U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
|
x |
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30,
2015
|
¨ |
TRANSITION REPORT UNDER 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 |
98-054-3851 |
(State of Other Jurisdiction of incorporation or organization) |
(I.R.S. Employer I.D. No.) |
104 West 29th Street, 11th Floor, New York,
NY 10001
(Address of Principal Executive Offices)
Issuer’s Telephone Number: 857-777-6190
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 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)
Large accelerated filer ¨ |
Accelerated filer ¨ |
Non-accelerated filer ¨ |
Smaller reporting company x |
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding
of each of the Registrant’s classes of common stock, as of the latest practicable date:
December 4, 2015
Common Voting Stock: 639,806,112
VNUE, INC.
INDEX TO FORM
10-Q FILING
FOR THE THREE
MONTHS ENDED JUNE 30, 2015
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
The accompanying interim 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. Except as disclosed herein, there has been no material change in the
information disclosed in the notes to the consolidated financial statements included in the Company's 8-K/A filed on November 4,
2015. 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 three months ended June 30, 2015 are not necessarily indicative of the results that can be expected for the year ending
December 31, 2015.
Vnue, Inc.
June 30, 2015 and 2014
Index to the Consolidated Financial Statements
VNUE Inc.
Consolidated Balance Sheets
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
(Unaudited) | | |
| |
| |
| | |
| |
Assets | |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash | |
$ | 125,251 | | |
$ | 46 | |
Prepaid expenses | |
| 187,370 | | |
| - | |
Advances to related party | |
| 52,037 | | |
| - | |
| |
| | | |
| | |
Total current assets | |
| 364,658 | | |
| 46 | |
| |
| | | |
| | |
Intangible Assets | |
| | | |
| | |
Intangible assets | |
| 354,000 | | |
| 354,000 | |
Accumulated amortization | |
| (17,700 | ) | |
| (5,900 | ) |
| |
| | | |
| | |
Intangible assets , net | |
| 336,300 | | |
| 348,100 | |
| |
| | | |
| | |
Total assets | |
$ | 700,958 | | |
$ | 348,146 | |
| |
| | | |
| | |
Liabilities and Stockholders' Equity (Deficit) | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable | |
$ | 96,240 | | |
$ | 105,943 | |
Accrued expense | |
| 2,186 | | |
| - | |
Note payable | |
| 50,000 | | |
| - | |
| |
| | | |
| | |
Total current liabilities | |
| 148,426 | | |
| 105,943 | |
| |
| | | |
| | |
Long-Term Liabilities | |
| | | |
| | |
Advances from stockholders | |
| 24,745 | | |
| 86,736 | |
Convertible notes payable, net | |
| 21,639 | | |
| 21,643 | |
Derivative liabilities | |
| 96,451 | | |
| 215,748 | |
| |
| | | |
| | |
Total long-term liabilities | |
| 142,835 | | |
| 324,127 | |
| |
| | | |
| | |
Total liabilities | |
| 291,261 | | |
| 430,070 | |
| |
| | | |
| | |
Commitment and contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' Equity (Deficit) | |
| | | |
| | |
Preferred stock par value $0.0001: 20,000,000 shares authorized; 0 and
7,425,370 shares issued and outstanding, respectively | |
| - | | |
| 743 | |
Common stock par value $0.0001: 750,000,000 shares authorized; 639,496,220
and 445,408,977 shares issued and outstanding, respectively | |
| 63,950 | | |
| 44,541 | |
Additional paid-in capital | |
| 1,548,466 | | |
| (75,827 | ) |
| |
| | | |
| | |
Accumulated deficit | |
| (1,202,719 | ) | |
| (51,381 | ) |
| |
| | | |
| | |
Total Stockholders' Equity (Deficit) | |
| 409,697 | | |
| (81,924 | ) |
| |
| | | |
| | |
Total Liabilities and Stockholders' Equity (Deficit) | |
$ | 700,958 | | |
$ | 348,146 | |
See accompanying notes to the consolidated
financial statements.
VNUE Inc.
Consolidated Statements of Operations
For the Six months ended June 30, 2015 and
2014
| |
For the Six Months | | |
For the Three Months | | |
For the Six Months | | |
For the Three Months | |
| |
Ended | | |
Ended | | |
Ended | | |
Ended | |
| |
June 30, 2015 | | |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2014 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| | |
| | |
| |
Sales | |
$ | 236 | | |
$ | 126 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Cost of sales | |
| 178,390 | | |
| 154,423 | | |
| 19,230 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Gross margin | |
| (178,154 | ) | |
| (154,297 | ) | |
| (19,230 | ) | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Acquisition-related costs | |
| 819,105 | | |
| 819,105 | | |
| - | | |
| - | |
Professional fees | |
| 137,980 | | |
| 104,435 | | |
| 12,594 | | |
| - | |
General and administrative | |
| 42,214 | | |
| 32,540 | | |
| 24,775 | | |
| 72 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 999,299 | | |
| 956,080 | | |
| 37,369 | | |
| 72 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from Operations | |
| (1,177,453 | ) | |
| (1,110,377 | ) | |
| (56,599 | ) | |
| (72 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other (income) expenses | |
| | | |
| | | |
| | | |
| | |
Change in fair value of derivative liability | |
| (119,297 | ) | |
| (25,809 | ) | |
| - | | |
| - | |
Financing cost | |
| 50,000 | | |
| - | | |
| - | | |
| - | |
Debt discount | |
| 40,996 | | |
| 23,201 | | |
| - | | |
| - | |
Interest expense | |
| 2,186 | | |
| 2,186 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Other (income) expenses, net | |
| (26,115 | ) | |
| (422 | ) | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Loss before income tax provision | |
| (1,151,338 | ) | |
| (1,109,955 | ) | |
| (56,599 | ) | |
| (72 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income tax provision | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (1,151,338 | ) | |
$ | (1,109,955 | ) | |
$ | (56,599 | ) | |
$ | (72 | ) |
| |
| | | |
| | | |
| | | |
| | |
Earnings per share | |
| | | |
| | | |
| | | |
| | |
- Basic and Diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic and Diluted | |
| 483,102,290 | | |
| 518,901,465 | | |
| 445,408,977 | | |
| 445,408,977 | |
See accompanying notes to
the consolidated financial statements.
VNUE Inc.
Consolidated Statement of Changes in Members'
Capital and Stockholders' Equity (Deficit)
For the six months ended June 30, 2015
(Unaudited)
| |
Preferred Stock
par value $0.0001 | | |
Common Stock
par value $0.0001 | | |
| | |
| | |
| | |
| |
| |
Number of
Shares | | |
Amount | | |
Number of
Shares | | |
Amount | | |
Members' Capital | | |
Additional
Paid-in
Capital | | |
Accumulated
Deficit | | |
Total Members'
and
Stockholders' Equity (Deficit) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2013 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Members' contributions | |
| | | |
| | | |
| | | |
| | | |
| 100,000 | | |
| | | |
| | | |
| 100,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Founders' shares issued | |
| | | |
| | | |
| 434,827,877 | | |
| 43,483 | | |
| | | |
| (43,483 | ) | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for membership
transfer | |
| | | |
| | | |
| 10,581,100 | | |
| 1,058 | | |
| (100,000 | ) | |
| 98,942 | | |
| | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of proferred
shares for the acquisition of intangible assets on July 23, 2014 | |
| 7,425,370 | | |
| 743 | | |
| | | |
| | | |
| | | |
| 203,257 | | |
| | | |
| 204,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the period from January 1,
2014 through December 2, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (334,543 | ) | |
| (334,543 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Reclassification of accumulated
deficit as of December 2, 2014 to additional paid-in capital | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (334,543 | ) | |
| 334,543 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the period
from December 3, 2014 through December 31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (51,381 | ) | |
| (51,381 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2014 | |
| 7,425,370 | | |
| 743 | | |
| 445,408,977 | | |
| 44,541 | | |
| - | | |
| (75,827 | ) | |
| (51,381 | ) | |
| (81,924 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common shares issued for
cash during quarter ended March 31, 2015 | |
| | | |
| | | |
| 4,003,832 | | |
| 400 | | |
| | | |
| 109,600 | | |
| | | |
| 110,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common shares issued for
cash during the period from April 1, 2015 thru May 28, 2015 | |
| | | |
| | | |
| 20,977,309 | | |
| 2,098 | | |
| | | |
| 574,222 | | |
| | | |
| 576,320 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common shares issued for conversion of preferred
shares on May 29, 2015 | |
| (7,425,370 | ) | |
| (743 | ) | |
| 7,425,370 | | |
| 743 | | |
| | | |
| | | |
| | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Reverse acquisition adjustment
on May 29, 2015 | |
| | | |
| | | |
| 126,866,348 | | |
| 12,687 | | |
| | | |
| (12,523 | ) | |
| | | |
| 164 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for acquisition-related
costs on May 29, 2015 | |
| | | |
| | | |
| 29,814,384 | | |
| 2,981 | | |
| | | |
| 816,124 | | |
| | | |
| 819,105 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for 3rd
party consulting services on June 29, 2015 | |
| | | |
| | | |
| 5,000,000 | | |
| 500 | | |
| | | |
| 136,870 | | |
| | | |
| 137,370 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,151,338 | ) | |
| (1,151,338 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30,
2015 | |
| - | | |
$ | - | | |
| 639,496,220 | | |
$ | 63,950 | | |
$ | - | | |
$ | 1,548,466 | | |
$ | (1,202,719 | ) | |
$ | 409,697 | |
See accompanying notes to the consolidated
financial statements.
VNUE Inc.
Consolidated Statements of Cash Flows
| |
For the Six Months | | |
For the Six Months | |
| |
Ended | | |
Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| |
Cash Flows from Operating Activities | |
| | | |
| | |
Net loss | |
$ | (1,151,338 | ) | |
$ | (56,599 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Amortization | |
| 11,800 | | |
| - | |
Change in fair value of derivative liabilities | |
| (119,297 | ) | |
| - | |
Note issued for financing cost | |
| 50,000 | | |
| - | |
Debt discount | |
| 40,996 | | |
| - | |
Shares issued for acquisition-related costs | |
| 819,105 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expense | |
| (50,000 | ) | |
| - | |
Accounts payable | |
| (9,539 | ) | |
| 25 | |
Accrued expense | |
| 2,186 | | |
| - | |
| |
| | | |
| | |
Net Cash Used in Operating Activities | |
| (406,087 | ) | |
| (56,574 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Advances to related party | |
| (52,037 | ) | |
| - | |
| |
| | | |
| | |
Net cash used in Investing Activities | |
| (52,037 | ) | |
| - | |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Advances from (repayment to) stockholder | |
| (61,991 | ) | |
| 56,574 | |
Repayment of convertible notes payable | |
| (41,000 | ) | |
| - | |
Proceeds from issuance of common shares | |
| 686,320 | | |
| - | |
| |
| | | |
| | |
Net Cash Provided by Financing Activities | |
| 583,329 | | |
| 56,574 | |
| |
| | | |
| | |
Net Change in Cash | |
| 125,205 | | |
| - | |
| |
| | | |
| | |
Cash - beginning of the reporting period | |
| 46 | | |
| - | |
| |
| | | |
| | |
Cash - end of the reporting period | |
$ | 125,251 | | |
$ | - | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
| |
| | | |
| | |
Interest paid | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Income tax paid | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-cash Financing and Investing Activities | |
| | | |
| | |
Fully-vested, non-forfeitable shares issued to 3rd party for future services | |
$ | 137,370 | | |
$ | - | |
See accompanying notes to the consolidated
financial statements.
Vnue, Inc.
June 30, 2015 and 2014
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Organization and Operations
Vnue, Inc. (formerly Tierra Grande
Resources, Inc.)
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. TGRI engaged in the acquisition and exploration of mineral properties and was inactive prior to the acquisition
of Vnue, Inc. (a company incorporated under the laws of the State of Washington).
Vnue Washington and Consolidated
Entities
Vnue, LLC
Vnue LLC ("Vnue LLC" or “Predecessor”)
is a limited liability company organized under the laws of the State of Delaware on August 1, 2013 which began operations in January
2014. On December 3, 2014, Vnue LLC filed a certificate of merger and merged into VNUE Washington with VNUE Washington as the surviving
corporation. VNUE LLC offers a technology driven solution for Artist, Venues and Festivals to automate the capturing, publishing
and monetization of the content.
Vnue, Inc.
VNUE, Inc. ("VNUE Washington")
was incorporated on October 16, 2014 under the laws of the State of Washington for the sole purpose of acquiring all of the membership
interests of the Predecessor.
On December 3, 2014, the Company issued
an aggregate of 7,800,001 shares of the newly formed corporation’s common stock to the members of the Predecessor for all
of their membership interests in the Predecessor. No value was given to the common stock issued by the newly formed corporation.
The acquisition process utilizes the capital structure of VNUE Washington and the assets and liabilities of the Predecessor, which
are recorded at historical cost.
The Company applied paragraph 505-10-S99-3
of the FASB Accounting Standards Codification (formerly Topic 4B of the Staff Accounting Bulletins (“SAB”) (“SAB
Topic 4B”) issued by the United States Securities and Exchange Commission (the “SEC”), by reclassifying the Predecessor’s
accumulated deficit of $334,543 at December 3, 2014 to additional paid-in capital.
The accompanying financial statements have
been prepared as if the Company had its corporate capital structure as of the date of the incorporation of the Predecessor.
Vnue Technology Inc.
Vnue Technology Inc. ("Vnue Tech")
was incorporated under the laws of the State of Washington on October 16, 2014, with VNUE Washington owning 90% of the shares and
10% owned by one of VNUE Washington's directors. Vnue Tech is currently inactive.
Vnue Media Inc.
Vnue Media Inc. ("Vnue Media")
was incorporated under the laws of the State of Washington on October 16, 2014, with VNUE Washington owning 89% of the shares and
11% owned by one of VNUE Washington's directors. Vnue Media is currently inactive.
Acquisition of Vnue Washington Treated
as a Reverse Acquisition
On May 29, 2015, Vnue, Inc. (formerly Tierra
Grande Resources Inc.) (the “TGRI”) closed the Agreement and Plan of Merger (the “Merger Agreement”), initially
entered into on April 13, 2015 with Vnue Washington and all of the stockholders of Vnue Washington.
Upon closing of the Merger Agreement a
total of 507,629,872 shares of TGRI common stock were issued as follows: (i) all shares of Vnue Washington stock of any class or
series issued and outstanding immediately prior to the closing of the Merger Agreement were automatically converted into and exchanged
for an aggregate of 477,815,488 fully paid and non-assessable shares of TGRI common stock; and (ii) an aggregate of 29,814,384
shares of TGRI common stock were issued to Matheau J. W. Stout, Esq. as payment for services performed prior to and in connection
with the Merger. The number of TGRI common shares issued to Vnue Washington's stockholders for the acquisition of all shares of
Vnue Washington represented approximately 79.0% of the issued and outstanding common stock immediately after the closing of the
Merger Agreement. The board of directors and the members of the management of TGRI resigned and the board of directors and the
member of the management of Vnue Washington became the board of directors and the member of the management of the combined entities
upon closing of the Merger Agreement.
As a result of the controlling financial
interest of the former stockholders of Vnue Washington, for financial statement reporting purposes, the merger between TGRI and
Vnue Washington was treated as a reverse acquisition, with Vnue Washington deemed the accounting acquirer and TGRI deemed the accounting
acquiree under the acquisition method of accounting in accordance with Section 805-10-55 of the FASB Accounting Standards Codification.
The reverse acquisition is deemed a capital transaction in substance whereas the assets and liabilities of Vnue Washington (the
accounting acquirer) are carried forward to TGRI (the legal acquirer and the reporting entity) at their carrying value before the
combination and the equity structure (the number and type of equity interests issued) of Vnue Washington is being retroactively
restated using the exchange ratio established in the Merger Agreement to reflect the number of shares of TGRI issued to effectuate
the acquisition. The number of common shares issued and outstanding and the amount recognized as issued equity interests
in the consolidated financial statements is determined by adding the number of common shares deemed issued and the issued equity
interests of Vnue Washington immediately prior to the business combination to the unredeemed shares and the fair value of
TGRI determined in accordance with the guidance in ASC Section 805-40-55 applicable to business combinations, i.e. the equity structure
(the number and type of equity interests issued) in the consolidated financial statements immediately post the combination reflects
the equity structure of TGRI, including the equity interests the legal parent issued to effect the combination.
Note 2 - Significant and Critical Accounting
Policies and Practices
The
Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of
accounting policies and their application. Critical accounting policies and practices are those that are both most important to
the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective,
or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted
accounting principles.
Basis of Presentation – Unaudited
Interim Financial Information
The unaudited interim financial statements
and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities
and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial
statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily
indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the
financial statements of Vnue Washington for the year ended December 31, 2014 and notes thereto contained in Vnue Inc.’s Current
Report amendment No. 1 to Form 8-K as filed with the SEC.
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. The Company’s critical accounting estimates and assumptions
affecting the financial statements were:
| (i) | Assumption as a going concern: Management assumes
that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation
of liabilities in the normal course of business; |
| (ii) | Fair value of long-lived assets:
Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than
originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated
useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review:
(i) significant under-performance or losses of assets relative to expected historical or projected future operating results;
(ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner
or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry
or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price
for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment
indicators at least annually and more frequently upon the occurrence of such events. |
| (iii) | Valuation allowance for deferred tax assets: Management
assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”)
carry–forwards for Federal income tax purposes that may be offset against future taxable income was considered more likely
than not and accordingly, the potential tax benefits of the net loss carry-forwards are recorded as a deferred tax benefit. Management
made this assumption based on its ability to raise additional funds to support its daily operations by way of a public or private
offering, among other factors. |
| (iv) | Estimates and assumptions used in valuation of derivative
liabilities and equity instruments: Management estimates expected term of share options and similar instruments, expected volatility
of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk
free rate(s) to value derivative liabilities, share options and similar instruments. |
These significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
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.
Reverse Acquisition
Identification of the Accounting
Acquirer
The Company considers factors in ASC paragraphs
805-10-55-10 through 55-15 in identifying accounting acquirer. The Company uses the existence of a controlling financial interest
to identify the acquirer—the entity that obtains control of the acquiree. Other pertinent facts and circumstances also shall
be considered in identifying the acquirer in a business combination effected by exchanging equity interests, including the following:
a. The relative voting rights in the combined entity after the business combination. The acquirer usually is the combining entity
whose owners as a group retain or receive the largest portion of the voting rights in the combined entity taking into consideration
the existence of any unusual or special voting arrangements and options, warrants, or convertible securities. b. The existence
of a large minority voting interest in the combined entity if no other owner or organized group of owners has a significant voting
interest. The acquirer usually is the combining entity whose single owner or organized group of owners holds the largest minority
voting interest in the combined entity. c. The composition of the governing body of the combined entity. The acquirer usually is
the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing
body of the combined entity. d. The composition of the senior management of the combined entity. The acquirer usually is the combining
entity whose former management dominates the management of the combined entity. e. The terms of the exchange of equity interests.
The acquirer usually is the combining entity that pays a premium over the pre-combination fair value of the equity interests
of the other combining entity or entities. The acquirer usually is the combining entity whose relative size (measured in,
for example, assets, revenues, or earnings) is significantly larger than that of the other combining entity or entities.
Pursuant to ASC Paragraph 805-40-05-2 as
one example of a reverse acquisition, a private operating entity may arrange for a public entity to acquire its equity interests
in exchange for the equity interests of the public entity. In this situation, the public entity is the legal acquirer because it
issued its equity interests, and the private entity is the legal acquiree because its equity interests were acquired. However,
application of the guidance in paragraphs 805-10-55-11 through 55-15 results in identifying: a. The public entity as the acquiree
for accounting purposes (the accounting acquiree) and b. The private entity as the acquirer for accounting purposes
(the accounting acquirer).
Measuring the Consideration
Transferred and Non-controlling Interest
Pursuant to ASC Paragraphs 805-40-30-2
and 30-3 in a reverse acquisition, the accounting acquirer usually issues no consideration for the acquiree. Instead, the
accounting acquiree usually issues its equity shares to the owners of the accounting acquirer. Accordingly, the acquisition-date
fair value of the consideration transferred by the accounting acquirer for its interest in the accounting acquiree is based
on the number of equity interests the legal subsidiary would have had to issue to give the owners of the legal parent the same
percentage equity interest in the combined entity that results from the reverse acquisition. The fair value of the number of equity
interests calculated in that way can be used as the fair value of consideration transferred in exchange for the acquiree. The assets
and liabilities of the legal acquiree are measured and recognized in the consolidated financial statements at their pre-combination
carrying amounts (see paragraph 805-40-45-2(a)). Therefore, in a reverse acquisition the non-controlling interest reflects the
non-controlling shareholders’ proportionate interest in the pre-combination carrying amounts of the legal acquiree’s
net assets even though the non-controlling interests in other acquisitions are measured at their fair values at the acquisition
date.
Acquisition-Related
Costs
Pursuant to FASB
ASC Paragraph 805-10-25-23 acquisition-related costs are costs the acquirer incurs to effect a business combination. Those
costs include finder’s fees; advisory, legal, accounting, valuation, and other professional or consulting fees; general administrative
costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity
securities. The acquirer shall account for acquisition related costs as expenses in the periods in which the costs are incurred
and the services are received, with one exception. The costs to issue debt or equity securities shall be recognized in accordance
with other applicable GAAP.
Presentation of Consolidated
Financial Statements Post Reverse Acquisition
Pursuant to ASC Paragraphs 805-40-45-1
and 45-2 consolidated financial statements following a reverse acquisition are issued under the name of the legal parent (accounting
acquiree) but described in the notes as a continuation of the financial statements of the legal subsidiary (accounting acquirer),
with one adjustment, which is to retroactively adjust the accounting acquirer’s legal capital to reflect the legal capital
of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent (the accounting acquiree). Comparative
information presented in those consolidated financial statements also is retroactively adjusted to reflect the legal capital of
the legal parent (accounting acquiree). The consolidated financial statements reflect all of the following: a. The assets and liabilities
of the legal subsidiary (the accounting acquirer) recognized and measured at their pre-combination carrying amounts. b. The assets
and liabilities of the legal parent (the accounting acquiree) recognized and measured in accordance with the guidance in Topic
805 "business combinations". c. The retained earnings and other equity balances of the legal subsidiary (accounting
acquirer) before the business combination. d. The amount recognized as issued equity interests in the consolidated financial statements
determined by adding the issued equity interest of the legal subsidiary (the accounting acquirer) outstanding immediately before
the business combination to the fair value of the legal parent (accounting acquiree) determined in accordance with the guidance
in this Topic applicable to business combinations. However, the equity structure (that is, the number and type of equity interests
issued) reflects the equity structure of the legal parent (the accounting acquiree), including the equity interests the legal parent
issued to effect the combination. Accordingly, the equity structure of the legal subsidiary (the accounting acquirer) is restated
using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent (the accounting
acquiree) issued in the reverse acquisition. e. The non-controlling interest’s proportionate share of the legal subsidiary’s
(accounting acquirer’s) pre-combination carrying amounts of retained earnings and other equity interests as discussed in
paragraphs 805-40-25-2 and 805-40-30-3.
Pursuant to ASC Paragraphs 805-40-45-4
and 45-5 In calculating the weighted-average number of common shares outstanding (the denominator of the earnings-per-share (“EPS”)
calculation) during the period in which the reverse acquisition occurs: a. The number of common shares outstanding from the beginning
of that period to the acquisition date shall be computed on the basis of the weighted-average number of common shares of
the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger
agreement. b. The number of common shares outstanding from the acquisition date to the end of that period shall be the actual number
of common shares of the legal acquirer (the accounting acquiree) outstanding during that period. The basic EPS for each comparative
period before the acquisition date presented in the consolidated financial statements following a reverse acquisition shall be
calculated by dividing (a) by (b): a. The income of the legal acquiree attributable to common shareholders in each of those periods.
b. The legal acquiree’s historical weighted-average number of common shares outstanding multiplied by the exchange ratio
established in the acquisition agreement.
Principles of Consolidation
The Company applies the guidance of Topic
810 “Consolidation” of the FASB Accounting Standards Codification ("ASC") to determine whether and
how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in
which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the
parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary;
(3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC
Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and,
therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding
voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser
percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates
all less-than-majority-owned subsidiaries, if any, in which the parent’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 |
% |
The consolidated financial statements include
the accounts of the subsidiaries/entities as of reporting periods end date and for the reporting periods then ended from their
respective dates of incorporation/formation, acquisition or disposition.
All inter-company balances and transactions
have been eliminated.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements
and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted)
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
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 fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s
financial assets and liabilities, such as cash and accounts payable approximate their fair value because of the short maturity
of this instrument.
The Company’s convertible notes payable
approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available
to the Company for similar financial arrangements at June 30, 2015 and December 31, 2014.
The Company’s Level 3 financial liabilities
consist of the derivative financial instruments for which there is no current market for these securities such that the determination
of fair value requires significant judgment or estimation. The Company valued the automatic conditional conversion,
re-pricing/down-round, change of control; default and follow-on offering provisions using a Monte Carlo model, with the assistance
of a valuation specialist, for which management understands the methodologies. These models incorporate transaction details such
as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility,
and holder behavior as of the date of issuance and each balance sheet date.
Transactions involving related parties
cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
Fair Value of Financial Assets and
Liabilities Measured on a Recurring Basis
Level 3 Financial Liabilities
– Derivative Financial Instruments
The Company uses Level 3 of the fair value
hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liability at the end of every reporting
period and recognizes gains or losses in the Statements of Operations that are attributable to the change in the fair value of
the derivative liability.
Carrying Value, Recoverability and
Impairment of Long-Lived Assets
The Company has adopted Section 360-10-35
of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss
shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value.
The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying
amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount
by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20
if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable
long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration
of a previously recognized impairment loss is prohibited.
Pursuant to ASC Paragraph 360-10-35-21
the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate
that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes
in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset
group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in
its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value
of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly
in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period
operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates
continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely
than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously
estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently
upon the occurrence of such events.
Pursuant to ASC Paragraphs 360-10-45-4
and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income
from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from
operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset
(disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes
in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts
of those gains or losses.
Cash Equivalents
The Company considers all highly liquid
investments with maturities of three months or less at the time of purchase to be cash equivalents.
Intangible Assets Other Than Goodwill
The Company has adopted Subtopic 350-30
of the FASB Accounting Standards Codification for intangible assets other than goodwill. Under the requirements, the Company amortizes
the acquisition costs of intangible assets other than goodwill on a straight-line basis over or their estimated useful lives, the
terms of the exclusive licenses and/or agreements, or the terms of legal lives of the respective assets as follows:
|
|
|
|
|
|
Estimated Useful Life (Years) |
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
Upon becoming fully amortized, the related
cost and accumulated amortization are removed from the accounts.
Discount on Debt
The Company allocates the proceeds received
from convertible debt instruments between the liability component and equity component, and records the conversion feature as a
liability in accordance with subtopic 470-20 of the FASB Accounting Standards Codification (“Subtopic 470-20”). The
conversion feature and certain other features that are considered embedded derivative instruments, such as a conversion reset provision,
a penalty provision and redemption option, have been recorded at their fair value as its fair value can be separated from the convertible
note and its conversion is independent of the underlying note value. The conversion liability is marked to market each reporting
period with the resulting gains or losses shown in the Statement of Operations. The Company has also recorded the resulting discount
on debt related to the conversion features and amortizes the discount using the effective interest rate method over the life of
the debt instruments.
Derivative Liability
The Company evaluates its convertible debt,
options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting
Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market
each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability,
the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise
or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation
and then that the related fair value is reclassified to equity.
In circumstances where the embedded conversion
option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the
convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting
period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to
liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified
in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected
within 12 months of the balance sheet date.
The Company adopted Section 815-40-15 of
the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded
feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step
approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including
evaluating the instrument’s contingent exercise and settlement provisions.
The Company marks to market the fair value
of the remaining embedded derivative conversion features at each balance sheet date and records the change in the fair value of
the remaining embedded derivative conversion features as other income or expense in the consolidated statements of operations.
The Company utilizes the Monte Carlo model
that values the liability of the derivative conversion feature based on a probability weighted discounted cash flow model with
the assistance of the third party valuation firm. Black-Scholes valuation does not consider all of the terms of the instrument
which may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded
derivatives). The Monte Carlo model is based on future projections of the various potential outcomes. The features that were analyzed
and incorporated into the model included the conversion features. The Monte Carlo model analyzed the underlying economic factors
that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect
at the time (i.e. stock price, exercise price, volatility, etc.). Projections were then made on the underlying factors which led
to potential scenarios. Probabilities were assigned to each scenario based on management projections. This led to a cash flow projection
and a probability associated with that cash flow. A discounted weighted average cash flow over the various scenarios was completed
to determine the value of the conversion features.
Related Parties
The Company follows subtopic 850-10 of
the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related
parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other
Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with
such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments
in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection
of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit
of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal
owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls
or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties
might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the
management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties
and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests.
The financial statements shall include
disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar
items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated
or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the
relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an
understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each
of the periods for which income statements are presented and the effects of any change in the method of establishing the terms
from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Commitment and Contingencies
The Company follows subtopic 450-20 of
the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date
the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted
claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted
claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss
contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are
generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Non-Controlling Interest
The Company follows paragraph 810-10-65-1
of the FASB Accounting Standards Codification to report the non-controlling interest in its majority-owned subsidiaries and controlled
entities in the consolidated balance sheets within the equity section, separately from the Company’s stockholders’
equity. Non-controlling interest represents the non-controlling interest holders’ proportionate share of the equity of the
Company’s majority-owned subsidiaries and controlled entities. Non-controlling interest is adjusted for the non-controlling
interest holders’ proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling
interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest
balance.
Revenue Recognition
The Company follows paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii)
the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Equity Instruments Issued to Parties
Other Than Employees for Acquiring Goods or Services
The Company accounts for equity instruments
issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting
Standards Codification (“Sub-topic 505-50”).
Pursuant to ASC paragraphs 505-50-25-6
through 505-50-25-8 a grantor shall recognize the goods acquired or services received in a share-based payment transaction when
it obtains the goods or as services are received. A grantor may need to recognize an asset before it actually receives goods or
services if it first exchanges share-based payment for an enforceable right to receive those goods or services. Nevertheless, the
goods or services themselves are not recognized before they are received. If fully vested, non-forfeitable equity instruments are
issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by
the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty
to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they
are issued (in most cases, when the agreement is entered into). An entity may grant fully vested, non-forfeitable equity instruments
that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability
if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same
period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount
instead of paying with, or using, the equity instruments.
Pursuant to Paragraph 505-50-25-9 a recognized
asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires
unexercised.
Pursuant to ASC Paragraphs 505-50-30-2
and 505-50-30-11 share-based payment transactions with non-employees shall be measured at the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value
of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the
following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to
earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete.
If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s
common stock will be used to measure the fair value of the common shares issued; however, if the Company’s common shares
are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”),
or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares
could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
Pursuant to ASC Paragraph 718-10-55-21
if an observable market price is not available for a share option or similar instrument ("instrument") with the same
or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model
that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:
a. |
The exercise price of the instrument. |
b. |
The expected term of the instrument, taking into account both the contractual term of the instrument and the effects of instrument holder's expected exercise behavior: Pursuant to ASC Paragraph 718-10-50-2(f)(2)(i) the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. |
c. |
The current price of the underlying share. |
d. |
The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility. |
e. |
The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. |
f. |
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model. |
Pursuant to ASC paragraph 505-50-S99-1,
if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity
instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are
not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should
be recorded.
Deferred Tax Assets and Income Tax
Provision
The Company accounts for income taxes under
Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based
upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation
allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of
the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of
whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section
740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the
tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a
greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance
on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased
disclosures.
The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit
carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance
sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the
Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion,
adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates,
additional allowances or reversals of reserves may be necessary.
Earnings per Share
Earnings per share ("EPS") is
the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings
or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC
Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the
numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to
common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not
paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing
operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar
to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential
dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21
through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint
of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting
entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35
through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include
non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23).
Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the
treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of
issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be
used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through
55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed
purchased) shall be included in the denominator of the diluted EPS computation.
The Company’s contingent shares issuance
arrangements are as follows:
| |
Contingent shares issuance arrangements | |
| |
For the Reporting
Period Ended June 30, 2015 | | |
For the Reporting
Period Ended June 30, 2014 | |
| |
| | |
| |
Convertible notes payable (*) | |
| 4,362,162 | | |
| - | |
| |
| | | |
| | |
Convertible preferred stock (**) | |
| - | | |
| 7,425,370 | |
| |
| | | |
| | |
Total contingent shares issuance arrangement | |
| 4,362,162 | | |
| 7,425,370 | |
(*) 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.
(**) One preferred share is convertible
to one common share.
There were 2,360,160 and 7,425,370 incremental
common shares under the treasury stock method for the reporting period ended June 30, 2015 and 2014, respectively, which were excluded
from the diluted earnings per share calculation as they were anti-dilutive.
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or
reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification
to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities
by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating
cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
Subsequent Events
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent
events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards
Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users,
such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued the FASB Accounting
Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)
This guidance amends the existing FASB
Accounting Standards Codification, creating a new Topic 606, Revenue from Contracts with Customer. The core principle
of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, an entity
should apply the following steps:
| 1. | Identify the contract(s) with the customer |
| 2. | Identify the performance obligations in the contract |
| 3. | Determine the transaction price |
| 4. | Allocate the transaction price to the performance obligations in the contract |
| 5. | Recognize revenue when (or as) the entity satisfies a performance obligations |
The ASU also provides guidance on disclosures
that should be provided to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue
recognition and cash flows arising from contracts with customers. Qualitative and quantitative information is required about
the following:
| 1. | Contracts with customers –
including revenue and impairments recognized, disaggregation of revenue, and information
about contract balances and performance obligations (including the transaction price
allocated to the remaining performance obligations) |
| 2. | Significant judgments and changes
in judgments – determining the timing of satisfaction of performance obligations
(over time or at a point in time), and determining the transaction price and amounts
allocated to performance obligations |
| 3. | Assets recognized from the
costs to obtain or fulfill a contract. |
ASU 2014-09 is effective for periods beginning
after December 15, 2016, including interim reporting periods within that reporting period for all public entities. Early
application is not permitted.
In June 2014, the FASB issued the FASB
Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718): Accounting for Share-Based
Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”
(“ASU 2014-12”).
The amendments clarify the proper method
of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the
requisite service period. The Update requires that a performance target that affects vesting and that could be achieved after
the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating
the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that
the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the
requisite service has already been rendered.
The amendments in this Update are effective
for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.
In August 2014, the FASB issued the FASB
Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).
In connection with preparing financial
statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern
within one year after the date that the financial statements are issued (or within one year after the date that the financial
statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions
and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that
the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability
to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable
that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements
are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.
When management identifies conditions or
events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider
whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating
effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively
implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about
the entity’s ability to continue as a going concern.
If conditions or events raise substantial
doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration
of management’s plans, the entity should disclose information that enables users of the financial statements to understand
all of the following (or refer to similar information disclosed elsewhere in the footnotes):
a. Principal
conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration
of management’s plans)
b. Management’s
evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
c. Management’s
plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.
If conditions or events raise substantial
doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration
of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt
about the entity’s ability to continue as a going concern within one year after the date that the financial statements
are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial
statements to understand all of the following:
a. Principal
conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
b. Management’s
evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
c. Management’s
plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue
as a going concern.
The amendments in this Update are effective
for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application
is permitted.
In November 2014, the FASB issued the FASB
Accounting Standards Update No. 2014-16 “ Derivatives and Hedging (Topic 815) : Determining Whether the Host
Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”).
The amendments in ASU No. 2014-16 clarify
that an entity must take into account all relevant terms and features when reviewing the nature of the host contract. Additionally,
the amendments state that no one term or feature would define the host contract’s economic characteristics and risks. Instead,
the economic characteristics and risks of the hybrid financial instrument as a whole would determine the nature of the host contract.
The amendments
in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2015. Early adoption, including adoption in an interim period, is permitted.
In February 2015, the FASB issued the FASB
Accounting Standards Update No. 2015-02 “ Consolidation (Topic 810) -Amendments to the Consolidation Analysis”
(“ASU 2015-02”) to improve certain areas of consolidation guidance for reporting organizations (i.e., public,
private, and not-for-profit) that are required to evaluate whether to consolidate certain legal entities such as limited partnerships,
limited liability corporations, and securitization structures (e.g., collateralized debt/loan obligations). All
legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments:
| · | Eliminating the presumption that a general
partner should consolidate a limited partnership. |
| · | Eliminating the indefinite deferral of
FASB Statement No. 167, thereby reducing the number of Variable Interest Entity (VIE) consolidation models from four to two (including
the limited partnership consolidation model). |
| · | Clarifying when fees paid to a decision
maker should be a factor to include in the consolidation of VIEs. Note: a VIE is a legal entity in which consolidation is not based
on a majority of voting rights. |
| · | Amending the guidance for assessing how
related party relationships affect VIE consolidation analysis. |
| · | Excluding certain money market funds from
the consolidation guidance. |
The amendments in this Update are effective
for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15,
2015. Early adoption is permitted, including adoption in an interim period.
In April 2015, the FASB issued the FASB
Accounting Standards Update No. 2015-03 “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs” (“ASU 2015-03”).
To
simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized
debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent
with debt discounts. The recognition and measurement guidance for
debt issuance costs are not affected by the amendments in this Update.
For public business entities, the amendments
in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods
within those fiscal years.
In August 2015, the FASB issued the FASB
Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective
Date” (“ASU 2015-14”).
The amendments in this Update defer the
effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain
employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017,
including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 15, 2016, including interim reporting periods within that reporting period.
Management does not believe that any recently
issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial
statements.
Note 3 - Going Concern
The Company has elected to adopt early
application of Accounting Standards Update No. 2014-15, “Presentation of Financial Statements—Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).
The consolidated financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business.
As reflected in the consolidated financial
statements, the Company had an accumulated deficit at June 30, 2015, a net loss and net cash used in operating activities for the
reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Currently, management is focused on the
development of VNUE’s platform, raising capital, and signing contracts with select music industry leaders. The Company believes
in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances
to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to continually
increase its customer base and realize increased revenues from recently signed contracts.
The consolidated financial statements do
not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 – Intangible Assets
Entry into an Asset Purchase Agreement
On July 23, 2014, the Company entered into
an Asset purchase agreement with Lively, LLC (the “Agreement”), whereby the Company acquired certain assets of Lively,
LLC for consideration of (i) cash payment of $150,000 and (ii) Preferred shares with a fair market value of $250,000 at the time
of the issuance. Assets purchased included: a) software, inventions, customers, customer lists, development, documents and records,
designs, claims, intellectual property rights, distribution rights and merchandising rights; b) all copyright, patents, trademarks,
trade names, logos or service marks and other intangible property and rights.
Consideration of the Asset Purchase
Agreement
The Company issued 133,334 preferred shares
of Vnue Washington to Lively LLC to satisfy the consideration (ii) for the acquisition of the intangible assets which were valued
at $1.53 per share, the most recent PPM price per common share from the subsequent sale of Vnue Washington's common stock as a
Vnue Washington's preferred share is convertible to a common share on a 1 to 1 basis and the business has not changed between July
2014, the date of acquisition of the assets and April 2015, the date of the equity financing. The Company recorded the intangible
assets of $354,000 including (i) $150,000 in cash and (ii) $204,000 in Vnue Washington's preferred shares.
Impairment Testing and Amortization
Expense
(i) Impairment
Testing
The Company acquired the intangible assets
in July 2014 and is in the process of developing the technology for its commercial operations and the management of the Company
determined that there was no impairment of such assets at December 31, 2014.
No events or changes in circumstances have
occurred through June 30, 2015 to indicate that its carrying amount may not be recoverable.
(ii) Amortization
Expense
Amortization expense was $11,800 and $0
for the reporting period ended June 30, 2015 and 2014, respectively.
Note 5 – Related Party Transactions
Related parties
Related parties with whom the Company had
transactions are:
Related Parties |
|
Relationship |
|
Related Party Transactions |
|
Business Purpose of
transactions |
|
|
|
|
|
|
|
Management and significant stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew Carona |
|
President, CEO and significant shareholder |
|
(i) Advances/Repayments |
|
(i) Working capital |
|
|
|
|
|
|
|
Collin Howard |
|
CFO |
|
(i) Note payable/Repayments |
|
(i) Working capital |
|
|
|
|
|
|
|
Chris Mann |
|
Significant shareholder |
|
(i) Notes payable/Repayments |
|
(i) Working capital |
|
|
|
|
|
|
|
Lou Mann (*) |
|
Father of Mr. Chris Mann |
|
None |
|
N/A |
|
|
|
|
|
|
|
Entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcasting Institute of Maryland ("BIM") |
|
An entity controlled by Lou Mann |
|
(i) Advances to BIM |
|
(i) planned collaboration |
|
|
|
|
|
|
|
(*) Mr. Lou Mann resigned as President
and Director of the Company on August 26, 2015.
Advances from President, CEO and
Significant Stockholder
From time to time, President, CEO and significant
stockholder of the Company advances funds to the Company for working capital purpose. Those advances are unsecured, non-interest
bearing and due on demand.
Convertible Notes Payable to the
Officers and Directors
The Company issued convertible notes to
the Officers and Directors of the Company for working capital purpose with 0% interest. 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.
Advances to BIM
The Company advanced $52,037 in aggregate
to BIM ("BIM Advances") for planned collaboration during the reporting period ended June 30, 2015. On August 26, 2015
the Company entered into a share transfer agreement with Louis Mann (“MANN”), then president and CEO of the Company,
whereby Mann returned 21,885,591 Common Shares to the Company in exchange for the advances, and Mann resigned from his respective
officer and director positions with the Company.
Note 6 – Convertible Notes Payable
Convertible notes payable consisted of
the following:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
On August 14, 2014 and August 20, 2014 the Company issued three convertible notes to three note holders in the principal amount of $5,000, $10,000 and $10,000 with interest at 10% per annum. Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a "pre-money" valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a "pre-money" valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The note is due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. | |
$ | 25,000 | | |
$ | 25.000 | |
| |
| | | |
| | |
On August 31, 2014, the Company issued a convertible note to the CFO bearing 0% interest in the amount of $15,000. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a "pre-money" valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a "pre-money" valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The note is due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The Company repaid $13,500 of the note during the six months ended June 30, 2015. | |
| 1,500 | | |
| 15,000 | |
| |
| | | |
| | |
Two
convertible notes with a director bearing 0% interest were issued on August 31, 2014 in the amounts of $35,000 and $21,000,
respectively. Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing,
an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is
converted in the event of a Corporate Transaction, a price per share derived by dividing a "pre-money" valuation of $8,000,000
by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if
the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a "pre-money" valuation of $8,000,000
by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion,
on a fully diluted basis. The note is due and payable on demand at any time after the earlier of (i) 36 months following the
note issuance or (ii) the consummation of a corporate transaction if not previously converted. The Company repaid
$27,500 of the note during the six months ended June 30, 2015. | |
| 28,500 | | |
| 56,000 | |
| |
| | | |
| | |
Face amount | |
| 55,000 | | |
| 96,000 | |
| |
| | | |
| | |
Discount representing the derivative liability on conversion features | |
| (55,000 | ) | |
| (96,000 | ) |
| |
| | | |
| | |
Accumulated amortization of discount of convertible notes payable (*) | |
| 21,639 | | |
| 21,643 | |
| |
| | | |
| | |
Remaining discount | |
| (33,361 | ) | |
| (74,357 | ) |
| |
| | | |
| | |
Convertible notes payable, net | |
$ | 21,639 | | |
$ | 21,643 | |
(*) The discount is being amortized using
the effective interest rate method over the life of the debt instruments.
Note 7 – Derivative Instruments
and the Fair Value of Financial Instruments
In August of 2014, the Company entered
into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors (the “Holders”)
for an aggregate of $96,000 in Convertible Promissory Notes (“Securities”). The Company issued 6 convertible
debt instruments with variable conversion prices with reset provisions. The notes convert at a percent of future financing and/or
pre-money valuations on a full dilution basis therefore the Company has an indeterminate number of shares required to settle the
notes in shares and is a derivative instrument as of issuance. In addition, since this note has an indeterminate number of shares
to settle the note in shares this qualifies the convertible debt instruments as derivative instrument as of the issuance.
Under the Agreements, the holders of the Convertible
Promissory Notes have the following terms and conditions:
1. If not previously converted, all outstanding principal and accrued interest under a given Note will be due and payable on demand by the Holder at any time after the earlier of (i) 36 months following issuance of such Note (the "Maturity Date") or {ii) the consummation of a Corporate Transaction (sale of substantially all of the Company's assets or stock; an IPO by the Company; merger of the Company; or a liquidation/dissolution).
2. The Notes accrue interest at a rate of 0% to 10% per annum compounded annually.
3. The Note is convertible as follows: (a) If the Note is converted upon the Next Equity Financing, shares of the same class of stock issued to investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, shares of common stock of the Company; or (c) if the Note is converted as part of a Maturity Conversion, units of Class A limited liability company membership interest ("Class A Units").
4. 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.
5. If
the Next Equity Financing or a Corporate Transaction has not occurred on or before the Maturity Date, and the Note has not been
repaid in full, the outstanding balance will, at the Holder's election, be (a) due and payable in full or (b) converted into Conversion
Security.
Valuation of Derivative Financial
Instruments
The Company has utilized a
third party valuation consultant to assist the Company to fair value the derivative financial instruments. The company uses Monte
Carlo models that value the derivative liability within the notes. The technique applied generates a large number of possible (but
random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash
or stock) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian
motion with constant drift, and constant volatility. The stock price is determined by a random sampling from a normal distribution.
Since the underlying random process is the same, for enough price paths, the value of derivative is derived from path dependent
scenarios and outcomes.
The features in the Notes that were analyzed and
incorporated into the model included the conversion feature with the adjustable conversion price and redemption
provisions (at the option of the Holder). Based on these features, there are two primary events that can occur: the Holder
converts the note or the Holder redeems the note.
The model simulates the underlying
economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that
would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as
redemption likelihood, and timing and pricing of reset events over the remaining term of the note based on management projections.
This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed, and it
was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative
liability for that simulation. For each valuation, 10,000 simulations were run and the results were averaged to determine the derivative
liability as of the date of each valuation.
The convertible notes were valued at issuance (potentially
convertible if a financing event occurred in the period) and also at the quarterly periods with the following assumptions:
- The stock price was based on the Private Placement
dated January 1, 2015 which raised $686,320 at $1.53 per VNUE Washington Common S tock share price with 9,491,961 issued / outstanding
and using the TGRI capitalization of 477,815,488issued / outstanding with a Common Stock share price of $0.0304.
- The stock projections are based on the comparable
company annual volatilities for each date. These volatilities were in the 120 – 130% range:
| |
1 year | | |
| |
1 year | |
12/31/14 | |
| 119 | % | |
5/4/15 | |
| 131 | % |
| |
| | | |
| |
| | |
2/9/15 | |
| 120 | % | |
5/29/15 | |
| 130 | % |
| |
| | | |
| |
| | |
3/31/15 | |
| 122 | % | |
6/30/15 | |
| 130 | % |
| |
| | | |
| |
| | |
4/27/15 | |
| 128 | % | |
6/30/15 | |
| 130 | % |
-The stock price projection
was modeled such that it follows a geometric Brownian motion with constant drift and an constant volatility, starting with the
$0.03 market stock price at each valuation date;
-The public market price
of $0.02 was utilized in the stock price projection as of 6/30/15
- An event of default would
not occur during the remaining term of the note;
- Conversion of the notes
to stock would occur only at maturity if the Note was in the money and a reset event had occurred - either the Next Financing or
Corporate Transaction;
- Redemption would have
no derivative value since no penalty or interest rate adjustment exist in these Notes;
- Discount rates were based
on risk free rates in effect based on the remaining term and date of each valuation and instrument.
-The Note is convertible
as follows: (a) if the Note is converted upon the Next Equity Financing, shares of the same class of stock issued to investors
in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, shares of common stock;
or (c) if the Note is converted as part of a Maturity Conversion.
- The Note Conversion Price
is based on the following: (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 prior to 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/shares (restricted
and non-restricted) outstanding prior to such conversion, on a fully diluted basis.
- If the
Next Equity Financing or a Corporate Transaction has not occurred on or before the Maturity Date, and the Note has not been repaid
in full, the outstanding balance will, at the Holder's election, be (a) due and payable in full or (b) converted into Conversion
Security.
The conversion
price adjustments from the Next Financing and Corporate Transaction (the IPO/Reverse Merger on May 29, 2015) and cash requirements
since the IPO are:
As a result
of the reverse merger and Corporate Transaction with Tierra Grande Resources Inc. (TGRI stock symbol), 634,345,251 issued and outstanding
common shares existed following the Closing of the Merger with VNUE on 5/29/15.
As of May
29, 2015 the conversion price assuming an $8 million pre-money valuation and 634,345,251 shares outstanding was $0.01261. The conversion
may reset up through maturity assuming the same $8 million pre-money value and the fully diluted shares outstanding at that time.
The Company has no further projected financings in
the form of private placements.
As of June 30, 2015 and December 31, 2014, the estimated fair
value of derivative liabilities on convertible notes was $96,451 and $215,748, respectively.
The following table
summarizes the change of fair value of the derivative liabilities.
Balance at January 1, 2015 | |
$ | (215,748 | ) |
To record derivative liabilities as debt discount | |
| | |
Change in fair value of derivative liabilities | |
| 59,639 | |
Settlement of derivative liability due to repayments of related notes | |
| 59,658 | |
Balance at June 30, 2015 | |
$ | (96,451 | ) |
Note 8 –Note Payable
On June 15, 2015, as a condition for the
execution of the Equity Purchase Agreement by Tarpon, the Company issued a Promissory Note to Tarpon in the principal amount of
$50,000 with an interest rate of 10% per annum and a maturity date of December 31, 2015. The note was recorded as financing cost
upon issuance.
Note 9 – Commitment and Contingencies
Graphic Design Service Agreement
with Flint
On May 1, 2015, the Company entered
into a graphic design service agreement with Flint (the "Consultant") for a period of one year starting on May 1, 2015.
Under the Agreement, the Company engaged the Consultant as an independent contractor to provide graphic design services. The
Company will compensate the Consultant $16,000 per month.
For the quarter ended June 30, 2015 the
Company recorded $32,100 in cost of sales under this Agreement.
Consulting Agreement with 2 Doors
Management
Prior to May 5, 2015 2 Doors Management
provided certain consulting services to the Company on as needed basis without a written agreement.
On May 5, 2015, the Company entered
into a consulting agreement with 2 Doors Management (the "Consultant") for a minimum period of 12 months starting on
May 5, 2015. Under the Agreement, the Company engaged the Consultant as an independent contractor to develop venue partnerships,
artists' onboard strategy, and facilitate recording of live shows on an ongoing basis. The Company will compensate the Consultant
$17,500 per month for a 12 month period plus a monthly invoice paid out to the film crew at $1,500 per show.
For the quarter ended June 30, 2015 the
Company recorded $58,950 in cost of sales under this Agreement.
Employment Agreement with Christopher
Nocera
On June 24, 2015, the Company entered
into an Executive Employment Agreement with Dr. Christopher Nocera, who will serve as the Company’s Chief Information Officer
for an initial term of one year with renewal option. As compensation for the services to be rendered by the Executive, the Company
shall pay the Executive at an annual base salary rate of Ninety-Five Thousand Dollars ($95,000) per year. Beginning on the first
anniversary of the date of the initial salary increase and continuing on each anniversary of the increase date, Base Salary shall
be increased by an amount no less than five percent (5%) times the Base Salary then in effect, plus any additional amount determined
by the Company’s Board of Directors.
For the quarter ended June 30, 2015 the
Company not recorded $0 in officer's compensation under this Agreement.
Note 10 – Stockholders’
Equity (Deficit)
Shares Authorized
Upon formation the total number of shares
of all classes of stock the Company is authorized to issue is twenty Million (20,000,000) shares of Preferred Stock, par value
$0.0001 per share and eighty Million (80,000,000) shares of Common Stock, par value $0.0001 per share.
January 31, 2011 Certificate of Amendment
On January 31, 2011 the Company filed Certificate
of Amendment to Articles of Incorporation and changed the aggregate of number of common shares of the Company is authorized to
issue to three hundred million (300,000,000) shares, par value $0.0001 per share.
April 8, 2013 Certificate of Amendment
On April 8, 2013 the Company filed Certificate
of Amendment to Articles of Incorporation and changed the aggregate of number of common shares of the Company is authorized to
issue to five hundred million (500,000,000) shares, par value $0.0001 per share.
January 20, 2015 Certificate of Amendment
On January 20, 2015 the Company filed Certificate
of Amendment to Articles of Incorporation and changed the aggregate of number of common shares of the Company is authorized to
issue to seven hundred and fifty million (750,000,000) shares, par value $0.0001 per share.
Common Stock
During the period from January 1, 2015
to May 28, 2015, the Company deemed to have sold 24,981,141 shares of its common stock (448,575 shares of Vnue Washington's common
stock) at $686,320 in aggregate for cash.
Immediately prior to the closing of the
Merger Agreement on May 29, 2015, the Company had 126,866,348 common shares issued and outstanding.
Upon consummation of the Merger Agreement
on May 29, 2015, the Company issued (i) 477,815,488 fully paid and non-assessable shares of TGRI common stock shares for the acquisition
of all shares of Vnue Washington stock of any class or series issued and outstanding immediately prior to the closing of the Merger
Agreement; and (ii) 29,814,384 fully paid and non-assessable shares of TGRI common stock to Matheau J. W. Stout, Esq. as payment
for services performed prior to and in connection with the Merger.
The Company valued the 29,814,384 acquisition-cost
related shares at the most recent PPM price, or $819,105 and recorded this amount as acquisition-related costs pursuant to FASB
ASC Paragraph 805-10-25-23.
Equity Instruments Issued to Parties
Other Than Employees for Acquiring Goods or Services
Consulting Agreement
On June 29, 2015, the Company entered into
a Consulting Agreement with Shenandoah Funding, LLC (“Consultant”) with the following key terms and conditions:
Section 1 Consulting Services: Under the
Agreement, the Company engaged the Consultant as an independent contractor to provide investor relations advisory services for
the Company.
Section 2 The Consultant has been providing
services informally for VNUE for several weeks and will continue to provide services to VNUE for a twelve (12) months period beginning
on July 1, 2015. The Company will compensate the Consultant for a total issuance of Five Million (5,000,000) shares. For the purpose
of SEC Rule 144, the Consultant shall be deemed to have fully earned and paid for such shares on the date of execution of this
agreement.
Accounting treatment of the share-based
compensation: The Company valued these shares at the most recent PPM price, or $137,370 and recorded this amount as prepaid consulting
fees and ratably amortizes the amount over the term of the service. For the quarter ended June 30, 2015 the Company did not recognize
any consulting fee under this agreement.
Equity Purchase Agreement with Tarpon
Bay Partners, LLC
On June 15, 2015, the Company entered into
an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Tarpon Bay Partners, LLC, a Florida limited liability
company (“Tarpon”). Under the terms of the Equity Purchase Agreement, Tarpon will purchase, at the Company's
election, up to $5,000,000 of the Company's registered common stock (the “Shares”).
During the term of the Equity Purchase
Agreement, the Company may at any time deliver a “put notice” to Tarpon thereby requiring Tarpon to purchase a certain
dollar amount of the Shares. Simultaneous with the delivery of such Shares, Tarpon shall deliver payment for the Shares. Subject
to certain restrictions, the purchase price for the Shares shall be equal to 90% of the lowest Closing Price during the Valuation
Period as such capitalized terms are defined in the Agreement.
The number of Shares sold to Tarpon shall
not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially
owned by Tarpon, would result in Tarpon owning more than 9.99% of all of the Company's common stock then outstanding. Additionally,
Tarpon may not execute any short sales of the Company's common stock. Further, the Company has the right, but never the obligation
to draw down.
The Equity Purchase Agreement shall terminate
(i) on the date on which Tarpon shall have purchased Shares pursuant to the Equity Purchase Agreement for an aggregate Purchase
Price of $5,000,000, or (ii) on the date occurring 24 months from the date on which the Equity Purchase Agreement was executed
and delivered by the Company and Tarpon.
As a condition for the execution of the
Equity Purchase Agreement by Tarpon, the Company issued a Promissory Note to Tarpon in the principal amount of $50,000 with an
interest rate of 10% per annum and a maturity date of December 31, 2015.
Registration Rights Agreement with Tarpon
Bay Partners, LLC
In addition, on June 15, 2015, the Company
and Tarpon entered into a Registration Rights Agreement (the “Registration Agreement”). Under the terms of the Registration
Agreement the Company agreed to file a registration statement with the Securities and Exchange Commission with respect to the Shares
within 120 days of June 15, 2015. The Company is obligated to keep such registration statement effective until (i) three months
after the last closing of a sale of Shares under the Purchase Agreement, (ii) the date when Tarpon may sell all the Shares under
Rule 144 without volume limitations, or (iii) the date Tarpon no longer owns any of the Shares.
Note 11 – Subsequent Events
The Company has evaluated all events that
occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.
The Management of the Company determined that there were certain reportable subsequent event(s) to be disclosed as follows:
Settlement and Release Agreement
On July 23, 2015, the Company reached a
Settlement and Release Agreement with Dean Graziano (“GRAZIANO”) after learning that GRAZIANO might assert claims for
equity or compensation against the Company or its subsidiary VNUE Washington and that such claims were not contained in the transaction
documents surrounding the purchase of the intangible assets of Lively, LLC (“LIVELY”) closed on July 23, 2014. Under
the terms of the settlement, GRAZIANO agreed to resolve any and all claims, damages, causes of action, suits and costs, of whatever
nature, character or description, whether known or unknown, anticipated or unanticipated, whether or not directly or indirectly
related to the purchase of the LIVELY assets, or to any alleged verbal understandings of promises of employment, advisory roles,
or equity, which GRAZIANO may now have or may hereafter have or claim to have against VNUE, and its subsidiaries (the “GRAZIANO
CLAIMS”) in exchange for Three Million Five Hundred Thousand (3,500,000) Shares (the “SETTLEMENT SHARES”). VNUE
and GRAZIANO agreed that delivery of the Settlement Shares pursuant to the conditions set forth therein shall satisfy VNUE’s
obligation in full regarding any and all GRAZIANO CLAIMS. On July 27, 2015 the Company's board passed the resolution and issued
the Settlement Shares to GRAZIANO.
Accounting treatment of the shares granted:
The Company valued the 3,500,000 shares of its common stock at the most recent PPM price, or $96,159 and recorded this amount as
settlement of claims upon execution of this agreement.
Consulting Agreement
On July 27, 2015, the Company entered into
a Consulting Agreement with PanAmerica Global, LLC (“Consultant”) with the following key terms and conditions:
Section 1 Consulting Services: Under the
Agreement, the Company engaged the Consultant as an independent contractor to provide investor relations advisory services for
the Company.
Section 2 Consulting Fees: A. The Consultant
has been providing services informally for VNUE for several weeks and will continue to provide services to VNUE for a twelve (12)
months period beginning on August 1, 2015. Both parties agree to a firm commitment for the First Three Months (August, September,
and October 2015) and thereafter, either party can cancel this agreement upon a 30 days notice. B. Upfront Fees. The Company will
compensate the Consultant in the amount of Two Million Five Hundred Thousand (2,500,000) shares for service already performed.
For the purpose of SEC Rule 144, the Consultant shall be deemed to have fully earned and paid for such shares on the date of execution
of this agreement. C. Monthly Fees. The Company will also compensate the Consultant on a monthly basis beginning on August 1, 2015
by the issuance of 791,667 shares on the first day of subsequent month until expiration of the Term,
Accounting treatment of the share-based
compensation: The Company valued the 2,500,000 upfront shares at the most recent PPM price, or $68,685 and recorded this amount
as consulting fees upon execution of this agreement as these shares were issued for service already performed.
Share Transfer Agreement
Following the Closing of the Merger, VNUE
advanced a total of $52,037 in funds to Broadcasting Institute of Maryland ("BIM") at Louis Mann’s request for
the payment of certain BIM operating expenses (the “BIM Advances”). On August 26, 2015 the Company entered into a share
transfer agreement with Louis Mann (“MANN”), then president and CEO of the Company, whereby Mann returned 21,885,591
Common Shares to the Company for the advance and resigned from his respective officer and director positions with the Company.
Advisory Agreement
On August 26, 2015, the Company entered
into an Advisory Agreement with MANN. Such Advisory Agreement provides for MANN’s continued and ongoing advisory services
to the Company until December 31, 2015 and MANN will be paid Twenty-Five Thousand Dollars ($25,000) for providing such Advisory
Services, which is due and payable on or before December 31, 2015. If such Advisor’s Fee is not paid within Four (4) Months
following the end of the Term, the Company may elect to issue MANN Twenty-Five Thousand Dollars ($25,000) worth of the Company’s
common stock as payment in full for services rendered under this Agreement. If stock is issued to MANN in lieu of cash, the value
of such stock shall be determined by using the closing price published by OTCMarkets.com on December 31, 2015.
Employment Agreement
On September 9, 2015, the Company entered
into an Executive Employment Agreement with Peter W. Slavish, who will serve as the Company’s Chief Content Officer for a
term of one year. As compensation for the services to be rendered by the Executive hereunder, (I) The Company shall pay the Executive
at an annual base salary (the “Base Salary”) rate of Ninety-Five Thousand Dollars ($95,000) per year, payable in biweekly
installments on the 1st and 15th of each month. Beginning on the first anniversary of the date of the initial
salary increase and continuing on each anniversary of the increase date, Base Salary shall be increased by an amount no less than
five percent (5%) times the Base Salary then in effect, plus any additional amount determined by the Company’s Board of Directors.
(II) The Executive shall be entitled to One Million (1,000,000) shares of common stock upon signing the Agreement.
Accounting treatment of the shares granted:
The Company valued the 1,000,000 shares of its common stock at the most recent PPM price, or $27,474 and recorded this amount as
Officer's compensation upon execution of this agreement.
Promotion Agreement
On September 10, 2015, the Company entered
into a Promotion Agreement with BookingEntertainment.com for a term of One (1) Year to secure contracts with Thirty (30) live music
venues.
Under the terms of the Promotion Agreement,
the Company shall pay BookingEntertainment.com Two Thousand Five Hundred Dollars ($2,500) for each One (1) Year contract secured
per venue and Five Thousand Dollars ($5,000) for each Two (2) Year contract secured per venue, with payment due to the Promoter
within Thirty (30) Days from the date on which each such contract is countersigned.
The Promotion Agreement also compensates
BookingEntertainment.com through the issuance of the Company’s common stock under a series of performance benchmarks outlined
in Section 2. Under such performance benchmarks, BookingEntertainment.com will earn a total of Three Million (3,000,000) shares
of the Company’s common stock for securing contracts with the Thirty (30) live music venues. In addition, if Ten (10) of
those venues sign contracts before January 16, 2016, BookingEntertainment.com shall receive a bonus of Three Hundred Thousand (300,000)
shares of the Company’s common stock.
Advisory Agreement
On September 10, 2015, the Company entered
into An Advisory Agreement with Steve Einzig, the Founder, President and CEO of BookingEntertainment.com.
The Advisory Agreement is effective September
10, 2015 and has a term of One (1) Year, during which Mr. Einzig will work directly with the Directors and Officers of the Company
on a strategic level, while leveraging his skills, expertise, experience and abilities in the music and entertainment business.
Under the terms of the Advisory Agreement,
VNUE will compensate Mr. Einzig in the amount of Fifty Thousand Dollars ($50,000) worth of the Company’s common stock as
payment in full for services rendered during the Term. The number of common stock shares awarded to Mr. Einzig shall be determined
by using the closing price published by OTCMarkets.com on the final trading day during the Term of the Agreement.
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.
License agreement
On November 2, 2015, the Company entered
into a License Agreement with Universal Music Corp. (“Universal”).
The License Agreement is effective September
8, 2015, and has a term of Two (2) Years from the Effective Date. Under the terms of the License Agreement, Universal is granting
to VNUE a non-exclusive, non-transferable, non-sublicensable license to create and distribute content using certain Universal compositions,
more specified in the Grant of Right’s section of the License Agreement.
The Company will then market and sell this
content via the VNUE Service at certain agreed upon price points more specifically described in the Business Model and Price Points
Section of the License Agreement, and the Company shall pay Universal royalties for each sale of the content as specified in the
Royalty Rates section of the License Agreement.
In accordance with the Minimum
Guarantee provision of the License Agreement, the Company shall pay to Universal a minimum first year fee of Fifty Thousand
Dollars ($50,000), which is due within 10 days of execution and a second year minimum fee of Fifty Thousand Dollars
($50,000), which is due upon the commencement of the second year of the Term. The Company paid the minimum first year fee of
Fifty Thousand Dollars ($50,000.00) to Universal on November 10, 2015.
Sale of Common Shares for Cash
On September 24, 2015, the Company sold
2,666,667 shares of its common stock to an investor at $0.015 per share, or $40,000 for cash.
During the period from November 5, 2015
to November 23, 2015, the Company sold 8,675,213 shares of its common stock in aggregate to three investors at the price ranging
from $0.012 to $0.026 per share, or $135,000 for cash.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding
Forward-Looking Information
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 quarterly 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 quarterly
report refer to US dollars unless otherwise indicated.
Overview
Following the Merger on
May 29, 2015, we now carry on business as a live entertainment music service company which brings bands and fans together by capturing
professional quality audio and video recordings of live performances and delivers the experience of a venue to your home and hand.
By streamlining the processes of curation, clearing, capturing, distribution & monetization,
VNUE manages and simplifies the complexities of the music ecosystem.
VNUE captures content through its Front of House mobile application and provides world-wide
distribution and monetization through a suite of mobile, web administration applications, allowing an artist to seamlessly deliver
and sell their live performances directly to the fans who attend their shows.
While VNUE is primarily being used in live music venues, we are also branching into many
other entertainment experiences such as comedy, plays, musicals, university lectures, professional demonstrations and panel discussions,
as well as action sports and much more.
Business Model Prior to the Merger
The Company was incorporated in the State of Nevada on April
4, 2006. Prior to the Merger, we were engaged in the acquisition and exploration of mineral properties since our inception. Under
that prior business model, the Company did not generate any revenues and incurred losses since inception.
Effective April 10, 2013, the Company changed its name from
Buckingham Exploration Inc. to Tierra Grande Resources Inc. On August 9, 2010, the Company incorporated 0887717 B.C. Ltd., a wholly-owned
subsidiary in British Columbia, Canada. On February 28, 2013, the Company acquired a 100% interest in Tierra Grande Resources,
S.A.C. (“Tierra”), a company incorporated in Peru, in consideration for $10.
Prior to the Merger, the Company’s strategy had been to
identify, acquire and advance assets that present near term cash-flow with the emphasis on creating early cash flow to enable the
Company to consider other projects.
In July 2013, prior management entered into a Letter of Intent
to acquire the Buldibuyo Gold Project in Peru, South America. The Company subsequently entered into an updated Letter of Intent
to acquire the project in May 2014. It was the Company’s intention to acquire 100% of the gold project, which had produced
high grade ore in the past, and had engaged in some due diligence to qualify expectations and timelines. However, despite the execution
of the Letter of Intent and numerous attempts to accommodate the vendors, the vendors failed to deliver essential information to
us required to conduct a thorough technical and legal due diligence on the project and associated holding companies and, accordingly,
we terminated negotiations to acquire the project in July 2014.
The Merger on May 29, 2015 with VNUE, Inc.
As reported in the Form 8-K dated April 14, 2015, Tierra Grande
Resources Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), on
April 13, 2015 with VNUE, Inc., a company incorporated pursuant to the laws of the State of Washington (“VNUE”), and
TGRI Merger Corp., a Nevada corporation and a wholly-owned subsidiary of the Company (“Merger Sub”).
On April 30, 2015, the Company filed an 8-K announcing the extension
of the deadline to close on the Merger Agreement until May 30, 2015.
On May 29, 2015, Vnue, Inc. (formerly Tierra
Grande Resources Inc.) (“TGRI”) closed the Agreement and Plan of Merger (the “Merger Agreement”), initially
entered into on April 13, 2015 with Vnue Washington and all of the stockholders of Vnue Washington.
Upon closing of the Merger Agreement a
total of 507,629,872 shares of TGRI common stock were issued as follows: (i) all shares of Vnue Washington stock of any class or
series issued and outstanding immediately prior to the closing of the Merger Agreement were automatically converted into and exchanged
for an aggregate of 477,815,488 fully paid and non-assessable shares of TGRI common stock; and (ii) an aggregate of 29,814,384
shares of TGRI common stock were issued to Matheau J. W. Stout, Esq. as payment for services performed prior to and in connection
with the Merger. The number of TGRI common shares issued to Vnue Washington's stockholders for the acquisition of all shares of
Vnue Washington represented approximately 79.0% of the issued and outstanding common stock immediately after the closing of the
Merger Agreement. The board of directors and the members of the management of TGRI resigned and the board of directors and the
member of the management of Vnue Washington became the board of directors and the member of the management of the combined entities
upon closing of the Merger Agreement.
As a result of the controlling financial
interest of the former stockholders of Vnue Washington, for financial statement reporting purposes, the merger between TGRI and
Vnue Washington was treated as a reverse acquisition, with Vnue Washington deemed the accounting acquirer and TGRI deemed the accounting
acquiree under the acquisition method of accounting in accordance with Section 805-10-55 of the FASB Accounting Standards Codification.
The reverse acquisition is deemed a capital transaction in substance whereas the assets and liabilities of Vnue Washington (the
accounting acquirer) are carried forward to TGRI (the legal acquirer and the reporting entity) at their carrying value before the
combination and the equity structure (the number and type of equity interests issued) of Vnue
Washington is being retroactively restated using the exchange ratio established in the Merger Agreement
to reflect the number of shares of TGRI issued to effectuate the acquisition. The number
of common shares issued and outstanding and the amount recognized as issued equity interests in the consolidated financial statements
is determined by adding the number of common shares deemed issued and the issued equity interests of Vnue Washington immediately
prior to the business combination to the unredeemed shares and the fair value of TGRI determined in accordance with the
guidance in ASC Section 805-40-55 applicable to business combinations, i.e. the equity structure (the number and type of equity
interests issued) in the consolidated financial statements immediately post the combination reflects the equity structure of TGRI,
including the equity interests the legal parent issued to effect the combination .
A copy of the Merger Agreement was attached as Exhibit 10.1
to the Company’s 8-K filed on April 14, 2015. The description of the Merger Agreement herein is qualified by the terms of
the full text of the agreement attached thereto and the terms thereof are incorporated herein by reference.
Plan of Operations
The History of VNUE
VNUE was founded in August of 2013 with the vision of creating
a collective network of connected venues that empower and assist bands, artist, and entertainers to monetize their performance
(audio & video) in the venue using mobile technologies. VNUE has developed its business and technology in tandem to enter into
deals with venues, artists and labels across the United States using this initial launch strategy. The collective venue network
effect, whereby each deal makes the offer more compelling to other potential customers, has been a key driver of VNUE’s growth
to date. The initial focus of the business in early 2014 as a YouTube certified company, to create a Multi-Channel Network (MCN)
specifically focused on live streaming and monetization of content through the google display network..
On July 23, 2014, the Company entered into an Asset purchase
agreement with Lively, LLC (the “Agreement”), whereby the Company acquired certain assets of Lively, LLC for a consideration
of (i) payment of $150,000 and (ii) Preferred shares with a fair market value of $250,000 at the time of the issuance. Assets purchased
included: a) software, inventions, customers, customer lists, development, documents and records, designs, claims, intellectual
property rights, distribution rights and merchandising rights; b) all copyright, patents, trademarks, trade names, logos or service
marks and other intangible property and rights.
Since the Lively assets acquisition, VNUE has grown its platform,
expanded into enabled venues and enhanced its platform offering to approve the monetization model and further evangelize the creation
of the collective network of connected venues that empower artist to create content and monetize it.
Markets and Opportunity
There are over 400,000+ Indie bands performing in the US domestic
market alone, and while a handful of them will get produced under a label even less will be big enough to attempt to utilize today’s
current methods to capture and deliver live performance audio from a given show. Currently artist, bands and performers are missing
a simple capture and immediately sell tool kit to deliver high quality audio and video to their fans for each of their live shows.
VNUE’s goal first and foremost is to empower artists -
not only in serving their fans, but generating a monetary footprint which can foster the continued creation of their art which
moves millions all over the world.
VNUE strategically aligns an economically viable in-house
digital solution across during a golden era of live music. By creating a platform and connected network that is extremely complex
and resource-intensive. Through a suite of applications and dashboard centered at the heart of the software platform, a connected
network of partners, labels, publishers, right management, artist, bands and venues and a range of advanced 3rd party distributors,
VNUE allows distribution of content to all types of digital and social focused sites as well as within its own sandbox, with a
range of revenue models and centralized reporting that the artists, labels and publishers get to keep. By using the VNUE platform,
artists can create, market and distribute their shows while creating new revenue streams. Fans are able to connect with their favorite
performers in a new way, discover new performances and listen to and watch their live performances on their mobile devices, computer,
gaming consoles, OTT services and connected TVs.
Serving multiple customers on one platform enables VNUE to cost-effectively
invest significant amounts in innovation to drive continuous product iterations that succeed the prior use case.
Monetization and Business Model
In today’s social media world, fans want to be able to
immediately share with their friends the fact they were at the show and how great this unique individual show was that they just
attended. Fans do not want to wait for a post-tour, live show CD to be produced from some other show on the tour months or years
after the fact, they want it now. VNUE is the solution.
Artist, Industry executives, Labels, Music publishers and Venues
will access VNUE’s solution as a service, through which they are able to benefit from a range of different revenue models
to optimize the value of their live and on-demand content across a majority of digital ecosystems. The Company’s primary
revenue model is to take a share of the revenue from sales of concerts, performances both audio and video or audio separately.
In addition the revenue stream can also include an advertising or sponsorship component that was integrated into tours. This revenue
share aligns business outcomes for all parties and means that costs are primarily baked into the software and delivery agent. Typical
revenue shares are expected to range from 15-60 percent and vary based on the level of service allocated to each Artist, Label,
Music publisher, venue and the scale of the business opportunity. Secondary revenue streams include fees for storage, usage, licensing
and software upgrades (design or social ad distribution). VNUE’s revenue share is reported as net revenue (i.e. gross transaction
revenues minus any revenue share due to third parties).
As a software-focused business, VNUE can take advantage of a
single technology platform to continuously acquire users at low marginal cost leveraging artist promotion, in venue marketing and
mobile notifications. Further automation and self-service tools are intended to allow VNUE to provide more advanced services to
the industry and artist without adding significantly to the cost base or headcount.
VNUE delivers a technology suite to accompany the publishers
that allows them to source, pull a wide swath of reports down to granular in venue streams and conversions. VNUE looks to commercialize
the in venue sales components that is currently missing and expand these efforts globally and embed live and on-demand content
from the VNUE Audience network efficiently and cost-effectively. These features, such as its real time audio sweating tools, are
designed to significantly reduce the manual effort required to display music content and, therefore, increase the efficiency of
content distribution and the revenue yield per performance sold.
License Agreement with Universal Music Corp.
On November 2, 2015, the Company entered into a License Agreement
with Universal Music Corp. (“Universal”).
The License Agreement is effective September 8, 2015, and has
a term of Two (2) Years from the Effective Date. Under the terms of the License Agreement, Universal is granting to VNUE a non-exclusive,
non-transferable, non-sublicensable license to create and distribute content using certain Universal compositions, more specified
in the Grant of Right’s section of the License Agreement.
The Company will then market and sell this content via the VNUE
Service at certain agreed upon price points more specifically described in the Business Model and Price Points Section of the License
Agreement, and the Company shall pay Universal royalties for each sale of the content as specified in the Royalty Rates section
of the License Agreement.
In accordance with the Minimum Guarantee provision of the License
Agreement, the Company was required to pay Universal a minimum first year fee of Fifty Thousand Dollars ($50,000), which is due
within 10 days of execution and a second year minimum fee of Fifty Thousand Dollars ($50,000), which is due upon the commencement
of the second year of the Term. The Company paid the minimum first year fee of Fifty Thousand Dollars ($50,000) to Universal on
November 10, 2015.
Now that the Company has paid the minimum first year fee to
Universal, the Company’s plan is to continue raising capital through the sales of its common stock in order to complete the
development of its VNUE Service. Once development of the VNUE Service is complete, the Company plans to concentrate on the marketing
and sales of content created under the Licensing Agreement with Universal, as well as identifying strategic opportunities with
other music industry leaders.
Results of Operations
The following discussion and analysis of
our results of operations and financial condition for the six months ended June 30, 2015 should be read in conjunction with our
unaudited interim consolidated financial statements and related notes included in this report, as well as our consolidated financial
statements of Vnue Washington for the year ended December 31, 2014 and notes thereto contained in Vnue Inc.’s Current Report
amendment No. 1 to Form 8-K as filed with the SEC.
Six months Ended June 30, 2015 Compared to Six months Ended
June 30, 2014
Cost of Sales
Our cost of sales for the Six-Months Ended
June 30, 2015 amounted to $178,390 compared to $19,230 for the Six-Months Ended June 30, 2014.
Acquisition-Related Costs
Our acquisition-related costs for the Six-Months Ended June
30, 2015 amounted to $819,105 compared to $0 for the Six-Months Ended September 30 2014 in connection with the closing of
the Merger on May 29, 2015.
Professional Fees
Our professional fee expenses for the Six-Months Ended June
30, 2015 amounted to $137,980 compared to $12,594 for the Six-Months Ended June 30, 2014. The increase in professional fees
relative to last year is primarily due to fees for legal fees incurred by VNUE Washington prior to the Merger, and other
legal, accounting and auditing services, associated with the Merger.
General and Administrative Expenses
Our general and administrative expenses for the Six-Months Ended
June 30, 2015 amounted to $42,214 compared to $24,775 for the Six-Months Ended June 30, 2014. The increase in general and
administrative expenses relative to last year is due primarily to expenses associated with the Merger.
Other Income, Net
We recorded other income for the Six-Months Ended June 30, 2015
of $26,115 compared to $0 for the Six-Months Ended June 30, 2014. The increase in net other income was primarily due to the change
in fair value of derivative liability, resulting in net other income of $119,297 against a financing expense of $50,000, a debt
discount (expense) of $40,996, and interest expense of $2,186.
Net Loss from operations
As a result of the foregoing cost of sales, acquisition-related
costs, professional fees, general and administrative expenses, and other income, and as we have not yet generated significant revenues
since our inception, our net loss for the Six-Months Ended June 30, 2015 was $1,151,338, compared to our net loss for the Six-Months
Ended June 30, 2014 of $56,599. The main reason for the change is the one-time acquisition related cost of $819,105.
Three months Ended June 30, 2015 Compared to Three months
Ended June 30, 2014
Cost of Sales
Our cost of sales for the Three-Months Ended June 30, 2015
amounted to $154,423 compared to $0 for the Three-Months Ended June 30, 2014.
Acquisition-Related Costs
Our acquisition-related costs for the Three-Months Ended June
30, 2015 amounted to $819,105 compared to $0 for the Three-Months Ended September 30 2014 in connection with the closing
of the Merger on May 29, 2015.
Professional Fees
Our professional fee expenses for the Three-Months Ended June
30, 2015 amounted to $104,435 compared to $0 for the Three-Months Ended June 30, 2014. The increase in professional fees
relative to last year is primarily due to fees for legal fees incurred by VNUE Washington prior to the Merger, and other
legal, accounting and auditing services, associated with the Merger.
General and Administrative Expenses
Our general and administrative expenses for the Three-Months
Ended June 30, 2015 amounted to $32,540 compared to $72 for the Three-Months Ended June 30, 2014. The increase in general
and administrative expenses relative to last year is due primarily to expenses associated with the Merger.
Other Income, Net
We recorded other income for the Three-Months Ended June 30,
2015 of $422 compared to $0 for the Three-Months Ended June 30, 2014. The increase in net other income was primarily due to the
change in fair value of derivative liability, resulting in net other income of $25,809 against a debt discount (expense) of $23,201,
and interest expense of $2,186.
Net Loss from operations
As a result of the foregoing cost of sales, acquisition-related
costs, professional fees, general and administrative expenses, and other income, and as we have not yet generated significant revenues
since our inception, our net loss for the Three-Months Ended June 30, 2015 was $1,109,955, compared to our net loss for the Three-Months
Ended June 30, 2014 of $72. The main reason for the change is the one-time acquisition related cost of $819,105.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily
through private offerings of our equity securities.
As of June 30, 2015, we had cash and cash equivalents of $125,251.
We had negative cash flow from operating activities of $406,087
for the Six-Months Ended June 30, 2015, compared with negative cash flow from operating activities of $56,574 for the Six-Months
Ended June 30, 2014. The increase in negative cash flow for operating activities is due to
costs associated with the Merger, and reflects Company’s expanded operations under the VNUE business model, which resulted
in significant payments to service providers and employees.
We had negative cash flow from investing activities of $52,037for
the Six-Months Ended June 30, 2015. The investment activity is due to an advance to a related party. We have not recorded any investing
activities for the Six-Months Ended June 30, 2014.
We had positive cash flow from financing activities of $583,329
for the Six-Months Ended June 30, 2015 as compared to $56,574 for the Six-Months Ended June 30, 2014. The cash flow from financing
activities for the Six-Months Ended June 30, 2015 was primarily due to $686,320 in proceeds from the issuance of common shares
in VNUE (Washington), when it was a private company, prior to the Merger. This $686,320 is offset by $61,991 in repayments to a
stockholder and $41,000 in repayments of convertible notes payable during the same period. The cash flow from financing activities
for the Six-Months Ended June 30, 2014 was due to advances from a stockholder.
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
Our consolidated financial statements for the period ended June 30, 2015 have been prepared on a going
concern basis and Note 3 to the financial statements identifies issues that raise substantial doubt about our ability to continue
as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
We have not generated significant revenues,
have achieved losses since our inception, and rely upon the sale of our common stock and loans from related and other parties to
fund our operations. We do not anticipate generating any revenues in the foreseeable future, and if we are unable to raise equity
or secure alternative financing, we may not be able to pursue our plans and our business may fail.
Application of Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial
condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally
accepted accounting principles issued by the FASB. 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.
Selected Financial Data
Not applicable.
Item 3. Quantitative and Qualitative
Disclosures of Market Risk
Not applicable.
Item 4. Controls and
Procedures
We carried out an evaluation required
by the Securities Exchange Act of 1934 (the “1934 Act”), under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of the end of the period covered by this report. Based on this
evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures
were ineffective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or
submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
During the most recent fiscal quarter,
there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Our disclosure controls and procedures
are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however,
that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well
designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives
will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within the Company have been detected.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time,
we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other
than described herein, neither the Company, nor its officers or directors are involved in, or the subject of, any pending legal
proceedings or governmental actions the outcome of which, in management’s opinion, would be material to our financial condition
or results of operations.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
Upon consummation of the Merger Agreement
on May 29, 2015, the Company issued (i) 477,815,488 fully paid and non-assessable shares of TGRI common stock shares for the acquisition
of all shares of Vnue Washington stock of any class or series issued and outstanding immediately prior to the closing of the Merger
Agreement; and (ii) 29,814,384 fully paid and non-assessable shares of TGRI common stock to Matheau J. W. Stout, Esq. as payment
for services performed prior to and in connection with the Merger.
Equity Purchase Agreement with Tarpon
Bay Partners, LLC
On June 15, 2015, the Company entered into
an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Tarpon Bay Partners, LLC, a Florida limited liability
company (“Tarpon”). Under the terms of the Equity Purchase Agreement, Tarpon will purchase, at the Company's
election, up to $5,000,000 of the Company's registered common stock (the “Shares”).
During the term of the Equity Purchase
Agreement, the Company may at any time deliver a “put notice” to Tarpon thereby requiring Tarpon to purchase a certain
dollar amount of the Shares. Simultaneous with the delivery of such Shares, Tarpon shall deliver payment for the Shares. Subject
to certain restrictions, the purchase price for the Shares shall be equal to 90% of the lowest Closing Price during the Valuation
Period as such capitalized terms are defined in the Agreement.
The number of Shares sold to Tarpon shall
not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially
owned by Tarpon, would result in Tarpon owning more than 9.99% of all of the Company's common stock then outstanding. Additionally,
Tarpon may not execute any short sales of the Company's common stock. Further, the Company has the right, but never the obligation
to draw down.
The Equity Purchase Agreement shall terminate
(i) on the date on which Tarpon shall have purchased Shares pursuant to the Equity Purchase Agreement for an aggregate Purchase
Price of $5,000,000, or (ii) on the date occurring 24 months from the date on which the Equity Purchase Agreement was executed
and delivered by the Company and Tarpon.
As a condition for the execution of the
Equity Purchase Agreement by Tarpon, the Company issued a Promissory Note to Tarpon in the principal amount of $50,000 with an
interest rate of 10% per annum and a maturity date of December 31, 2015.
Registration Rights Agreement with Tarpon
Bay Partners, LLC
In addition, on June 15, 2015, the Company
and Tarpon entered into a Registration Rights Agreement (the “Registration Agreement”). Under the terms of the Registration
Agreement the Company agreed to file a registration statement with the Securities and Exchange Commission with respect to the
Shares within 120 days of June 15, 2015. The Company is obligated to keep such registration statement effective until (i) three
months after the last closing of a sale of Shares under the Purchase Agreement, (ii) the date when Tarpon may sell all the Shares
under Rule 144 without volume limitations, or (iii) the date Tarpon no longer owns any of the Shares.
Sale of Common Shares for Cash
On September 24, 2015, the Company sold
2,666,667 shares of its common stock to an investor at $0.015 per share, or $40,000 for cash.
During the period from November 5, 2015
to November 23, 2015, the Company sold 8,675,213 shares of its common stock in aggregate to three investors at the price ranging
from $0.012 to $0.026 per share, or $135,000 for cash.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities
during the period ended June 30, 2015.
ITEM 4. MINING SAFETY DISCLOSURES
N/A
ITEM 5. OTHER INFORMATION
There is no information with respect to
which information is not otherwise called for by this form.
ITEM 6. EXHIBITS
Exhibits filed herein for June 30, 2015
Exhibits
Exhibit Number |
|
Description of Exhibits |
3.1 |
|
Articles of Incorporation (1) |
3.2 |
|
Bylaws (2) |
31.1 |
|
Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |
|
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |
|
Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 |
|
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
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 |
______________________
(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. |
______________________
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: December 8, 2015 |
By: |
/s/ Matthew Carona |
|
|
Matthew Carona |
|
|
Chief Executive Officer
(Principal Executive Officer)
Secretary Treasurer |
Registrant |
VNUE, Inc. |
|
|
|
Date: December 8, 2015 |
By: |
/s/ Collin Howard |
|
|
Collin Howard |
|
|
Chief Financial Officer
(Principal Financial Officer) |
Exhibit 31.1
Certification pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14 under
the Securities Exchange Act of 1934
I, Matthew Carona certify that:
1. |
I have reviewed this Quarterly report on Form 10-Q of VNUE, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Registrant |
VNUE, Inc. |
|
|
|
Date: December 8, 2015 |
By: |
/s/ Matthew Carona |
|
|
Matthew Carona |
|
|
Chief Executive Officer
(Principal Executive Officer)
Secretary Treasurer |
Exhibit 31.2
Certification pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14 under
the Securities Exchange Act of 1934
I, Collin Howard, certify that:
1 |
I have reviewed this Quarterly report on Form 10-Q of VNUE, Inc.; |
2 |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Registrant |
VNUE, Inc. |
|
|
|
Date: December 8, 2015 |
By: |
/s/ Collin Howard |
|
|
Collin Howard |
|
|
Chief Financial Officer
(Principal Financial Officer)
|
Exhibit 32.1
CERTIFICATIONS PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report
of VNUE, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2015 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Matthew Carona, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
Registrant |
VNUE, Inc. |
|
|
|
Date: December 8, 2015 |
By: |
/s/ Matthew Carona |
|
|
Matthew Carona |
|
|
Chief Executive Officer
(Principal Executive Officer)
Secretary Treasurer |
Exhibit 32.2
CERTIFICATIONS PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report
of VNUE, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2015 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Collin Howard, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
Registrant
|
VNUE, Inc.
|
|
|
|
Date: December 8, 2015 |
By: |
/s/ Collin Howard |
|
|
Collin Howard |
|
|
Chief Financial Officer
(Principal Financial Officer) |
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