Quarterly Report (10-q)

Date : 05/20/2019 @ 6:06PM
Source : Edgar (US Regulatory)
Stock : Vnue, Inc. (PC) (VNUE)
Quote : 0.0003  -0.0001 (-25.00%) @ 2:56PM

Quarterly Report (10-q)

  

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

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

 

For the quarterly period ended March 31, 2019

 

¨

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

 

For the transition period from _________ to _________

 

Commission File No. 000-53462

 

VNUE, INC.

(Name of Registrant in its Charter)

 

Nevada

 

98-0543851

(State of Other Jurisdiction of incorporation or organization)

 

(I.R.S. Employer I.D. No.)

 

104 West 29th Street, 11th Floor, New York, NY 10001

(Address of Principal Executive Offices)

 

(833) 937-5493

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12 (b) of the Exchange Act: 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 None

 

 

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

 

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

 

Indicate by check mark whether the registrant is a 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

 

The number of shares of registrant’s common stock outstanding as of May 15, 2019 was 336,021,079.

 

 
 
 
 

  VNUE, INC.

TABLE OF CONTENTS

 

 

PAGE

PART I - FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

Item 2.

Management Discussion & Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

Item 3.

Defaults Upon Senior Securities

21

Item 4.

Mining Safety Disclosures

21

Item 5

Other information

21

Item 6.

Exhibits

22

 

SIGNATURES

23

 

 
2
 
Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

(Unaudited)

 

 

 

Assets

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 53,405

 

 

$ 18,191

 

Prepaid expenses

 

 

-

 

 

 

667

 

Total current assets

 

 

53,405

 

 

 

18,858

 

 

 

 

 

 

 

 

 

 

Intangible assets, net

 

 

208,201

 

 

 

233,429

 

Total assets

 

$ 261,606

 

 

$ 252,287

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 828,436

 

 

$ 859,680

 

Accrued payroll to officers

 

 

111,125

 

 

 

146,325

 

Advances from stockholders

 

 

720

 

 

 

14,720

 

Note payable

 

 

9,000

 

 

 

9,000

 

Convertible notes payable, net

 

 

1,302,598

 

 

 

1,202,290

 

Convertible notes payable, related parties, net

 

 

28,500

 

 

 

30,000

 

Derivative liabilities

 

 

873,825

 

 

 

1,744,601

 

Total current liabilities

 

 

3,154,204

 

 

 

4,006,616

 

 

 

 

 

 

 

 

 

 

Purchase liability

 

 

300,000

 

 

 

300,000

 

Total liabilities

 

 

3,454,204

 

 

 

4,306,616

 

 

 

 

 

 

 

 

 

 

Commitment and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

 

 

 

Preferred stock, par value $0.0001: 20,000,000 shares authorized; none issued

 

 

-

 

 

 

-

 

Common stock, par value $0.0001: 750,000,000 shares authorized; 254,718,271 and 105,635,816 shares issued and outstanding, respectively

 

 

25,471

 

 

 

10,564

 

Additional paid-in capital

 

 

6,962,666

 

 

 

6,493,069

 

Common stock to be issued, 5,024,352 shares and 3,964,352 shares, respectively

 

 

247,523

 

 

 

243,839

 

Accumulated deficit

 

 

(10,428,258 )

 

 

(10,801,801 )

 

 

 

 

 

 

 

 

 

Total Stockholders’ Deficit

 

 

(3,192,598 )

 

 

(4,054,329 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Deficit

 

$ 261,606

 

 

$ 252,287

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 
3
 
Table of Contents

 

VNUE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2019 AND 2018

   

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ 23,556

 

 

$ 15,483

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Direct costs of revenues

 

 

58,438

 

 

 

23,124

 

Research and development

 

 

2,081

 

 

 

3,676

 

General and administrative

 

 

125,568

 

 

 

185,657

 

Total operating expenses

 

 

186,087

 

 

 

212,457

 

Loss from operations

 

 

(162,531 )

 

 

(196,974 )

Other income (expense):

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

633,110

 

 

 

274,324

 

Gain on extinguishment of derivative liability

 

 

389,730

 

 

 

-

 

Loss on settlement of notes payable

 

 

(198,873 )

 

 

-

 

Financing costs

 

 

(297,036 )

 

 

(270,730 )

Gain on settlement of obligations

 

 

9,143

 

 

 

-

 

Other income (expense), net

 

 

536,074

 

 

 

3,594

 

Net income

 

$ 373,543

 

 

$ (193,380 )

 

 

 

 

 

 

 

 

 

Earnings per share - Basic and diluted

 

$ 0.00

 

 

$ (0.00 )

Weighted average common shares outstanding - Basic

 

 

168,050,218

 

 

 

74,335,070

 

Weighted average common shares outstanding - Diluted

 

 

743,810,467

 

 

 

74,335,070

 

 

See accompanying notes to the consolidated financial statements.

 

 
4
 
Table of Contents

 

  VNUE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2019   

 

 

 

Common Stock, par value $0.0001

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Amount

 

 

Paid-In

Capital

 

 

Shares to

be  Issued

 

 

Accumulated

Deficit

 

 

Stockholders’

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

105,635,816

 

 

$ 10,563

 

 

$ 6,493,069

 

 

$ 243,839

 

 

$ (10,801,801 )

 

$ (4,054,329 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares returned from former officer

 

 

(4,555,918 )

 

 

(456 )

 

 

456

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of accrued payroll to officer/shareholder recorded as contributed capital

 

 

 

 

 

 

 

 

 

 

12,046

 

 

 

 

 

 

 

 

 

 

 

12,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares to be issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

184

 

 

 

 

 

 

 

184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in settlement of accrued payroll to officer

 

 

15,057,143

 

 

 

1,506

 

 

 

39,149

 

 

 

-

 

 

 

-

 

 

 

40,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in settlement of accounts payable

 

 

11,428,571

 

 

 

1,143

 

 

 

29,714

 

 

 

-

 

 

 

-

 

 

 

30,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares to be issued for financing costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,500

 

 

 

 

 

 

 

3,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued on conversion of notes payable

 

 

127,152,659

 

 

 

12,715

 

 

 

388,232

 

 

 

 

 

 

 

 

 

 

 

400,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

373,543

 

 

 

373,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019 (Unaudited)

 

 

254,718,271

 

 

$ 25,471

 

 

$ 6,962,666

 

 

$ 247,523

 

 

$ (10,428,258 )

 

$ (3,192,598 )

 

THREE MONTHS ENDED MARCH 31, 2018

 

 

 

Common Stock,

par value $0.0001

 

 

Additional  

 

 

 

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Amount

 

 

Paid-In

Capital

 

 

Shares to

be Issued

 

 

Accumulated

Deficit

 

 

Stockholders’

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

74,335,070

 

 

$ 7,433

 

 

$ 4,755,719

 

 

$ 932,734

 

 

$ (8,445,523 )

 

$ (2,749,637 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of warrants and beneficial conversion feature related to convertible notes payable recorded as debt discount

 

 

-

 

 

 

-

 

 

 

40,367

 

 

 

 

 

 

 

 

 

 

 

40,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193,380 )

 

 

(193,380 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018 (Unaudited)

 

 

74,335,070

 

 

$ 7,433

 

 

$ 4,796,086

 

 

$ 932,734

 

 

$ (8,638,903 )

 

$ (2,902,650 )

 

See accompanying notes to the consolidated financial statements.

 

 
5
 
Table of Contents

 

VNUE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

Three months ended March 31,

 

 

 

            2019       

 

 

           2018

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$ 373,543

 

 

$ (193,380 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

(633,110 )

 

 

(274,324 )

Derivative value in excess of convertible notes considered financing costs

 

 

69,759

 

 

 

81,098

 

Gain on extinguishment of derivative liability

 

 

(389,730 )

 

 

-

 

Gain on settlement of vendor obligations

 

 

(9,143 )

 

 

-

 

Loss on extinguishment of debt

 

 

210,213

 

 

 

-

 

Amortization of debt discount

 

 

184,847

 

 

 

166,303

 

Amortization of intangible assets

 

 

25,228

 

 

 

29,167

 

Shares issued for financing costs

 

 

3,500

 

 

 

-

 

Shares issued for services

 

 

184

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expense

 

 

667

 

 

 

(6,000 )

Accounts payable and accrued expenses

 

 

8,756

 

 

 

37,774

 

Accrued payroll to officer

 

 

17,500

 

 

 

55,000

 

Net cash used in operating activities

 

 

(137,786 )

 

 

(104,362 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible notes payable

 

 

173,000

 

 

 

110,000

 

Net cash provided by financing activities

 

 

173,000

 

 

 

110,000

 

 

 

 

 

 

 

 

 

 

Net Change in Cash

 

 

35,214

 

 

 

5,638

 

 

 

 

 

 

 

 

 

 

Cash – Beginning of the Reporting Period

 

 

18,191

 

 

 

10,278

 

 

 

 

 

 

 

 

 

 

Cash – End of the Reporting Period

 

$ 53,405

 

 

$ 15,916

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Interest Paid

 

$ 5,874

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Income Tax Paid

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-Cash Financing Activities

 

 

 

 

 

 

 

 

Common shares issued upon conversion of notes payable and accrued interest

 

$ 400,947

 

 

$ -

 

Common shares issued in settlement of accounts payable and accrued expenses

 

$ 30,857

 

 

$ -

 

Common shares issued up conversion of accrued payroll

 

$ 40,654

 

 

$ -

 

Fair value of derivative created upon issuance of convertible debt recorded as debt discount

 

$ 82,306

 

 

$ 37,531

 

Fair value of warrants and beneficial conversion feature related to convertible notes payable recorded as debt discount

 

$ -

 

 

$ 40,367

 

Capital contribution upon conversion of accrued payroll for officer/shareholder

 

$ 12,046

 

 

$ -

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 
6
 
Table of Contents

 

VNUE, INC.

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 

NOTE 1 – 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 ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

 

History and Organization

 

VNUE, Inc. (formerly Tierra Grande Resources, Inc.) (“VNUE”, “TGRI”, or the “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.

 

Overview of Business

 

We are a music technology company, that offers a suite of products and services that monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music.

 

Going Concern

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, during the three months ended March 31, 2019, the Company incurred an operating loss of $162,531, used cash in operations of $137,786, and had a stockholders’ deficit of $3,192,598 as of March 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being 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 its report on the Company’s December 31, 2018 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At March 31, 2019, the Company had cash on hand in the amount of $53,405.  Management estimates that the current funds on hand will be sufficient to continue operations through June 2019. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case or equity financing.

 

 
7
 
Table of Contents

 

NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES

 

Basis of Consolidation

 

The Company consolidates all wholly owned and majority-owned subsidiaries in which the Company’s power to control exists. The Company consolidates the following subsidiaries and/or entities:

 

Name of consolidated subsidiary or Entity

 

State or other jurisdiction of

incorporation or organization

 

Date of incorporation or formation

(date of acquisition/disposition, if

applicable)

 

Attributable interest

 

 

 

 

 

 

 

 

 

VNUE Inc. (formerly TGRI)

 

The State of Nevada

 

April 4, 2006 (May 29, 2015)

 

 

100 %

 

 

 

 

 

 

 

 

 

VNUE Inc. (VNUE Washington)

 

The State of Washington

 

October 16, 2014

 

 

100 %

 

 

 

 

 

 

 

 

 

VNUE LLC

 

The State of Washington

 

August 1, 2013 (December 3, 2014)

 

 

100 %

 

 

 

 

 

 

 

 

 

VNUE Technology Inc.

 

The State of Washington

 

October 16, 2014

 

 

90 %

 

 

 

 

 

 

 

 

 

VNUE Media Inc.

 

The State of Washington

 

October 16, 2014

 

 

89 %

 

VNUE Technology, Inc. and VNUE Media, Inc. were inactive corporations at March 31, 2019 and 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. Revenue is recognized on the sale of a product when the risk of loss transfers to our customers, and collection of the receivable is reasonably assured, which generally occurs when the product is purchased.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. 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.

 

 
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Fair Value of Financial Instruments

 

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal 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 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:

 

 

·

Level 1 — Quoted prices in active markets for identical assets or liabilities.

 

·

Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments.

 

The fair value of the derivative liabilities of $873,825 and $1,744,601 at March 31, 2019 and December 31, 2018, respectively, were valued using Level 3 inputs.

 

Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

 

Income (Loss) per Common Share

 

Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share at March 31, 2018, because their impact was anti-dilutive.  As of March 31, 2018, the Company had total outstanding warrants 8,004,708 and shares related to convertible notes payables of 58,502,514, respectively, which were excluded from the computation of net loss per share.

 

Intangible Assets

 

The Company accounts for intangible assets in accordance with the authoritative guidance issued by the FASB. Intangibles are valued at their fair market value and are amortized taking into account the character of the acquired intangible asset and the expected period of benefit. The Company evaluates intangible assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated undiscounted future cash flows. Recoverability of intangible assets is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors, including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss.

 

 
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The Company had intangible assets with a carrying value of $208,201 and $233,429 as of March 31, 2019 and December 31, 2018, respectively. In accordance with ASC Topic 350 – Goodwill and Other Intangible Assets, the Company assesses the carrying value of its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and records an impairment charge if the carrying value of such intangible assets is not recoverable and if it exceeds its fair value. While our fiscal year-to-date financial performance has not met our expectations, and the enterprise value of the Company based on the current price of our common stock may fluctuate at or near the recorded level of finite-lived intangible assets, management does not consider these to be events requiring the performance of an impairment test. The Company will continue to monitor its operating results for indicators of impairment and perform additional tests as necessary, which could result in an impairment charge to intangible assets.

 

Recently Issued Accounting Pronouncements  

 

Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 3 – INTANGIBLE ASSETS AND PURCHASE LIABILITY

 

Intangible assets as of March 31, 2019 and December 31, 2018, consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Intangible assets

 

$ 302,737

 

 

$ 302,737

 

Accumulated amortization

 

 

(94,536 )

 

 

(69,308 )

Dividend yield

 

$ 208,201

 

 

$ 233,429

 

 

On April 23, 2018, the Company entered into an agreement with MusicPlay Analytics, LLC (d/b/a Soundstr) (“Soundstr”) whereby the Company acquired the assets of Soundstr, a technology that aims to help businesses pay fairer music license fees based on actual music usage. The Company purchased the assets of Soundstr by agreeing to issue 2,275,000 shares of the Company’s common stock, valued at $68,250, based on the closing market price of the Company’s stock on the date of the agreement, and the Company agreed to assume and pay $234,487 of identified Soundstr obligations within 60 days of April 23, 2018.  The Company assigned the aggregate purchase price of $302,737 to intellectual property which will be amortized over a three (3) year period. 

 

Total amortization expense during the three months ended March 31, 2019 and 2018 was $25,228 and $29,167, respectively, which is included in general and administrative expense in the condensed consolidated statements of operations.

 

NOTE 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 $23,556 and $15,483 and direct cost of revenues of $58,438 and $23,124 during the three months ended March 31, 2019 and 2018, respectively, were recorded using the assets licensed under this agreement.

 

 
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Accrued Payroll to Officers

 

Accrued payroll to officers was $146,325 as of December 31, 2018. During the three months ended March 31, 2019, the Company entered into a conversion and cancellation of debt agreement with its Chief Executive Officer. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’ stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. The difference between the total accrued payroll converted of $52,700, and the market value of the shares issued of $40,654, was recorded as contributed capital of $12,046 in the condensed consolidated statements of stockholders’ deficit for the three months ended March 31, 2019. During the three months ended March 31, 2019 an additional $17,500 of payroll was accrued, resulting in accrued payroll to officers of $111,125 at March 31, 2019.

 

Advances from Employees

 

From time to time, stockholders of the Company advance funds to the Company for working capital purposes. The advances are unsecured, non-interest bearing and due on demand. At December 31, 2018, advances from employees was $14,720.  During the three months ended March 31, 2019, a former employee and stockholder agreed to forgive $14,000 owed by the Company.  The Company recorded the $14,000 as a gain on the settlement of debt, leaving a remaining balance of $720 at March 31, 2019.   

 

Transactions with Former Director and Officer

 

On September 15, 2017, the Company entered into an Advisory Agreement with Louis Mann (“MANN”), a former officer and director with the Company who resigned as an officer and director on August 26, 2015. The Advisory Agreement provides for MANN’s continued and ongoing advisory services to the Company for 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, 2018, $40,000 of cash compensation was owed to MANN under the Advisory Agreements and included in accounts payable and accrued expenses.  On March 4, 2019, the Company and MANN entered into a conversion and cancellation of debt agreement relating to the $40,000 cash compensation balance outstanding at December 31, 2018.  The Company issued 11,428,571 shares of common stock, at $0.0035 per share, as payment in full for the $40,000 balance outstanding at December 31, 2018.  The difference between the total vendor obligations converted of $40,000, and the market value of the shares issued of $30,857, was recorded as a gain on settlement of obligations of $9,143 in other income in the consolidated statements of operations for the three months ended March 31, 2019.

 

During the three months ended March 31, 2019, the Company also incurred costs of $15,000, relating to the agreement and made payments of $2,500, leaving a balance owed to MANN of $12,500 at March 31, 2019, which is included in accounts payable and accrued expenses.

 

NOTE 5 – NOTE PAYABLE (IN DEFAULT)

 

On December 17, 2015, the Company issued a Promissory Note in the principal amount of $9,000. The note is due within 10 business days of the Company receiving a notice of effectiveness of its Form S-1 filed on February 22, 2016. Failure to make payment during that 10 business day period shall constitute an Event of Default, as a result of which the note will become immediately due and payable and the balance will bear interest at 7%. The Company’s Form S-1 was declared effective on 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%. The balance of the note payable outstanding was $9,000 as of March 31, 2019 and December 31, 2018, respectively.

 

 
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NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consist of the following:

 

 

As of

 

March 31,

 

December 31,

 

2019

 

2018

 

Various Convertible Notes

 

(a)

 

$

43,500

 

$

45,000

 

Ylimit, LLC Convertible Notes

 

(b)

 

707,500

 

707,500

 

Golock Capital, LLC Convertible Notes

 

(c)

 

302,067

 

302,067

 

Other Convertible Notes

 

(d)

 

424,731

 

426,964

 

Total Convertible Notes

 

1,477,798

 

1,484,531

 

Discount

 

(146,700

)

 

(249,241

)

Convertible notes, net

 

$

1,331,098

 

$

1,232,290

_____________ 

(a)

In August 2014 the Company issued a series of convertible notes with various interest rates ranging up to 10% per annum. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a “pre-money” valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a “pre-money” valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The notes are due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The balance of the notes outstanding was $45,000 as of December 31, 2018. On March 4, 2019, a note holder elected to forgive and cancel their outstanding convertible note balance of $1,500, which the Company recorded as a gain on extinguishment of debt in the accompanying condensed consolidated statement of operations.  The balance of the notes outstanding was $43,500 as of March 31, 2019, of which $28,500 was due to related parties.

 

(b)

On December 31, 2018, the aggregate convertible principal note balance to YLimit, LLC was $705,500 and the related debt discount was $70,078.  The convertible notes have an interest rate of 10% per annum, a maturity date of May 9, 2019, and convertible into shares of common stock at 85% of the per share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. At March 31, 2019, the balance of notes outstanding was $707,500 and the balance of the debt discount was $6,330.

 

(c)

At December 31, 2018, the aggregate convertible notes balance to Golock Capital, LLC (“Lender”) was $302,067.  The convertible notes have an interest rate of 10% per annum and maturity dates ranging from June 1, 2018 to November 1, 2018, and are convertible into shares of common stock of the Company at the lower of (i) $0.015 per share or, (ii) 58% of the lowest closing bid price in the 20 trading days prior to the day that the Lender requests conversion.  At March 31, 2019, the balance of the notes outstanding was $302,067 but is subject to dispute with said holder as to the actual principal amount and interest calculations.

 

(d)

At December 31, 2018, the aggregate convertible notes balance to five lenders was $426,964 and the related debt discount was $179,162.  The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018 to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 58% of the lowest trading price for the Company’s common stock during the prior twenty (20) trading day period, and for one lender, no lower than $0.035 per share.  During the three months ended March 31, 2019, the Company entered into additional notes of $173,000, interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020 to June 19, 2020 at conversion terms comparable to the terms above. 

 

During the three months ended March 31, 2019, the lenders elected to convert a portion of the Company’s outstanding principal and interest balances into the Company’s stock.  In aggregate, the Company converted outstanding aggregate principal and interest balances of $186,574 into 127,152,659 shares of common stock with a fair value of $400,947, or $0.0015 per share.  The aggregate difference between the total principal and interest converted of $186,574, and the market value of the shares issued of $400,947, was recorded as a loss on settlement of notes payable of $214,373 in the condensed consolidated statements of operations for the three months ended March 31, 2019.  At March 31, 2019, the aggregate balance of the notes outstanding was $424,431 and the related debt discount was $140,370.

 

 
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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 Consolidated Statement of Operations. The discount is being amortized using the effective interest rate method over the life of the debt instruments.

 

The balance of the unamortized discount at December 31, 2018, was $249,241. During the three months ended March 31, 2019, the Company issued $173,000 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $152,065, of which $82,306 was recorded as a valuation discount, and the remaining $69,759 was recorded as a financing cost.  During the three months ended March 31, 2019, amortization of debt discount was $184,847. The unamortized balance of the debt discount was $146,700 as of March 31, 2019.

 

For the purposes of Balance Sheet presentation, convertible notes payable have been presented as follows:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Convertible notes payable, net

 

$ 1,302,598

 

 

$ 1,202,290

 

Convertible notes payable, related party, net

 

 

28,500

 

 

 

30,000

 

Total

 

$ 1,331,098

 

 

$ 1,232,290

 

 

NOTE 7 – DERIVATIVE LIABILITY

 

The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 6 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events 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 March 31, 2019 and December 31, 2018, the derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following assumptions:

  

 

 

March 31,

2019

 

 

Issued During

2019

 

 

December 31,

2018

 

 

 

 

 

 

 

 

 

 

 

Exercise Price

 

$

0.0009 – 0.035

 

 

$

0.001 – 0.035

 

 

$

0.005 – 0.035

 

Stock Price

 

$ 0.0014

 

 

$

0.020 - 0.004

 

 

$ 0.016

 

Risk-free interest rate

 

 

2.40 %

 

2.41 – 2.57

 

 

2.59 %

Expected volatility

 

 

385 %

 

385% - 388

 

 

293 %

Expected life (in years)

 

 

1.00

 

 

1.00 – 1.36

 

 

 

1.00

 

Expected dividend yield

 

 

0 %

 

 

0 %

 

 

0 %

Fair Value:

 

$ 873,825

 

 

$ 152,065

 

 

$ 1,744,601

 

  

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.

 

 
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During the three months ended March 31, 2019, the Company recognized $633,110 as other income, which represented the change in the value of the derivative from the respective prior period. In addition, the Company recognized derivative liabilities of $152,065 upon issuance of convertible notes and recognized a gain on extinguishment of derivative liabilities of $389,730 upon the conversion of convertible notes during the period.

 

NOTE 8 – STOCKHOLDERS’ DEFICIT

 

Common stock returned by a director or officer

 

On March 13, 2019, a former Company director voluntarily returned 4,555,918 shares of Company common stock to Treasury. 

 

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 was 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 March 31, 2019, the Company had not yet issued 5,024,352 shares of common stock with a value of $247,523. 

 

Warrants

 

A summary of warrants for the year ended 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

 

 

-

 

 

 

-

 

Warrants exercised

 

 

-

 

 

 

-

 

Warrants expired or forfeited

 

 

-

 

 

 

-

 

Balance outstanding, March 31, 2019

 

 

8,004,708

 

 

$ 0.014

 

Balance exercisable, March 31, 2019

 

 

8,004,708

 

 

$ 0.014

 

 

Information relating to outstanding warrants at March 31, 2019, summarized by exercise price, is as follows: 

 

 

 

 

Outstanding

 

 

Exercisable

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

Exercise Price Per

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

Average

 

 

Share

 

 

Shares

 

 

Life (Years)

 

 

Exercise Price

 

 

Shares

 

 

Exercise Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ 0.010 - 0.015

 

 

 

8,004,708

 

 

 

1.69

 

 

$ 0.014

 

 

 

8,004,708

 

 

$ 0.014

 

 

The weighted-average remaining contractual life of warrants outstanding and exercisable at March 31, 2019 is 1.89 years. Both the outstanding and exercisable warrants outstanding at March 31, 2019 had no intrinsic value.

 

 
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NOTE 9 – COMMITMENT AND CONTINGENCIES

 

Joint Venture Agreement – Music Reports, Inc.

 

On September 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com), , will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform. The initial term of the JV is for six (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue of a quarterly basis. As of March 31, 2019, no net revenue was generated from the JV.

 

Litigation

 

On November 27, 2018, Stout Law Group, P.A., the former counsel for the company and an affiliate of Matheau J. Stout, filed a Federal Complaint in the United States District Court for the District of Maryland (Stout Law Group, PA, v. VNUE, Inc.”, Civil Action No 1:18-CV-03614 JKB) for outstanding legal fees and other damages for work provided during the 2015 and 2016 fiscal years. The Company denies any liability therein and after negotiation with the plaintiff, the foregoing action was voluntarily withdrawn on February 27, 2019 by the plaintiff. The Company has a recorded liability of approximately $72,000 as of March 31, 2019 and December 31, 2018 to Stout Law Group, S.A. for services rendered which are the subject of settlement negotiations.

 

Artist Agreement

 

On October 27, 2015, the Company entered into an Artist Agreement with I Break Horses, a Swedish duo based in Stockholm. The Artist Agreement is effective October 27, 2015 and has a term lasting as long as I Break Horses artist recordings are available via the VNUE Service. Under the terms of the Artist Agreement, the Company shall handle rights clearing and distribution for I Break Horses recordings and receive 30% of the Net Income generated thereby. As of March 31, 2019, the Company did not earn any revenue under this agreement.

 

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent to March 31, 2019, several convertible note holders (see Note 6) elected to convert $68,196 of outstanding principal and interest into 81,315,181 shares of the Company’s common at $0.0008 per share.

 

Subsequent to March 31, 2019, the Company entered into an amendment to convertible notes with two lenders that extended the maturity dates to July 31, 2019 and beginning on May 1, 2019, no cash interest payments shall be required in the aggregate of at least $14,000 a month.  In addition, the conversion price discount changed to 50% from 58%, and the principal face amount of the notes increased in the aggregate by approximately $12,000.  The Company is also required to issue the note holders warrants, with a four year life, for an aggregate of 15,800,319 shares of the Company’s common stock at an exercise price of $0.00475. 

 

On May 9, 2019, the Company and Ylimit LLC (see Note 6), extended the maturity date of its convertible notes from May 9, 2019 to August 9, 2019.

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The statements in this quarterly report that are not reported financial results or other historical information are “forward-looking statements” 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”, “projects”, “expects”, “intends”, “believes”, “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”). 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”, “us”, “our” and the “Company” mean VNUE, Inc. and its subsidiaries, unless the context requires otherwise.

 

All dollar amounts in this annual report refer to US dollars unless otherwise indicated.

 

Overview

 

We were incorporated as a Nevada corporation on April 4, 2006.

 

Overview of our Current Business

 

The live music and entertainment space is constantly searching for new monetization outlets. Music licensing and royalties are particular “hot button” issues in the industry. We believe that we have developed solutions that create new revenue streams, and simultaneously helps to protect the rights of the creators and will help ensure they are properly compensated. This befits not only artist, labels, publishers and live venues but the fans as well.

 

Through VNUE, Inc., our wholly owned subsidiary, we now carry on business as a live entertainment music technology company that offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music. 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 related marks and names are not owned by the Company and are owned or utilized by RockHose Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to Set.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to them.

 

 
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The following discussion and analysis of our results of operations and financial condition for the three months ended March 31, 2019 and 2018, should be read in conjunction with our condensed consolidated financial statements and related notes included in this report. We are in the process of completing development of our products and services and therefore had minimal revenues during this quarter.

 

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

 

Revenues

 

Our revenues for the three months ended March 31, 2019 and 2018, was $23,556 and $15,483, respectively. The revenues resulted from the use of the assets licensed from DiscLive discussed above.

 

Direct Costs of Revenues

 

Our direct costs of revenues for the three months ended March 31, 2019 and 2018, was $58,438 and $23,124, respectively. The direct costs of revenues resulted from the use of the assets licensed from DiscLive.

 

Research and Development

 

Our research and development expenses for the three months ended March 31, 2019 and 2018, was $2,081 and $3,676, respectively. The decrease in research and development expenses relative to last year reflected the decrease in full time personnel and contract labor caused by our lack of sufficient working capital.

 

General and Administrative Expenses

 

Our general and administrative expenses for the three months ended March 31, 2019 and 2018, was $125,568 and $185,657, respectively. The decrease in general and administrative expenses relative to last year was due to decreased professional fees.

 

Other Income (Expenses), Net

 

We recorded other income, net of $536,074 for the three months ended March 31, 2019, compared to other income of $3,594 for the three months ended March 31, 2018. The change in other income (expenses), net, was primarily due to the change in the fair value of derivative liabilities of $358,786 and the change in financing costs of $26,306.  In addition, we recorded a gain on the extinguishment of derivative liability of $389,730, a loss on settlement of convertible debt of $198,873, and a gain on settlement a vendor obligation of $9,143, all of which did not occur during the prior year period.

 

Net Income (Loss)

 

As a result of the foregoing revenues, direct costs of revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net income for the three months ended March 31, 2019 was $373,543, compared to our net loss for the three months ended March 31, 2018 of $193,380.

 

Liquidity and Capital Resources

 

Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans.

 

As of March 31, 2019, we had cash and cash equivalents of $53,405.

 

We had negative cash flows from operating activities of $137,786 for the three months ended March 31, 2019, compared with negative cash flows from operating activities of $104,362 for the three months ended March 31, 2018. Our negative cash flows was to fund our operating losses.

 

We generated cash flows from financing activities of $173,000 for the three months ended March 31, 2019, as compared to $110,000 for the three months ended March 31, 2018. The cash flows from financing activities for the both the three months ended March 31, 2019 and 2018, was from proceeds received from the issuance of convertible notes.

 

 
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Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Going Concern

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, during the three months ended March 31, 2019, the Company incurred an operating loss of $162,531, used cash in operations of $137,786 and had a stockholders’ deficit of $3,192,598 as of March 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2018 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At March 31, 2019, the Company had cash on hand in the amount of $54,405. Management estimates that the current funds on hand will be sufficient to continue operations through June 2019. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case or equity financing.

 

We have not generated meaningful revenues, have incurred losses since our inception, and rely upon the sale of our common stock and loans from related and other parties to fund our operations. While we do plan to generate increasing revenues in the foreseeable future, 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.

 

Convertible Notes Payable

 

Ylimit, LLC

 

On December 31, 2018, the aggregate convertible principal note balance to YLimit, LLC was $705,500 and the related debt discount was $70,078.  The convertible notes have an interest rate of 10% per annum and maturity date of May 9, 2019, and are convertible into shares of common stock at 85% of the per share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. At March 31, 2019, the balance of notes outstanding was $707,500 and the balance of the debt discount was $6,330.

 

Golock Capital, LLC

 

At December 31, 2018, the aggregate convertible notes balance to Golock Capital, LLC (“Lender”) was $302,067.  The convertible notes have an interest rate of 10% per annum and maturity dates ranging from June 1, 2018 to November 1, 2018, and are convertible into shares of common stock of the Company at the lower of (i) $0.015 per share or, (ii) 58% of the lowest closing bid price in the 20 trading days prior to the day that the Lender requests conversion.  At March 31, 2019, the balance of the notes outstanding was $302,067. 

 

Other Convertible Note Holders

 

At December 31, 2018, the aggregate convertible notes balance to five lenders was $426,964 and the related debt discount was $179,162.  The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018 to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 58% of the lowest trading price for the Company’s common stock during the prior twenty (20) trading day period, and for one lender, no lower than $0.035 per share.  During the three months ended March 31, 2019, the Company entered into additional notes of $173,000, interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020 to June 19, 2020 at conversion terms comparable to the terms above.  Additionally, these lenders elected to convert an aggregate of $175,233 of outstanding principal, and $11,341 of accrued interest, into 127,152,659 shares of the Company’s common at an average of $0.0015 per share.   The aggregate balance of the notes outstanding, and the related debt discount was $424,731 and $140,370, respectively, at March 31, 2019.

 

 
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Critical Accounting Policies and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which were prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

 

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this prospectus, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations. (See 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.

 

Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Stock-Based Compensation

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by FASB where the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB where the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Options granted to non-employees are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company’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 Statement herein for management’s discussion of recent accounting pronouncements.

 

 
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Table of Contents

 

Selected Financial Data

 

Not applicable.

 

Item 3. Quantitative and Qualitative Disclosures of Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this quarterly report, an evaluation was carried out by our management, with the participation of our principal executive officer and principal accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2018. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

 

Based on that evaluation, and the material weaknesses outlined below under Internal Control Over Financial Reporting, our principal executive officer and principal accounting officer concluded, as of the end of the period covered by this annual report, that, due to weaknesses in our internal controls described below, our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting information required to be disclosed, within the time periods specified in the SEC’s rules and forms, and that such information may not be accumulated and communicated to our principal executive officer and principal accounting officer to allow timely decisions regarding required disclosures.

 

Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our principal executive officer and principal accounting officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 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.

 

2.

Lack of a formal review process that includes multiple levels of review.

 

3.

Lack of adequate policies and procedures for accounting for financial transactions.

 

4.

Lack of independent board member(s)

 

5.

Lack of independent audit committee

 

Management is currently evaluating remediation plans for the above control deficiencies.

 

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, 2017 based on criteria established in Internal Control—Integrated Framework issued by COSO.

  

Changes in Internal Control

 

During the three months ended March 31, 2019, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

On November 27, 2018, Stout Law Group, P.A., the former counsel for the company and an affiliate of Matheau J. Stout, filed a Federal Complaint in the United States District Court for the District of Maryland (Stout Law Group, PA, v. VNUE, Inc.”, Civil Action No 1:18-CV-03614 JKB) for outstanding legal fees and other damages for work provided during the 2015 and 2016 fiscal years. The Company denies any liability therein and after negotiation with the plaintiff, the foregoing action was voluntarily dismissed on February 27, 2019 by the plaintiff and the Company has agreed to no liability. The Company has a recorded liability of approximately $72,000 as of December 31, 2018 and 2017 to Stout Law Group, S.A. for services rendered. 

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

There were no defaults upon senior securities during the period ended March 31, 2019.

 

ITEM 4. MINING SAFETY DISCLOSURES

 

N/A

 

ITEM 5. OTHER INFORMATION

 

None.

 

 
21
 
Table of Contents

 

ITEM 6. EXHIBITS

 

Exhibits

 

Exhibit Number

 

Description of Exhibits

3.1

 

Articles of Incorporation (1)

3.2

 

Bylaws (2)

31.1*

 

Certification of the Chief Executive Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act

32.1*

 

Certification of the Chief Executive Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Schema

101.CAL

 

XBRL Taxonomy Calculation Linkbase

101.DEF

 

XBRL Taxonomy Definition Linkbase

101.LAB

 

XBRL Taxonomy Label Linkbase

101.PRE

 

XBRL Taxonomy Presentation Linkbase

___________

*

Filed herein

 

(1)

Included as an exhibit with our Form SB-2 filed October 13, 2006.

(2)

Included as an exhibit with our Form 8-K filed February 1, 2011.

 

 
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SIGNATURES

 

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.

 

Date: May 20, 2019

By:

/s/ Zach Bair

 

Zach Bair

 

Chief Executive Officer and Principal Accounting Officer

 

 
23

 

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