U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT |
For the quarterly period ended September 30, 2017March 31, 2019
¨ | TRANSITION REPORT |
For the transition period from _________ to _________
Commission File No. 000-53462
VNUE, INC. |
(Name of Registrant in its Charter) |
Nevada |
| 98-0543851 |
(State of Other Jurisdiction of incorporation or organization) |
| (I.R.S. Employer I.D. No.) |
104 West 29th Street, 11th Floor, New York, NY 10001
(Address of Principal Executive Offices)
Issuer’s Telephone Number: 857-777-6190(833) 937-5493
(Registrant’s telephone number, including area code)
Securities registered under Section 12 (b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ¨ No x
Indicate by check mark whether the registrant is a shelllarge accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, (as definedor an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act) YesAct.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”shell company (as defined in Rule 12b-2 of the Exchange Act. (Check One)
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|
|
|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate theThe number of shares outstanding of each of the Registrant’s classes ofregistrant’s common stock outstanding as of the latest practicable date:
September 30, 2017
Common Voting Stock: 69,244,707May 15, 2019 was 336,021,079.
INDEX TO FORM 10-Q FILING
FOR THE PERIOD ENDED SEPTEMBER 30, 2017
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| 3 | |||
Management Discussion & Analysis of Financial Condition and Results of Operations |
| 16 | ||
| 20 | |||
| 20 | |||
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| 21 | |||
| 21 | |||
| 21 | |||
| 21 | |||
| 21 | |||
| 22 | |||
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| 23 |
2 |
FINANCIAL INFORMATION
The accompanying interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the interim period ended September 30, 2017 are not necessarily indicative of the results that can be expected for the year ending December 31, 2017.
|
Table of Contents |
VNUE, Inc.
September 30, 2017 and 2016PART I - FINANCIAL INFORMATION
Index to theItem 1. Condensed Consolidated Financial StatementsStatements.
CONDENSED CONSOLIDATED BALANCE SHEETS |
| ||
|
| ||
| |||
| |||
| |||
|
|
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||
|
| (Unaudited) |
|
|
| |||
Assets |
| |||||||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 53,405 |
|
| $ | 18,191 |
|
Prepaid expenses |
|
| - |
|
|
| 667 |
|
Total current assets |
|
| 53,405 |
|
|
| 18,858 |
|
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
| 208,201 |
|
|
| 233,429 |
|
Total assets |
| $ | 261,606 |
|
| $ | 252,287 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit | ||||||||
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 828,436 |
|
| $ | 859,680 |
|
Accrued payroll to officers |
|
| 111,125 |
|
|
| 146,325 |
|
Advances from stockholders |
|
| 720 |
|
|
| 14,720 |
|
Note payable |
|
| 9,000 |
|
|
| 9,000 |
|
Convertible notes payable, net |
|
| 1,302,598 |
|
|
| 1,202,290 |
|
Convertible notes payable, related parties, net |
|
| 28,500 |
|
|
| 30,000 |
|
Derivative liabilities |
|
| 873,825 |
|
|
| 1,744,601 |
|
Total current liabilities |
|
| 3,154,204 |
|
|
| 4,006,616 |
|
|
|
|
|
|
|
|
|
|
Purchase liability |
|
| 300,000 |
|
|
| 300,000 |
|
Total liabilities |
|
| 3,454,204 |
|
|
| 4,306,616 |
|
|
|
|
|
|
|
|
|
|
Commitment and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.0001: 20,000,000 shares authorized; none issued |
|
| - |
|
|
| - |
|
Common stock, par value $0.0001: 750,000,000 shares authorized; 254,718,271 and 105,635,816 shares issued and outstanding, respectively |
|
| 25,471 |
|
|
| 10,564 |
|
Additional paid-in capital |
|
| 6,962,666 |
|
|
| 6,493,069 |
|
Common stock to be issued, 5,024,352 shares and 3,964,352 shares, respectively |
|
| 247,523 |
|
|
| 243,839 |
|
Accumulated deficit |
|
| (10,428,258 | ) |
|
| (10,801,801 | ) |
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit |
|
| (3,192,598 | ) |
|
| (4,054,329 | ) |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit |
| $ | 261,606 |
|
| $ | 252,287 |
|
See accompanying notes to the condensed consolidated financial statements.
Table of Contents |
VNUE, Inc.
VNUE, INC. |
|
| Three Months Ended March 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Revenues |
| $ | 23,556 |
|
| $ | 15,483 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Direct costs of revenues |
|
| 58,438 |
|
|
| 23,124 |
|
Research and development |
|
| 2,081 |
|
|
| 3,676 |
|
General and administrative |
|
| 125,568 |
|
|
| 185,657 |
|
Total operating expenses |
|
| 186,087 |
|
|
| 212,457 |
|
Loss from operations |
|
| (162,531 | ) |
|
| (196,974 | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
Change in fair value of derivative liability |
|
| 633,110 |
|
|
| 274,324 |
|
Gain on extinguishment of derivative liability |
|
| 389,730 |
|
|
| - |
|
Loss on settlement of notes payable |
|
| (198,873 | ) |
|
| - |
|
Financing costs |
|
| (297,036 | ) |
|
| (270,730 | ) |
Gain on settlement of obligations |
|
| 9,143 |
|
|
| - |
|
Other income (expense), net |
|
| 536,074 |
|
|
| 3,594 |
|
Net income |
| $ | 373,543 |
|
| $ | (193,380 | ) |
|
|
|
|
|
|
|
|
|
Earnings per share - Basic and diluted |
| $ | 0.00 |
|
| $ | (0.00 | ) |
Weighted average common shares outstanding - Basic |
|
| 168,050,218 |
|
|
| 74,335,070 |
|
Weighted average common shares outstanding - Diluted |
|
| 743,810,467 |
|
|
| 74,335,070 |
|
Condensed Consolidated Balance SheetsSee accompanying notes to the consolidated financial statements.
|
| September 30, |
|
| December 31, 2016 |
| ||
|
| (Unaudited) |
|
|
| |||
Assets |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 73,195 |
|
| $ | 17,952 |
|
Prepaid expenses |
|
| 2,667 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 75,862 |
|
| $ | 17,952 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 550,639 |
|
| $ | 391,952 |
|
Accrued payroll (including $453,585 and $312,710 payable to officers) |
|
| 908,263 |
|
|
| 703,138 |
|
Advances from stockholders |
|
| 14,720 |
|
|
| 14,720 |
|
Note payable to officer |
|
| 74,131 |
|
|
| 74,131 |
|
Notes payable |
|
| 9,000 |
|
|
| 34,000 |
|
Convertible notes payable, net |
|
| 400,033 |
|
|
| 121,865 |
|
Convertible notes payable, related parties, net |
|
| 30,000 |
|
|
| 22,101 |
|
Derivative liabilities |
|
| 779,903 |
|
|
| 508,107 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
| 2,766,689 |
|
|
| 1,870,014 |
|
|
|
|
|
|
|
|
|
|
Commitment and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.0001: 20,000,000 shares authorized; none issued |
|
| - |
|
|
| - |
|
Common stock, par value $0.0001: 750,000,000 shares authorized; 69,244,707 and 64,487,971 shares issued and outstanding, respectively |
|
| 6,924 |
|
|
| 6,449 |
|
Additional paid-in capital |
|
| 4,670,643 |
|
|
| 4,428,357 |
|
Common stock to be issued, 4,674,352 shares and 4,674,352 shares, respectively |
|
| 903,570 |
|
|
| 903,570 |
|
Accumulated deficit |
|
| (8,271,964 | ) |
|
| (7,190,438 | ) |
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit |
|
| (2,690,827 | ) |
|
| (1,852,062 | ) |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit |
| $ | 75,862 |
|
| $ | 17,952 |
|
4 |
Table of Contents |
VNUE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED) |
|
| Common Stock, par value $0.0001 |
|
| Additional |
|
|
|
|
|
|
|
| Total |
| |||||||||
|
| Number of Shares |
|
| Amount |
|
| Paid-In Capital |
|
| Shares to be Issued |
|
| Accumulated Deficit |
|
| Stockholders’ Deficit |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, December 31, 2018 |
|
| 105,635,816 |
|
| $ | 10,563 |
|
| $ | 6,493,069 |
|
| $ | 243,839 |
|
| $ | (10,801,801 | ) |
| $ | (4,054,329 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares returned from former officer |
|
| (4,555,918 | ) |
|
| (456 | ) |
|
| 456 |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of accrued payroll to officer/shareholder recorded as contributed capital |
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued for services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 184 |
|
|
|
|
|
|
| 184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in settlement of accrued payroll to officer |
|
| 15,057,143 |
|
|
| 1,506 |
|
|
| 39,149 |
|
|
| - |
|
|
| - |
|
|
| 40,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in settlement of accounts payable |
|
| 11,428,571 |
|
|
| 1,143 |
|
|
| 29,714 |
|
|
| - |
|
|
| - |
|
|
| 30,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued for financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,500 |
|
|
|
|
|
|
| 3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued on conversion of notes payable |
|
| 127,152,659 |
|
|
| 12,715 |
|
|
| 388,232 |
|
|
|
|
|
|
|
|
|
|
| 400,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 373,543 |
|
|
| 373,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019 (Unaudited) |
|
| 254,718,271 |
|
| $ | 25,471 |
|
| $ | 6,962,666 |
|
| $ | 247,523 |
|
| $ | (10,428,258 | ) |
| $ | (3,192,598 | ) |
THREE MONTHS ENDED MARCH 31, 2018
|
| Common Stock, par value $0.0001 |
|
| Additional |
|
|
|
|
|
|
|
| Total |
| |||||||||
|
| Number of Shares |
|
| Amount |
|
| Paid-In Capital |
|
| Shares to be Issued |
|
| Accumulated Deficit |
|
| Stockholders’ Deficit |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
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 |
|
| - |
|
|
| - |
|
|
| 40,367 |
|
|
|
|
|
|
|
|
|
|
| 40,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (193,380 | ) |
|
| (193,380 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2018 (Unaudited) |
|
| 74,335,070 |
|
| $ | 7,433 |
|
| $ | 4,796,086 |
|
| $ | 932,734 |
|
| $ | (8,638,903 | ) |
| $ | (2,902,650 | ) |
See accompanying notes to the consolidated financial statements.
5 |
Table of Contents |
VNUE, INC. |
|
| Three months ended March 31, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net income (loss) |
| $ | 373,543 |
|
| $ | (193,380 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities |
|
| (633,110 | ) |
|
| (274,324 | ) |
Derivative value in excess of convertible notes considered financing costs |
|
| 69,759 |
|
|
| 81,098 |
|
Gain on extinguishment of derivative liability |
|
| (389,730 | ) |
|
| - |
|
Gain on settlement of vendor obligations |
|
| (9,143 | ) |
|
| - |
|
Loss on extinguishment of debt |
|
| 210,213 |
|
|
| - |
|
Amortization of debt discount |
|
| 184,847 |
|
|
| 166,303 |
|
Amortization of intangible assets |
|
| 25,228 |
|
|
| 29,167 |
|
Shares issued for financing costs |
|
| 3,500 |
|
|
| - |
|
Shares issued for services |
|
| 184 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expense |
|
| 667 |
|
|
| (6,000 | ) |
Accounts payable and accrued expenses |
|
| 8,756 |
|
|
| 37,774 |
|
Accrued payroll to officer |
|
| 17,500 |
|
|
| 55,000 |
|
Net cash used in operating activities |
|
| (137,786 | ) |
|
| (104,362 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes payable |
|
| 173,000 |
|
|
| 110,000 |
|
Net cash provided by financing activities |
|
| 173,000 |
|
|
| 110,000 |
|
|
|
|
|
|
|
|
|
|
Net Change in Cash |
|
| 35,214 |
|
|
| 5,638 |
|
|
|
|
|
|
|
|
|
|
Cash – Beginning of the Reporting Period |
|
| 18,191 |
|
|
| 10,278 |
|
|
|
|
|
|
|
|
|
|
Cash – End of the Reporting Period |
| $ | 53,405 |
|
| $ | 15,916 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
Interest Paid |
| $ | 5,874 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Income Tax Paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
Common shares issued upon conversion of notes payable and accrued interest | �� | $ | 400,947 |
|
| $ | - |
|
Common shares issued in settlement of accounts payable and accrued expenses |
| $ | 30,857 |
|
| $ | - |
|
Common shares issued up conversion of accrued payroll |
| $ | 40,654 |
|
| $ | - |
|
Fair value of derivative created upon issuance of convertible debt recorded as debt discount |
| $ | 82,306 |
|
| $ | 37,531 |
|
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 |
|
| $ | - |
|
See accompanying notes to the condensed consolidated financial statements.
Table of Contents |
VNUE, Inc.
Condensed Consolidated Statements of Operations
|
| For the Three Months Ended September 30, |
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | - |
|
| $ | - |
|
| $ | 37,825 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs of revenues |
|
| - |
|
|
| - |
|
|
| 35,151 |
|
|
| - |
|
Software development |
|
| 24,778 |
|
|
| 126,838 |
|
|
| 92,905 |
|
|
| 1,033,207 |
|
General and administrative |
|
| 172,319 |
|
|
| 154,908 |
|
|
| 631,057 |
|
|
| 992,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
| (197,097 | ) |
|
| (281,746 | ) |
|
| (721,288 | ) |
|
| (2,025,677 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liability |
|
| 57,467 |
|
|
| (23,345 | ) |
|
| 38,068 |
|
|
| 194,912 |
|
Gain on extinguishment of derivative liability |
|
| 174,529 |
|
|
| - |
|
|
| 292,838 |
|
|
| 21,308 |
|
Financing costs |
|
| (342,708 | ) |
|
| (214,067 | ) |
|
| (691,144 | ) |
|
| (332,081 | ) |
Sale of trademark |
|
| - |
|
|
| 30,000 |
|
|
| - |
|
|
| 30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expenses), net |
|
| (110,712 | ) |
|
| (207,412 | ) |
|
| (360,238 | ) |
|
| (85,861 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (307,809 | ) |
| $ | (489,158 | ) |
| $ | (1,081,526 | ) |
| $ | (2,111,538 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
| $ | (0.03 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted |
|
| 73,919,059 |
|
|
| 68,891,601 |
|
|
| 72,205,256 |
|
|
| 67,591,512 |
|
See accompanying notes to the condensed consolidated financial statements.
VNUE, INC. THREE MONTHS ENDED MARCH 31, 2019 AND 2018 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
VNUE, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Deficit
For the Nine Months ended September 30, 2017
(Unaudited)
|
| Common Stock par value $0.0001 |
|
| Additional |
|
| Shares |
|
|
|
|
| Total |
| |||||||||
|
| Number of Shares |
|
| Amount |
|
| Paid-In Capital |
|
| to be Issued |
|
| Accumulated Deficit |
|
| Stockholders’ Deficit |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, December 31, 2016 |
|
| 64,487,971 |
|
| $ | 6,449 |
|
| $ | 4,428,357 |
|
| $ | 903,570 |
|
| $ | (7,190,438 | ) |
| $ | (1,852,062 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares returned by officer |
|
| (5,000,000 | ) |
|
| (500 | ) |
|
| 500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services |
|
| 2,575,000 |
|
|
| 258 |
|
|
| 94,868 |
|
|
| - |
|
|
| - |
|
|
| 95,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for conversion of debt |
|
| 7,181,736 |
|
|
| 718 |
|
|
| 62,803 |
|
|
| - |
|
|
| - |
|
|
| 63,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants issued related to convertible note payable |
|
|
|
|
|
|
|
|
|
| 18,261 |
|
|
|
|
|
|
|
|
|
|
| 18,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature on conversion of note |
|
|
|
|
|
|
|
|
|
| 65,855 |
|
|
| - |
|
|
| - |
|
|
| 65,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,081,526 | ) |
|
| (1,081,526 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2017 (Unaudited) |
|
| 69,244,707 |
|
| $ | 6,924 |
|
| $ | 4,670,643 |
|
| $ | 903,570 |
|
| $ | (8,271,964 | ) |
| $ | (2,690,827 | ) |
See accompanying notes to the condensed consolidated financial statements.
VNUE, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Nine Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
Cash Flows From Operating Activities |
|
|
|
|
|
| ||
Net loss |
| $ | (1,081,526 | ) |
| $ | (2,111,538 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities |
|
| (38,068 | ) |
|
| (194,912 | ) |
Derivative value in excess of convertible notes |
|
| 291,702 |
|
|
| 90,762 |
|
Note issued for financing costs |
|
| - |
|
|
| 25,000 |
|
Gain on extinguishment of derivative liability |
|
| (292,838 | ) |
|
| (21,308 | ) |
Amortization of debt discount |
|
| 265,828 |
|
|
| 86,113 |
|
Beneficial conversion feature on conversion of note |
|
| 65,855 |
|
|
| - |
|
Original issue discount on convertible note payable |
|
| 9,000 |
|
|
| - |
|
Shares to be issued for financing costs |
|
| - |
|
|
| 41,000 |
|
Shares issued for services |
|
| 95,125 |
|
|
| - |
|
Shares to be issued for services |
|
| - |
|
|
| 730,513 |
|
Shares transferred for financing costs |
|
| - |
|
|
| 108,000 |
|
Shares transferred for compensation |
|
| - |
|
|
| 491,153 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expense |
|
| (2,667 | ) |
|
| 37,500 |
|
Accounts payable and accrued expenses |
|
| 163,707 |
|
|
| 276,217 |
|
Accrued payroll |
|
| 205,125 |
|
|
| 210,912 |
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Operating Activities |
|
| (318,757 | ) |
|
| (230,587 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
Advances from (repayment to) stockholders, net |
|
| - |
|
|
| 17,510 |
|
Proceeds from issuance of convertible notes payable |
|
| 407,000 |
|
|
| 250,000 |
|
Repayment of convertible notes payable |
|
| (33,000 | ) |
|
| - |
|
Shares to be issued for proceeds from sale of common shares |
|
| - |
|
|
| 5,000 |
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities |
|
| 374,000 |
|
|
| 272,510 |
|
|
|
|
|
|
|
|
|
|
Net Change in Cash |
|
| 55,243 |
|
|
| 41,923 |
|
|
|
|
|
|
|
|
|
|
Cash – Beginning of the Reporting Period |
|
| 17,952 |
|
|
| 7,788 |
|
|
|
|
|
|
|
|
|
|
Cash – End of the Reporting Period |
| $ | 73,195 |
|
| $ | 49,711 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
Interest Paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Income Tax Paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
Common shares issued upon conversion of notes payable and accrued interest |
| $ | 63,521 |
|
| $ | 20,385 |
|
Return of common shares by officer |
| $ | (500 | ) |
| $ | - |
|
Note payable converted to convertible note |
| $ | - |
|
| $ | 50,000 |
|
Fair value of derivative created upon issuance of convertible debt recorded as debt discount |
| $ | 311,000 |
|
| $ | 300,000 |
|
See accompanying notes to the condensed consolidated financial statements.
VNUE, Inc.
Three and Nine Months Ended September 30, 2017 and 2016
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Organization and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of VNUE, Inc., a Nevada corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
History and Organization
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.
On May 29, 2015, VNUE, Inc. entered into a merger agreement with VNUE Washington, Inc. Pursuant to the terms of the Merger Agreement, all of the outstanding shares of any class or series of VNUE Washington were exchanged for an aggregate of 50,762,987 shares of TGRI common stock. As a result of the Merger, VNUE Washington became a wholly-owned subsidiary of the Company, and the transaction was accounted for as a reverse merger with VNUE Washington deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer. The Company is developing a technology driven solution for Artists, Venues and Festivals to automate the capturing, publishing and monetization of their content.
The Company conducted a reverse stock split of the Company’s common stock at a ratio 1 for 10 of each share issued and outstanding on the effective date of April 15, 2017. The reverse was effective as to the market on August 7, 2017. All historical reported share amounts within have been adjusted to reflect the reverse stock split.
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 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.
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc., whereby the Company will acquire the assets of the digital live music distribution platform Set.fm from PledgeMusic. Additionally, the Company will offer PledgeMusic North America’s full suite of music business tools allowing artists to sell music, merchandise and live experiences directly to fans, enhancing the Company’s clients’ revenue opportunities on a shared revenue basis. Set.fm is a DIY platform that makes it easy for artists to record and sell their live shows directly to fans’ mobile devices, uploading simultaneously with their performance. The platform, which also features an innovative and easy-to-use studio app, already boasts thousands of artists and tens of thousands of fans using it. VNUE plans to update and improve the existing platform for indie artists and their fans, and to implement pro features for artists that VNUE and its affiliate DiscLive produce.
BasisOverview of PresentationBusiness
We are 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.
Going Concern
The interim condensed consolidated financial statements included herein reflect all material adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) which, in the opinion of management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under the accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated balance sheet information as of December 31, 2016 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2017 (the “2016 Annual Report”). These condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2016 and notes thereto included in the 2016 Annual Report. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other period.
Going Concern
The Company’saccompanying condensed 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 condensed consolidated financial statements, during the three months ended March 31, 2019, the Company incurred an operating loss of $162,531, used cash in operations of $137,786, and had a stockholders’ deficit of $2,690,827 at September 30, 2017, and incurred a net loss$3,192,598 as of $1,081,526, and used net cash in operating activities of $318,757 for the reporting period then ended. Certain of the Company’s notes payable are also past due and in default.March 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date thatof the financial statements arebeing issued. The condensed 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 concern.
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements were issued. In addition, the Company’s independent registered public accounting firm, in theirits report on the Company’s December 31, 2018 consolidated financial statements, for the year ended December 31, 2016, has expressedraised substantial doubt about the Company’s ability to continue as a going concern.
At March 31, 2019, the Company had cash on hand in the amount of $53,405. Management estimates that the current funds on hand will be sufficient to continue operations through June 2018.2019. 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 through the issuance ofobtain necessary debt or equity securities forfinancing to continue operations until it begins generating positive cash to operate our business.flow. 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, in case or equity financing.
7 |
Table of Contents |
NoteNOTE 2 - Significant and Critical Accounting Policies and Practices– SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
PrinciplesBasis of Consolidation
The Company consolidates all wholly 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 |
| |
|
|
|
|
|
|
|
| |
VNUE Inc. (formerly TGRI) |
| The State of Nevada |
| April 4, 2006 (May 29, 2015) |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
VNUE Inc. (VNUE Washington) |
| The State of Washington |
| October 16, 2014 |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
VNUE LLC |
| The State of Washington |
| August 1, 2013
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
VNUE Technology Inc. |
| The State of Washington |
| October 16, 2014 |
|
| 90 | % |
|
|
|
|
|
|
|
|
|
VNUE Media Inc. |
| The State of Washington |
| October 16, 2014 |
|
| 89 | % |
VNUE Technology, Inc. and VNUE Media, Inc. were inactive corporations with no operations at September 30, 2017March 31, 2019 and 2016,2018, 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. The implementation of ASC 606 did not have a material impact on the Company’s consolidated financial statements. 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.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of the condensed 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 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. Significant estimates include the assumptions used for impairment testing of intangible assets, assumptions used to value the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
8 |
Table of Contents |
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, accounts payable accrued expenses, and other currentaccrued liabilities, approximate theirthe related fair values because ofdue to the short maturityshort-term maturities of these instruments.
The fair value of the derivative liabilities of $779,903$873,825 and $508,107$1,744,601 at September 30, 2017March 31, 2019 and December 31, 2016,2018, respectively, were valued using Level 23 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 net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
Income (Loss) per Common Share
Basic 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 when the average market price of the common stock during the period exceeds the exercise price of the options 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 at March 31, 2018, because their impact was anti-dilutive. As of March 31, 2018, the Company had total outstanding warrants 8,004,708 and shares related to convertible notes payables of 58,502,514, respectively, which were excluded from the computation of net loss per share.
Intangible Assets
The Company 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 and the expected period of benefit. The Company evaluates intangible assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated undiscounted future cash flows. Recoverability of intangible assets is 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 loss.
Table of Contents |
Loss per Common ShareThe Company had intangible assets with a carrying value of $208,201 and $233,429 as of March 31, 2019 and December 31, 2018, respectively. In accordance with ASC Topic 350 – Goodwill and Other Intangible Assets, the Company assesses the carrying value of its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and records an impairment charge if the carrying value of such intangible assets is not recoverable and if it exceeds its fair value. While our fiscal year-to-date financial performance has not met our expectations, and the enterprise value of the Company based on the current price of our common stock may fluctuate at or near the recorded level of finite-lived intangible assets, management does not consider these to be events requiring the performance of an impairment test. The Company will continue to monitor its operating results for indicators of impairment and perform additional tests as necessary, which could result in an impairment charge to intangible assets.
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 three and nine months ended September 30, 2017 and 2016, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. As of September 30, 2017 and 2016, 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.
|
| September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Convertible Notes Payable |
|
| 110,015,835 |
|
|
| 15,951,363 |
|
Warrants |
|
| 1,000,000 |
|
|
| - |
|
Total |
|
| 111,015,835 |
|
|
| 15,951,363 |
|
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20 all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows. The Company will adopt the provisions of this statement in the first quarter of fiscal 2018.
In February 2016, the FASB issued 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. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.
In March 2016, the FASB issued the ASU 2016-09, Compensation - Stock Compensation (Topic 718): 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.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The Company plans to adopt ASU 2017-11 in the first quarter of 2018. The adoption of ASU 2017-11 is expected to have a material impact on the Company’s financial statements and related disclosures because derivative liabilities from financial instruments (or embedded conversion features) that have down round features will be reclassified from liabilities to additional paid-in capital, effective as of the beginning of the fiscal year.
Other recentRecent 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 statements.
NOTE 3 – INTANGIBLE ASSETS AND PURCHASE LIABILITY
Intangible assets as of March 31, 2019 and December 31, 2018, consist of the following:
|
| March 31, |
|
| December 31, |
| ||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Intangible assets |
| $ | 302,737 |
|
| $ | 302,737 |
|
Accumulated amortization |
|
| (94,536 | ) |
|
| (69,308 | ) |
Dividend yield |
| $ | 208,201 |
|
| $ | 233,429 |
|
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. The Company purchased the assets of Soundstr by agreeing to issue 2,275,000 shares of the 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 the Company agreed to assume and pay $234,487 of identified Soundstr obligations within 60 days of April 23, 2018. The Company assigned the aggregate purchase price of $302,737 to intellectual property which will be amortized over a three (3) year period.
Total amortization expense during the three months ended March 31, 2019 and 2018 was $25,228 and $29,167, respectively, which is included in general and administrative expense in the condensed consolidated statements of operations.
Note 3 - Related Party TransactionsNOTE 4 – RELATED PARTY TRANSACTIONS
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 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 $37,825$23,556 and $15,483 and direct cost of revenues of $35,151$58,438 and $23,124 during the ninethree months ended September 30, 2017 resulted from the use ofMarch 31, 2019 and 2018, respectively, were recorded using the assets licensed under this agreement.
10 |
Table of Contents |
Accrued Payroll to Officers
Accrued payroll to officers was $146,325 as of December 31, 2018. During the three months ended March 31, 2019, the Company entered into a conversion and cancellation of debt agreement with its Chief Executive Officer. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’ 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 difference between the total accrued payroll converted of $52,700, and the market value of the shares issued of $40,654, was recorded as contributed capital of $12,046 in the condensed consolidated statements of stockholders’ deficit for the three months ended March 31, 2019. During the three months ended March 31, 2019 an additional $17,500 of payroll was accrued, resulting in accrued payroll to officers of $111,125 at March 31, 2019.
Advances from Stockholders / Employees
From time to time, employeesstockholders of the Company advance funds to the Company for working capital purposes. The advances are unsecured, non-interest bearing and due on demand. As of September 30, 2017 andAt December 31, 2016, the2018, advances from employees was $14,720. During the employees were $14,720three months ended March 31, 2019, a former employee and $14,720, respectively.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 at March 31, 2019.
Note payable to PresidentTransactions with Former Director and Significant StockholderOfficer
On December 31, 2014 the Company entered into a note payable agreement with its President, and significant stockholder of the Company. The note is unsecured, non-interest bearing and due on December 31, 2024. As of September 30,15, 2017, and December 31, 2016, the note payable to the officer was $74,131 and $74,131, respectively.
Convertible Notes Payable to the Officers and Directors
In August 2014 the Company issued non-interest bearing convertible notes to certain Officers and Directors of the Company for working capital purposes. The notes are convertible at variable prices 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 discussion in Note 5.
Transactions with Louis Mann
On August 26, 2015, the Company entered into an Advisory Agreement with Louis Mann (“MANN”), a former officer and director with the Company who resigned from hisas an officer and director on August 26, 2015. The Advisory Agreement providedprovides for MANN’s continued and ongoing advisory services to the Company untilfor a period of nine (6) months and with automatic nine (6) months renewals, unless terminated in accordance with the agreement. MANN is to receive $5,000 per month and 20,000 shares of common stock per month.
As of December 31, 20152018, $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 at 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 at December 31, 2018. The difference between the total vendor obligations converted of $40,000, 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 three months ended March 31, 2019.
During the three months ended March 31, 2019, the Company also incurred costs of $15,000, relating to be paid $25,000 for providing such advisory services,the agreement and made payments of $2,500, leaving a balance owed to MANN of $12,500 at March 31, 2019, which wasis included in accounts payable and accrued expenses.
NOTE 5 – NOTE PAYABLE (IN DEFAULT)
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 a notice of 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 orMarch 8, 2016 and payment was due before DecemberMarch 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%. The balance of the note payable outstanding was $9,000 as of March 31, 2015. Such amount is included in accrued expenses at September 30, 20172019 and December 31, 2016,2018, respectively.
Table of Contents |
Note 4 – Notes Payable
Notes payable as of September 30, 2017 and December 31, 2016 consist of the following
|
|
|
|
| As of |
| |||||
|
|
|
|
| September 30, |
|
| December 31, |
| ||
|
|
|
|
| 2017 |
|
| 2016 |
| ||
|
|
|
|
|
|
|
|
|
| ||
Individual |
| (a) |
|
| $ | 9,000 |
|
| $ | 9,000 |
|
Tarpon |
| (b) |
|
|
| - |
|
|
| 25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
| $ | 9,000 |
|
| $ | 34,000 |
|
______________
Note 5NOTE 6 – Convertible Notes PayableCONVERTIBLE NOTES PAYABLE
Convertible notes payable consist of the following:
|
|
| As of |
|
| As of | |||||||||||||||
|
|
| September 30, |
| December 31, |
|
| March 31, |
| December 31, | |||||||||||
|
|
| 2017 |
|
| 2016 |
|
| 2019 |
| 2018 |
| |||||||||
Various Convertible Notes |
| (a) |
| $ | 55,000 |
| $ | 55,000 |
|
| (a) |
| $ | 43,500 |
| $ | 45,000 |
| |||
Tarpon Convertible Note |
| (b) |
| - |
| 33,500 |
| ||||||||||||||
Tarpon Convertible Note |
| (c) |
| - |
| - |
| ||||||||||||||
Ylimit, LLC Convertible Notes |
| (d) |
| 517,000 |
| 300,000 |
|
| (b) |
| 707,500 |
| 707,500 |
| |||||||
Crossover Capital Fund II, LLC Convertible Notes |
| (e) |
| 61,000 |
| - |
| ||||||||||||||
Golock Capital, LLC Convertible Notes |
| (f) |
|
| 105,000 |
|
|
| - |
|
| (c) |
| 302,067 |
| 302,067 |
| ||||
|
|
|
|
|
|
|
| ||||||||||||||
Other Convertible Notes |
| (d) |
| 424,731 |
| 426,964 |
| ||||||||||||||
Total Convertible Notes |
|
|
| 738,000 |
| 388,500 |
|
| 1,477,798 |
| 1,484,531 |
| |||||||||
Discount |
|
|
|
| (307,967 | ) |
|
| (244,534 | ) |
| (146,700 | ) |
| (249,241 | ) | |||||
|
|
|
|
|
|
|
| ||||||||||||||
Convertible notes, net |
|
|
| $ | 430,033 |
|
| $ | 143,966 |
|
| $ | 1,331,098 |
| $ | 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 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 notes are 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 balance of the notes outstanding was |
(b)
On | |
(c) | At December 31, |
|
|
| |
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
|
| |
During the |
12 |
Table of |
The Company considered the current FASB guidance of “Contracts in Entity’s Own 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 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, the initial fair value of the embedded conversion feature was recorded as debt discount offsetting the fair value of the Notes and the remainder recorded as financing costs in the Condensed Consolidated Statement of Operations. The discount is being amortized using the effective interest rate method over the life of the debt instruments.
AsThe balance of the unamortized discount at December 31, 2016, the unamortized debt discount2018, was $244,534.$249,241. During the ninethree months ended September 30, 2017,March 31, 2019, the Company issued $311,000$173,000 of convertible notes subject to a debt discount, andwhose conversion features created a derivative liability upon issuance with a fair value of $668,557,$152,065, of which $311,000$82,306 was recorded as a valuation discount, and the remaining $357,557$69,759 was recorded as a financing cost. In addition, the Company recorded an additional debt discount of $18,261 related to a warrant issued associated with the issuance of a convertible note during the period. During the ninethree months ended September 30, 2017,March 31, 2019, amortization of debt discount was $265,828.$184,847. The unamortized balance of the debt discount was $307,967$146,700 as of September 30, 2017.
For the purposes of Balance Sheet presentation, convertible notes payable have been presented as follows:
|
| September 30, |
|
| December 31, |
|
| March 31, 2019 |
| December 31, 2018 |
| |||||
Convertible notes payable, net |
| $ | 400,033 |
| $ | 121,865 |
|
| $ | 1,302,598 |
| $ | 1,202,290 |
| ||
Convertible notes payable, related party, net |
|
| 30,000 |
|
|
| 22,101 |
|
|
| 28,500 |
|
|
| 30,000 |
|
Total |
| $ | 430,033 |
|
| $ | 143,966 |
|
| $ | 1,331,098 |
|
| $ | 1,232,290 |
|
Note 6NOTE 7 – Derivative LiabilityDERIVATIVE 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 56 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or 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.
As of September 30, 2017March 31, 2019 and December 31, 2016,2018, the derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following assumptions:
|
| September 30, 2017 |
|
| Issued During 2017 |
|
| December 31, |
|
| March 31, 2019 |
|
| Issued During 2019 |
|
| December 31, 2018 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Exercise Price |
| $ | 0.002 – 0.108 |
| $ | 0.005 – 0.026 |
| $ | 0.013 – 0.116 |
|
| $ | 0.0009 – 0.035 |
| $ | 0.001 – 0.035 |
| $ | 0.005 – 0.035 |
| ||||
Stock Price |
| $ | 0.008 |
| $ | 0.006 - 0.035 |
| $ | 0.044 |
|
| $ | 0.0014 |
| $ | 0.020 - 0.004 |
| $ | 0.016 |
| ||||
Risk-free interest rate |
| 0.84 – 1.24 | % |
| 0.94 – 1.23 | % |
| 0.59 – 0.85 | % |
| 2.40 | % |
| 2.41 – 2.57 | 5 |
| 2.59 | % | ||||||
Expected volatility |
| 358 | % |
| 273% - 344 | % |
| 243 | % |
| 385 | % |
| 385% - 388 | % |
| 293 | % | ||||||
Expected life (in years) |
| 1.000 |
| 0.792 – 1.292 |
| 0.583 – 1.833 |
|
| 1.00 |
| 1.00 – 1.36 |
| 1.00 |
| ||||||||||
Expected dividend yield |
| 0 | % |
| 0 | % |
| 0 | % |
| 0 | % |
| 0 | % |
| 0 | % | ||||||
Fair Value: |
| $ | 779,903 |
|
| $ | 594,666 |
|
| $ | 508,107 |
|
| $ | 873,825 |
|
| $ | 152,065 |
|
| $ | 1,744,601 |
|
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.
13 |
Table of Contents |
During the ninethree months ended September 30, 2017,March 31, 2019, the Company recognized $38,068$633,110 as other income, compared to $194,912 as other income during the nine months ended September 30, 2016, which represented the change in the fair value of the derivative from the respective prior period. In addition, the Company recognized derivative liabilities of $602,702$152,065 upon issuance of convertible notes during the period and recognized a gain of $292,838 and $21,308 during the nine months ended September 30, 2017 and 2016, respectively, which represented theon extinguishment of derivative liabilities related to bothof $389,730 upon the extinguishmentconversion of convertible notes with cash andduring the conversion of a note to common stock.period.
Note 7NOTE 8 – Stockholders’ DeficitSTOCKHOLDERS’ DEFICIT
Common stock returned by a director or officer
On March 15, 2017,13, 2019, a former Company officerdirector voluntarily returned 5,000,0004,555,918 shares of Common Stock held by him to the Company for no consideration. The shares were subsequently cancelled.
Shares issued for services
During the nine months ended September 30, 2017, the Company issued an aggregate of 2,575,000 shares of its common stock to certain employeesTreasury.
Shares to be 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 provided and contractors for servicesan acquisition. During the three months ended March 31, 2019, the Company was obligated to issue an additional 60,000 shares of common, valued at $95,125, based upon$184, per the closing market price onterms of a consulting agreement (see Note 4), and 1,000,000 shares of common stock valued at $3,500, as consideration for amending an existing convertible note. As of March 31, 2019, the date theCompany had not yet issued 5,024,352 shares were authorized to be issued.of common stock with a value of $247,523.
Warrants
A summary of warrants for the nine monthsyear ended September 30, 2017December 31, 2018, is as follows:
|
| Number of |
|
| Weighted - Average |
| ||
|
| Shares |
|
| Exercise Price |
| ||
Outstanding at December 31, 2016 |
|
| - |
|
|
| - |
|
Granted |
|
| 1,000,000 |
|
| $ | 0.01 |
|
Forfeited |
|
| - |
|
|
| - |
|
Outstanding at September 30, 2017 |
|
| 1,000,000 |
|
| $ | 0.01 |
|
Exercisable at September 30, 2017 |
|
| 1,000,000 |
|
| $ | 0.01 |
|
|
|
|
|
| Weighted |
| ||
|
| Number |
|
| Average |
| ||
|
| of |
|
| Exercise |
| ||
|
| Warrants |
|
| Price |
| ||
Balance outstanding, December 31, 2018 |
|
| 8,004,708 |
|
|
| 0.014 |
|
Warrants granted |
|
| - |
|
|
| - |
|
Warrants exercised |
|
| - |
|
|
| - |
|
Warrants expired or forfeited |
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| - |
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| - |
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Balance outstanding, March 31, 2019 |
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| 8,004,708 |
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| $ | 0.014 |
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Balance exercisable, March 31, 2019 |
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| 8,004,708 |
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| $ | 0.014 |
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On September 1, 2017, the Company issued 1,000,000Information relating to outstanding warrants to purchase the Company’s common stock as an inducement to enter into a convertible note payable with Golock Capital LLC (See Note 5). The fair value of the warrants granted was determined to be $18,261 and was recorded as a debt discount and being amortized to financing costs over a term of the related convertible note of 12 months. The fair value of the warrant was calculated using the Black-Scholes option pricing model using the following assumptions – stock price of $0.01;at March 31, 2019, summarized by exercise price, of $0.01; expected life of 1 year; volatility of 358%; no dividend rate and a discount rate of 1.31%.is as follows:
Outstanding Exercisable Weighted Weighted Exercise Price Per Average Average Share Shares Life (Years) Exercise Price Shares Exercise Price Additional information regarding warrants outstanding as of September 30, 2017 is as follows:$ 0.010 - 0.015 8,004,708 1.69 $ 0.014 8,004,708 $ 0.014
Warrants Outstanding at September 30, 2017 |
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| Number of |
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| Remaining |
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Range of |
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| Contractual Life |
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| Exercise |
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Exercise |
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| Outstanding |
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| Exercisable |
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$ 0.01 |
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| 1,000,000 |
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| 2.92 |
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| $ | 0.01 |
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| 1,000,000 |
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| $ | 0.01 |
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| 1,000,000 |
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| 1,000,000 |
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The weighted-average remaining contractual life of warrants outstanding and exercisable at September 30, 2017March 31, 2019 is 2.921.89 years. Both the outstanding and exercisable warrants outstanding at March 31, 2019 had no intrinsic value.
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Note 8 - Commitment and ContingenciesNOTE 9 – COMMITMENT AND CONTINGENCIES
LitigationJoint Venture Agreement – Hughes Media Law Group,Music Reports, Inc.
On December 11, 2015, Hughes MediaSeptember 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 six (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue of a quarterly basis. As of March 31, 2019, no net revenue was generated from the JV.
Litigation
On November 27, 2018, Stout Law Group, Inc. (“HLMG”)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 the Superior Court of King County, Washington, under case number 15-2-30108-0. HMLG claims damages of $130,553”, Civil Action No 1:18-CV-03614 JKB) for unpaidoutstanding legal fees HMLG alleges are owed pursuant to an April 4, 2014 agreement with VNUE Washington,and other damages for legal work performed by HMLG for VNUE Washington prior toprovided during the Merger. The Complaint sets forth no legal basis for a lawsuit against VNUE, Inc. (Nevada)2015 and does not, in fact, sue VNUE Washington, HMLG’s former client.2016 fiscal years. The Company believes that VNUE, Inc. (Nevada) is notdenies 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 withdrawn 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. On July 25, 2016, the court issued judgment awarding HLMG $133,482 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 sheetsapproximately $72,000 as of September 30, 2017March 31, 2019 and December 31, 2016.2018 to Stout Law Group, S.A. for services rendered which are the subject of settlement negotiations.
Artist Agreement
On October 27, 2015, the Company entered 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. As of March 31, 2019, the Company did not earn any revenue under this agreement.
Note 9NOTE 10 – Subsequent EventsSUBSEQUENT EVENTS
Asset AcquisitionSubsequent to March 31, 2019, several convertible note holders (see Note 6) elected to convert $68,196 of outstanding principal and interest into 81,315,181 shares of the Company’s common at $0.0008 per share.
On October 16, 2017,Subsequent to March 31, 2019, the Company entered into an agreementamendment to convertible notes with PledgeMusic, Inc.two lenders that extended the maturity dates to July 31, 2019 and beginning on May 1, 2019, no cash interest payments shall be required in the aggregate of at least $14,000 a month. In addition, the conversion price discount changed to 50% from 58%, wherebyand the Company will acquire the assetsprincipal face amount of the digital live music distribution platform Set.fm from PledgeMusic. Additionally,notes increased in the aggregate by approximately $12,000. The Company will offer PledgeMusic North America’s full suiteis also required to issue the note holders warrants, with a four year life, for an aggregate of music business tools allowing artists to sell music, merchandise and live experiences directly to fans, enhancing the Company’s clients’ revenue opportunities on a shared revenue basis.
Set.fm is a DIY platform that makes it easy for artists to record and sell their live shows directly to fans’ mobile devices, uploading simultaneously with their performance. The platform, which also features an innovative and easy-to-use studio app, already boasts thousands of artists and tens of thousands of fans using it. VNUE plans to update and improve the existing platform for indie artists and their fans, and to implement pro features for artists that VNUE and its affiliate DiscLive produce.
PledgeMusic has a growing base of 3 million music fans directly engaging with the artists they love. The platform has launched more than 50,000 campaigns across a wide range of artists with inventive ways to connect with those fans, creating newfound revenue and strategic marketing and engagement opportunities.
Convertible Note Payable
Subsequent to September 30, 2017, the Company received additional borrowings of $50,000 and issued the Lender a warrant to purchase 3,454,70815,800,319 shares of the Company’s common stock at an exercise price of $0.015 per share.$0.00475.
On May 9, 2019, the Company and Ylimit LLC (see Note 6), extended the maturity date of its convertible notes from May 9, 2019 to August 9, 2019.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The statements in this quarterly 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.
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. 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.
Presentation of Information
As used in this annual report, the terms "we"“we”, "us"“us”, "our"“our” and the "Company"“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.
Overview
We were incorporated as a Nevada corporation on April 4, 2006.
Overview of our Current Business
The live music and entertainment space is 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 befits not only artist, labels, publishers and live venues but the fans as well.
Through VNUE, Inc., our wholly 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. Additionally, VNUE will now offer physical products such as limited edition “instant” CD sets, USB drives,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 15-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 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 Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive and its strategic partnershiprelated marks and exclusive licensing agreement with RockHousenames are not owned by the Company and are owned or utilized by RockHose Live Media Productions, Inc., dba DiscLive, widely known The Company has not filed any formal trademark applications relating to beSet.fm™ with the leaderUnited States US Patent and pioneer in the “instant live” space.
While VNUE will primarily be used in live music venues, we are also planningTrademark Office but has been using these marks openly since 2017 and claims common law rights to branch into many other entertainment experiences such as comedy, plays, musicals, university lectures, professional demonstrations and panel discussions, as well as action sports and religious events.
VNUE's business model is based on the production of instant content – available to fans as they leave events, as well as business to business monetization of our back end rights clearing system software, which is currently in development.
We are a relatively new company and to date we have received a minimal amount of revenues from our operations. VNUE, Inc., our wholly owned subsidiary, only recently commenced operations and we have undertaken only 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.them.
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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.
Results of Operations
The following discussion and analysis of our results of operations and financial condition for the three and nine months ended September 30, 2017March 31, 2019 and 2018, should be read in conjunction with our condensed consolidated financial statements and related notes included in this report. We are in the process of completing development of our products and services and therefore had minimal but material revenues during this quarter.
Three Months Ended September 30, 2017March 31, 2019 Compared to Three Months Ended September 30, 2016March 31, 2018
Software DevelopmentRevenues
Our softwarerevenues for the three months ended March 31, 2019 and 2018, was $23,556 and $15,483, respectively. The revenues resulted from the use of the assets licensed from DiscLive discussed above.
Direct Costs of Revenues
Our direct costs of revenues for the three months ended March 31, 2019 and 2018, was $58,438 and $23,124, respectively. The direct costs of revenues resulted from the use of the assets licensed from DiscLive.
Research and Development
Our research and development expenses for the three months ended September 30, 2017 amounted to $24,778 compared to $126,838 for the three months ended September 30, 2016.March 31, 2019 and 2018, was $2,081 and $3,676, respectively. The decrease in softwareresearch and development expenses relative to last year reflected the decrease in salaries for full time personnel and contract labor.labor caused by our lack of sufficient working capital.
General and Administrative Expenses
Our general and administrative expenses for the three months ended September 30, 2017 amounted to $172,319 compared to $154,908 for the three months ended September 30, 2016.March 31, 2019 and 2018, was $125,568 and $185,657, respectively. The increasedecrease in general and administrative expenses relative to last year was due primarily to an increase indecreased professional fees.
Other Income (Expenses), Net
We recorded other expense,income, net of $536,074 for the three months ended September 30, 2017 of $110,712March 31, 2019, compared to other expense, netincome of $207,412$3,594 for the three months ended September 30, 2016.March 31, 2018. The change in other income (expenses), net, was primarily due to the change in the fair value of derivative liabilities of $80,812, increased$358,786 and the change in financing costs of $128,641, offset by$26,306. In addition, we recorded a gain on the increase in the gain in fair valueextinguishment of derivative liability of $174,529 as compared to last year.$389,730, a loss on settlement of convertible debt of $198,873, and a gain on settlement a vendor obligation of $9,143, all of which did not occur during the prior year period.
Net Lossfrom OperationsIncome (Loss)
As a result of the foregoing revenues, direct costs of revenues, softwareresearch and development expenses, general and administrative expenses, and other income (expenses), net, our net lossincome for the three months ended September 30, 2017March 31, 2019 was $307,809,$373,543, compared to our net loss for the three months ended September 30, 2016March 31, 2018 of $489,158.$193,380.
Nine months Ended September 30, 2017 Compared to Nine months Ended September 30, 2016
Revenues
Our revenues for the nine months ended September 30, 2017 amount to $37,825. The Company had no revenues for the nine months ended September 30, 2016. The revenues resulted from the use of the assets licensed from DiscLive.
Direct Costs of Revenues
Our direct costs of revenues for the nine months ended September 30, 2017 amounted to $35,121. The Company had no direct costs of revenues for the nine months ended September 30, 2016. The costs resulted from the use of the assets licensed from DiscLive.
Software Development
Our software development expenses for the nine months ended September 30, 2017 amounted to $92,905 compared to $1,033,207 for the nine months ended September 30, 2016. The decrease in software development expenses relative to last year was due to $730,513 in stock based compensation expense recorded last year relating to shares issued to certain employees and contractors for services received as compared to $18,500 recorded for the nine months ended September 30, 2017. Excluding stock based compensation expense, our software development expenses decreased reflecting the decrease in salaries for full time personnel and contract labor caused by our lack of sufficient working capital.
General and Administrative Expenses
Our general and administrative expenses for the nine months ended September 30, 2017 amounted to $631,057 compared to $992,470 for the nine months ended September 30, 2016. The decrease in general and administrative expenses relative to last year was due primarily to the decrease in stock based compensation expense of $491,123 relating to shares issued to certain employees and contractors for services received. Excluding the difference in stock based compensation expense, our general and administrative expenses increased reflecting an increase in professional fees.
Other Income (Expenses), Net
We recorded other expense, net for the nine months ended September 30, 2017 of $360,238 compared to other expense, net of $85,861 for the nine months ended September 30, 2016. The change in other income (expenses), net, was primarily due to the change in the fair value of derivative liabilities of $156,844, increased financing costs of $359,063, offset by the increase in the gain in fair value of derivative liability of $271,530 as compared to last year.
Net Lossfrom Operations
As a result of the foregoing revenues, direct costs of revenues, software development expenses, general and administrative expenses, and other income (expenses), net, our net loss for the nine months ended September 30, 2017 was $1,081,526, compared to our net loss for the nine months ended September 30, 2016 of $2,111,538.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans.
As of September 30, 2017,March 31, 2019, we had cash and cash equivalents of $73,195.$53,405.
We had negative cash flows from operating activities of $318,757$137,786 for the ninethree months ended September 30, 2017,March 31, 2019, compared with negative cash flows from operating activities of $230,587$104,362 for the ninethree months ended September 30, 2016. The increase in ourMarch 31, 2018. Our negative cash flows fromwas to fund our operating activities for the period is primarily due to changes in our working capital accounts.losses.
We had positivegenerated cash flows from financing activities of $374,000$173,000 for the ninethree months ended September 30, 2017March 31, 2019, as compared to $272,510$110,000 for the ninethree months ended September 30, 2016.March 31, 2018. The cash flows from financing activities for the nineboth the three months ended September 30, 2017March 31, 2019 and 2018, was due to $407,000 infrom proceeds from convertible notes less repayments of $33,000. The cash flows from financing activities for the nine months ended September 30, 2016 were primarily due to $250,000 in proceeds from a convertible note, $17,510 in advances from a stockholder and $5,000received from the saleissuance of common shares.convertible notes.
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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’saccompanying condensed 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 condensed consolidated financial statements, during the three months ended March 31, 2019, the Company incurred an operating loss of $162,531, used cash in operations of $137,786 and had a stockholders’ deficit of $2,690,827 at September 30, 2017, and incurred a net loss$3,192,598 as of $1,081,526, and used net cash in operating activities of $318,757 for the reporting period then ended. Certain of the Company’s notes payable are also past due and in default.March 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date thatof the financial statements werebeing issued. The ability 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 financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in theirits report on the Company’s December 31, 2018 consolidated financial statements, for the year ended December 31, 2016, has expressedraised substantial doubt about the Company’s ability to continue as a going concern. The condensed 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
At March 31, 2019, the Company be unable to continue as a going concern.
had cash on hand in the amount of $54,405. Management estimates that the current funds on hand will be sufficient to continue operations through June 2018.2019. 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 through the issuance ofobtain necessary debt or equity securities forfinancing to continue operations until it begins generating positive cash to operate our business.flow. 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, in case or equity financing.
We have not generated meaningful 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. WeWhile we do not anticipate generating anyplan to generate increasing 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.
ApplicationConvertible Notes Payable
Ylimit, LLC
On December 31, 2018, the aggregate convertible principal note balance to YLimit, LLC was $705,500 and the related debt discount was $70,078. The convertible notes have an interest rate of 10% per annum and maturity date of May 9, 2019, and are convertible into shares of common stock at 85% of the per share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. At March 31, 2019, the balance of notes outstanding was $707,500 and the balance of the debt discount was $6,330.
Golock Capital, LLC
At December 31, 2018, the aggregate convertible notes balance to Golock Capital, LLC (“Lender”) was $302,067. The convertible notes have an interest rate of 10% per annum and maturity dates ranging from June 1, 2018 to November 1, 2018, and are 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. At March 31, 2019, the balance of the notes outstanding was $302,067.
Other Convertible Note Holders
At December 31, 2018, the aggregate convertible notes balance to five lenders was $426,964 and the related debt discount was $179,162. 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 58% 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. During the three months ended March 31, 2019, the Company entered into additional notes of $173,000, interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020 to June 19, 2020 at conversion terms comparable to the terms above. Additionally, these lenders elected to convert an aggregate of $175,233 of outstanding principal, and $11,341 of accrued interest, into 127,152,659 shares of the Company’s common at an average of $0.0015 per share. The aggregate balance of the notes outstanding, and the related debt discount was $424,731 and $140,370, respectively, at March 31, 2019.
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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 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. See(See Note 2 - Significant and Critical Accounting Policies and Practices herein.
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. Significant estimates include the assumptions used to determine the value of the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities.
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 September 30, 2017, technological feasibility of the Company’s software had not been established; and, accordingly, no costs have been capitalized to date.
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 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 value 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 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, 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.
The fair value of the Company'sCompany’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.
Recent Accounting Pronouncements
See Note 2 of the condensed consolidated financial statementCondensed Consolidated Financial Statement herein for management’s discussion of recent accounting pronouncements.
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Selected Financial Data
Not applicable.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this quarterly 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) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”)) as of September 30, 2017.2018. 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, 20162017 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
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, 2016,2018, 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. |
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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. |
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4. | Lack of independent board member(s) |
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5. | Lack of independent audit committee |
Management is currently evaluating remediation plans for the above control deficiencies.
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, 20162017 based on criteria established in Internal Control—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, 2016 pursuant to rules of the SEC.
Changes in Internal Control
During the ninethree months ended September 30, 2017,March 31, 2019, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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OTHER INFORMATION
From time to time, we may be involved in litigation relating to claims arising outOn November 27, 2018, Stout Law Group, P.A., the former counsel for the company and an affiliate of our operationsMatheau J. Stout, filed a Federal Complaint in the normal courseUnited States District Court for the District of business. Other than described herein, neitherMaryland (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 dismissed on February 27, 2019 by the plaintiff and the Company nor its officers or directors are involved in, or the subjecthas agreed to no liability. The Company has a recorded liability of any pending legal proceedings or governmental actions the outcomeapproximately $72,000 as of which, in management’s opinion, would be materialDecember 31, 2018 and 2017 to our financial condition or results of operations.
On December 11, 2015, Hughes MediaStout Law Group, Inc. 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 $130,553S.A. 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) 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. 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 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 condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016.services rendered.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period ended September 30, 2017.March 31, 2019.
ITEM 4. MINING SAFETY DISCLOSURES
N/A
The Board of Directors of Vnue, Inc., a Nevada corporation (the “Company”), has approved a reverse stock split of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1 for 10 of each share issued and outstanding on the effective date of April 15, 2017 with the State of Nevada. The reverse became effective with the market on August 7, 2017 after receipt of FINRA's acknowledgement of our corporate action authorizing the reverse split. (the “Reverse Stock Split”).
Reason for the Reverse Stock Split
The Board of Directors of the Company has determined that it is in the best interests of the Company to reverse split the common stock of the Company on a one (1) for ten (10) basis because the Company’s stock is currently quoted with no Bid and a very low ask affording little or no liquidity for the shareholders. It is the belief of the Board that the reverse split will cause the Bid and Ask prices to increase, creating the possibility for the stock to trade at more reasonable prices and a more reasonable spread between the Bid and Ask prices. The Company would also have sufficient authorized shares to be able to acquire additional capital.
The Board of Directors of the Company have the right to reverse split the stock of the Company in accordance with the Nevada Revised Statutes (NRS Section 78.207 and NRS Section 78.209) to effect a reverse stock split of the Common Stock and the By Laws of the Company do not preclude the Board of Directors from taking such action.None.
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Effects of the Reverse Stock Split
The Company is currently authorized to issue 750,000,000 shares of Common Stock. As a result of the Reverse Stock Split, the authorized shares will not be changed.
As of April 14, 2017 prior to the reverse there were approximately 694,825,747 outstanding. After the 1 for 10 reverse split the number of shares outstanding is 69,482,575.
The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on August 7, 2017 upon FINRA’s acknowledgement of our corporate action.. As of the market effective date the shares of common stock began trading on a split-adjusted basis and the Company’s trading symbol changed to “VNUED” for a period of 20 business days, after which the “D” will be removed from the Company’s trading symbol, which will revert to the original symbol of “VNUE”. A new CUSIP number has been issued and will be placed on all stock certificates going forward.
Split Adjustment; No Fractional Shares
On the Effective Date with the Nevada Secretary of State, the total number of shares of the Company’s Common Stock held by each stockholder were converted automatically into the number of whole shares of Common Stock equal to (i) the number of issued and outstanding shares of Common Stock held by such stockholder immediately prior to the reverse stock split, divided by 10 and (ii) no fractional shares will be issued, and no cash or other consideration will be paid. Instead, the Company will issue one whole share of the post-Reverse Stock Split Common Stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split.
State Filing
The Reverse Stock Split was effected by the Company filing a Certificate of Change (the “Certificate”) pursuant to Nevada Revised Statutes (“NRS”) Section 78.207 and Section 78.209 with the Secretary of State of the State of Nevada on April 4, 2017. The Certificate became effective with the Nevada Secretary of State on April 15, 2017. Under Nevada law, no amendment to the Company’s Articles of Incorporation is required in connection with the Reverse Stock Split.
No Stockholder Approval Required
Under Nevada law, because the Reverse Stock Split was approved by the Board of Directors of the Company in accordance with NRS Section 78.207. No stockholder approval is required. NRS Section 78.207 provides that the Company may affect the reverse stock split without stockholder approval. Company does not pay money or issue scrip to stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split. As described herein, the Company has complied with these requirements.
Capitalization
The Reverse Stock Split does not affect the Company’s authorized preferred stock. There are no outstanding shares of the Company’s preferred stock. After the Reverse Stock Split, the Company’s authorized preferred Stock of 20,000,000 shares will remain unchanged.
Immediately after the Reverse Stock Split, each stockholder’s percentage ownership interest in the Company and proportional voting power will remain virtually unchanged except for minor changes and adjustments that will result from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of Common Stock will be substantially unaffected by the reverse stock split.
All options, warrants and convertible securities of the Company outstanding immediately prior to the Reverse Stock Split that have a fixed conversion price will be appropriately adjusted by dividing the number of shares of Common Stock into which the options, warrants and convertible securities are exercisable or convertible by 10 and multiplying the exercise or conversion price thereof by 10, as a result of the Reverse Stock Split.
Exhibits
Exhibit Number |
| Description of Exhibits |
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101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Schema |
101.CAL |
| XBRL Taxonomy Calculation Linkbase |
101.DEF |
| XBRL Taxonomy Definition Linkbase |
101.LAB |
| XBRL Taxonomy Label Linkbase |
101.PRE |
| XBRL Taxonomy Presentation Linkbase |
___________
* | Filed herein |
(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. |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant | VNUE, Inc. | ||
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Date: | By: | /s/ Zach Bair | |
| Zach Bair | ||
| Chief Executive Officer and Principal Accounting Officer |
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