelve-Months Ended December 31, 2014 due to the acquisition of intangible assets.
We had positive cash flowprovided from financing activities of $887,946 for the Twelve-Months Ended December 31, 2015 as comparedis primarily attributable to $282,736 for the Twelve-Months Ended December 31, 2014. The cash flow from financing activities for the Twelve-Months Ended December 31, 2015 was primarily due to $946,319a reduction in proceeds from the issuance of common shares. This $946,319 is offset by $17,373 in repayments to a stockholder and $41,000 in repayments of convertible notes payable during the same period. The cash flow from financing activities for the Twelve-Months Ended December 30, 2014 was dueof $42,940 in 2019 compared to $86,736 in advances from a stockholder, $96,000 in proceeds from convertible notes payable and $100,000 in proceeds from the issuance of common stock..2018 levels.
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Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Going Concern
The Company’s consolidated financial statementsauditors have been prepared assuming that it willexpressed doubt as to the ability of the Company to continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the consolidated financial statements, theconcern. The Company had a stockholders’ deficit of $721,686$3,777,345 at December 31, 2015,2019, and incurred a net loss of $4,267,263,$1,400,098 and used net cash in operating activities of $828,167$501,905 for the reporting period then ended. Certain of the Company’s notes payable are also past due, however, we have negotiated extensions for them and in default.continue to honor them. These factors raise substantial doubt about the Company’s ability to continue as a going concern.concern within one year after the date that the financial statements were issued. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concernconcern.
Management estimates that the current funds on hand will only be sufficient to continue operations through December 2016.June, 2020. Historically, the Company has used the proceeds of convertible notes to fund its operations. The Company believes that it can continue to raise proceeds during 2020, however, there can be no assurances. The ability of the Company to continue as a going concern is dependent on the Company’s ability to execute its strategy and in its ability to raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity or convertible debt securities for cash to operate our business. However, among other risks and uncertainties, given our low stock price, and limited number of authorized common shares available for issuance, we will likely be required to increase our authorized capital in order to accommodate these financings, which action will require shareholder approval. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders,stockholders, in case or equity financing.
We have not generated significant revenues, have incurred losses since our inception, and rely upon the sale of our common stock and loans from related and other parties to fund our operations. We do not anticipate generating any revenues in the foreseeable future, and if we are unable to raise equity or secure alternative financing, we may not be able to pursue our plans and our business may fail.
Application of Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which were prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this prospectus, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because the information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.Seeoperations. (See Note 2 - Significant and Critical Accounting Policies and Practices page F-7 herein.herein).
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Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Internal Software Development Costs
Development costs incurred in Significant estimates include the research and development of new software products and enhancementsassumptions used to existing software products are expensed as incurred until technological feasibility has been established. The Company considers technological feasibility to be established when all planning, designing, coding and testing has been completed according to design specifications. After technological feasibility is established, any additional costs are capitalized. Through December 31, 2015, technological feasibilitydetermine the value of the Company’s software had not been established;derivative liabilities, the valuation allowance for the deferred tax asset and accordingly, no costs have been capitalized to date.the accruals for potential liabilities.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Stock-Based Compensation
The Company periodically issues stock options and warrantsaccounts for share-based awards to employees and non-employeesnonemployees directors and consultants in non-capital raising transactions for servicesaccordance with the provisions of ASC 718, Compensation—Stock Compensation., and for financing costs. The Company accounts for stock optionunder the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and warrant grants issued and vesting to employees based on the authoritative guidance provided by FASB where theapplicable updates adopted, share-based awards are valued at fair value of the award is measured on the date of grant and that fair value is recognized as compensation expense on the straight-line basis over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB where the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Options granted to non-employees are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options vest,forfeitures when they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.occur.
The fair valueUse of the Company's stockBlack-Scholes option and warrant grants are estimated usingpricing model requires the Black-Scholes-Merton Option Pricing model, which uses certaininput of subjective assumptions related to risk-free interest rates,including expected volatility, expected lifeterm, and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected term of the stock options or warrants,is estimated by using the Securities and future dividends. Compensation expenseExchange Commission Staff Bulletin No. 107’s Simplified Method for Estimate Expected Term. The risk-free interest rate is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.estimated using comparable published federal funds rates.
Recent Accounting Pronouncements
See Note 2 of the consolidated financial statement for management’s discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable.
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Item 8. Financial Statements and Supplementary Data
VNUE, Inc.
Venue, Inc.
December 31, 20152019
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| F-2 |
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| F-3 |
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| F-4 |
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| F-5 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Vnue,VNUE, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Vnue,VNUE, Inc. and Subsidiaries (the "Company") as of December 31, 20152019 and 2014, and2018, the related consolidated statements of operations, stockholders' deficit, and cash flows for the years then ended. Theseended, and the related notes (collectively referred to as the "consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States)statements"). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 20152019 and 2014,2018, and the consolidated results of itstheir operations and itstheir cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, to the consolidated financial statements,Company experienced a net loss and utilized cash from operations during the year ended December 31, 2015, the Company incurred2019 and has a net loss and utilized cash flows in operations, and at December 31, 2015, had a stockholders' deficit.stockholders’ deficit as of that date. These conditionsmatters raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. Management'sManagement’s plans in regardsregard to these matters are also described in Note 1. The1 to the consolidated financial statements. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, and audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2016.
Weinberg and& Company P.A.
Los Angeles, California
December 12, 2016May 19, 2020
F-1 |
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VNUE, Inc.INC.
Consolidated Balance SheetsCONSOLIDATED BALANCE SHEETS
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| December 31, 2019 |
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| December 31, 2018 |
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Assets |
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Current assets: |
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Cash |
| $ | 52,096 |
|
| $ | 18,191 |
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Prepaid expenses |
|
| - |
|
|
| 667 |
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Total current assets |
|
| 52,096 |
|
|
| 18,858 |
|
|
|
|
|
|
|
|
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Intangible assets, net of amortization |
|
| - |
|
|
| 233,429 |
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Total assets |
| $ | 52,096 |
|
| $ | 252,287 |
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|
|
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|
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|
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Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: |
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|
|
|
|
|
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Accounts payable and accrued expenses |
| $ | 1,018,145 |
|
| $ | 953,305 |
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Accrued payroll-officer |
|
| 68,000 |
|
|
| 52,700 |
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Advances from officer |
|
| 720 |
|
|
| 14,720 |
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Notes payable |
|
| 34,000 |
|
|
| 9,000 |
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Convertible notes payable, net |
|
| 1,486,067 |
|
|
| 1,232,290 |
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Purchase liability |
|
| 300,000 |
|
|
| - |
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Derivative liability |
|
| 922,509 |
|
|
| 1,744,601 |
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Total current liabilities |
|
| 3,829,441 |
|
|
| 4,006,616 |
|
|
|
|
|
|
|
|
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Purchase liability |
|
| - |
|
|
| 300,000 |
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Total liabilities |
|
| 3,829,441 |
|
|
| 4,306,616 |
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|
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|
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|
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Commitments and Contingencies |
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Stockholders' Deficit |
|
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Preferred stock, par value $0.0001: 20,000,000 shares authorized 4,126,776 issued and outstanding |
|
| 413 |
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Common stock, par value $0.0001, 2,000,000,000 shares authorized; 770,883,602 and 105,635,816 shares issued and outstanding, respectively |
|
| 77,088 |
|
|
| 10,563 |
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Additional paid-in capital |
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| 8,099,346 |
|
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| 6,493,070 |
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Common stock to be issued, 5,084,352 and 3,964,352 shares, respectively |
|
| 247,707 |
|
|
| 243,839 |
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Accumulated deficit |
|
| (12,201,899 | ) |
|
| (10,801,801 | ) |
Total stockholders' deficit |
|
| (3,777,345 | ) |
|
| (4,054,329 | ) |
Total Liabilities and Stockholders' Deficit |
| $ | 52,096 |
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| $ | 252,287 |
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December 31, 2015 December 31, 2014 Assets Current Assets Cash Prepaid expenses Total current assets Intangible assets , net Total assets Liabilities and Stockholders' Deficit Current Liabilities Accounts payable Accrued expenses Advances from stockholders Note payable to officer Notes payable Convertible notes payable, net Convertible notes payable, related parties, net Derivative liabilities Total current liabilities Commitment and contingencies Stockholders' Deficit Preferred stock, par value $0.0001: 20,000,000 shares authorized; 0 and 6,709,775 shares issued and outstanding, respectively Common stock, par value $0.0001: 750,000,000 shares authorized; 640,913,164 and 402,483,881 shares issued and outstanding, respectively Additional paid-in capital Common stock to be issued, 2,608,334 shares and 0 shares, respectively Accumulated deficit Total Stockholders' Deficit Total Liabilities and Stockholders' Deficit $ 7,788 $ 46 37,500 - 45,288 46 - 336,300 $ 45,288 $ 336,346 $ 280,610 $ 105,943 84,311 - 14,720 720 54,643 86,016 59,000 - 11,441 3,116 13,003 7,551 249,246 215,748 766,974 419,094 - 671 64,091 40,248 3,736,177 263,081 132,057 - (4,654,011 (386,748 ) (721,686 ) (82,748 ) $ 45,288 $ 336,346
SeeThe accompanying notes to the condensedare an integral part of these consolidated financial statements.
F-2 |
Table of Contents |
VNUE, Inc.INC.
Consolidated Statements of OperationsCONSOLIDATED STATEMENTS OF OPERATIONS
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| For the Year |
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| For the Year |
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| Ended |
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| Ended |
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| December 31, 2019 |
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| December 31, 2018 |
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Revenues |
| $ | 206,161 |
|
| $ | 82,881 |
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Operating expenses: |
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Direct costs of revenues |
|
| 211,031 |
|
|
| 111,086 |
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Research and development |
|
| 12,404 |
|
|
| 12,369 |
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General and administrative |
|
| 1,177,756 |
|
|
| 957,141 |
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Intangible asset impairment |
|
| 132,397 |
|
|
| 204,165 |
|
Total costs and expenses |
|
| 1,533,587 |
|
|
| 1,284,761 |
|
Operating loss |
|
| (1,327,427 | ) |
|
| (1,201,880 | ) |
Other income (expense), net |
|
|
|
|
|
|
|
|
Change in fair value of derivative liability |
|
| 1,179,556 |
|
|
| 451,659 |
|
Loss on extinguishment of debt |
|
| (532,529 | ) |
|
| (159,048 | ) |
Gain on settlement of obligations |
|
| 35,534 |
|
|
| 41,112 |
|
Financing costs |
|
| (755,232 | ) |
|
| (1,488,121 | ) |
Other income (expense), net |
|
| (72,671 | ) |
|
| (1,154,398 | ) |
Net loss |
| $ | (1,400,098 | ) |
|
| (2,356,278 | ) |
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|
|
|
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|
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Net loss per common share - basic and diluted |
| $ | (0.00 | ) |
|
| (0.03 | ) |
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|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
| 447,194,161 |
|
|
| 89,153,042 |
|
For the Year Ended December 31, 2015 For the Year Ended December 31, 2014 Operating expenses Software development Acquisition-related costs General and administrative Impairment of intangibles Total operating expenses Loss from Operations Other (income) expenses Change in fair value of derivative liability Gain on extinguishment of derivative liability Financing costs Other (income) expenses, net Net loss Earnings per share - Basic and diluted Weighted average common shares outstanding - Basic and diluted $ 550,262 $ 97,514 906,462 - 2,400,578 158,819 265,500 - 4,122,802 256,333 (4,122,802 ) (256,333 ) 83,156 (33,204 ) (49,658 ) - 110,963 163,619 144,461 130,415 $ (4,267,263 ) $ (386,748 ) $ (0.01 ) $ (0.00 ) 542,382,209 402,483,881
SeeThe accompanying notes to the condensedare an integral part of these consolidated financial statements.
F-3 |
Table of Contents |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Consolidated Statement of Changes in Stockholders' Deficit
For the Years ended DecemberYEARS ENDED DECEMBER 31, 2015 and 20142019 AND 2018
|
|
|
|
|
|
|
| Par value $0.001 |
|
| Additional |
|
| Shares to |
|
|
|
|
|
|
| |||||||||||
|
| Preferred Shares |
|
| Common Shares |
|
| Paid- in |
|
| be Issued |
|
|
|
|
|
|
| ||||||||||||||
|
| Number |
|
| Amount |
|
| Number |
|
| Amount |
|
| Capital |
|
| Amount |
|
| Deficit |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance December 31, 2017 |
|
|
|
|
|
|
|
| 74,335,070 |
|
| $ | 7,433 |
|
| $ | 4,755,719 |
|
| $ | 932,734 |
|
| $ | (8,445,523 | ) |
| $ | (2,749,637 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Fair value of warrants and beneficial conversion feature related to convertible notes payable recorded as debt discount in settlement of accrued payroll |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 40,367 |
|
|
|
|
|
|
|
|
|
|
| 40,367 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Gain on extinguishment of accrued payroll to officers/shareholders recorded as contributed capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 419,003 |
|
|
|
|
|
|
|
|
|
|
| 419,003 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares issued for services |
|
|
|
|
|
|
|
| 3,813,000 |
|
|
| 381 |
|
|
| 707,514 |
|
|
| (707,895 | ) |
|
|
|
|
|
| - |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares issued in settlement of a note payable and accrued payroll to officers |
|
|
|
|
|
|
|
| 3,746,660 |
|
|
| 375 |
|
|
| 74,558 |
|
|
|
|
|
|
|
|
|
|
| 74,933 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares issued in settlement of accounts payable |
|
|
|
|
|
|
|
| 5,616,086 |
|
|
| 562 |
|
|
| 160,421 |
|
|
|
|
|
|
|
|
|
|
| 160,983 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares issued for services |
|
|
|
|
|
|
|
| 3,550,000 |
|
|
| 355 |
|
|
| 53,595 |
|
|
| 19,000 |
|
|
|
|
|
|
| 72,950 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares issued on conversion of notes payable |
|
|
|
|
|
|
|
| 12,300,000 |
|
|
| 1,230 |
|
|
| 213,870 |
|
|
|
|
|
|
|
|
|
|
| 215,100 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares issued for acquisition |
|
|
|
|
|
|
|
| 2,275,000 |
|
|
| 228 |
|
|
| 68,022 |
|
|
|
|
|
|
|
|
|
|
| 68,250 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,356,278 | ) |
|
| (2,356,278 | ) | ||
Balance - December 31, 2018 |
|
| - |
|
|
| - |
|
|
| 105,635,816 |
|
|
| 10,563 |
|
|
| 6,493,070 |
|
|
| 243,839 |
|
|
| (10,801,801 | ) |
|
| (4,054,329 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued upon conversion of notes payable |
|
|
|
|
|
|
|
|
|
| 640,276,078 |
|
|
| 64,028 |
|
|
| 895,262 |
|
|
|
|
|
|
|
|
|
|
| 959,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred Shares -issued for services |
|
| 4,126,776 |
|
|
| 413 |
|
|
|
|
|
|
|
|
|
|
| 589,716 |
|
|
|
|
|
|
|
|
|
|
| 590,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for settlement of accounts payable to former officer |
|
|
|
|
|
|
|
|
|
| 11,428,571 |
|
|
| 1,143 |
|
|
| 29,714 |
|
|
|
|
|
|
|
|
|
|
| 30,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for settlement of accounts payable |
|
|
|
|
|
|
|
|
|
| 541,912 |
|
|
| 54 |
|
|
| 650 |
|
|
|
|
|
|
|
|
|
|
| 704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued on conversion of accrued payroll to officers |
|
|
|
|
|
|
|
|
|
| 15,057,143 |
|
|
| 1,506 |
|
|
| 39,149 |
|
|
|
|
|
|
|
|
|
|
| 40,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of accrued payroll to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
officers recorded as contributed capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued for financing cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,500 |
|
|
|
|
|
|
| 3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued for services |
|
|
|
|
|
|
|
|
|
| 2,500,000 |
|
|
| 250 |
|
|
| 2,750 |
|
|
| 368 |
|
|
|
|
|
|
| 3,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares returned by former officer |
|
|
|
|
|
|
|
|
|
| (4,555,918 | ) |
|
| (456 | ) |
|
| 456 |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for notes amendment |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 36,533 |
|
|
|
|
|
|
|
|
|
|
| 36,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,400,098 | ) |
|
| (1,400,098 | ) |
Balance - Dec 31, 2019 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 770,883,602 |
|
| $ | 77,088 |
|
| $ | 8,099,346 |
|
| $ | 247,707 |
|
| $ | (12,201,899 | ) |
| $ | (3,777,345 | ) |
Preferred Stock par value $0.0001 Common Stock par value $0.0001 Number of Number of Paid-in Shares to Accumulated Stockholders' Shares Amount Shares Amount be Issued Deficit Balance, December 31, 2013 Founders' shares issued Issuance of shares for cash Issuance of preferred shares for the acquisition of intangible assets Net loss Balance, December 31, 2014 Shares issued for cash Shares issued for services to related parties Shares issued for services Common shares issued for conversion of preferred shares as part of reverse merger Shares issued upon reverse acquisition Shares issued for acquisition-related costs Shares issued per settlement agreement reached Return of shares in exchange for advances Net loss Balance, December 31, 2015 Additional Total Capital Deficit - $ - - $ - $ - $ - $ - $ - 392,922,500 39,292 (39,292 ) - - 9,561,381 956 99,044 100,000 6,709,775 671 203,329 204,000 (386,748 ) (386,748 ) 6,709,775 671 402,483,881 40,248 263,081 - (386,748 ) (82,748 ) 37,501,250 3,750 942,569 946,319 46,048,116 4,604 1,395,423 1,400,027 9,875,001 988 217,345 132,057 350,390 (6,709,775 ) (671 ) 6,709,775 671 - 126,866,348 12,687 (12,523 ) 164 29,814,384 2,981 903,481 906,462 3,500,000 350 76,650 77,000 (21,885,591 ) (2,188 ) (49,849 ) (52,037 ) (4,267,263 ) (4,267,263 ) - $ - 640,913,164 $ 64,091 $ 3,736,177 $ 132,057 $ (4,654,011 ) $ (721,686 )
SeeThe accompanying notes to the condensedare an integral part of these consolidated financial statements.
F-4 |
Table of Contents |
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2015 For the Year Ended December 31, 2014 Cash Flows from Operating Activities Net loss Adjustments to reconcile net loss to net cash used in operating activities: Amortization Impairment of intangible asset Change in fair value of derivative liabilities Derivative value in excess of convertible notes Note issued for financing cost Note issued for services Gain on extinguishment of debt Amortization of debt discount Shares issued for acquisition-related costs Shares issued for services Shares issued for settlement agreement Changes in operating assets and liabilities: Prepaid expense Accounts payable Accrued expense Net Cash Used in Operating Activities Cash Flows from Investing Activities Acquistion of intangible assets Advances to related party Net cash used in Investing Activities Cash Flows from Financing Activities Advances from (repayment to) stockholders, net Repayment of convertible notes payable Sale of convertible notes payable Proceeds from issuance of common shares Net Cash Provided by Financing Activities Net Change in Cash Cash - beginning of the reporting period Cash - end of the reporting period Supplemental disclosure of cash flow information: Interest paid Income tax paid Non-cash Financing and Investing Activities Conversion of preferred shares to common shares upon reverse merger Cancellation of advances to related party in exchange for return of treasury shares Issuance of preferred shares for acquisition of intangible assets $ - $ 204,000 $ (4,267,263 ) $ (386,748 ) 70,800 17,700 265,500 - 83,156 (33,204 ) - 152,952 50,000 - 9,000 (49,658 ) - 54,778 10,667 906,462 - 1,750,582 - 77,000 - (37,500 ) - 174,666 105,943 84,310 - (828,167 ) (132,690 ) - (150,000 ) (52,037 ) - (52,037 ) (150,000 ) (17,373 ) 86,736 (41,000 ) - - 96,000 946,319 100,000 887,946 282,736 7,742 46 46 - $ 7,788 $ 46 $ - $ - $ - $ - $ 671 $ 52,037 $ -
See accompanying notes to the condensed consolidated financial statements.
VNUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
| For the Year |
| |||||
|
| Ended December 31 |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Cash Flows From Operating Activities: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | (1,400,098 | ) |
|
| (2,356,278 | ) |
Adjustments to reconcile net income to net cash provided by (used for) operating activities |
|
|
|
|
|
|
|
|
Change in the fair value of derivatives |
|
| (1,179,556 | ) |
|
| (294,767 | ) |
Derivative value in excess of convertible notes considered financing costs |
|
| 138,828 |
|
|
| 346,619 |
|
Fair value of derivative recorded as financing cost |
|
|
|
|
|
| 553,000 |
|
Financing cost on amendment to notes payable |
|
|
|
|
|
| 43,250 |
|
Gain on the extinguishment of derivative liability |
|
|
|
|
|
| (156,892 | ) |
Gain on the settlement of vendor obligations |
|
| (35,534 | ) |
|
| (41,112 | ) |
Loss on the extinguishment of debt |
|
| 532,529 |
|
|
| 159,048 |
|
Amortization of debt discount |
|
| 389,793 |
|
|
| 432,419 |
|
Amortization of intangible assets |
|
| 101,032 |
|
|
| 185,976 |
|
Impairment of intangible assets |
|
| 132,397 |
|
|
| 204,165 |
|
Warrants issued for financing costs |
|
| 36,533 |
|
|
|
|
|
Issuance of preferred stock for services |
|
| 590,129 |
|
|
|
|
|
Shares issued for financing costs |
|
| 3,500 |
|
|
|
|
|
Shares issued for services |
|
| 3,368 |
|
|
| 72,950 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Gain on debt forgiveness |
|
| (15,500 | ) |
|
|
|
|
Prepaid expenses |
|
| 666 |
|
|
|
|
|
Accounts payable and accrued interest |
|
| 132,008 |
|
|
| 258,693 |
|
Purchase obligations |
|
| - |
|
|
| (40,578 | ) |
Accrued payroll officers |
|
| 68,000 |
|
|
| 57,670 |
|
Net cash (used in) operating activities |
|
| (501,905 | ) |
|
| (575,837 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from notes payable |
|
| 25,000 |
|
|
|
|
|
Payoff of convertible note |
|
| (30,000 | ) |
|
|
|
|
Proceeds from the issuance of convertible notes |
|
| 540,810 |
|
|
| 583,750 |
|
Net cash provided by (used for) investing activities |
|
| 535,810 |
|
|
| 583,750 |
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash |
|
| 33,905 |
|
|
| 7,913 |
|
Cash At The Beginning Of The Period |
|
| 18,191 |
|
|
| 10,278 |
|
Cash At The End Of The Period |
| $ | 52,096 |
|
| $ | 18,191 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
Common shares issued upon conversion of notes payable and accrued interest |
| $ | 959,290 |
|
| $ | 215,100 |
|
Common shares issued in settlement of accounts payable and accrued expenses |
| $ | 31,561 |
|
| $ | 160,893 |
|
Convertible note issued in settlement of accounts payable balance |
|
|
|
|
|
|
|
|
Common shares issued upon conversion of accrued payroll |
| $ | 40,654 |
|
| $ | 74,933 |
|
Convertible note issued in settlement of accounts payable |
|
|
|
|
| $ | 15,000 |
|
Fair value of derivative created upon issuance of convertible debt recorded as debt discount |
| $ | 218,637 |
|
| $ | 483,635 |
|
Fair value of shares to be issued and assumed liabilities upon the acquisition of Soundstr |
| $ | - |
|
| $ | 302,737 |
|
Fair value of warrants and beneficial conversion feature related to convertible notes payable |
|
|
|
|
|
|
|
|
recorded as debt discount |
|
|
|
|
| $ | 40,367 |
|
Capital contribution upon conversion of accrued payroll for officer/shareholder |
| $ | 12,046 |
|
| $ | 419,003 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5 |
Table of Contents |
Vnue, Inc.VNUE, INC.
Years Ended DecemberYEARS ENDED DECEMBER 31, 2015 and 20142019 AND 2018
Notes to Consolidated Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NoteNOTE 1 - Organization and Basis of PresentationORGANIZATION AND BASIS OF PRESENTATION
History and Organization
Vnue,VNUE, Inc. (formerly Tierra Grande Resources, Inc.) ("VNUE"(“VNUE”, "TGRI"“TGRI”, or the "Company"“Company”) was incorporated under the laws of the State of Nevada on April 4, 2006. TGRI engaged in the acquisition and exploration of mineral properties and was inactive prior to the reverse acquisition described below. The Company is developing a technology driven solution for Artists, Venues and Festivals to automate the capturing, publishing and monetization of their content.
Vnue LLC ("Vnue LLC" or "Predecessor") was a limited liability company organized under the laws of the State of Delaware on August 1, 2013 which began operations in January 2014. On December 3, 2014, Vnue LLC filed a certificate of merger and merged into VNUE Washington with VNUE Washington as the surviving corporation. On May 29, 2015, VNUE, Inc. entered into a merger agreement with VnueVNUE Washington, Inc. Pursuant to the terms of the Merger Agreement, all of the outstanding shares of any class or series of VnueVNUE Washington were exchanged for an aggregate of 507,629,87250,762,987 shares of TGRI common stock as follows: (i) all shares of Vnue Washington stock of any class or series issued and outstanding immediately prior to the closing of the Merger were exchanged for an aggregate of 477,815,488 fully paid and non-assessable shares of TGRI common stock; and (ii) 29,814,384 shares of TGRI common stock were issued to an attorney as payment for legal services performed prior to and in connection with the Merger.stock. As a result of the Merger, VnueVNUE Washington became a wholly-owned subsidiary of the Company, with the former stockholders of Vnue Washington collectively owning shares of the Company's common stock representing approximately 79.0% of the voting power of the Company's outstanding capital stock. On May 29, 2015 the Company changed its name to Vnue, Inc.
As the former owners and management of Vnue Washington have voting and operating control of the Company after the Merger, the transaction has beenwas accounted for as a reverse merger with VnueVNUE Washington deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer. Due to the change in control, the consolidated financial statements reflect the historical results of Vnue Washington prior to the Merger, and that of the combined company following the Merger. Common stock and the corresponding capital amounts of the Company pre-Merger have been retroactively restated as capital stock shares reflecting the exchange ratio in the Merger, with 126,866,348 shares of common stock outstanding before the reverse merger reflected in the accompanying financial statements as shares issued upon the reverse merger. The fair value of $906,462 of the 29,814,384 shares issued to the attorney has been recorded as an acquisition related cost.
Going Concern
The Company’sCompany is developing technology driven solutions for Artists, Venues and Festivals to automate the capturing, publishing and monetization of their content, as well as protection of their rights.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that it will continue ason a going concern basis, which contemplates continuity of operations,the realization of assets and liquidationthe settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the year ended December 31, 2019 the Company incurred a net operating loss of $1,400,098, used cash in operations of $501,905 and had a stockholders’ deficit of $721,686 at$3,777,345 as of December 31, 2015, and incurred a net loss2019. In addition, $396,749 of $4,267,263, and used net cash in operating activities of $828,167 for the reporting period then ended. Certain of the Company’s notes payable, are alsoalong with $59,512 in accrued interest were past due and in default.as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern.concern within one year after the date of the financial statements being issued. The consolidatedability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary shouldif the Company beis unable to continue as a going concernconcern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2019, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.
On December 31, 2019, the Company had cash on hand of $52,096. Subsequent to December 31, 2019, the Company raised an additional $250,000 from the issuance of notes payable that was used for corporate operating purposes. Management estimates that the current funds on hand will be sufficient to continue operations through December 2016.June 30, 2020. The abilitycontinuation of the Company to continue as a going concern is dependent on the Company’s ability to execute its strategy and inupon its ability to raise additional funds. Management is currently seeking additional funds, primarily throughobtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the issuanceCompany has been able to fund its operations from the proceeds of equity securities for cash to operate our business.notes payable and convertible notes. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able tocan obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders,stockholders, in the case orof equity financing.
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NoteNOTE 2 - Significant and Critical Accounting Policies and Practices– SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
PrinciplesBasis of Consolidation
The Company consolidates all wholly ownedwholly-owned and majority-owned subsidiaries in which the Company’s power to control exists. The Company consolidates the following subsidiaries and/or entities:
Name of consolidated subsidiary or Entity |
| State or other jurisdiction of incorporation or organization |
| Date of incorporation or formation (date of acquisition/disposition, if applicable) |
| Attributable interest |
| |
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| The State of Nevada |
| April 4, 2006
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| 100 | % |
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| The State of Washington |
| October 16, 2014 |
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| 100 | % |
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| The State of Washington |
| August 1, 2013
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| 100 | % |
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| The State of Washington |
| October 16, 2014 |
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| 90 | % |
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| The State of Washington |
| October 16, 2014 |
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| % |
VnueVNUE Technology, Inc. and VnueVNUE Media, Inc. were inactive corporations aton December 31, 20152019 and 2014.2018, respectively. Inter-company balances and transactions have been eliminated.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company recognizes revenue on the sale of digital video disks (DVD) that contain the recording of live concerts and made available to concert viewers immediately after the show and on-line. Revenue is recognized on the sale of a product when our performance obligation is completed which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaU.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the financial statement date of the financial statements and the reported amounts of revenuesrevenue and expenses during the reporting period. Critical accountingSignificant estimates are estimatesinclude the assumptions used for which (a) the natureimpairment testing of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values ofintangible assets, and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to developvalue the estimates utilizing currently available information, changes in factsderivative liabilities, the valuation allowance for the deferred tax asset and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.the accruals for potential liabilities. Actual results could differ from thosethese estimates.
Internal Software Development Costs
Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. The Company considers technological feasibility to be established when all planning, designing, coding and testing has been completed according to design specifications. After technological feasibility is established, any additional costs are capitalized. Through December 31, 2015, technological feasibility of the Company’s software had not been established; and, accordingly, no costs have been capitalized to date.
F-7 |
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Fair Value of Financial Instruments
The Company follows the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and to measuredetermines the fair value of its financial instruments. The FASB Accounting Standards Codification establishesassets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a fair value hierarchy which prioritizesliability (an exit price) in the inputs to valuationprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value into three broad levels.maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value hierarchy are described below.value:
• | Level 1 | — Quoted | |
| • | ||
Level 2 |
| ||
| • | ||
Level 3 |
|
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The carrying amounts of the Company’s financial assetsinstruments such as cash, and liabilities, including cash, prepaid expenses, accounts payable and accrued expenses, and other current liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying values of our notes payable approximate their fair values because of the short maturity ofinterest rates on these instruments.obligations are based on prevailing market interest rates.
The fair value of the derivative liabilities of $249,246$922,509 and $215,748 at$1,744,601 on December 31, 20152019, and 2014,December 31, 2018, respectively, were valued using Level 2 inputs.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within 12twelve months of the balance sheet date.
Carrying Value, Recoverability and Impairment of Long-Lived AssetsIncome (Loss) per Common Share
An impairment loss will be recognizedBasic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only ifwhen the carrying amountaverage market price of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if itthe common stock during the period exceeds the sumexercise price of the undiscounted cash flows expectedoptions and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on December 31, 2019, because their impact was anti-dilutive. As of December 31, 2019, the Company had 23,805,027 outstanding warrants and 3,334,494,813 shares related to resultconvertible notes payables respectively, which were excluded from the use and eventual dispositioncomputation of the asset (asset group). That assessment is based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairmentnet loss is measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset will be its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset. Restoring a previously recognized impairment loss is prohibited.per share.
Intangible Assets
The Company’s long-livedCompany accounts for intangible assets in accordance with the authoritative guidance issued by the FASB. Intangibles are valued at their fair market value and are amortized taking into account the character of the acquired intangible asset (asset group) is testedand the expected period of benefit. The Company evaluates intangible assets for recoverabilityimpairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that itsthe carrying amountvalue may not be recoverable. The Company testsrecoverable from its long-livedestimated undiscounted future cash flows. Recoverability of intangible assets for potentialis measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors, including past operating results, budgets, economic projections, market trends, and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment indicators at least annually and more frequently upon the occurrenceloss. As of such events. The long lived asset was determined to be impaired at December 31, 2015 and a loss2019 based on the assessment of $265,500 was recorded forManagement, the year ended December 31, 2015.Company determined that its intangible asset had been impaired.
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Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company does not anticipate incurring any losses related to these credit risks. The Company extends credit based on an evaluation of the customer's financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and intends to maintain allowances for anticipated losses, as required.
Loss per Common Share
Basic earnings (loss) per share are computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation as their effect is antidilutive.
For the years ended December 31, 2015 and 2014, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. As of December 31, 2015 and 2014, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from our calculation of earnings per share, as their effect would have been anti-dilutive.
December 31, 2015 2014 Convertible Notes Payable 4,700,603 4,714,783
Stock-Based CompensationSegments
The Company periodically issues stock optionsoperates in one segment for the manufacture and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by FASB where the valuedistribution of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees inour products. In accordance with the authoritative guidance“Segment Reporting” Topic of the FASB whereASC, the value ofCompany’s chief operating decision maker has been identified as the stock compensationChief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based upon the measurement date as determined at either a) the date at whichon a performance commitment is reached, or b) at the date at which the necessary performancemanagement approach to earn the equity instruments is complete. Options grantedsegment reporting, establishes requirements to non-employees are revalued each reporting periodreport selected segment information quarterly and to determine the amount to be recorded as an expense in the respective period. As the options vest, they are valued on each vesting datereport annually entity-wide disclosures about products and an adjustment is recorded for the difference between the value already recordedservices, major customers, and the then current value on the date of vesting. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
The fair value of the Company's stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.
Income Taxes
The Company follows the asset and liability method which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the yearcountries in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred taxentity holds material assets and liabilities are measured using enacted tax rates expectedreports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to apply to taxable incometheir similar customer base and similarities in economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes. Since the yearsCompany operates in which those temporary differences are expected toone segment, all financial information required by “Segment Reporting” can be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reportedfound in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.financial statements
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company’s tax years 2011 to 2015 remain subject to examination by major tax jurisdictions.
Pursuant to the Internal Revenue Code Section 382 ("Section 382"), certain ownership changes may subject the NOL’s to annual limitations which could reduce or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an "ownership change." In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.
Recently Issued Accounting Pronouncements
In May 2014,June 2016, the FASB issued Accounting Standards UpdateASU No. 2014-09, Revenue from Contracts2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with Customers. ASU 2014-09 is a comprehensive revenue recognition standard thatan “expected loss” model, under which companies will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenueallowances based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costsexpected rather than incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.losses. Entities will be able to transition toapply the standard either retrospectively orstandard’s provisions as a cumulative-effect adjustment to retained earnings as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures.
In August, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one yearbeginning of the datefirst reporting period in which the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern.guidance is effective. The ASU applies to all entities andstandard is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early2019. The adoption of ASU 2016-13 is permitted. A modified retrospective transition approach is required for lessees for capitalnot expected to have a material impact on the Company’s financial position, results of operations, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.cash flows.
In March 2016, the FASB issued the ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.
OtherOher recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company'sCompany’s present or future consolidated financial statement presentation or disclosures.statements.
NoteNOTE 3 - – INTANGIBLE ASSETS
Intangible Assetsassets as of December 31, 2019 and December 31, 2018, consist of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Intangible assets |
| $ | -0- |
|
| $ | 302,737 |
|
Accumulated amortization |
|
|
|
|
|
| (69,308 | ) |
Balance |
| -0- |
|
| $ | 233,429 |
|
On JulyApril 23, 2014,2018, the Company entered into an Asset purchase agreement with Lively,MusicPlay Analytics, LLC (d/b/a Soundstr) (“Sounds”) whereby the Company acquired certainthe assets of Lively, LLC for considerationSoundstr, a technology that aims to help businesses pay fairer music license fees based on actual music usage. The Company purchased the assets of (i) cash paymentSoundstr by agreeing to issue 2,275,000 shares of $150,000the Company’s common stock, valued at $68,250, based on the closing market price of the Company’s stock on the date of the agreement, and (ii) issuancethe Company agreed to assume and pay $234,487 of 6,709,775 Preferred shares withidentified Soundstr obligations within 60 days of April 23, 2018. The Company assigned the aggregate purchase price of $302,737 to the intellectual property which will be amortized over a fair marketthree (3) year period.
Total amortization expense during the year ended December 31, 2019, and 2018 was $101,032 and $131,581, respectively, which is included in general and administrative expenses in the consolidated statements of operations.
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On December 31, 2019 the Company conducted its impairment analysis and although the Company believes that it will be able to generate revenues in the future from the Sounstr asset, based on the lack of any historical sales to date or lack of any pending contracts, Management determined that is could not substantiate any anticipated future revenues, and determined that the remaining book value of $204,000 at the time of the issuance. The shares were valued at $0.0304 per share, which was the most recent sales price per common share from the subsequent sale of Vnue Washington's common stock as a Vnue Washington preferred share is convertible to a common share on a 1 to 1 basis. Assets purchased included: a) software, inventions, customers, customer lists, development, documents and records, designs, claims, intellectual property rights, distribution rights and merchandising rights; b) all copyright, patents, trademarks, trade names, logos or service marks and other intangible property and rights. The Company recorded the intangible assets of $354,000 including (i) $150,000$132,397 should be impaired as of December 31, 2019.
Pledge Music
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc. (the “Seller”), whereby the Company acquired the digital live music distribution platform “Set.fm” from PledgeMusic.The purchase price for the acquisition was comprised of $50,000 paid in cash, and (ii) $204,000a purchase liability of $300,000, for an aggregate purchase price of $350,000. The Company assigned $350,000 of the purchase price to intellectual property, of which $116,668 was amortized in Vnue Washington's preferred shares.
During2018. As of December 31, 2018, the Company recorded an impairment charge of the remaining balance of $204,165. The purchase liability is payable on the net revenues derived from VNUE’s live recording and content business and must be paid in full to the Seller no later than the three (3) year anniversary of the date of the agreement, or October 16, 2020. If the Company fails to pay the Seller the purchase liability on time, the Seller may request at any time within one hundred eighty days (180) days following the (3) year anniversary of the asset purchase agreement, that the Company immediately forfeit, convey, assign and transfer to the Seller all or any of the Purchased Assets so requested by the Seller for no additional consideration. For the years ended December 31, 20152019 and 2014,2018, there was no net revenue derived from the acquired assets and accordingly, no payments were made on the earnout. The balance due at December 31, 2019 and 2018 was $300,000
The Company assigned the purchase price of $350,000 to intellectual property, which was to be amortized over a three year period. The Company recorded amortization of $70,800 and $17,700, respectively.$116,668 during the year ended December 31, 2018. As of December 31, 2015,2018, Management of the Company performedmade an impairment test and determinedassessment that the recorded costs were no longer recoverable, and an impairment lossremaining balance of $265,500 was recorded.$204,165 should be impaired.
NoteNOTE 4 - Related Party Transactions– RELATED PARTY TRANSACTIONS
Note payable to President, CEO and Significant StockholderDiscLive Network
On December 31, 2014July 10, 2017, the Company entered into a note payableLicensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $206,161 and $82,881 and direct cost of revenues of $211,031 and $111,086 during the year ended December 31, 2019, and 2018, respectively, were recorded using the assets licensed under this agreement. For the periods ended December 31, 2019 and 2018. The fees would have amounted to $10,308 and $4,144, respectively. Our Chief Executive Officer agreed to waive the right to receive these license fees for both years.
Accrued Payroll to Officers
Accrued payroll to officers was $68,000 and $52,700, respectively, as of December 31, 2019, and December 31, 2018, respectively. During the year ended December 31, 2019, the Company entered into a conversion and cancellation of a debt agreement with its President, CEO and significant stockholderChief Executive Officer. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company.Company’s stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. The note is unsecured, non-interest bearingdifference between the total accrued payroll converted of $52,700, and due onthe market value of the shares issued of $40,654, was recorded as contributed capital of $12,046 in the consolidated statements of stockholders’ deficit for the year ended December 31, 2024. As2019. The Chief Executive Officers’ compensation is $170,000 per year all of which was expensed during the year ended December 31, 2019; of which $102,000 has been paid and $68,000 was outstanding as of December 31, 2015 and 2014, the note payable to the officer was $54,643 and $86,016, respectively. 2019.
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Advances from employeesOfficers/Stockholders
From time to time, employeesofficers/stockholders of the Company advance funds to the Company for working capital purposes. As of December 31, 2015 and 2014, the advances from the employees were $14,720 and $720, respectively. ThoseThe advances are unsecured, non-interest bearing and due on demand. On December 31, 2018, advances from officers/stockholders were $14,720. During the year ended December 31, 2019, a former employee and stockholder agreed to forgive $14,000 owed by the Company. The Company recorded the $14,000 as a gain on the settlement of debt, leaving a remaining balance of $720 on December 31, 2019.
Transactions with Former Director and Officer
On September 15, 2017, the Company entered into an Advisory Agreement with Louis Mann (“MANN”), a former officer and director with the Company who resigned as an officer and director on August 26, 2015. The Advisory Agreement provides for MANN’s continued and ongoing advisory services to the Company for nine (9) months and with automatic nine (9) months renewals unless terminated per the agreement. MANN is to receive $5,000 per month and 20,000 shares of common stock per month.
As of December 31, 2018, $40,000 of cash compensation was owed to MANN under the Advisory Agreements and included in accounts payable and accrued expenses. On March 4, 2019, the Company and MANN entered into a conversion and cancellation of debt agreement relating to the $40,000 cash compensation balance outstanding on December 31, 2018. The Company issued 11,428,571 shares of common stock, at $0.0035 per share, as payment in full for the $40,000 balance outstanding on December 31, 2018. The difference between the total obligations of $40,000 that MANN converted, and the market value of the shares issued of $30,857, was recorded as a gain on settlement of obligations of $9,143 in other income in the consolidated statements of operations for the year ended December 31, 2019.
During the year ended December 31, 2019, the Company recorded $45,000 of compensation relating to the agreement and made payments of $3,750 leaving a balance owed to MANN of $41,250 on December 31, 2019, which is included in accounts payable and accrued expenses. In May 2019, the Company awarded MANN, 748,429 shares of Series A Preferred Stock.
NOTE 5 – NOTES PAYABLE -PAST DUE
On December 17, 2015, the Company issued a Promissory Note in the principal amount of $9,000. The note is due within 10 business days of the Company receiving notice of the effectiveness of its Form S-1 filed on February 22, 2016. Failure to make payment during that 10 business day period shall constitute an Event of Default, as a result of which the note will become immediately due and payable and the balance will bear interest at 7%. The Company’s Form S-1 was declared effective on March 8, 2016, and payment was due before March 22, 2016. The Company did not repay the note before March 22, 2016; therefore, the note is in default with an interest rate of 7%.
On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $25,000. The Note is due and payable on August 30, 2019, along with $5,000 worth of interest. The Promissory Note is past due, however, the maker of the Note has verbally agreed not to call a default.
During the year ended December 31, 2019; the Company recorded $5,630 of accrued interest expense on these two Notes.
The balance of the Notes Payable outstanding was $34,000 and $9,000 as of December 31, 2019, and December 31, 2018, respectively and are past due.
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NOTE 6 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE, RELATED PARTIES
Convertible Notes Payablenotes payable consist of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2019 |
|
| 2018 |
| ||
Various Convertible Notes(a) |
| $ | 43,500 |
|
| $ | 45,000 |
|
Ylimit, LLC Convertible Notes (b) |
|
| 882,500 |
|
|
| 707,500 |
|
Golock Capital, LLC Convertible Notes(c) |
|
| 339,011 |
|
|
| 302,067 |
|
Other Convertible Notes(d) |
|
| 299,069 |
|
|
| 426,964 |
|
Total Convertible Notes |
|
| 1,564,080 |
|
|
| 1,481,531 |
|
Debt discount |
|
| (78,013 | ) |
|
| (249,241 | ) |
Convertible notes, net |
|
| 1,486,067 |
|
| $ | 1,232,290 |
|
(a) In August 2014, the Company issued a series of convertible notes with various interest rates ranging up to 10% per annum. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a “pre-money” valuation of $8,000,000 by the number of shares outstanding immediately prior to the Officerstime of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a “pre-money” valuation of $8,000,000 by the total number of units (restricted and Directors
The Company issued convertible notesnon-restricted) outstanding immediately prior to certain Officers and Directorsthe time of the Company for working capital purpose with 0% interest.such conversion, on a fully diluted basis. The notes are convertible at variable pricesdue and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. See further discussionThe balance of the notes outstanding was $45,000 as of December 31, 2018. On March 4, 2019, a note holder elected to forgive and cancel their outstanding convertible note balance of $1,500, which the Company recorded as a gain on extinguishment of debt in Note 6.the accompanying consolidated statement of operations. The balance of the notes outstanding was $43,500 as of December 31, 2019 of which $28,500 was due to related parties.
Transactions(b) On May 9, 2016, the Company issued a convertible note to YLimit, LLC in the principal amount of $100,000 with Louis Manninterest at 10% per annum and due on May 9, 2018. The note is secured by the Company’s rights, titles and interests in all the Company’s tangible and intangible assets, including intellectual property and proprietary software whether existing now or created in the future. On August 25, 2017, the Note was amended to authorize total borrowings on this Note to $517,000, The balance of the notes outstanding was $517,000 as of December 31, 2017 and the balance of the debt discount was $137,358.
During 2015, the Company advanced $52,037 to Broadcast Institute of Maryland ("BIM") in anticipation of a planned collaboration. Louis Mann ("MANN"), an officerOn April 12, 2018, and director of the Company at the time, was also the owner of BIM. Onagain on August 26, 2015 Mann resigned from his officer and director positions with15, 2018, the Company and Ylimit, LLC entered into an amendment to the original secured convertible promissory note. The amendments increased the borrowing limits by $190,500 to a total of $707,500, and extended the maturity date to May 9, 2019. In addition, the amendment on April 12, 2018 modified the conversion feature to state that all borrowings under the note will be converted at 75% of the per share transfer agreement withstock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. This feature gave rise to a derivative liability of $135,900 during the period ended December 31, 2018 that is discussed below. During the year ended December 31, 2018, the Company whereby Mann returned 21,885,591 common sharesborrowed an additional $190,500. The balance of notes outstanding was $707,500 as of December 31, 2018 and the balance of the debt discount was $70,078.
On November 9, 2019 the Company and Ylimit, LLC entered into an amendment (“Ylimit Amendment One”) to the original secured convertible promissory note dated May 9, 2016 along with subsequent amendment and fundings that followed. Under the terms of Ylimit Amendment One, Ylimit extended maturity date of all outstanding convertible debt due to them by the company, to a new maturity date of February 09, 2020. Ylimit received no consideration for this amendment.
By verbal agreement Ylimit increased the Company’s borrowing limits by $175,000 and extended this amount of additional funding to the Company in exchange forduring the advanceslast three months of 2019 bring the total convertible note balance due to BIM. The Company has accounted for this transactionYLimit to a total of $882,500 as the purchaseDecember 31, 2019. All note discount related to Ylimit was fully amortized as of treasury stock which was then cancelled.December 31, 2019.
Subsequent to his termination, on August 26, 2015,On February 9, 2020, the Company entered into an Advisory Agreementanother amendment with MANN. Such Advisory Agreement providedYlimit (“Ylimit Amendment Two”) to further extend the maturity date of all of the Company’s outstanding debt to August 9, 2020 including the $175,000 that Ylimit funded in the fourth quarter of 2019. Ylimit received no consideration for MANN’s continued and ongoing advisory services to the Company until December 31, 2015 and MANN was to be paid $25,000 for providing such Advisory Services, which was due and payable on or before December 31, 2015. Such amount is included in accrued expenses at December 31, 2015.Ylimit Amendment Two.
Note 5 - Note Payable
Notes payable at December 31, 2015 consist of the following;
(a) Tarpon (b) Individual Total $ 50,000 9,000 $ 59,000
________________
Note 6 - Convertible Notes Payable
Convertible notes payable consist of the following:
December 31, 2015 December 31, 2014 On August 14, 2014 and August 20, 2014 the Company issued three convertible notes to three note holders in the principal amounts of $5,000, $10,000 and $10,000, respectively, with interest at 10% per annum. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a "pre-money" valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a "pre-money" valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The note is due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. On August 31, 2014, the Company issued a non-interest bearing convertible note to an officer in the amount of $15,000. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a "pre-money" valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a "pre-money" valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The note is due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The Company repaid $13,500 of the note during the year ended December 31, 2015. Two non-interest bearing convertible notes were issued to a director on August 31, 2014 in the amounts of $35,000 and $21,000, respectively. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a "pre-money" valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a "pre-money" valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The note is due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The Company repaid $27,500 of the note during the year ended December 31, 2015. Total notes outstanding Valuation discount Convertible notes payable, net $ 25,000 $ 25,000 1,500 15,000 28,500 56,000 55,000 96,000 (30,556 ) (85,333 ) $ 24,444 $ 10,667
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For(c) From September 1, 2017 to December 31, 2017, the purposes of Balance Sheet presentation,Company issued convertible notes payableto Golock Capital, LLC (“Lender”) in the aggregate principal amount of $191,750 with an interest rate at 10% per annum and maturity dates between June 1, 2018 and August 31, 2018. The notes are convertible into shares of the Company’s common stock at prices between $0.015 and $0.02 per share. As additional consideration for the Lender to enter into these agreements with the Company, the Company issued warrants to the Lender to acquire in the aggregate 4,804,708 shares of the Company’s common stock at a weighted average exercise price of $0.014 per share. In addition, the Lender shall have been presentedthe first right of refusal as follows:to any future funding of Borrower in that Lender shall have the right to provide all or a portion of the funding upon the same terms as those offered in writing by any third party or contained in any private placement of borrower. The Lender, upon conversion, shall have piggyback registration rights for all of its common stock shares in any registration or post-effective amendment to any registration initiated by Borrower with the Securities and Exchange Commission. The balance of the notes outstanding and the related debt discount was $191,750 and $19,652, respectively, as of December 31, 2017.
December 31, 2015 December 31, 2014 Convertible notes payable, net Convertible notes payable, related party, net Total On February 2, 2018, the Company issued a convertible note to Golock Capital, LLC (“Lender”) in the principal amount of $40,000 with an interest rate at 10% per annum and a maturity date of November 2, 2018. The note included an original issue discount of $5,000. The note is convertible into shares of the Company’s common stock at $0.015 per share. As additional consideration for the Lender to enter into this agreement with the Company, the Company issued warrants to the Lender to acquire in the aggregate 2,500,000 shares of the Company’s common stock at an exercise price of $0.015 per share that expire three years from the date of grant. The relative fair value of the warrants, the original issue discount, and the beneficial conversion feature totaling $40,000 was recorded as a debt discount and will be amortized to interest expense over the term of the note. On November 5, 2018, the Company amended the notes above by changing the conversion feature for the aggregate notes to be convertible into shares of common stock of the Company at the lower of (i) $0.015 per share or, (ii) 58% of the lowest closing bid price in the 20 trading days prior to the day that the Lender requests conversion. This feature gave rise to a derivative liability of $553,000 at date of issuance as discussed below. The amendment also increased the principal face amount of notes to include accrued interest, and an additional $43,250 was added to principal, which was recorded to financing costs. The aggregate balance of the notes outstanding, and the related debt discount was $302,067 and $0, respectively, as of December 31, 2018.$ 11,441 $ 3,116 13,003 7,551 $ 24,444 $ 10,667
On April 29, 2019, Golock entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, Golock received several concessions. They received (a) a warrant to purchase 12,833,333 shares of the Company’s common stock for 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ending December 31, 2019 the Company issued new notes payable of $53,331 and $23,102 of notes and accrued interest were converted into 100,000,000 shares of common stock. The balance of the notes outstanding at December 31, 2019, was $339,010. As of December 31, 2019, $285,679 of these notes were past due.
(d) As of December 31, 2017 the Company had an outstanding convertible note payable of $61,000. During the year ended December 31, 2018, the Company entered into additional notes of $369,250. The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018, to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 50% of the lowest trading price for the Company s common stock during the prior twenty (20) trading day period, and for one lender, no lower than $0.035 per share. The issuance of notes with conversion features gave rise to derivative liabilities of $559,397 (see discussion below). As of December 31, 2018, the aggregate convertible notes balance to the five lenders was $426,964 and the related debt discount was $179,162.
During the year ended December 31, 2019, the Company entered into additional notes of $256,000, with interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020, to August 2, 2020, at conversion terms comparable to the terms above. The issuance of notes with conversion features gave rise to derivative liabilities of $357,465 (see discussion below). In addition, On April 29, 2019, one of the lenders entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, the Company issued (a) a warrant to purchase 2,966,986 shares of the Company’s common stock for a period of 48 months exercisable at a strike price of $.00475 with a fair value of $5,934, and (b) the conversion price of outstanding notes was changed from $.015 to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ended December 31, 2019, convertible notes of $388,207 and accrued interest were converted into 540,276,078 shares of common stock. As of December 31, 2019, the aggregate convertible notes balance to the five lenders was $299,069 and the related debt discount was $ 33,667. As of December 31, 2019, $96,069 of these notes were past due.
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In total, during 2019 convertible notes and accrued interest aggregating $411,309 were converted into 640,276,078 common shares with a fair value of $959,290 and recognized loss on settlement of debt of $548,029 during the year ended December 31, 2019. On December 31, 2019, the aggregate balance of the fair value of the notes outstanding was $1,564,080 and the related debt discount was $78,013. As of December 31, 2019, the above notes are convertible into 3,334,494,813 shares of common stock.
The Company considered the current FASB guidance of "Contracts“Contracts in Entity’s Own Stock"Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers’ control means the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events.events or the conversion price was variable. As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Notes, in 2014, the initial fair value of the embedded conversion feature was $248,952. As such, the Company recorded a $248,952 derivative liability, of which $96,000 was recorded as debt discount offsetting the fair value of the Notes and the remainder of $152,952 recorded as financing costs in the Consolidated Statement of Operations for the year ended December 31, 2014.Operations. The discount is being amortized using the effective interest rate method over the life of the debt instruments.
The balance of the unamortized note discount on December 31, 2017 was $198,025. During the yearsyear ended December 31, 20152018, the Company issued $583,750 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $1,329,389 of which $483,635 was recorded as a debt discount, and 2014,the remaining $845,754 was recorded as a financing cost. During the year ended December 31, 2018, the amortization of debt discount was $54,778 and $10,677, respectively.$432,419 which is included in financing costs on the Company’s statement of operations. The unamortized balance of the unamortized note discount on December 31, 2018 was $249,241.
During the year ended December 31, 2019, the Company issued $484,331 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $357,465 of which $218,637 was recorded as a debt discount, and the remaining $138,828 was recorded as a financing cost. During the year ended December 31, 2019, the amortization of debt discount was $30,556 and $85,333 as$389,793 which is included in financing costs on the Company’s statement of operations. The balance of the unamortized note discount on December 31, 2015 and 2014, respectively2019 was $78,013.
NoteNOTE 7 - Derivative Liability– DERIVATIVE LIABILITY
The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 6 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events.events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
At As of December 31, 2014,2019 and at2018, the date of issuance, the Company utilized a third party valuation consultant to assist the Company in determining the fair value of its derivative financial instruments related to its convertible notes. The convertible notesliabilities were valued at issuance at $248,952 and $215,748 at December 31, 2014using probability weighted option pricing models with the following assumptions:
|
| December 31, 2019 |
|
| Issued During 2019 |
|
| December 31, 2018 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Exercise Price |
| $ | 0.00015–0.00018 |
|
| $ | 0.00015–0.035 |
|
| $ | 0.005–0.035 |
|
Stock Price |
| $ | 0.0003 |
|
| $ 0.020-0.003 |
|
| $ | 0.016 |
| |
Risk-free interest rate |
|
| 1.59 | % |
| 1.59–1.85 | % |
|
| 2.59 | % | |
Expected volatility |
|
| 236 | % |
| 236-388 | % |
|
| 293 | % | |
Expected life (in years) |
|
| 1.00 |
|
|
| 1.00 |
|
|
| 1.00 |
|
Expected dividend yield |
|
| 0 | % |
| 0 | % |
|
| 0 | % | |
Fair Value: |
| $ | 922,509 |
|
| $ | 546,651 |
|
| $ | 1,744,601 |
|
- The stock price was based on the Private Placement dated January 1, 2015 which raised $686,320 at $1.53 per VNUE Common S tock share price with 9,491,961 issued / outstanding and using the TGRI capitalization of 477,815,488 issued / outstanding with a Common Stock share price of $0.0304.
- The stock projections are based on the comparable company annual volatilities for each date. These volatilities were in the 104–122% range:
1 year 1 year 8/14/14 9/30/14 8/20/14 12/31/14 8/31/14 3/31/15 104 % 109 % 109 % 119 % 109 % 122 %
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At December 31, 2015, the fair value of the derivative liabilities of $249,246 was determined through use of a probability-weighted Black-Scholes-Merton valuation model, based on the following assumptions: (i) stock price of $0.065, (ii) conversion prices of $0.0124 and $0.0282, (iii) volatility rate of 188%, (iv) discount rate of 0.85%, (v) zero expected dividend yield, and (vi) expected life of 1.67 years. The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.
As noted above,During the year ended December 31, 2019, the Company recorded derivative liabilities of $357,465 related to the issuance of certain new convertible notes, a modification of $189,186 relating to an additional derivative, and recognized $1,179,556 as other income, which represented the net change in the value of the derivative liability at December 31.
NOTE 8 – STOCKHOLDERS’ DEFICIT
On July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada. The Charter Amendment increased the Company’s capitalization to 2,000,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock, of which, 5,000,000 were designated as Series A Convertible Preferred Stock.
On May 22, 2019, the Company authorized and designated a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently issued 4,126,776 restricted shares of Series A Preferred Stock to various employees and service providers to compensate and reward them for services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock receives relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.
Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders shall be entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders shall vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock have no liquidation or redemption preference rights but get treated as common stockholders on an as converted basis.
The Company believes that the issuance of the Series A Preferred Stock was exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act in that said transaction did not involve a public solicitation and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
The Company determined the fair value of the preferred shares to be $590,129 which is included as stock-based compensation in general and administrative expense on the Company’s statements of operations for the year ended December 31, 2015, the Company utilized the probability-weighted Black-Scholes-Merton valuation model to value its derivatives, whereas in the prior period2019.
Common stock returned by a Monte Carlo model was utilized. Management's basis for changing methodologies included: (1) its conclusion that the probability-weighted Black-Scholes-Merton valuation model would meet the fair value objective for these types of derivatives; (2) the simplicity and transparency of the probability-weighted Black-Scholes-Merton valuation model, including the Company's disclosure of all input assumptions, provides the user of the financial statements the benefit of more clearly understanding managements judgments and estimates utilized in valuing these instruments in comparison to the more complex and less transparent Monte Carlo model; (3) cost benefit considerations in preparing the estimates, considering that both methodologies (Black Scholes Merton and the Monte Carlo model) are acceptable for valuing instruments with these characteristics, and (4) the use of the probability-weighted Black-Scholes-Merton valuation model would not result in a valuation materially different than the Monte Carlo model.director or officer
During the year ended December 31, 2015 and 2014, the2019, a former Company recognized $83,156 and ($33,204), respectively, as other (income) expense, which represented the difference in thedirector voluntarily returned 4,555,918 shares of Company common stock to Treasury. These shares were valued at par value of $456 and decreased common stock and increased paid-in capital by the derivative fromsame amount, so the respective prior period. In addition,transaction had no impact on the Company recognized a gain of $49,658 duringCompany’s equity.
Shares issued for services
During the year ended December 31, 2015 which represented2019, the extinguishmentCompany issued 2,500,000 shares to the vendor who supplied consulting services to the Company. The Company recorded consulting expense of derivative liabilities$3,368 related to repayments made on the unsecured convertible notes
Note 8 - Stockholders’ Deficit
Common stock issued to foundersthis issuance.
During the year ended December 31, 2014, VNUE Washington2018, the Company issued an aggregate of 392,922,5003,550,000 shares of its common stockvalued at $72,950, for services received relating to its founders for no consideration.consulting agreements.
Common stockShares issued for cash
During 2015, and priorupon cancellation of payable to the reverse merger on May 18, 2015, the Company sold 22,572,344 shares of its common stock for aggregate proceeds of $686,320. Subsequent to the reverse merger, the Company sold 14,928,938 shares of its common stock for aggregate proceeds of $260,000.Executive Officers
During the year ended December 31, 2014,2018, the Company issued 9,561,381entered into conversion and cancellation of debt agreements with two executive officers. The Company agreed to convert a note payable for $74,131 and aggregate accrued payroll of $419,805 into 3,746,660 shares of itsthe Company’ stock, valued at $74,933 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. The difference between the total executive obligations converted of $493,936, and the market value of the shares issued of $74,933, was recorded as contributed capital of $419,003 in the consolidated statements of stockholders’ deficit for year ended December 31, 2018.
Shares issued to retire trade debt
During the year ended December 31, 2019, the Company reached agreement with a vendor to retire approximately $27,096 in debt at a price of $0.05 per share and issued the vendor 541,912 shares pursuant to the agreement. At the time of the settlement of the debt the Company’s common stock for aggregate proceedswas trading at a price of $100,000.
Shares issued for services$.0013, so the Company recognized a profit of $26,391 upon the extinguishment of the debt
During the year ended December 31, 2015,2018, the Company issued anentered into conversion and cancellation of debt agreements relating to two outstanding convertible notes. The Company agreed to convert the outstanding aggregate principal and interest balances of 46,048,116$56,052 into 12,300,000 shares of its common stock with a fair value of $215,100, and recorded a loss on cancellation of debt of $159,048.
F-15 |
Table of Contents |
Shares to certain foundersbe issued
As of December 31, 2018, the Company had not yet issued 3,964,352 shares of common stock with a value of $243,839 for past services renderedprovided and for an acquisition. During the year ended December 31, 2019 the Company became obligated to issue an additional 60,000 shares of common, valued at $1,400,027 based upon$184, per the most recent per share cash sales priceterms of itsa consulting agreement (see Note 4), and 1,000,000 shares of common stock and recorded this amountvalued at $3,500, as acquisition-related costs.consideration for amending an existing convertible note. As of December 31, 2019, the Company had not yet issued 5,204,352 shares of common stock with a value of $247,707.
Warrants
During the year ended December 31, 2015,2019, the Company issued an aggregate15,800,319 warrants to two convertible noteholders as consideration for extending the term of 9,875,001 sharestheir convertible notes. The warrants are exercisable for a period of its common stock to certain consultants for investor relations and software development services valuedfour years at $218,333, based upon the most recent per share cash salesa strike price of its common stock,$0.00475. As a result of the issuance of these warrants, the company recorded a financing expense of $36,533.
Upon consummationA summary of warrants for the Merger Agreement on May 29, 2015, the Company issued 29,814,384 fully paidyears ended December 31, 2019 and non-assessable shares of TGRI common stock to Matheau J. W. Stout, Esq.December 31, 2018, is as payment for services performed prior to and in connection with the Merger. The Company valued the 29,814,384 shares at $906,462 based upon the most recent per share cash sales price of its common stock, and recorded this amount as acquisition-related costs.follows:
|
| Number |
|
| Weighted |
| ||
|
| of |
|
| Average |
| ||
|
| Warrants |
|
| Exercise |
| ||
Balance outstanding, December 31, 2017 |
|
| 5,004,708 |
|
|
| 0.014 |
|
Warrants granted |
|
| 3,000,000 |
|
|
| 0.015 |
|
Warrants exercised |
|
| - |
|
|
| - |
|
Warrants expired or forfeited |
|
| - |
|
|
| - |
|
Balance outstanding, December 31, 2018 |
|
| 8,004,708 |
|
|
| 0.014 |
|
Warrants granted |
|
| 15,800,319 |
|
|
| .00475 |
|
Warrants exercised |
|
| - |
|
|
| - |
|
Warrants expired or forfeited |
|
| - |
|
|
| - |
|
Balance outstanding and exercisable, December 31, 2019 |
|
| 23,805,027 |
|
| $ | 0.0079 |
|
SharesInformation relating to be issuedoutstanding warrants on December 31, 2019, summarized by exercise price, is as follows:
|
|
| Outstanding and Exercisable |
| ||||||||||
|
|
|
|
|
|
|
|
| Weighted |
| ||||
Exercise Price Per |
|
|
|
|
|
|
|
| Average |
| ||||
Share |
|
| Shares |
|
| Life (Years) |
|
| Exercise Price |
| ||||
$ | 0.010-0.015 |
|
|
| 8,004,708 |
|
|
| 1.14 |
|
| $ | 0.014 |
|
$ | 0.004750 |
|
|
| 15,800,319 |
|
|
| 3.58 |
|
| $ | 0.00475 |
|
The weighted-average remaining contractual life of all warrants outstanding and exercisable at December 31, 2019, is 1.96 years. Both the outstanding and exercisable warrants outstanding at December 31, 2019, had no intrinsic value.
NOTE 9 – COMMITMENT AND CONTINGENCIES
Joint Venture Agreement – Music Reports, Inc.
On JulySeptember 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com) will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform. The initial term of the JV is for nine (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue every quarter. As of December 31, 2019, no net revenue was generated from the JV.
Litigation
On November 27, 2018, Stout Law Group, P.A., the former counsel for the company and an affiliate of Matheau J. Stout, filed a Federal Complaint in the United States District Court for the District of Maryland (Stout Law Group, PA, v. VNUE, Inc.”, Civil Action No 1:18-CV-03614 JKB) for outstanding legal fees and other damages for work provided during the 2015 and 2016 fiscal years. The Company denies any liability therein and after negotiation with the plaintiff, the foregoing action was voluntarily withdrawn on February 27, 2019, by the plaintiff. The Company has a recorded liability of approximately $72,000 as of December 31, 2019, and December 31, 2018, to Stout Law Group, S.A. for services rendered which are the subject of settlement negotiations.
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Table of Contents |
Artist Agreement
On October 27, 2015, the Company entered into an Artist Agreement with I Break Horses, a consulting agreement with a consultant, which included, among other things, monthly compensation of 791,667 shares of common stock. As of December 31, 2015,1,583,334 shares of common stock with a value of $81,146 have not been issued and are includedSwedish duo based in common shares to be issued in the accompanying consolidated balance sheet.
On September 10, 2015, the Company entered into a one-year consulting agreement with a consultant, which included, among other things, compensation of $50,000 to be paid in shares of common stock based on the closing price of the Company’s common stock on the final trading day of the consulting agreement. As of December 31, 2015, $16,667 of the value of the shares of common stock has been included in common shares to be issued in the accompanying consolidated balance sheet.
On July 23, 2015, the Company entered into an employment agreement with an individual pursuant to which it agreed to issue 25,000 shares of the Company’s common stock at the end of each calendar quarter that the individualStockholm. The Artist Agreement is employed by the Company. During the year ended December 31, 2015, the individual earned 25,000 shares valued at $1,625 based on their fair value at the end of the quarters. The shares due were not issued as of December 31,effective October 27, 2015, and were reflectedhas a term lasting as common shares to be issued inlong as I Break Horses artist recordings are available via the accompanying consolidated balance sheet.
On September 8, 2015, the Company entered into an employment agreement with an officer pursuant to which it granted 1,000,000 shares of the Company’s common stock. The shares vested immediately and were recognized as stock based compensation expense during the year ended December 31, 2015 based on their fair value on the agreement date in the aggregate amount of $27,474. The shares due were not issued as of December 31, 2015 and were reflected as common shares to be issued in the accompanying consolidated balance sheet.
Equity Purchase Agreement with Tarpon Bay Partners, LLC
On June 15, 2015, the Company entered into an Equity Purchase Agreement (the "Equity Purchase Agreement") with Tarpon Bay Partners, LLC, a Florida limited liability company ("Tarpon").VNUE Service. Under the terms of the Equity Purchase Agreement, Tarpon will purchase, at the Company's election, up to $5,000,000 of the Company's registered common stock (the "Shares").
During the term of the Equity PurchaseArtist Agreement, the Company may at any time deliver a "put notice" to Tarpon thereby requiring Tarpon to purchase a certain dollar amountshall handle rights clearing and distribution for I Break Horses recordings and receive 30% of the Shares. Simultaneous with the delivery of such Shares, Tarpon shall deliver payment for the Shares. Subject to certain restrictions, the purchase price for the Shares shall be equal to 90% of the lowest Closing Price during the Valuation Period as such capitalized terms are defined in the Agreement.
The number of Shares sold to Tarpon shall not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially owned by Tarpon, would result in Tarpon owning more than 9.99% of all of the Company's common stock then outstanding. Additionally, Tarpon may not execute any short sales of the Company's common stock. Further, the Company has the right, but never the obligation to draw down.
The Equity Purchase Agreement shall terminate (i) on the date on which Tarpon shall have purchased Shares pursuant to the Equity Purchase Agreement for an aggregate Purchase Price of $5,000,000, or (ii) on the date occurring 24 months from the date on which the Equity Purchase Agreement was executed and delivered by the Company and Tarpon.
Net Income generated thereby. As a condition for the execution of the Equity Purchase Agreement by Tarpon, the Company issued a Promissory Note to Tarpon in the principal amount of $50,000 with an interest rate of 10% per annum and a maturity date of December 31, 2015. The issuance of the note was recorded as a finance fee in the statement of operations for the year ending December 31, 2015.
In addition, on June 15, 2015,2019, the Company and Tarpon entered into a Registration Rights Agreement (the "Registration Agreement"). Under the terms of the Registration Agreement the Company agreed to file a registration statement with the Securities and Exchange Commission with respect to the Shares within 120 days of June 15, 2015. The Company is obligated to keep such registration statement effective until (i) three months after the last closing of a sale of Shares under the Purchase Agreement, (ii) the date when Tarpon may sell all the Shares under Rule 144 without volume limitations, or (iii) the date Tarpon no longer owns any of the Shares.
At December 31, 2015, Tarpon had not purchasedearned any sharesrevenue under this agreement.
Settlement and Release Agreement - Dean Graziano
On July 23, 2015, the Company reached a Settlement and Release Agreement with Dean Graziano ("GRAZIANO") after learning that GRAZIANO might assert claims for equity or compensation against the Company or its subsidiary VNUE Washington and that such claims were not contained in the transaction documents surrounding the purchase of the intangible assets of Lively, LLC ("LIVELY") closed on July 23, 2014. Under the terms of the settlement, GRAZIANO agreed to resolve any and all claims, damages, causes of action, suits and costs, of whatever nature, character or description, whether known or unknown, anticipated or unanticipated, whether or not directly or indirectly related to the purchase of the LIVELY assets, or to any alleged verbal understandings of promises of employment, advisory roles, or equity, which GRAZIANO may now have or may hereafter have or claim to have against VNUE, and its subsidiaries (the "GRAZIANO CLAIMS") in exchange for Three Million Five Hundred Thousand (3,500,000) Shares (the "SETTLEMENT SHARES"). VNUE and GRAZIANO agree that delivery of the Settlement Shares pursuant to the conditions set forth herein shall satisfy VNUE’s obligation in full regarding any and all GRAZIANO CLAIMS. On July 27, 2015 the Company's board passed the resolution and issued the Settlement Shares to GRAZIANO.COVID-19
The Company valuedoutbreak of communicable diseases, such as a new virus known as the 3,500,000 sharesCoronavirus (COVID-19), could result in a widespread health crisis that could adversely affect general commercial activity and our business. An outbreak of its common stock earned upon grant oncommunicable diseases in the dateregion that we operate or regions from which our customers travel from or through, or the perception that such an outbreak could occur, and the measures taken by the governments of signing at $77,000 based on its most recent cash sales pricecountries affected, including restricting air travel and other means of its common stock,transportation, imposing quarantines and recorded this amount ascurfews and requiring the closure of our offices or other expenses - settlementbusinesses, including office buildings, theatres, retail stores and other commercial venues, could adversely affect our business, financial condition or results of claims upon execution of this agreement.operations.
Preferred StockNOTE 10 – INCOME TAXES
In July 2014,
Reconciliation between the Company issued 133,334 shares of preferred stock forexpected federal income tax rate and the acquisition of certain assets from Lively, LLC. actual tax rate is as follows:
|
| Year Ended December 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Federal statutory tax rate |
|
| 21 | % |
|
| 21 | % |
State tax, net of federal benefit |
|
| 6 | % |
|
| 6 | % |
Total tax rate |
|
| 27 | % |
|
| 27 | % |
Allowance |
|
| (27 | %) |
|
| (27 | %) |
Effective tax rate |
|
| - | % |
|
| - | % |
The preferred shares were valued at $1.53 per share or $204,000. This was based on the pricefollowing is a summary of the January 2015 private placement, as there were no significant changes in the business between the date of assets acquisition and the date of private placement. The preferred stock had no voting rights and was convertible to common stock. The holder of the preferred stock exercised that conversion on May 29, 2015 and received 6,709,775 in exchange for 6,709,775 shares of preferred stock.deferred tax assets:
|
| Year Ended December 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ | 2,434,000 |
|
|
| 2,319,000 |
|
Accrued compensation |
|
| - |
|
|
|
|
|
Deferred tax asset |
|
| 2,434,000 |
|
|
| 2,319,000 |
|
Valuation allowance |
|
| (2,434,000 | ) |
|
| (1,846,000 | ) |
Net deferred tax asset |
| $ | - |
|
| $ | - |
|
Note 9 - Income Taxes
The Company has no tax provision for any period presented due to our history of operating losses. As of December 31, 2015,2018, the Company had estimated net operating loss carry forwards of approximately $4,077,000that$9,014,000 that may be available to reduce future years'years’ taxable income through 2030.2032 subject to Section 382 limitations. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as management has determined that their realization is not likely to occur and accordingly, the Company has recorded a valuation allowance for the full value of the deferred tax asset relating to these tax loss carry-forwards. Additionally, the Company has not filed tax returns, therefore the potential realizability of this loss in future periods is indeterminable
The Company adopted accounting rules which address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under these rules, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. These accounting rules also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 20152017 no liability for unrecognized tax benefits was required to be recorded.
Note 10 - Commitment and Contingencies
Litigation - Hughes Media Law Group, Inc.
On December 11, 2015, Hughes Media Law Group, Inc. ("HLMG") filed a lawsuit against VNUE, Inc. in the Superior Court of King County, Washington, under case number 15-2-30108-0. HMLG claims damages of $130,552.78 for unpaid legal fees HMLG alleges are owed pursuantSubsequent to an April 4, 2014 agreement with VNUE Washington, for legal work performed by HMLG for VNUE Washington prior to the Merger. The Complaint sets forth no legal basis for a lawsuit against VNUE, Inc. (Nevada) and does not, in fact, sue VNUE Washington , HMLG’s former client. The Company believes that VNUE, Inc. (Nevada) is not the proper party for this lawsuit, and reserves all available defenses and counterclaims. Under Washington Superior Court rules, VNUE, Inc. (Nevada) if service of process takes place outside of Washington, a defendant has Sixty (60) days from the date on which it was served the Complaint, to file a response setting forth its defenses. On July 25, 2016, the court issued judgment awarding HLMG $133,482.12 with interest at a rate of 12% per annum. The judgment stipulated that $12,000 be paid within five days of the judgment and payments of $4,000 per month to start in October, 2016. The amount of the settlement has been recorded in accounts payable in the accompanying consolidated balance sheets as of December 31, 2015.
Artist Agreement
On October 27, 2015, the Company entered2019 one noteholder elected to convert $48,000 of outstanding principal into an Artist Agreement with I Break Horses, a Swedish duo based in Stockholm. The Artist Agreement is effective October 27, 2015 and has a term lasting as long as I Break Horses artist recordings are available via the VNUE Service. Under the terms of the Artist Agreement, the Company shall handle rights clearing and distribution for I Break Horses recordings and receive 30% of the Net Income generated thereby. For the year ended December 31, 2105, the Company did not earn any revenue under this agreement.
License Agreement
On November 2, 2015, the Company entered into a License Agreement with Universal Music Corp. ("Universal"). The License Agreement is effective September 8, 2015, and has a term of Two (2) Years from the Effective Date. Under the terms of the License Agreement, Universal is granting to VNUE a non-exclusive, non-transferable, non-sub-licensable license to create and distribute content using certain Universal compositions, more specified in the Grant of Right’s section of the License Agreement. The Company will then market and sell this content via the VNUE Service at certain agreed upon price points more specifically described in the Business Model and Price Points Section of the License Agreement, and the Company shall pay Universal royalties for each sale of the content as specified in the Royalty Rates section of the License Agreement.
In accordance with the Minimum Guarantee provision of the License Agreement, the Company shall pay to Universal a minimum first year fee of Fifty Thousand Dollars ($50,000), which is due within 10 days of execution and a second year minimum fee of Fifty Thousand Dollars ($50,000), which is due upon the commencement of the second year of the Term. The Company paid the first installment in September 2015 and recorded such amount as a prepaid asset. As of December 31, 2015, $12,500 of this amount has been amortized and recorded as an operating expense and $37,500 remains prepaid.
Note 11 - Subsequent Events
June 2015 Promissory Note with Tarpon Bay Partners, LLC
On February 26, 2016, the Company and Tarpon entered into an amendment to the Promissory Note. The amendment added a conversion feature to the Note so that the Note and all accrued interest are convertible into378,872,550 shares of the Company’s common stock at a conversionan average price equalof $.000128 per share.
On Jan 9th, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty “MT”), to 80%record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. As part of the lowest closing bid pricedeal, the Company agreed to pay an advance of $100,000 against sales, to MT and its affiliated companies, which was paid in full in installments, with the last installment of $40,000 paid on March 4th.
Also as part of the common stocktransaction, Ticketmaster agreed to include the option for their customers to pre-purchase a double CD set at checkout, for a price to the 30 trading days precedingcustomer of $25.00, resulting in a net payment to VNUE of approximately $20 after Ticketmaster's fees and taxes. Additionally, Wonderful Union, the conversionVIP package sales company utilized by MT agreed to buy 5000 digital download cards from VNUE for $7 each (to include in VIP packages that they send to fans) for $35,000 which has been paid full. As of May 11, 2020, Ticketmaster has paid via wire $40,378 toward the aforementioned pre-sales.
During the period from January 9, 2020 through the date of this Report, Ylimit extended $250,000 in convertible loans to the Company at an interest rate of 10%. The Company used $100,000 of these proceeds, as above, as an advance to MT, and used the maturity date was extended to December 31, 2016. On March 2, 2016 and March 28, 2016, Tarpon converted principal and interest of $10,075 and $10,310, respectively, into 1,144,925 shares and 2,343,150 shares, respectively,remainder of the Company’s common stock.proceeds to fund its operations.
F-17 |
Table of Contents |
Convertible Note Payable
On May 9, 2016 the Company issued a convertible note in the principal amount of $100,000 with interest at 10% per annum and due on May 9, 2018. The Note Conversion Price is determined as follows: if the Company receives equity funding of $1 million or more, then the Lender may choose to either convert the Note into shares of the Company’s common stock or request repayment of the principal and interest on the Note. If the Lender chooses to convert the Note, then the Lender shall receive the number of shares equal to the dollar amount of principal and interest owed by the Company as of the date of the conversion divided by 85% of the per share stock price in the equity funding. If the Company borrows additional amounts above the initial $100,000, then the Lender shall receive the number of shares equal to the dollar amount of principal and interest of those additional borrowings owed by the Company as of the date of the conversion divided by 75% of the per share stock price in the equity funding. The Note is secured by the Company’s rights, titles and interests in all the Company’s tangible and intangible assets, including intellectual property and proprietary software whether existing now or created in the future. Further consideration was the granting of 10,000,000 shares of common stock, valued at $33,000 and recorded as shares to be issued. On July 18, 2016 the Company obtained an increase of principal on the note to $150,000. On August 10, 2016, the Company obtained an increase of principal on the note to $200,000. On September 30, 2016 the Company obtained an increase of principal on the note to $250,000. As further consideration for the increase in principal of the note in 2016, two officers of the Company transferred ownership of an aggregate of 35,000,000 shares valued at $108,000 to the lender.
February 2016 Equity Purchase Agreement with Tarpon Bay Partners, LLC
On February 18, 2016, the Company entered into an Equity Purchase Agreement (the "Equity Purchase Agreement") with Tarpon Bay Partners, LLC, a Florida limited liability company ("Tarpon"). Under the terms of the Equity Purchase Agreement, Tarpon will purchase, at the Company's election, up to $10,000,000 of the Company's registered common stock (the "Shares"). During the term of the Equity Purchase Agreement, the Company may at any time deliver a "put notice" to Tarpon thereby requiring Tarpon to purchase a certain dollar amount of the Shares. Simultaneous with the delivery of such Shares, Tarpon shall deliver payment for the Shares. Subject to certain restrictions, the purchase price for the Shares shall be equal to 125% of the lowest Closing Price during the Valuation Period as such capitalized terms are defined in the Agreement.
The number of Shares sold to Tarpon shall not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially owned by Tarpon, would result in Tarpon owning more than 9.99% of all of the Company's common stock then outstanding. Additionally, Tarpon may not execute any short sales of the Company's common stock. Further, the Company has the right, but never the obligation to draw down. The Equity Purchase Agreement shall terminate (i) on the date on which Tarpon shall have purchased Shares pursuant to the Equity Purchase Agreement for an aggregate Purchase Price of $10,000,000, or (ii) on the date occurring 24 months from the date on which the Equity Purchase Agreement was executed and delivered by the Company and Tarpon.
As a condition for the execution of the Equity Purchase Agreement by Tarpon, the Company issued a Promissory Note to Tarpon in the principal amount of $25,000 with an interest rate of 10% per annum and a maturity date of August 31, 2016. The issuance of the note was recorded as a finance fee in the statement of operations for the three months ending March 31, 2016.
In addition, on February 18, 2016, the Company and Tarpon entered into a Registration Rights Agreement (the "Registration Agreement"). Under the terms of the Registration Agreement the Company agreed to file a registration statement with the Securities and Exchange Commission with respect to the Shares within 120 days of June 15, 2015. The Company is obligated to keep such registration statement effective until (i) three months after the last closing of a sale of Shares under the Purchase Agreement, (ii) the date when Tarpon may sell all the Shares under Rule 144 without volume limitations, or (iii) the date Tarpon no longer owns any of the Shares.
At March 31, 2016, Tarpon had purchased 2,500,000 shares under this agreement. The Company has not received proceeds of $25,000 and has recorded the amount as a subscription receivable. The February 18, 2016 Purchase Agreement for $10,000,000 effectively supersedes and terminates the prior Equity Purchase Agreement with Tarpon dated June 15, 2015, which was for $5,000,000.
Shares to be Issued
On January 2, 2016, the Company entered into an employment agreement with an officer pursuant to which it granted 10,000,000 shares of the Company’s common stock. The shares vested immediately and were recognized as stock based compensation expense during the period ended March 31, 2016 based on their fair value on the agreement date of $650,000.
On February 26, 2016, the Company entered into a common stock purchase agreement with an individual pursuant to which it agreed to issue shares of the Company’s common stock in exchange for proceeds of $5,000. The shares due were not issued as of March 31, 2016.
Transfer of Ownership-Loss of Control
On May 12, 2016, as part of the appointment of the Company’s new Chief Executive Officer, the Company’s controlling shareholder transferred the ownership of half of his shares to the new Chief Executive Officer. The Company considered the provisions of Staff Accounting Bulletin ("SAB") Topic 5T, Accounting for Expenses or Liabilities Paid by Principal Stockholders, and determined that the value of the shares was additional compensation cost and a contribution to capital by the controlling shareholder. As such, the Company recorded a charge of $491,153 during the period ended June 30, 2016 relating to the fair market value of the shares on the date of the share transfer. As a result of the transfer the transferring shareholder is no longer a controlling shareholder.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Effective September 2016, the Company engaged the firm of WEINBERG & COMPANY, PC as the Independent Registered Public Accountant to Audit the Company’s financial statements for the fiscal year ending December 31, 2015.None.
The decision to change accountants was approved by the Company’s Board of Directors based upon WEINBERG'S favorable quote for performance of the 2015 audit.
Prior to engagement of WEINBERG & COMPANY, PC we had engaged the firm of LI & Company, PC to provide audited financial statements solely for the purpose of providing such statements for our recent S-1 filed on February 22, 2016. LI & COMPANY PC gave us an unsuccessful bid for our December 31, 2015 audit.
In accordance with the terms of the reverse merger, the Company’s fiscal year-end changed to December 31, 2015. During the Company’s most recent fiscal years ended May 31, 2014 and the subsequent interim period, there were no disagreements between the Company and MALONEBAILEY, LLP concerning any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which disagreements, if not resolved to MALONEBAILEY, LLP’s satisfaction would have caused them to make a reference to the subject matter of the disagreements in connection with their reports; there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K.
MALONEBAILEY, LLP’s report dated September 12, 2014 on the Company’s financial statements for the fiscal year ended May 31, 2014 did not contain any adverse opinion or disclaimer of opinion, nor was the report qualified or modified as to uncertainty, audit scope or accounting principles.
The Company provided MALONEBAILEY, LLP with a copy of the foregoing disclosures and requested from MALONEBAILEY, LLP a letter addressed to the Commission stating whether MALONEBAILEY, LLP agrees with the statements made by the Company in response to Item 304(a) of Regulation S-K and, if not, stating the respects in which it does not agree. MALONEBAILEY, LLP’s letter was attached as an exhibit to the Company’s 8-K Current Report dated November 9, 2015 as Exhibit 10.01.
We have had no disagreements with any of our accountants.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this annual report, an evaluation was carried out by our management, with the participation of our principal executive officer and principal accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)13a-15c and 15d-15(e)15d-15c under the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”)) as of December 31, 2015.2019. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.
Based on that evaluation, and the material weaknesses outlined below under Internal Control Over Financial Reporting, our principal executive officer and principal accounting officer concluded, as of the end of the period covered by this annual report, that, due to weaknesses in our internal controls described below, our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting information required to be disclosed, within the time periods specified in the SEC’s rules and forms, and that such information may not be accumulated and communicated to our principal executive officer and principal accounting officer to allow timely decisions regarding required disclosures.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our principal executive officer and principal accounting officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 20152019 using the criteria established in Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
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A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2015,2019, the Company determined that there were deficiencies that constituted material weaknesses, as described below.
1. | Lack of proper segregation of duties due to limited personnel. |
| |
2. | Lack of a formal review process that includes multiple levels of review. |
3. | Lack of adequate policies and procedures for accounting for financial transactions. |
| |
4. | Lack of independent board member(s) |
| |
5. | Lack of independent audit committee |
Management is currently evaluating remediation plans for the above control deficiencies.material weaknesses.
In light of the existence of these material weaknesses, management concluded that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 20152019 based on criteria established in Internal Control—IntegratedControl-Integrated Framework issued by COSO.
Weinberg & Company, an independent registered public accounting firm, is not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, 20152019 pursuant to rules of the SEC.
Changes in Internal Control
During the quarteryear ended December 31, 2015,2019, there were no other changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9A(T). Controls and Procedures
Not Applicable.
None.
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Item 10. Directors, Executive Officers, Promoters and Corporate Governance
Management and Directors
Our current directors and executive officers are as follows.
Name | Age | Position | ||
M. Zach Bair |
| Chairman of the Board of Directors, Chief Executive Officer and | ||
|
| Chief | ||
|
|
| ||
Anthony Cardenas |
| Director, Chief Creative Officer and Vice President of Artist Relation | ||
Louis Mann | 69 | Executive Vice President |
Our directorsdirectors’ serve as directors until our next annual shareholders’ meeting or until a successor is elected and qualified. Officers hold their positions at the discretion of the Board of Directors. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.
M. Zach Bair, 54,58, Chairman of the Board of Directors, Chief Executive Officer and Chief Accounting Officer joined VNUE, Inc. in May 2016. Prior to his employment with VNUE, Mr. Bair was founder, president and chief executive officer for DiscLive Network/RockHouse Live Media Productions, Inc. from January 2007 to May 2016. From March 2001 to December 2006 Mr. Bair was founder, chairman and chief executive officer of Immediatek, Inc. a music tech company Mr. Bair took public in 2002. Bair is an accomplished audio and video producer, and is a voting member of the Recording Academy (the Grammys™). since 2012. Bair has a significant history of implementing and commercializing the "instant media"“instant media” business model, acquiring pioneer DiscLive in 2004. After selling the original DiscLive in 2006 as part of Immediatek, Mr. Bair started a similar instant media company in 2007 under the RockHouse brand. From 2009-2012, Bair aligned RockHouse with EMI Music, under the Abbey Road Live moniker, and in April of 2012, Bair rebranded the live operation "DiscLive Network"“DiscLive Network”.
Matthew P. CaronaAnthony Cardenas, 32,54, Director and Chief Operations Officer joined VNUE, Inc. as Chief Executive Officer and Director in April 2014. From November 2010 to March 2014 Mr. Carona was Chief Strategy Officer of Quello, LLC and from June 2008 to November 2010 was head of mobile business development for Billboard Magazine at Billboard, Inc. Prior to Billboard, Mr. Carona was an account executive for Show Media, Inc. from October 2007 to November 2008 and Director of Sales and Founder at World Trade Publication from September 2006 to October 2007. Mr. Carona has a Bachelor's Degree in Business Administration and Management from Western New England University.
Collin Howard, 46, Director As an operations-savvy executive with more than 15 years in banking, Collin’s experience has resulted in the successful development of financial planning and analysis, business intelligence, integrated business partnerships and decision support from the ground up. Collin Howard joined VNUE, Inc. in 2014 as the Chief Financial Officer. Collin is focused on driving investment strategy and next generation partnerships on a multitude of financial matters including raising capital, acquisition, accounting, financial modeling and analysis. Prior to joining VNUE, Collin served as a Vice President at the Toronto-Dominion Bank. Prior to his position with TD, Collin served as a Branch Manager at SunTrust Bank in 2006. He also served as a Business Development Officer for M&T Bank beginning in 2005. Before entering banking, Collin’s fascination with information technology and wireless services began when he joined TESSCO Technologies in 2000 as Credit Manager. Collin earned a Bachelor’s of Science Degree in Business Management from University of Phoenix in 2006.
Anthony Cardenas, 50, Chief Creative Officer-Vice President of Artist Relations joined VNUE, Inc. in May, 2016. Before his engagement with the company, Mr. Cardenas was employed by DiscLive Network/RockHouse Live Media Productions, Inc. from January 2012 to May 2016 in product development and marketing and from January 2002 to January 2012 was employed by DiskFactory.com, Inc. where he was president and co-founder of the enterprise.
ChangeLouis Mann, 69, Executive Vice President, joined VNUE in September, 2017. Prior to joining VNUE, Mann had been President of Statusthe Media Properties division of House of Blues International since June 1999. During his illustrious musical career, Mr. Mann was responsible for helping to develop new artists such as Whitney Houston, Alan Parsons Project, and Barry Manilow. He served as Senior Vice President of Capital Records, Inc., Hollywood, California from October 1988 to December 2002, and as General Manager. Mr. Mann created the Third Day Partnership, LLC. As Senior Vice President of Marketing for MCA Records, a division of Universal Studios, Inc., he directed the marketing and strategic initiatives for the entire MCA music division. During his ten years at Capitol Records, he served as Executive Vice President and General Manager for this subsidiary of EMI and was part of the team developing the strategic vision for Capitol Records and the music industry.
In May 2016 Collin Howard was replaced as chief financial officer by Zach Bair who became our principle accounting officer.Significant Employees
Significant EmployeesJames A. King (Jim),59, Chief Technology Officer (CTO), joined VNUE in March, 2019. Prior to joining the VNUE team as an adviser, King has held numerous business leadership roles, technology, and operations roles, and is involved in a number of start-up efforts. Over a 33 year career, positions held included officer roles as CIO, CTO, COO/Ops roles for The McGraw-Hill Companies, Reed Elsevier, plc and LexisNexis, United Business Media’s PRNewswire, Broadcast Music Incorporated, Brightpoint Mobile, Microsoft Corporation, and AT&T/NCR Corporation. Mr. King is also the CEO for Spoken Giants, LLC and Core Rights, LLC, and provides consulting services for companies such as Outsell, Inc, Capital Investment Partners, Inc., and others.
Other than our officers, there are no other individualsJock Weaver, Special Advisor to the company, joined VNUE in December of 2018. Weaver founded and serves as chairman of Heritage Trust Company, a private equity firm that makeprovides advisory services to growing businesses, and can efficiently access debt and equity capital. Mr. Weaver is the youngest person in history to list a significant contribution to our business.company on the London Stock Exchange and the American Stock Exchange. He has over 35 years’ business experience in mergers, acquisitions, and the development of growth companies on an international basis. Mr. Weaver has been involved in over 50 merger and/or acquisition transactions. Mr. Weaver founded TBA Entertainment Company, one of the nation’s larger live event companies, and Mr. Weaver served as president of Hard Rock Café International, an English public company.
Jeff Zakim, 48, Vice President-Business Development and Content Curation, joined VNUE, Inc. in October 2017. Prior to his employment with the Company, Mr. Zakim was self-employed as a consultant from July 2015 to October 2017 and NAPC from September 2014 to July 2015. Mr. Zakim was employed by Eleven Seven Music Group, Inc. from January 2014 to August 2014 and Razor and Tie Enterprises, LLC from October 2012 to December 2013. From January 2011 to November 2011 Mr. Zakim was employed by Ruckus Media Group, LLC and from 2001 to November 2011 he was employed by EMI Music, Inc. Mr. Zakim has a Bachelor of Science degree in communications from Towson State University.
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Family Relationships
There are no family relationships among our directors and officers.
Other Directorships
None of our directors or proposed directors currently hold, or within the past five years have held, directorships in companies with a class of securities registered pursuant to Section 12 of the Exchange Act or that are subject to the requirements of Section 15(d) of such Act.
Involvement in Certain Legal Proceedings
No director, officer or affiliate of the Company, any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries in any material legal proceeding.
None of our directors, executive officers, promoters, or control persons have been involved in any of the following events during the past five years:
· | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
· | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
· | being subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, or banking activities; or | |
· | being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Corporate Governance
Corporate Governance
Director Independence
Our securities are not listed on a national securities exchange or on any inter-dealer quotation system which has a requirement that a majority of directors be independent. We evaluate independence by the standards for director independence set forth in the NYSE MKT Marketplace Rules.
Under these rules, a director is not considered to be independent if he or she also is an executive officer or employee of the Company or has loaned funds to us within the past two years. As a result, Mr. Eley and Mr. Gasmier would not be considered independent because each serves as an officer of our company. Our other directors, Mr. Evans, Mr. Cardozo and Mr. Ferrero, would be considered independent under these rules.
Board of Directors’ Meetings
During the fiscal year ended December 31, 20152019 our board of directors did not formally meet. Our board conducted all business and approved all corporate actions during the fiscal year ended December 31, 20152019 by the unanimous written consent of its members in the absence of formal board meetings.
Committees of the Board of Directors
As our common stock is not presently listed for trading or quotation on a national securities exchange, or NASDAQ, we are not presently required to have board committees.
We currently have an audit committee comprised of all of our current directors as a whole..directors. We do not have a "financial expert"“financial expert” under applicable rules. We do not have a separate audit committee charter. We believe the cost related to retaining a financial expert at this time is prohibitive.
The purpose of the Audit Committeeaudit committee is, among other things, to assist the board in its oversight of the integrity of our financial statements and other relevant public disclosures, our compliance with legal and regulatory requirements relating to financial reporting, the external auditors'auditors’ qualifications and independence and the performance of the internal audit function and the external auditors. As there is no audit committee these tasks were overseen by the entire Board. The Board has reviewed and discussed the audited financial statements with management. The board has had the opportunity to discuss with the independent auditors the matters required to be discussed by the applicable requirements of the PCAOB and received written disclosures and the letter from the independent accountant required by applicable requirements of the PCAOB relating to independent accountant communications with each board member. The board has approved the audited financial statements for inclusion in this annual report.
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Due to our small size and limited operations to date, we do not presently have a nominating committee, compensation committee or other committee performing similar functions. We have not adopted any procedures by which security holders may recommend nominees to our board, and we do not have a diversity policy.
Code of Ethics
DueOur securities are not listed on a national securities exchange, and we are, therefore, not required and do not have a written code of business conduct and ethics that applies to our small sizedirectors, officers, and limited operations to date, we have not adopted a formal code of ethics.employees, including our principal executive officer, principal accounting officer or controller or persons performing similar functions. Our Board has found that the fiduciary duties placed on individual directors by applicable legislation and the restrictions placed by applicable legislation on an individual director'sdirector’s participation in decisions of the Board in which the director has an interest have been sufficient to ensure that the Board operates independently of management and in the best interests of our company.
Board Leadership Structure and Role on Risk Oversight
At present, we have determined our current leadership structure, comprised of our directors and officers, is appropriate due to our small size and limited operations and resources.
We have no policy requiring the combination or separation of the Principal Executive Officer and Chairman roles and our governing documents do not mandate a particular structure. Our directors recognize that the leadership structure and the combination or separation of these leadership roles is driven by our needs at any point in time.
Our directors are involved in the general oversight of risks that could affect our business and they will continue to evaluate our leadership structure and modify such structure as appropriate based on our size, resources and operations.
Stockholder Communication with the Board of Directors
Stockholders may send communications to our board of directors by writing to us at our corporate offices
Other Information
We are required to file periodic reports, proxy statements and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of these reports by accessing the SEC’s website at http://www.sec.gov. You may also send communications to our board of directors at VnueVNUE Inc., Attention: Chief Executive Officer, 104 W. 29th29th Street, 11th11th Floor, New York, NY 10001Attention: Chief Executive Officer.10001.
Delinquent Section 16(a) Beneficial Ownership Compliance ReportingReports
Section 16(a) of the Securities Exchange Act of 1934 requires a company’sour executive officers, directors, and officers, and persons who ownholders of more than ten-percent (10%)10% of the company’sour common stock to file with the Securities and Exchange CommissionSEC initial reports of ownership on Form 3 and reports of changechanges in ownership of our common stock and other equity securities. Based solely on Forms 4 and 5. Such officers, directors and ten-percent stockholders are also required to furnishour review of the company with copies of all Section 16(a)these reports, they file. Based on information providedwe believe that during the fiscal year ended December 31, 2019, the following persons did not file Form 3, 4 or 5 with respect to us, all such reports havetheir receipt of Series A Preferred Stock from the Company: Mr. Bair did not been filed under Section 16(a)file a Form 4 with respect to 1,498,347 shares of the Securities Exchange ActSeries A Preferred Stock issued to him; Mr. Anthony Cardenas did not file a Form 4 with respect to 260,000 shares of 1934Series A Preferred Stock issued to him; and Mr. Louis Mann did not file a Form 3 with respect to 748,429 shares of Series A Preferred Stock issued to him, in a timely manner since the filingeach case, in May of our prior annual report..2019.
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Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth the compensation paid to our principal executive officers during the last two completed fiscal years.
Summary Compensation Table | |||||||||||||||||||||||||||||||||||
Name and Principal Position |
| Year |
|
|
Salary |
|
|
Bonus |
|
|
Stock Awards |
|
|
Option Awards |
|
| Non-Equity Incentive Plan Compensation |
|
| Nonqualified Deferred Compensation Earnings |
|
|
All Other Compensation |
|
|
Total | |||||||||
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($)(3) |
| ($) |
| |||||||||||||||||||||
Zach Bair, CEO(2) |
| 2019 |
| 170,000 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 214,264 |
| 384,264 | |||||||||||||||||
| 2018 |
| 170,000 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 170,000 | ||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
Louis Mann, EVP (1)(4 |
| 2018 |
| $ | 60,000 |
| 0 |
| 3,050 |
| 0 |
| 0 |
| 0 |
| 106,964 |
| 170,014 | ||||||||||||||||
| 2017 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
Summary Compensation Table Name and Year Salary Bonus Stock Option Non-Equity Nonqualified All Other Total ($) ($) ($) ($) ($) ($) ($) Matthew Carona 2015 2014 Collin Howard 2015 CFO 2014
Principal
Position
Awards
Awards
Incentive
Plan
Compensation
Deferred
Compensation
Earnings
Compensation$ 150,000 0 0 0 0 0 0 $ 0 CEO $ 0 0 0 0 0 0 0 $ 0 $ 150,000 0 0 0 0 0 0 $ 0 $ 0 0 0 0 0 0 0 $ 0
___________
(1) | Mr. Louis Mann, 68, Executive Vice President, joined VNUE, Inc. in September 2017. |
(2) | |
$68,000 of Mr. Bair’s compensation was deferred as of December 31, 2019. | |
(3) | Represents the fair value of |
(4) | $41,250 of Mr. Mann’s compensation was deferred as of December 31, 2019. |
Option Grants
We did not grant any stock options or other similar securities to our directors or officers during the years ended December31, 2014December 31, 2019 or 2015.2018. Our directors and officers do not own any stock options or other similar securities of our company.
Management Agreements
We currently have not entered into any management agreements.
Compensation upon Change of Control
As of December 31, 2015,2019, we had no pension plans or compensatory plans or other arrangements, which provide compensation in the event of the termination of directors, officers or employees or a change in control of our company.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans pursuant to which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
Compensation of Directors
We did not pay director'sdirector’s fees or other cash compensation to our directors for services rendered as directors in the year ended December 31, 20142019 or 2015.2018. We have no standard arrangements pursuant to which our directors are compensated for their services in their capacity as directors. The Board of Directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. No director has received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.
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The following table set forth the ownership, as of the date of this Prospectus,Annual Report, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner"“beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security.security even though they may not rightfully “own” those shares. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option, or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The mailing address for all persons is at 104 W. 29th29th Street, 11th11th Floor, New York, NY 1000110001.
Shareholders |
| # of Shares |
| Percentage |
| |||
Zach Bair, Chief Executive Officer |
| 179,917,330 | (1) |
| 13.53 | % | ||
Anthony Cardenas, Chief Creative Officer |
| 27,000,000 | (2) |
| 2.29 | % | ||
Louis Mann, Executive Vice President |
| 89,921,491 | (3) |
| 7.25 | % | ||
All directors and executive officers as a group |
| 296,838,821 | (4) |
| 20.52 | % | ||
Christopher Mann |
| 8,185,886 |
|
| .7 | % | ||
Thomas Jackson Weaver III |
| 105,000,000 | (5) |
| 8.3 | % |
Shareholders # of Shares Percentage Zach Bair, CEO Matthew Carona, COO Collin Howard, Director All directors and executive officers as a group Christopher Mann 122,788,266 19 % 122,788,266 19 % 45,559,177 7 % 291,135,708 45 % 81,858,860 13 %
This table is based upon information derived from our stock records. The shareholder named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based upon 646,901,2391,149,756,152 shares of common stock outstanding as of November 30, 2016.May 9, 2020. The common shares outstanding include voting power of shares of Series A Preferred Stock owned by such officer or director. The Series A Preferred Stock vote on a 100:1 basis with common stockholders and convert on a 50:1 basis into common stock.
(1) | Includes 30,082,630 shares of common stock and the voting power of 1,498,347 Series A Preferred Stock which cast votes as 149,834,700 shares of common stock. The Series A Preferred Stock owned by Mr. Cardenas converts into 74,917,350 shares of common stock. | |
(2) | Includes 1,000,000 shares of common stock and voting power of 260,000 shares of Series A Preferred Stock which vote as 26,000,000 shares of common stock. The Series A Preferred Stock owned by Mr. Cardenas converts into 13,000,000 shares of common stock. | |
(3) | Includes 15,078,591 shares of common stock and the voting power of 748,000 shares of Series A Preferred Stock which vote as 74,842,900 shares of common stock. The Series A Preferred Stock owned by Mr. Louis Mann convert into 37,421,450 shares of common stock. | |
(4) | Includes all common stock held by such directors or officers as a group, as well as the voting power of all Series A Preferred Stock owned by such persons. | |
(5) | Includes the voting power of 1,050,000 shares of Series A Preferred Stock which vote as 105,000,000 shares of common stock. Mr. Weaver’s Series A Preferred Stock convert into 52,500,000 shares of common stock. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
On March 4, 2019, the Company entered into a conversion and cancellation of a debt agreement with its Chief Executive Officer, Mr. Zach Bair. The Corporation may indemnifyCompany agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’s stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and advance litigation expensescancellation of debt agreements. During the year ended December 31, 2019, the Company accrued unpaid salary to Mr. Bair of $68,000.
DiscLive Network
On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its directors, officers, employees and agents tobusiness of “instant live” recording. Under the extent permitted by law, the Articles or these Bylaws, and shall indemnify and advance litigation expenses to its directors, officers, employees and agents to the extent required by law, the Articles or these Bylaws. The Corporation’s obligations of indemnification, if any, shall be conditioned on the Corporation receiving prompt noticeterms of the claimAgreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and the opportunity to settle and defend the claim. The Corporation may, to the extent permitted by law, purchase and maintain insurance on behalf of an individual who is or was a directors, officer, employee or agentuse of the Corporation. Sinceproducts and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $206,161 and $82,881 and direct cost of revenues of $211,031 and $111,086 during the beginning of our last fiscal year weended December 31, 2019, and 2018, respectively, were recorded using the assets licensed under this agreement. For the periods ended December 31, 2019 and 2018. The fees would have not entered into any transactions,amounted to $10,308 and there are no currently proposed transactions, with our officers, directors, beneficial owners of 5% or more of our common stock, or family members of$4,144, respectively. Our Chief Executive Officer agreed to waive the right to receive these persons wherein the amount involved in the transaction or a series of similar transactions exceeds the lesser of $120,000 or 1% of the average of our total assetslicense fees for the last two fiscalboth years.
While we do not have any special committee, policy or procedure related to the review, approval or ratification of transactions with related persons, our board of directors reviews all such transactions.Stock Bonus Issuances
DisclosureOn May 22, 2019, the Company authorized and designated a class of Commission PositionSeries A Convertible Preferred Stock (“Series A Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently issued 149,834,700 shares of restricted Series A Preferred Stock to Mr. Bair; 260,000 shares of restricted Series A preferred Stock to Mr. Cardenas; 748,000 shares of restricted Series A Preferred Stock to Mr. Louis Mann. These were issued as stock bonuses at a presumed value of $0.14 per share.
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Limitation of Liability and Indemnification for Securities Act LiabilitiesMatters
Our officers and directors are indemnified as provided by the Nevada Revised Statutes and our Bylaws. We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officer, or controlling person in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to the court of appropriate jurisdiction. We will then be governed by the court's decision.
Item 14. Principal Accountant Fees and Services
Audit and Non-Audit Fees
The following table represents fees for the professional audit services and fees billed for other services rendered by our auditors, Malone Bailey LLP,Weinberg, and Company PC, for the audit of our annual financial statements for the years ended December 31, 20142019 and Weinberg and Company PC for our December 31, 2015 audit.2018.
|
| Year Ended December 31, 2019 |
|
| Year Ended December 31, 2018 |
| ||
Audit fees |
| $ | 78,872 |
|
| $ | 86,487 |
|
Audit-related fees |
|
|
|
|
|
| 0 |
|
Tax fees |
|
|
|
|
|
| 0 |
|
All other fees |
|
|
|
|
|
| 0 |
|
Total |
| $ | 78,872 |
|
| $ | 86,487 |
|
Year Ended December 31, Year Ended December 31, Audit fees Audit-related fees Tax fees All other fees Total
2015
2014$ 50,354 $ 19,000 0 0 0 0 0 0 $ 50,354 $ 19,000
Since our inception, our Board of Directors, performing the duties of the Audit Committee, reviews all audit and non-audit related fees at least annually. The Board of Directors as the Audit Committee pre-approved all audit relatedaudit-related services in fiscal 2015.2018.
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Item 15. Exhibits and Financial Statement Schedules Financial Statement Schedules
None.
Exhibits
Exhibit
| Exhibit
| |
|
| |
| ||
| ||
Equity Purchase Agreement with Tarpon Bay Partners, LLC dated February 18, 2016 (4) | ||
Registration Rights Agreement with Tarpon Bay Partners, LLC dated February 18, 2016 (5) | ||
Promissory Note issued to Tarpon Bay | ||
|
|
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document |
_________
________
* Filed herein
(1)
(1) | Included as an exhibit with our Form SB-2 filed October 13, 2006. |
(2) | Included as an exhibit with our Form 8-K filed February 1, 2011. |
(3) | Included as an exhibit with our Form 8-K filed April 11, 2013. |
(4) | Included as an exhibit with our Form S-1 filed September 16, 2016. |
(5) | Included as an exhibit with our Form S-1 filed September 16, 2016 |
(6) | Included as an exhibit with our Form S-1 filed September 16, 2016. |
(7) | Included as an exhibit with our Form 8-K filed on November 9, 2015 |
(2) Included as an exhibit with our Form 8-K filed February 1, 2011.Item 16. FORM 10-K SUMMARY
(3) Included as an exhibit with our Form 8-K filed April 11, 2013.None.
(4) Included as an exhibit with our Form S-1 filed September 16, 2016.
(5) Included as an exhibit with our Form S-1 filed September 16, 2016.
(6) Included as an exhibit with our Form S-1 filed September 16, 2016.
(7) Included as an exhibit with our Form 8-K filed on November 9, 2015.
(8) Included as an exhibit with our Form 10-Q filed on January 19, 2010.
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Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Amended Report to be signed on its behalf by the undersigned thereunto duly authorized.
| VNUE, INC. | |||
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Date: | By: | /s/ Zach Bair | ||
| Zach Bair | |||
| Chief Executive Officer and Principal Accounting Officer |
Pursuant to the requirements of the Exchange Act this Amended Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURES | TITLE | DATE | ||
/s/ Zach Bair |
| Chief Executive Officer, Principal |
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Zach Bair | Accounting Officer and Chairman | |||
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/s/ |
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