U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT |
For the quarterly period ended SeptemberJune 30, 20172019
¨ | 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 |
| (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 | N/A | N/A |
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 ¨x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or 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.
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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ 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” 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: 69,244,707August 19, 2019, was 553,627,494.
VNUE, INC.
INDEX TO
QUARTERLY REPORT ON FORM 10-Q FILING
FOR THE PERIOD ENDED SEPTEMBERJune 30, 20172019
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3 |
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Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 | 3 | |||
4 | ||||
7 | ||||
5 | ||||
Notes to Unaudited Condensed Consolidated Financial Statements | 8 |
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Management Discussion & Analysis of Financial Condition and Results of Operations |
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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.
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VNUE, Inc.
Index to the Condensed Consolidated Financial Statements
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PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
The following unaudited interim financial statements of VNUE, Inc. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this quarterly report on Form 10-Q:
VNUE, Inc.
Condensed Consolidated Balance Sheets
Financial Statements for the Three and Six Months Ended June 30, 2019 and 2018
|
| September 30, |
|
| December 31, 2016 |
| ||
|
| (Unaudited) |
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Assets |
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Current Assets |
|
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Cash |
| $ | 73,195 |
|
| $ | 17,952 |
|
Prepaid expenses |
|
| 2,667 |
|
|
| - |
|
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|
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|
|
|
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Total assets |
| $ | 75,862 |
|
| $ | 17,952 |
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Liabilities and Stockholders’ Deficit |
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Current Liabilities |
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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 |
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|
| 22,101 |
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Derivative liabilities |
|
| 779,903 |
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|
| 508,107 |
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Total current liabilities |
|
| 2,766,689 |
|
|
| 1,870,014 |
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Commitment and Contingencies |
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Stockholders’ Deficit |
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Preferred stock, par value $0.0001: 20,000,000 shares authorized; none issued |
|
| - |
|
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| - |
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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 |
|
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| 6,449 |
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Additional paid-in capital |
|
| 4,670,643 |
|
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| 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 | ) |
|
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Total Stockholders’ Deficit |
|
| (2,690,827 | ) |
|
| (1,852,062 | ) |
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Total Liabilities and Stockholders’ Deficit |
| $ | 75,862 |
|
| $ | 17,952 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| June 30, 2019 |
|
| December 31, 2018 |
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| (Unaudited) |
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Assets |
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Current Assets |
|
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Cash |
| $ | 24,455 |
|
| $ | 18,191 |
|
Prepaid expenses |
|
| - |
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|
| 667 |
|
Total current assets |
|
| 24,455 |
|
|
| 18,858 |
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Intangible assets, net |
|
| 182,913 |
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| 233,429 |
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Total assets |
| $ | 207,368 |
|
| $ | 252,287 |
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Liabilities and Stockholders’ Deficit | ||||||||
Current Liabilities |
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Accounts payable and accrued expenses |
| $ | 955,218 |
|
| $ | 953,305 |
|
Accrued payroll to officers |
|
| 30,000 |
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| 52,700 |
|
Advances from stockholders |
|
| 720 |
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| 14,720 |
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Note payable |
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| 34,000 |
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| 9,000 |
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Convertible notes payable, net |
|
| 1,295,826 |
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| 1,202,290 |
|
Convertible notes payable, related parties, net |
|
| 28,500 |
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| 30,000 |
|
Derivative liabilities |
|
| 1,507,614 |
|
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| 1,744,601 |
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Total current liabilities |
|
| 3,851,878 |
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| 4,006,616 |
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Purchase liability |
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| 300,000 |
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| 300,000 |
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Total liabilities |
|
| 4,151,878 |
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| 4,306,616 |
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Commitment and Contingencies |
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Stockholders’ Deficit |
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Preferred stock, par value $0.0001: 20,000,000 shares authorized; 4,126,776 issued and outstanding |
|
| 413 |
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| - |
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Common stock, par value $0.0001: 750,000,000 shares authorized; 383,570,162 and 105,635,816 shares issued and outstanding, respectively |
|
| 38,356 |
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| 10,564 |
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Additional paid-in capital |
|
| 7,871,483 |
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| 6,493,069 |
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Common stock to be issued, 5,084,352 shares and 3,964,352 shares, respectively |
|
| 247,523 |
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| 243,839 |
|
Accumulated deficit |
|
| (12,102,285 | ) |
|
| (10,801,801 | ) |
Total Stockholders’ Deficit |
|
| (3,944,510 | ) |
|
| (4,054,329 | ) |
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Total Liabilities and Stockholders’ Deficit |
| $ | 207,368 |
|
| $ | 252,287 |
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See accompanying notes to the condensed consolidated financial statements.
Table of Contents |
VNUE, Inc.INC.
Condensed Consolidated Statements of OperationsCONDENSED 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, |
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|
| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
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| (Unaudited) |
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Revenues |
| $ | - |
|
| $ | - |
|
| $ | 37,825 |
|
| $ | - |
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Operating Expenses |
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|
|
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Direct costs of revenues |
|
| - |
|
|
| - |
|
|
| 35,151 |
|
|
| - |
|
Software development |
|
| 24,778 |
|
|
| 126,838 |
|
|
| 92,905 |
|
|
| 1,033,207 |
|
General and administrative |
|
| 172,319 |
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|
| 154,908 |
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|
| 631,057 |
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| 992,470 |
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Loss from Operations |
|
| (197,097 | ) |
|
| (281,746 | ) |
|
| (721,288 | ) |
|
| (2,025,677 | ) |
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Other income/(expenses) |
|
|
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|
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|
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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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income/(expenses), net |
|
| (110,712 | ) |
|
| (207,412 | ) |
|
| (360,238 | ) |
|
| (85,861 | ) |
|
|
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Net loss |
| $ | (307,809 | ) |
| $ | (489,158 | ) |
| $ | (1,081,526 | ) |
| $ | (2,111,538 | ) |
|
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Loss per share |
|
|
|
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|
|
|
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|
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-Basic and diluted |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
| $ | (0.03 | ) |
|
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Weighted average common shares outstanding |
|
|
|
|
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|
|
|
|
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|
|
|
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-Basic and diluted |
|
| 73,919,059 |
|
|
| 68,891,601 |
|
|
| 72,205,256 |
|
|
| 67,591,512 |
|
See accompanying notes to the condensed consolidated financial statements.
(UNAUDITED)
|
| For the Three Months Ended June 30, 2019 |
|
| For the Three Months Ended June 30, 2018 |
|
| For the Six Months Ended June 30, 2019 |
|
| For the Six Months Ended June 30, 201 |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
| ||||
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Revenues |
| $ | 64,544 |
|
| $ | 5,341 |
|
| $ | 88,100 |
|
| $ | 20,824 |
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Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Direct costs of revenues |
|
| 39,530 |
|
|
| 14,278 |
|
|
| 97,968 |
|
|
| 37,402 |
|
Research and development |
|
| 3,746 |
|
|
| 11,497 |
|
|
| 5,827 |
|
|
| 15,173 |
|
General and administrative |
|
| 706,503 |
|
|
| 227,789 |
|
|
| 832,071 |
|
|
| 413,447 |
|
Total operating expenses |
|
| 749,779 |
|
|
| 253,564 |
|
|
| 935,866 |
|
|
| 466,022 |
|
Loss from Operations |
|
| (685,235 | ) |
|
| (248,223 | ) |
|
| (847,766 | ) |
|
| (445,198 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income/(expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liability |
|
| (645,834 | ) |
|
| 167,454 |
|
| 377,006 |
|
|
| 441,478 |
| |
Loss on settlement of debt |
|
| (204,002 | ) |
|
| (44,248 | ) |
|
| (387,375 | ) |
|
| (44,248 | ) |
Gain on settlement of obligations |
|
| 12,046 |
|
|
| 41,111 |
|
|
| 9,143 |
|
|
| 41,111 |
|
Financing costs |
|
| (151,002 | ) |
|
| (82,910 | ) |
|
| (451,493 | ) |
|
| (353,640 | ) |
Other income (expenses), net |
|
| (988,793 | ) |
|
| 81,407 |
|
| (452,719 | ) |
|
| 85,001 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss |
| $ | (1,674,028 | ) |
| $ | (166,816 | ) |
| $ | (1,300,485 | ) |
| $ | (360,197 | ) |
|
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|
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|
|
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Net loss per share - Basic and diluted |
| $ | (0.01 | ) |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.00 | ) |
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|
|
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|
|
|
|
|
|
|
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|
Weighted average common shares outstanding - Basic and diluted |
|
| 322,251,427 |
|
|
| 87,842,954 |
|
|
| 245,570,640 |
|
|
| 81,141,410 |
|
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 |
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| Shares |
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| Total |
| |||||||||
|
| Number of Shares |
|
| Amount |
|
| Paid-In Capital |
|
| to be Issued |
|
| Accumulated Deficit |
|
| Stockholders’ Deficit |
| ||||||
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Balance, December 31, 2016 |
|
| 64,487,971 |
|
| $ | 6,449 |
|
| $ | 4,428,357 |
|
| $ | 903,570 |
|
| $ | (7,190,438 | ) |
| $ | (1,852,062 | ) |
|
|
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Shares returned by officer |
|
| (5,000,000 | ) |
|
| (500 | ) |
|
| 500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
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|
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|
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|
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|
|
|
|
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Shares issued for services |
|
| 2,575,000 |
|
|
| 258 |
|
|
| 94,868 |
|
|
| - |
|
|
| - |
|
|
| 95,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
Shares issued for conversion of debt |
|
| 7,181,736 |
|
|
| 718 |
|
|
| 62,803 |
|
|
| - |
|
|
| - |
|
|
| 63,521 |
|
|
|
|
|
|
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|
|
|
|
|
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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.
Table of Contents |
VNUE, Inc.
(Unaudited)FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019
|
| 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 |
|
|
| Preferred stock, par value $0.0001 |
|
| Common Stock, par value $0.0001 |
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||||||||
|
| Number of |
|
|
|
|
| Number of |
|
|
|
|
| Paid In |
|
| Shares to be |
|
| Accumulated |
|
| Stockholders’ |
| ||||||||
|
| shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Issued |
|
| Deficit |
|
| Deficit |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, January 1, 2019 |
|
| - |
|
| $ | - |
|
|
| 105,635,816 |
|
| $ | 10,563 |
|
| $ | 6,493,069 |
|
|
| 243,839 |
|
| $ | (10,801,800 | ) |
| $ | (4,054,329 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of accrued payroll to officer/shareholder |
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
record as contributed capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares returned by former officer |
|
|
|
|
|
|
|
|
|
| (4,555,918 | ) |
|
| (456 | ) |
|
| 456 |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services |
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 184 |
|
|
|
|
|
|
| 184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for employee obligations |
|
|
|
|
|
|
|
|
|
| 15,057,143 |
|
|
| 1,506 |
|
|
| 39,149 |
|
|
| - |
|
|
| - |
|
|
| 40,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for vendor obligations |
|
|
|
|
|
|
|
|
|
| 11,428,571 |
|
|
| 1,143 |
|
|
| 29,714 |
|
|
| - |
|
|
| - |
|
|
| 30,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued on conversion of notes payable |
|
|
|
|
|
|
|
|
|
| 127,152,659 |
|
|
| 12,715 |
|
|
| 388,232 |
|
|
| - |
|
|
| - |
|
|
| 400,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing costs |
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,500 |
|
|
| - |
|
|
| 3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 373,543 |
|
|
| 373,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019 (unaudited) |
|
| - |
|
| - |
|
|
| 254,718,271 |
|
| 25,471 |
|
| 6,962,666 |
|
| 247,523 |
|
| (10,428,257 | ) |
| (3,192,598 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A Preferred Stock |
|
| 4,127,766 |
|
|
| 413 |
|
|
|
|
|
|
|
|
|
|
| 589,716 |
|
|
|
|
|
|
|
|
|
|
| 590,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued on conversion of notes payable |
|
|
|
|
|
|
|
|
|
| 128,851,891 |
|
|
| 12,885 |
|
|
| 282,568 |
|
|
|
|
|
|
|
|
|
|
| 295,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants for financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 36,533 |
|
|
|
|
|
|
|
|
|
|
| 36,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,674,028 | ) |
|
| (1,674,028 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2019 (unaudited) |
|
| 4,127,766 |
|
| $ | 413 |
|
|
| 383,570,162 |
|
| $ | 38,356 |
|
| $ | 7,871,483 |
|
| $ | 247,523 |
|
| $ | (12,102,285 | ) |
| $ | (3,944,510 | ) |
See accompanying notes to the condensed consolidated financial statements.
5 |
Table of Contents |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 |
Preferred stock, par value Common Stock, par value $0.0001 Additional Total Number of Number of Paid In Shares to be Accumulated Stockholders’ shares Amount Shares Amount Capital Issued Deficit Deficit Balance, January 1, 2018 Fair value of warrants and beneficial conversion feature related to convertible notes payable recorded as debt discount Net loss Balance March 31, 2018 (unaudited) Gain on extinguishment of accrued payroll to officers/shareholders recorded as contributed capital Shares to be issued for shares to be issued Shares for employee obligations Shares issued for vendor obligations Shares issued for services received Shares issued on conversion of notes payable Shares issuable for acquisition Net loss Balance June 30, 2018, (unaudited)
$0.0001- $ - 74,335,070 7,433 $ 4,755,719 $ 932,734 $ (8,445,524 ) (2,749,638 ) 40,367 40,367 (193,380 ) (193,380 ) - - 74,335,070 7,433 4,796,086 932,734 (8,638,904 ) (2,902,651 ) 419,003 419,003 3,813,000 381 707,514 (707,895 ) - 3,746,660 375 74,558 74,933 5,616,086 562 160,421 160,983 300,000 30 8,969 12,680 21,679 2,400,000 240 69,760 70,000 68,250 68,250 (166,816 ) (166,816 ) - - 90,210,816 $ 9,021 $ 6,236,311 $ 305,769 $ (8,805,720 ) $ (2,254,619 )
See accompanying notes to the condensed consolidated financial statements.
Table of Contents |
VNUE, Inc.
Three and Nine Months Ended September 30, 2017 and 2016INC.
NotesCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended June 30, 2019 2018 (Unaudited) (Unaudited) Cash flows from operating activities Net loss $ (1,300,485 ) (360,197 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of derivative liabilities (377,006 ) (441,778 ) Derivative value in excess of convertible notes considered financing costs 69,759 81,908 Gain on settlement of vendor obligations (9,142 ) (41,111 ) Loss on extinguishment of debt 387,375 44,248 Amortization of debt discount 253,035 223,396 Amortization of intangible assets 50,516 77,186 Warrants issued for financing costs 36,533 - Financing cost for extension of the maturity date of convertible note 30,428 - Stock-based compensation 590,129 - Shares issued for financing costs 3,500 - Shares issued for services 184 21,679 Changes in operating assets and liabilities: Prepaid expense 667 (4,000 ) Accounts payable and accrued expenses 42,771 92,196 Accrued payroll to officer 30,000 27,670 Net cash used in operating activities (191,736 ) (279,613 ) Cash flows from financing activities Proceeds from notes payable 25,000 Proceeds from issuance of convertible notes payable 173,000 276,500 Net cash provided by financing activities 198,000 276,500 Net Change in Cash 6,264 (3,113 ) Cash – Beginning of the Reporting Period 18,191 10,278 Cash – End of the Reporting Period $ 24,455 7,165 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 $ 696,400 $ 25,752 Common shares issued in settlement of accounts payable and accrued expenses $ 30,857 $ 235,916 Convertible note issued in settlement of accounts payable balance 15,000 Common shares issued upon conversion of accrued payroll $ 40,654 $ - Fair value of derivative created upon issuance of convertible debt recorded as debt discount $ 82,306 $ 164,695 Fair value of shares to be issued and assumed liabilities upon the acquisition of Soundstr 40,367 Fair value of warrants and beneficial conversion feature related to convertible notes payable recorded as debt discount $ - $ 302,737 Capital contribution upon conversion of accrued payroll for officer/shareholder $ 12,046 $ 419,003
See accompanying notes to Condensed Consolidated Financial Statementsthe condensed consolidated financial statements.
(Unaudited)
7 |
Table of Contents |
VNUE, INC. THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NoteNOTE 1 - Organization and Basis of Presentation– ORGANIZATION AND BASIS OF PRESENTATION
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 and six months ended June 30, 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
The interim condensed consolidated financial statements included herein reflect all material adjustments (consistingWe are a music technology company, that offers a suite of normal recurring adjustmentsproducts and reclassificationsservices that monetize and non-recurring adjustments) which,monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders 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.music.
Table of Contents |
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 six months ended June 30, 2019, the Company incurred an operating loss of $847,766, used cash in operations of $191,736 and had a stockholders’ deficit of $2,690,827 at September$3,944,510 as of June 30, 2017, and incurred a net loss 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.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 June 30, 2019, the Company had cash on hand in the amount of $24,455. Management estimates that the current funds on hand will be sufficient to continue operations through June 2018.August 31, 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,stockholders, in the case orof equity financing.
NoteNOTE 2 - Significant and Critical Accounting Policies and Practices– SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
PrinciplesBasis of Consolidation
The Company consolidates all wholly ownedwholly-owned and majority-owned subsidiaries in which the Company’s power to control exists. The Company consolidates the following subsidiaries and/or entities:
Name of consolidated subsidiary or Entity |
| State or other jurisdiction of incorporation or organization |
| Date of incorporation or formation (date of acquisition/disposition, if applicable) |
| Attributable interest |
| |
|
|
|
|
|
|
|
| |
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 |
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| 100 | % |
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VNUE LLC |
| The State of Washington |
| August 1, 2013
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| 100 | % |
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VNUE Technology Inc. |
| The State of Washington |
| October 16, 2014 |
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| 90 | % |
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VNUE Media Inc. |
| The State of Washington |
| October 16, 2014 |
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| 89 | % |
9 |
Table of Contents |
VNUE Technology, Inc. and VNUE Media, Inc. were inactive corporations with no operations at SeptemberJune 30, 20172019, 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.
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$1,507,614 and $508,107$1,744,601 at SeptemberJune 30, 20172019, 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 June 30, 2019, because their impact was anti-dilutive. As of June 30, 2019, the Company had 23,805,027 outstanding warrants and 921,618,840 shares related to convertible notes payables 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.
The Company had intangible assets with a carrying value of $182,913 and $233,429 as of June 30, 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.
Table of Contents |
Loss per Common Share
Basic earnings (loss) per share are computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation as their effect is antidilutive.
For the 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, |
| |||||
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| 2017 |
|
| 2016 |
| ||
Convertible Notes Payable |
|
| 110,015,835 |
|
|
| 15,951,363 |
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Warrants |
|
| 1,000,000 |
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|
| - |
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Total |
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| 111,015,835 |
|
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| 15,951,363 |
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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 June 30, 2019 and December 31, 2018, consist of the following:
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| June 30, |
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| December 31, |
| ||
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| 2019 |
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| 2018 |
| ||
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Intangible assets |
| $ | 302,737 |
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| $ | 302,737 |
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Accumulated amortization |
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| (119,824 | ) |
|
| (69,308 | ) |
Balance |
| $ | 182,913 |
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| $ | 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 the intellectual property which will be amortized over a three (3) year period.
Total amortization expense during the three months ended June 30, 2019, and 2018 was $50,516 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$88,100 and $20,824 and direct cost of revenues of $35,151$97,968 and $37,402 during the ninesix months ended September 30, 2017 resulted from the use ofJune 2019 and 2018, respectively, were recorded using the assets licensed under this agreement.
12 |
Table of Contents |
Accrued Payroll to Officers
Accrued payroll to officers was $30,000 and $52,700, respectively, as of June 30, 2019, and December 31, 2018, respectively. During the six month months ended June 30, 2019, the Company entered into a conversion and cancellation of a 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 six months ended June 30, 2019. The Chief Executive Officers compensation is $170,000 per year, and $85,000 was incurred during the six months ended June 30, 2019; of which $30,000 was outstanding as of June 30, 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 the employees were $14,720$14,720. During the six months ended June 30, 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 June 30, 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 six months ended June 30, 2019.
During the six months ended June 30, 2019, the Company recorded $30,000 of compensation relating to be paidthe agreement and made payments of $3,750 leaving a balance owed to MANN of $26,250 at June 30, 2019, which is included in accounts payable and accrued expenses.
NOTE 5 – NOTE PAYABLE
On December 17, 2015, the Company issued a Promissory Note in the principal amount of $9,000. The note is due within 10 business days of the Company receiving notice of the effectiveness of its Form S-1 filed on February 22, 2016. Failure to make payment during that 10 business day period shall constitute an Event of Default, as a result of which the note will become immediately due and payable and the balance will bear interest at 7%. The Company’s Form S-1 was declared effective on March 8, 2016, and payment was due before March 22, 2016. The Company did not repay the note before March 22, 2016; therefore, the note is in default with an interest rate of 7%.
On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $25,000 for providing such advisory services, which wasThe Note is due and payable on or before December 31, 2015. Such amount is included inAugust 30, 2019, along with $5,000 worth of interest. During the six month period ended June 30, 2019; the Company recorded $2,812 of accrued expenses at Septemberinterest expense on these Notes.
The balance of the Notes Payable outstanding was $34,000 and $9,000 as of June 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
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| As of |
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| September 30, |
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| December 31, |
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| 2017 |
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| 2016 |
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Individual |
| (a) |
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| $ | 9,000 |
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| $ | 9,000 |
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Tarpon |
| (b) |
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| - |
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| 25,000 |
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Total |
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| $ | 9,000 |
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| $ | 34,000 |
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______________
Note 5NOTE 6 – Convertible Notes PayableCONVERTIBLE NOTES PAYABLE
Convertible notes payable consist of the following:
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| As of |
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| September 30, |
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| December 31, |
| |||
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| 2017 |
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| 2016 |
| |||
Various Convertible Notes |
| (a) |
| $ | 55,000 |
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| $ | 55,000 |
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Tarpon Convertible Note |
| (b) |
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| - |
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| 33,500 |
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Tarpon Convertible Note |
| (c) |
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| - |
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| - |
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Ylimit, LLC Convertible Notes |
| (d) |
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| 517,000 |
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| 300,000 |
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Crossover Capital Fund II, LLC Convertible Notes |
| (e) |
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| 61,000 |
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| - |
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Golock Capital, LLC Convertible Notes |
| (f) |
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| 105,000 |
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| - |
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Total Convertible Notes |
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| 738,000 |
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| 388,500 |
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Discount |
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| (307,967 | ) |
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| (244,534 | ) |
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Convertible notes, net |
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| $ | 430,033 |
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| $ | 143,966 |
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As of June 30, December 31, 2019 2018 Various Convertible Notes (a) $ 43,500 $ 45,000 Ylimit, LLCC convertible Notes (b) 707,500 707,500 Golock Capital, LLC Convertible Notes (c) 306,678 302,067 Other Convertible Notes (d) 345,160 426,964 Total Convertible Notes 1,402,838 1,484,531 Discount (78,512 ) (249,241 ) Convertible notes, net $ 1,324,326 $ 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, |
On April 29, 2019, Golock entered into an amendment with the |
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(d) | At December 31, 2018, the aggregate convertible notes balance to Convertible notes and accrued interest aggregating $293,525 were converted into 256,004,550 common shares and recognized loss on settlement of |
14 |
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 note discount at June 30, 2019, and December 31, 2016, the unamortized debt discount2018, respectively, was $244,534.$78,512 and $249,241. During the ninesix months ended SeptemberJune 30, 2017,2019, 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 ninesix months ended SeptemberJune 30, 2017,2019, amortization of debt discount was $265,828. The unamortized balance$170,728 which is included in financing costs on the Company’s statement of the debt discount was $307,967 as of September 30, 2017.
For the purposes of the Balance Sheet presentation, convertible notes payable have been presented as follows:
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| September 30, |
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| December 31, |
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| June 30, 2019 |
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| December 31, 2018 |
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Convertible notes payable, net |
| $ | 400,033 |
| $ | 121,865 |
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| $ | 1,295,826 |
| $ | 1,202,290 |
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Convertible notes payable, related party, net |
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| 30,000 |
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| 22,101 |
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| 28,500 |
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|
| 30,000 |
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Total |
| $ | 430,033 |
|
| $ | 143,966 |
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| $ | 1,324,326 |
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| $ | 1,232,290 |
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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 SeptemberJune 30, 20172019, and December 31, 2016,2018, the derivative liabilities were valued using a probability weightedprobability-weighted average Black-Scholes-Merton pricing model with the following assumptions:
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| September 30, 2017 |
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| Issued During 2017 |
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| December 31, |
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| June 30, 2019 |
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| Issued During 2019 |
|
| December 31, 2018 |
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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 | % |
| 2.13 | % |
| 2.41 – 2.575 |
| 2.59 | % | |||||||
Expected volatility |
| 358 | % |
| 273% - 344 | % |
| 243 | % |
| 377 | % |
| 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 |
|
| $ | 1,507,614 |
|
| $ | 331,194 |
|
| $ | 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.
During the ninesix months ended SeptemberJune 30, 2017,2019, the Company recognized $38,068$377,006 as other income, compared to $194,912 as other income during the nine months ended September 30, 2016, which represented the net change in the fair value of the derivative from the respective prior period. In addition, the Company recognizedliability at December 31, 2018 plus new derivative liabilities of $602,702$331,194 upon the issuance of new convertible notes duringand amendment of one convertible note in 2019, less the period and a gainending balance of $292,838 and $21,308 during the nine months ended Septemberderivative liability as of June 30, 2017 and 2016, respectively, which represented the extinguishment of derivative liabilities related to both the extinguishment of convertible notes with cash and the conversion of a note to common stock.2019.
Note 7NOTE 8 – Stockholders’ Deficit
Common stock returned by officerSTOCKHOLDERS’ DEFICIT
On March 15, 2017,July 2, 2019, the Company filed a Company officer voluntarily returned 5,000,000Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada. The Charter Amendment increased the Company’s capitalization to 2,000,000,000 shares of Common Stock 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 2,575,000and 20,000,000 shares of its common stock to certain employees and contractors for services valued at $95,125, based upon the closing market price on the date the sharesPreferred Stock, of which, 5,000,000 were authorized to be issued.
Warrants
designated as Series A summary of warrants for the nine months ended September 30, 2017 is as follows:Convertible Preferred Stock.
|
| 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 |
|
On September 1, 2017,May 22, 2019, the Company“Company” issued 1,000,000 warrants4,126,776 restricted shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) to purchasevarious employees and service providers to compensate and reward them for past services and to incentivize them to provide continued service to the Company’s common stock as an inducement to enter into a convertible note payable with Golock Capital LLC (See Note 5).Company. The fair valueSeries A Preferred Stock will receive relative rights and preferences under terms and conditions set forth in the Certificate of Designation 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; exercise price of $0.01; expected life of 1 year; volatility of 358%; no dividend rate and a discount rate of 1.31%.Preferred Stock.
Additional information regarding warrants outstanding as of September 30, 2017 is as follows:
Warrants Outstanding at September 30, 2017 |
|
| Warrants Exercisable at September 30, 2017 |
| |||||||||||||||||
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
| Average |
|
| Weighted |
|
|
|
|
| Weighted |
| |||||
|
|
| Number of |
|
| Remaining |
|
| Average |
|
| Number of |
|
| Average |
| |||||
Range of |
|
| Shares |
|
| Contractual Life |
|
| Exercise |
|
| Shares |
|
| Exercise |
| |||||
Exercise |
|
| Outstanding |
|
| (Years) |
|
| Price |
|
| Exercisable |
|
| Price |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
$ 0.01 |
|
|
| 1,000,000 |
|
|
| 2.92 |
|
| $ | 0.01 |
|
|
| 1,000,000 |
|
| $ | 0.01 |
|
|
|
|
| 1,000,000 |
|
|
|
|
|
|
|
|
|
|
| 1,000,000 |
|
|
|
|
|
The weighted-average remaining contractual lifeCompany believes that the issuance of warrants outstandingthe Series A Preferred Stock was exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act in that said transaction did not involve a public solicitation and exercisable at September 30, 2017 is 2.92 years.said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
Table of Contents |
In connection with the Series A Designation, the Company authorized 5,000,000 shares of its Series A Preferred Stock. Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders shall be entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders shall vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock shall have no liquidation or redemption rights.
The Company determined the fair value of the preferred shares to be $590,129 which is included as stock-based compensation in general and administrative expense on the Company’s statements of operations for the six months ended June 30,2019.
Common stock returned by a director or officer
During the three month period ended March 31, 2019, a former Company director voluntarily returned 4,555,918 shares of Company common stock to Treasury. These shares were valued at the value of $456 and decreased common stock and increased paid-in capital by the same amount, so the transaction had no impact on the Company’s equity.
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 an acquisition. During the three months ended March 31, 2019, the Company became obligated to issue an additional 60,000 shares of common, valued at $184, per the terms 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 June 30, 2019, the Company had not yet issued 5,084,352 shares of common stock with a value of $247,523.
Warrants
During the six month period ended June 30, 2019, the Company issued 15,800,319 warrants to two convertible noteholders as consideration for extending the term of their convertible notes. The warrants are exercisable for a period of four years at a strike price of $0.00475. As a result of the issuance of these warrants, the company recorded a financing expense of $36,533.
A summary of warrants for the six months and year ended June 30, 2018 and December 31, 2018, is as follows:
|
|
|
|
| Weighted |
| ||
|
| Number |
|
| Average |
| ||
|
| of |
|
| Exercise |
| ||
|
| Warrants |
|
| Price |
| ||
Balance outstanding, December 31, 2018 |
|
| 8,004,708 |
|
|
| 0.014 |
|
Warrants granted |
|
| 15,800,319 |
|
|
| .00475 |
|
Warrants exercised |
|
| - |
|
|
| - |
|
Warrants expired or forfeited |
|
| - |
|
|
| - |
|
Balance outstanding and exercisable, June 30, 2019 |
|
| 23,805,027 |
|
| $ | 0.0079 |
|
Information relating to outstanding warrants at June 30, 2019, summarized by exercise price, is as follows:
|
|
| Outstanding and Exercisable |
| ||||||||||
|
|
|
|
|
|
| Weighted |
| ||||||
Exercise Price Per |
|
|
|
|
|
| Average |
| ||||||
Share |
|
| Shares |
|
| Life (Years) |
|
| Exercise Price |
| ||||
$0.010-0.015 |
|
|
| 8,004,708 |
|
|
| 1.39 |
|
| $ | 0.014 |
| |
$ | 0.004750 |
|
|
| 5,800,319 |
|
|
| 3.83 |
|
| $ | 0.00475 |
|
16 |
Table of Contents |
The weighted-average remaining contractual life of all warrants outstanding and exercisable at June 30, 2019, is 2.21 years. Both the outstanding and exercisable warrants outstanding at June 30, 2019, had no intrinsic value.
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 on a quarterly basis. As of June 30, 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 SeptemberJune 30, 20172019, 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 June 30, 2019, the Company did not earn any revenue under this agreement.
Note 9NOTE 10 – Subsequent Events
Asset Acquisition
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.
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 PayableSUBSEQUENT EVENTS
Subsequent to SeptemberJune 30, 2017, the Company received additional borrowings2019, several convertible note holders (see Note 6) elected to convert $64,817 of $50,000outstanding principal and issued the Lender a warrant to purchase 3,454,708interest into 167,027,820 shares of the Company’s common at $0.0008 per share.
Subsequent to June 30, 2019 the Company entered into a new convertible note agreement for $30,000 with one lender with a variable conversion price equal to 58% of the lowest closing price of the Company’s stock twenty-day prior to conversion. The Note matures on August 2, 2020 at an exercise priceinterest rate of $0.015twelve percent (12%). Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per share.annum from the due date thereof until the same is paid. Additionally, this Note may not be prepaid.
Additionally subsequent to June 30, 2019, the Company issued 3,041,192 shares value at approximately $2,500 to two service providers.
Table of Contents |
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 ownedwholly-owned subsidiary, we now carry on business as a live entertainment music technology company which brings bands and fans together by capturing professional quality audio and video recordings of live performances and delivers the experience of a venue to your home and hand.
By streamlining the processes of curation, clearing, capturing, distribution and monetization of music performances, VNUE manages and simplifies the complexities of the music ecosystem.
VNUE produces and captures rich content through its Front of House mobile application and provides world-wide distribution and monetization of live concerts and other events throughthat offers a suite of mobile, web administration applications, allowing an artist to seamlessly deliverproducts and sell their live performances directly to the fans who attend their shows. 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 withnames are not owned by the Company and are owned or utilized by RockHouse 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.Trademark Office but has been using these marks openly since 2017 and claims common law rights to them.
While VNUE will primarily be used in live music venues, we are also planning 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.
Table of Contents |
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 SeptemberJune 30, 20172019, 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 the development of our products and services and therefore had minimal but material revenues during this quarter.
Three Months Ended SeptemberJune 30, 20172019, Compared to Three Months Ended SeptemberJune 30, 20162018
Software DevelopmentRevenues
Our softwarerevenues for the three months ended June 30, 2019, and 2018, was $64,544 and $5,341, respectively. The large increase in revenues resulted from the use of the assets licensed from DiscLive discussed above, for our live music recordings, and our set.fm mobile content platform. As we continue to ramp up our services and add additional clients and content, we believe this increase in revenue will continue and further improve.
Costs of Revenues
Our direct costs of revenues for the three months ended June 30, 2019, and 2018, was $39,530 and $14,278 respectively. Gross margin is calculated by subtracting direct costs from revenue. Gross margin percentage is calculated by dividing gross margins by revenue. Our gross margin percentage for the period ended June 30, 2019, was 39% compared to negative 167% for the same period in 2018. The gross margin improvement resulted from the increased use of the assets licensed from DiscLive and the set.fm mobile platform described above. As our client base continues to grow, and we book more tours, we expect these types of margins to be our normalized margins and in fact, we expect them to further improve.
Research and Development
Our research and development expenses for the three months ended SeptemberJune 30, 2017 amounted to $24,778 compared to $126,838 for the three months ended September 30, 2016.2019, and 2018, was $3,746 and $11,497 respectively. The decrease in softwareresearch and development expenses relative to last year reflected the decrease in salaries for full timefull-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 SeptemberJune 30, 2017 amounted to $172,319 compared to $154,908 for the2019, and 2018, was $706,503 and $227,789 respectively. The three months ended SeptemberJune 30, 2016.2019, includes a non-cash stock-based compensation expense of $590,129 related to the issuance of our Series A Preferred stock (See Footnote 8 - Stockholders Deficit). Excluding this charge, our administrative expenses were $116,374. This compares to $227,789 during the comparable period ended June 30, 2019, The increasesignificant decrease in general and administrative expenses (excluding this item), relative to last year, was due primarily to an increase indecreased professional fees.fees and the reduction of full-time and contract personnel.
Other Income (Expenses), Net
We recorded other expense,expenses, net, of $988,793 for the three months ended SeptemberJune 30, 2017 of $110,7122019, compared to other expense,expenses, net of $207,412$81,407 for the three months ended September 30, 2016.June 2018. The changeincrease in other income (expenses),expenses, net, in 2019 was primarily dueattributable to the changean increase in the fair value of derivative liabilities of $80,812,$478,380, an increase in loss on extinguishment of debt of $159,754, and increased financing costs of $128,641, offset by the increase in the gain in fair value of derivative liability of $174,529 as68,092; when compared to last year.the same period in 2019.
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 loss for the three months ended SeptemberJune 30, 20172019 was $307,809,$988,793, compared to oura net lossprofit for the three months ended SeptemberJune 30, 20162018 of $489,158.
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.$46,878.
Table of Contents |
Six Months Ended June 30, 2019, Compared to Six Months Ended June 30, 2018
Revenues
Our revenues for the six months ended June 30, 2019, and 2018, was $88,100 and $20,824, respectively. The large increase in revenues resulted from the use of the assets licensed from DiscLive discussed above, for our live music recordings, and our set.fm mobile content platform. As we continue to ramp up our services and add additional clients and content, we believe this increase in revenue will continue and further improve.
Direct Costs of Revenues
Our direct costs of revenues for the ninesix months ended SeptemberJune 30, 2017 amounted to $35,121. The Company had no2019, and 2018, was $97,968 and $37,402, respectively. Gross margin is calculated by subtracting direct costs of revenuesfrom revenue. Gross margin percentage is calculated by dividing gross margins by revenue. Our gross margin percentage for the nine monthsperiod ended SeptemberJune 30, 2016.2019, was negative 11% compared to negative 80% for the same period in 2018. The costsgross margin improvement resulted from the increased use of the assets licensed from DiscLive.DiscLive and the set.fm mobile platform described above during the second quarter in which our margin were positive.
SoftwareResearch and Development
Our softwareresearch and development expenses for the ninesix months ended SeptemberJune 30, 2017 amounted to $92,905 compared to $1,033,207 for the nine months ended September 30, 2016.2019 and 2018, was $5,827 and $15,173, respectively. The decrease in softwareresearch and 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 reflectingreflected the decrease in salaries for full timefull-time personnel and contract labor caused by our lack of sufficient working capital.
General and Administrative Expenses
Our general and administrative expenses for the ninesix months ended SeptemberJune 30, 2017 amounted to $631,057 compared to $992,4702019 and 2018, was $832,071 and $413,447, respectively. As noted above during the three month period ended June 30, 2019, the Company incurred a one -time non-cash of $590,129. Excluding this charge general and administrative expense for the ninesix months ended SeptemberJune 30, 2016.2019 would have been $241,942. The decrease in general and administrative expenses relative to last year excluding this item was due primarily to decreased professional fees and the decrease in stock based compensation expensereduction of $491,123 relating to shares issued to certain employeesfull-time 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.contract personnel.
Other Income (Expenses), Net
We recorded other expense, net, of 452,179 for the ninesix months ended SeptemberJune 30, 2017 of $360,2382019, compared to other expense, netincome of $85,861$85,001 for the ninethree months ended September 30, 2016.June 2018. The changedecrease in other income (expenses), net, in the 2019 was primarily dueattributable to the change in the fair value of derivative liabilities of $156,844, increased financing costs of $359,063, offset by thean increase in the gainloss on extinguishment of debt of $343,127 and an increase of $96,853 in fair value of derivative liability of $271,530 asfinancing charges when compared to last year.the same period in 2018.
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 loss for the ninesix months ended SeptemberJune 30, 20172019 was $1,081,526,$1,300,485 compared to our net loss for the ninesix months ended SeptemberJune 30, 20162018 of $2,111,538.$360,197.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans.
As of SeptemberJune 30, 2017,2019, we had cash and cash equivalents of $73,195.$24,455.
We had negative cash flows from operating activities of $318,757$191,736 for the ninesix months ended SeptemberJune 30, 2017,2019, compared with negative cash flows from operating activities of $230,587$279,613 for the ninesix months ended SeptemberJune 30, 2016. The increase in our2018. Our negative cash flows fromwere 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$198,000 for the ninesix months ended SeptemberJune 30, 20172019, as compared to $272,510$276,500 for the ninesix months ended SeptemberJune 30, 2016.2018. The cash flows from financing activities for both the ninesix months ended SeptemberJune 30, 20172019, and 2018, was due to $407,000 infrom proceeds received from the issuance of 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 $5,000 from the saleissuance of common shares.
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 six months ended June 30, 2019, the Company incurred an operating loss of $847,766, used cash in operations of $191,736 and had a stockholders’ deficit of $2,690,827 at September$3,944,510 as of June 30, 2017, and incurred a net loss 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.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 Company does not have any commitments for additional capital. 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 June 30, 2019, the Company be unable to continue as a going concern.
had cash on hand in the amount of $24,455. Management estimates that the current funds on hand will be sufficient to continue operations through June 2018.August 31, 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,stockholders, in the case orof equity financing.
We have not generated revenues, have incurred losses since our inception, and rely upon the sale of our common stock and loans from related and other parties to fund our operations. We do not anticipate generating any revenues in the foreseeable future, and if we are unable to raise equity or secure alternative financing, we may not be able to pursue our plans and our business may fail.
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Application of Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which were prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this prospectus, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because 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 currentthen-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.
Selected Financial Data
Not applicable.
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.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
Not applicable.
Item 4. Controls and Procedures
a) 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 SeptemberJune 30, 2017.2019. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.
Based on that evaluation, and the material weaknesses outlined below under Internal Control Over Financial Reporting, our principal executive officer and principal accounting officer concluded, as of the end of the period covered by this annual report, that, due to weaknesses in our internal controls described below, our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting information required to be disclosed, within the time periods specified in the SEC’s rules and forms, and that such information may not be accumulated and communicated to our principal executive officer and principal accounting officer to allow timely decisions regarding required disclosures.
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b) 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—IntegratedControl-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, 20162018, based on criteria established in Internal Control—IntegratedControl-Integrated Framework issued by COSO.
Weinberg & Company, an independent registered public accounting firm, is not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, 2016 pursuant to rules of the SEC.
c) Changes in Internal ControlControls over Financial Reporting
During the nine monthsfiscal quarter ended SeptemberJune 30, 2017,2019, 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 bebecome involved in litigation relating to claims arising out of our operationsvarious lawsuits and legal proceedings, which arise, in the normalordinary course of business. Other than described herein, neither the Company, nor its officersHowever, litigation is subject to inherent uncertainties, and an adverse result in these or directorsother matters may arise from time to time that may harm our business. We are involved in, or the subjectcurrently not aware of any pendingsuch legal proceedings or governmental actions the outcome of which, in management’s opinion, would beclaims that we believe will have a material toadverse effect on our business, financial condition or results of operations. operating results.
On December 11, 2015, Hughes Media 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 $130,553 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
None.During the six month period ended June 30, 2019, the Company issued 15,800,319 warrants to two convertible noteholders as consideration for extending the term of their convertible notes. The warrants are exercisable for a period of four years at a strike price of $0.00475.
On May 22, 2019, the Company issued 4,126,776 restricted shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) to various employees and service providers to compensate and reward them for past services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock will receive relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.
On April 29, 2019, the Company entered into an amendment with a noteholder to extend the maturity of the Notes until July 31, 2019. In return, the noteholder received several concessions. They received (a) a warrant to purchase 12,833,333 shares of the Company’s stock for a period of 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants, and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the noteholder request conversion. The balance of the notes outstanding at June 30, 2019, was $306,678.
The Company believes that the issuance of the Series A Preferred Stock and warrants were exempt from the registration requirements under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) of the Act in that said transactions did not involve a public solicitation and said preferred stock and warrants were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period ended SeptemberJune 30, 2017.2019.
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”).There is no other information required to be disclosed under this item which was not previously disclosed.
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.
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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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Series A Certificate of Designation, filed with the Secretary of State of Nevada on May 22, 2019 (3) | ||
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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 with the Securities and Exchange Commission on October 13, 2006. |
(2) | Included as an exhibit with our Form 8-K filed with the Securities and Exchange Commission on February 1, 2011. |
(3) | Included as an Exhibit with our Form 8-K filed with the Securities and Exchange Commission on June 26, 2019. |
(4) | Included as an Exhibit with our Form 8-K filed with the Securities and Exchange Commission on August 1, 2019. |
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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 (Principal Executive Officer and Principal Accounting |
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