UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

For the Fiscal Year Ended December 31, 2020

 

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

 

Commission File Number: 000-53462

 

VNUE, Inc.

(Exact name of registrant as specified in its charter)

    

Nevada

 

98-0543851

(State or Other Jurisdiction of
Incorporation of Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

104 W. 29th Street, 11th Floor

New York, NY 10001

 

833.937.5493

(Address of Principal
Executive Offices)

 

(Registrant's Telephone Number,
Including Area Code)

  

Securities registered pursuant to Section 12(b) of the Act: 

   

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

N/A

N/A

   

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐    No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐    No ☒

 

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

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☐    No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

    

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  Yes ☐    No ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐    No ☒

 

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant by reference to the average bid and asked price of such common equity, as of June 30, 2020 was approximately $269,723.

 

The number of shares of common stock of the registrant outstanding on March 29, 2021 was 1,211,495,162 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

   

VNUE, INC.

TABLE OF CONTENTS

 

PART I

 

 

 

 

 

 

 

Item 1.

Description of Business

 

4

 

Item 1A.

Risk Factors

 

11

 

Item 1B.

Unresolved Staff Comments

 

11

 

Item 2.

Properties

 

11

 

Item 3.

Legal Proceedings

 

11

 

Item 4.

Mine Safety Disclosures

 

11

 

 

 

 

 

PART II

 

 

 

 

 

 

 

Item 5.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

12

 

Item 6.

Selected Financial Data

 

13

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

13

 

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

 

18

 

Item 8.

Financial Statements and Supplementary Data

 

19

 

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

20

 

Item 9A.

Controls and Procedures

 

20

 

Item 9B.

Other Information

 

21

 

 

 

 

 

PART III

 

 

 

 

 

 

 

Item 10.

Directors, Executive Officers, Promoters and Corporate Governance

 

22

 

Item 11.

Executive Compensation

 

25

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

26

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

 

27

 

Item 14.

Principal Accountant Fees and Services

 

28

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules Financial Statement Schedules

 

29

 

Item 16.

Form 10K Summary

 

29

 

 

 

2

 

    

Presentation of Information

 

As used in this annual report, the terms “we”, “us”, “our” and the “Company” mean VNUE, Inc., a Nevada corporation, and its subsidiaries, unless the context requires otherwise. The term “VNUE” or “VNUE Washington” refers to our wholly-owned operating subsidiary, VNUE, Inc.

 

On May 29, 2015, the Company, known at that time as Tierra Grande Resources Inc., acquired VNUE Washington or VNUE, resulting in VNUE becoming our wholly-owned subsidiary, and the holders of VNUE acquiring the majority of our outstanding capital. The acquisition of VNUE Washington was treated as a reverse acquisition, with VNUE Washington deemed the accounting acquirer of the company, and VNUE, Inc. deemed the accounting acquiree under the acquisition method of accounting in accordance with Section 805-10-55 of the FASB Accounting Standards Codification.

 

On April 15, 2017, the Company effected a reverse stock split of the Company’s common stock at a ratio of 1 for 10 which became effective on the market as of August 7, 2017. All historically reported share amounts and related pricing herein have been adjusted to reflect this 1-for-10 reverse stock split.

 

Forward-Looking Statements

 

The statements in this annual report on Form 10-K, 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. Some forward-looking statements that we may use include, without limitation, those statements that relate to:

 

 

Competition and market acceptance of our product,

 

Other risks and uncertainties related to the music industry and our business strategy and the impact of the Covid-19 pandemic on our operations

 

Our ability to penetrate the market and continually innovate useful technologies,

 

Our ability to negotiate and enter into license agreements,

 

Our ability to raise capital,

 

Our ability to protect our intellectual property rights,

   

You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to 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. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.

 

 
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Table of Contents

   

PART I

 

Item 1. Description of Business

 

Overview

 

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

 

VNUE, Inc., was incorporated as a Nevada corporation on April 4, 2006, under the name “ Buckingham Exploration Inc.”

 

On May 29, 2015, the Company, known at that time as Tierra Grande Resources Inc., acquired VNUE Washington or VNUE, resulting in VNUE becoming our wholly-owned operating subsidiary, and the holders of VNUE acquiring the majority of our outstanding capital stock. We also changed our name at that time to VNUE, Inc.

 

Covid-19 Pandemic

 

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.

 

There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have. The onset of Covid-19 in March 2020 has had a material adverse impact on our business as described throughout this Report.

 

Overview of our Business

 

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

 

Through VNUE, Inc., our wholly-owned subsidiary, we now carry on business as a live entertainment music technology company that offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music. Our two main product lines are:

 

 

Set.fm™ / DiscLive Network™ - Our consumer app platform that allows fans to purchase the concert they just experienced instantly on their mobile device, and “instant” physical collectible products are recorded and sold at shows and online through the company’s exclusive partner DiscLive Network™, the 17+-year pioneer in “instant live” recording.

 

Soundstr™ - Our technology which is a comprehensive music identification and rights management Cloud platform that, when fully deployed, can accurately track and audit public performances of music, creating a more comprehensive and transparent ecosystem for general music licensing and associated royalty payments, and will help to ensure the correct stakeholders are paid through the use of our “big data” collection.

   

While Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive, and its related marks and names are not owned by the Company and are owned or utilized by RockHouse Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to Set.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to them. Set.fm had been using its marks since 2014 prior to our acquisition of the assets.

 

We are a relatively new company. Our wholly-owned VNUE subsidiary commenced operations in calendar year 2015 and we have undertaken mainly organizational activities and software application development. Our independent auditors have raised substantial doubts as to our ability to continue as a going concern without significant additional financing. Accordingly, for the foreseeable future, we will continue to be dependent on additional debt and equity financing to maintain our operations and continue with our development activities.

 

Acquisitions will be pursued where the Directors consider that there is clear value through the addition of expertise, customers, monetization potential or geographic footprint.

 

Our principal offices are located at 104 W. 29th Street, 11th Floor, New York, NY 10001. Our telephone number is 833-937-5493.

 

 
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Table of Contents

  

The History of VNUE

 

VNUE was founded in August of 2013 by Matthew Carona and Louis Mann with the vision of creating a collective network of connected venues that empower and assist bands, artists, and entertainers to monetize their performance (audio & video) in the venue using mobile technologies.

 

In 2014, VNUE acquired Lively LLC a Seattle based music technology company and direct-to-fan mobile platform that brings artists, fans, and brands together by capturing the live performance. In 2016, Zach Bair, CEO, took control of VNUE, and his team determined that the Lively IP, although valuable, had not been developed to the point where it could be deployed with major recording artist clients, and the decision was made to build and/or acquire other technologies which would help the company realize its goals. Bair and his team set out to immediately reset the company’s direction.

 

DiscLive™ Exclusive License-Related Party

 

On July 10, 2017, our wholly-owned VNUE subsidiary entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”). DiscLive and related marks indicated herein are marks utilized by DiscLive and the Company disclaims rights to those names or marks) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. This agreement provides VNUE with an exclusive license from DiscLive, for three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license for the foregoing rights. In exchange for the license, DiscLive receives a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services since the commencement of the agreement. DiscLive is controlled by our Chief Executive Officer.

 

The Licensing Agreement was renewed for another three year period on March 1, 2021. All terms of the original agreement remain in full force and effect, and have remained in force throughout the expiration of the original agreement which was June 20, 2020. Additionally, this Amendment will auto-renew if neither party notifies the other in writing with the intent to cancel within 30 days of the expiration date.

 

Set.fm™ Acquisition

 

On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc., whereby the Company acquired the assets of the digital live music distribution platform Set.fm™ from PledgeMusic . Set.fm™ allows us to record and sell live shows directly to fans’ mobile devices, uploading simultaneously with the artist’s performance, similar to the “instant live” physical distribution of DiscLive. The platform, which also features an innovative and easy-to-use DIY studio app, already boasts thousands of artists and tens of thousands of fans using it. VNUE has conducted updates and intends to continually update, the Set.fm™ platform, to update and improve it, and has leveraged the platform for major label music clients and will continue to roll out additional functionality.

 

Soundstr™ Acquisition

 

On April 23, 2018, the Company entered into an agreement with MusicPlay Analytics, LLC (d/b/a Soundstr) (“Soundstr”) whereby the Company acquired the assets of Soundstr, a technology that aims to help businesses pay fairer music license fees based on actual music usage.

 

The Company intends to continually update the above technologies, funds, and resources permitting.

 

Markets and Opportunity

 

Our business has two main “end users” or revenue sources:

 

 

the “consumer” side of the business, where we leverage our team’s expertise in recording live shows and releasing experiential content to fans immediately afterward (the “instant live” model), which consists of DiscLive, and Set.fm™, and

 

 

 

 

the emerging market of Music Recognition Technology (MRT), which is a B2B model whereby we identify music being played in bars, restaurants, other businesses, and radio stations, and tracing that music back to the original songwriters so that we can ensure the correct stakeholders are being paid. This is the Soundstr cloud and hardware technology. Eventually, we envision this functionality being merged together.

 

 
5

Table of Contents

   

The following sections are broken up accordingly.

 

Set.fm™ & DiscLive™: “Instant Live Recording and Experiential Products”

 

DiscLive and set.fm™ provide fans with “instant” experiential content, so that they may walk out of a concert and take home their experience. The concert never ends with DiscLive and Set.fm™. With the increase in digital media (and related piracy issues), music concerts and related media and merchandising and events (e.g. post-concert shows etc.) are becoming the primary driver in music revenues today.

 

How Instant Live Recording Works?

 

Teams follow tours and record major artists and release high-quality products instantly via the set.fm™ mobile app and DiscLive physical products (online and onsite), capturing the emotion of the moment and translating that to sales. Set.fm™ also offers “indie” artists a free “Set.fm Studio” app to record themselves and sell their music on our platform. DiscLive is the pioneer, and VNUE CEO helmed that company since 2004, as well as EMI/Capitol Records version (2009-2012), called “Abbey Road Live”. Thousands of shows have been recorded all over the world and tens of thousands of products sold. Major artist clients (past and current) include Rob Thomas, Peter Frampton, King’s X, Bad Company, Slash, Seether, Devo, Blondie, and many others.

 

Size of the Instant Live Recording Market

 

According to a report published by Statistica in January 2021, the global music business is currently valued at $53.8 billion and expected to surpass $65 billion by 2023. Within that market, live music revenue is projected to be over $31 billion by 2022, according to Pricewaterhouse Coopers. With sufficient capital that will be deployed into sales, marketing, and branding resources, we believe that we can capture between $50-$100 million annually within three years with our experiential products.

 

Instant Live Recording

 

Revenue Model

 

Based on our team’s 17+ years of operations (through DiscLive, Abbey Road Live when aligned with EMI, and Set.fm), thousands of shows recorded around the world, and data collection available to us, we believe that the average sales conversion is 15%, with product prices averaging $25. This means that at a show of 1000 people attending, based on previous statistics, 150 of those people would purchase one of our products. With just ten tours of 20 tour dates each, and an audience of only 2,500 per show, the revenue potential is $1.875 million. We also market our products worldwide through our e-Commerce websites and through the effective use of social networks. No assurance can be made that past results will be indicative of future results however, and a number of economic and technological factors could adversely affect our consumer spending habits.

 

Growth Potential for Instant Live Recording

 

This is a model that is scaled through the use of technology, software, and hardware that we have specifically assembled to address our proprietary business practices which have been honed over the years, staffed with readily available contract personnel that we train specifically for our model. This does not age out. It is very much the “Ray Kroc” model, translated to music services, where the processes are repeatable, and we have an unbeatable product and service line. Since the business is primarily built on relationships, our ability to scale is only limited by access to capital. Scaling the opportunity is as simple as accessing the capital to acquire the equipment and contract labor to cover more tours.

 

 
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Table of Contents

   

Barriers to Entry & Obsolescence

 

We do not believe that our instant live recording business has any direct competitors at this time, and there are no known competitors to the Set.fm immediate distribution platform. Currently, fans merely take poor quality videos and audio recordings and just spread them (without obtaining intellectual property rights) on whatever social media they use. We believe, however, that our team has the time-tested trust of the music industry and proprietary processes and trade secrets developed over a decade that creates substantial barriers to entry. Management has found that other companies have tried to enter the space in different formats but none have the industry trust, business processes and trade secrets that the Company has developed. We believe that because our focus is on creating experiential content, delivered instantly, in the manner in which the fan wants it (particularly digitally), our user base will continue to grow with repeat users. As the industry evolves, so will the manner in which concert-goers consume their content, and VNUE management believes that continued R&D and marketing are necessary to stay a step ahead.

 

Unlike a typical startup, Set.fm and DiscLive is a real product offering with measurable results, recognized brands, and a leadership team with deep domain experience, execution, and relationships.

 

Soundstr™

 

VNUE acquired the Soundstr technology in mid-2018. Soundstr™ is a patent-pending hardware/cloud-based Music Recognition Technology (MRT) platform that some have compared to the app “Shazam,” but which is focused on businesses such as radio stations, bars, restaurants, and other real-world scenarios that involve the public performance of music.

 

How Soundstr Works; PROs?

 

Anywhere that music is played in a public setting, such as radio stations, bars, restaurants, etc., it must be licensed by law. Royalties are required to be paid to the creators (songwriters, publishers) or rights holders when that music played in a public domain. Organizations called “Performing Rights Organizations,” a.k.a. PROs, are responsible for assessing and collecting royalties. Unfortunately, there has previously been no technology to accurately track and audit exactly what music is being played, and consequently, licensees have to agree to “blanket” agreements, which are usually expensive, and whereby any music that a PRO is responsible for would be licensed, if it is theoretically played. The problem with this scenario is that due to the lack of tracking technology, there is inherent inaccuracy in which stakeholders (usually writers and artists) are paid, and further to that, in some cases, only a fraction of that PRO’s catalog may be played. Additionally, these business venues are so significant in number and yet so spread out in terms of location that this becomes extremely difficult to monitor let alone collect and enforce. This creates a massive market shortfall and discrepancy of licensing fees that would otherwise be generated from these businesses.

 

Soundstr™ has been created to address this, streamline it, and eliminate errors in royalty allocation. Soundstr™ listens to music, records it, and uploads it to the Cloud, where it is processed for identification via artificial intelligence (AI) and other means. Once the music is identified, several industry-leading databases are accessed to assemble deep metadata, and further processing is accomplished to build our own deep, authoritative database so that VNUE can create an accurate audit record of what has been played, and help to ensure the correct stakeholders are paid - while at the same time encouraging unlicensed venues to become licensed, and through the use of data, giving businesses the ability to negotiate more competitive licensing fees. Eventually, our system will support direct licensing. This creates a win for everyone involved - writers, publishers, artists, PROs, venues, and other stakeholders.

 

Size of the Soundstr™ Market

 

Based on FCC data, as of 2019 there are 15,330 radio stations in the USA, and over 44,000 worldwide (CIA, 2010). According to Statistica, there are over 700,000 bars, taverns and restaurants in the US, and millions globally. Between the combined segments there is more than $500 million potential in recurring revenue per year. There are even more opportunities in various other verticals.

 

 
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Soundstr™ Revenue Model

 

Soundstr™ is a subscription model whereby radio stations and other businesses would “sign up” and subscribe for a monthly, annual, or other fees. This product line is currently about 80% complete, with our hardware already 100% complete). Further development is required for additional automation. Each location will be charged an installation fee and a monthly automated subscription charge. In addition to the subscription amount, we will also charge a percentage of the net savings from being able to reduce the licensing fees radio stations pay to PROs. For bars, restaurants, and other similar “brick and mortar” businesses we will likely charge a monthly fee, or it will be offered for free due to advertising revenue which will offset the monthly cost of the unit. Soundstr™ also has a built-in “beacon” technology to allow VNUE to push the aforementioned targeted advertising using geo-centric mobile applications. That revenue offsets the cost to the business owner and adds additional revenue to VNUE’s profit center.

 

Growth Potential for Soundstr™

 

Initially, Soundstr™ will be rolled out to radio, and then to brick and mortar establishments. There are already a handful of Soundstr units deployed for testing. There is more opportunity to scale quickly in radio, with large consolidated radio groups having single decision-makers, rather than thousands upon thousands of individual business owners. For radio stations and other “professional” clients, VNUE will install the Soundstr devices and provide fee-based services. We plan to roll out Soundstr™ as a self-installed item for brick and mortar establishments, which will be fulfilled via Amazon or a similar service, allowing for greater scale and lower cost. Currently there are approximately 450 Soundstr™ devices. We plan to have those devices deployed within 12 months or less, during which time our goal will be to raise additional funds to manufacture 10,000 or more units. The 450 units will get us to approximately $1.21 million in revenue deployed almost exclusively in radio stations as well as some physical locations. The deployment and roll out of existing and additional units is dependent upon funding. Assuming we are able to build and deploy 10,000 units, revenues will hit $36 million annually within three years, not taking into account additional revenues from the anticipated reduction in fees charged to clients by the PROs. It will take approximately $8-10 million to get us to $36 million in revenue. Our manufacturer has advised us that it is capable of manufacturing 10,000-20,000 units per month, with a three-month lead time for any engineering changes. Over time we hope to have both radio stations as well as other brick and mortar establishments and venues. This product also provides potential growth due to advertisement, sales of data etc. We believe that the data we will be collecting could potentially be one of the strongest revenue drivers.

 

Barriers to Entry & Obsolescence

 

Currently the PROs attempt to fill the void only in part, by employing statistical data and guesswork which, we believe leaves no room for independents or new media. Accordingly, we are not aware of any direct competitors. This market, we believe, is “white hot” however, and we believe will quickly become competitive. There is a great deal of interest in MRT, and some smaller startups in Europe have deployed technology to track DJ music (electronic), which is only a small subset of what we are able to capture (live, recorded, DJ, karaoke, radio, etc.).

 

We have patent-pending technology, USPTO Application US 2017/0316089, “System and Method for Capturing, Archiving and Controlling Content in a Performance Venue,” which creates a significant barrier to entry, and we expect to file more IP protection as we are funded. Another barrier to entry is the executive team, which has considerable success in the domain, as well as deep relationships. Because the system is predominantly Cloud-based, with software that evolves, we intend to continue to maintain and update the software to remain relevant and effective. Our hardware is tablet-based with some customized casing and components, and as technology continues to improve, our hardware will evolve as well, but will remain backward compatible. Additionally, as additional barriers to entry, we anticipate building open-architecture rack-mounted units, software plug-ins to compliment professional recording software and track internet radio, and in fact, we expect to combine Soundstr technology into Set.fm, so we can identify music we are recording on-the-fly and eventually enable “instant” and seamless licensing. This new technology be protected through additional patent filings.

 

 
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Key Business Strengths

 

Management believes that the key factors or features of our business that will contribute to VNUE’s success are:

   

Expertise and experience in “Instant Live” Content Production and Distribution - VNUE’s team members have been involved in the business of instant live content since 2003. VNUE’s CEO pioneered this concept and commercialized it with the original DiscLive in 2004, and has continued over the years to develop the processes and methodologies used to gain trust and a competitive advantage in the music business. Due to this lengthy history, and trust by major labels, management companies, and related parties, VNUE should remain in a position of strength in terms of this model, and plans to continue to develop the model and introduce new innovative and immersive software features to fans.

 

Intellectual Property - VNUE has pending patents for our Soundstr™ technology, and expects to file more related patents around the Soundstr™ platform, as well as Set.fm™.

 

The Company has not filed any formal trademark applications relating to Set.fm™ or Soundstr™ with the United States US Patent and Trademark Office but has been using these marks openly since approximately fall 2017 and spring 2018 respectively, although both marks had been in use well before our acquisition of the assets.

 

We have patent-pending technology, USPTO Application US 2017/0316089, “System and Method for Capturing, Archiving and Controlling Content in a Performance Venue” which relates to our Soundstr™ technology.

 

Employees

 

We currently have 2 full-time and 5 part-time employees. We also currently engage independent contractors in the areas of accounting, legal and auditing services, corporate finance, as well as marketing and business development. The remuneration paid to our officers and directors will be more completely described elsewhere in our audited financial statements. We do and will continue to outsource contract employment as needed.

 

Reports to Security Holders

 

We are subject to the reporting and other requirements of the Exchange Act and we intend to furnish our shareholder's annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the Securities and Exchange Commission in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the Commission if they become necessary in the course of our company’s operations.

 

The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

 

Patents, Trademarks, Franchises, Royalty Agreements or Labor Contracts

 

As stated above we have patents pending for our Soundstr™ technology, and expect to file more patents and trademarks around technology we are developing or have already developed, or plan to develop, funds permitting. We will continue to assess the need for any copyright, trademark, or patent applications on an ongoing basis.

 

Research and Development

 

We spent $12,404 on research and development activities during the year ended December 31, 2019, primarily related to the development of our proprietary software. Due to limited operations in 2020 due to the impact of Covid-19, we did not have any research and development expenses in 2020.

 

 
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Subsidiaries

 

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

%

      

The consolidated financial statements include the accounts of the subsidiaries/entities as of reporting periods end date and for the reporting periods then ended from their respective dates of incorporation/formation, acquisition, or disposition.

 

Environmental Laws

 

We believe that our operations do not have a material effect on the environment nor do environmental regulations have a material impact on our current operations.

 

Recent Developments

 

Impact of Current Coronavirus (COVID-19) Pandemic on the Company

 

Covid-19 has had a material adverse effect on our live recording business and the music industry in general. A material portion of our future set.fm and DiscLive business is dependent on success of public events and gatherings. In the event that quarantine and social distancing rules or even social fears continue through such time then we will be materially adversely affected, as these gatherings will see fewer attendees.

 

Available Information

 

We are required to file periodic reports, proxy statements and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of these reports by accessing the SEC’s website at http://www.sec.gov. You may also send communications to our board of directors at VNUE Inc., Attention: Chief Executive Officer, 104 W. 29th Street, 11th Floor, New York, NY 10001.

 

 
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Item 1A. Risk Factors

 

Not Applicable.

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

Our corporate office is located at 104 W. 29th Street, 11th Floor, New York, NY 10001. Our telephone number is 833.WE.R.LIVE. The office space is shared with other companies and entrepreneurs and we pay $1,000 per month for the use of the space on a month to month basis. We began the use of the office space in April 2015. We also lease a property in Memphis, TN, located at 5711 Raleigh LaGrange Road, Memphis, TN, 38134, for our distribution and fulfillment center, and equipment storage for recording and producing our live products. We have or lease no other property.

 

Item 3. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings relating to claims arising out of our operations in the normal course of business. However, as of the date of this annual report, we are currently not involved with any legal proceedings or claims.

   

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 
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PART II

 

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

There is a limited public market for our common shares. Our common stock is quoted on the Pink Current Information tier of OTC Markets Group Inc. (“OTC Markets”) under the symbol “VNUE.” Our common stock became eligible for quotation on the OTC Markets on November 18, 2013. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-downs, or commissions, and may not necessarily represent actual transactions. The closing price of our common stock on Pink Current Information on March 26, 2021 was $0.0259 per share.

 

Holders

 

As of March 19, 2021 we had 1,211,495,162 shares of our common stock issued and outstanding held by approximately 216 record holders of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

 

Dividends

 

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

 

1.     We would not be able to pay our debts as they become due in the usual course of business; or

 

2.     Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

 

We have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future.

 

Equity Compensation Plans

 

In April 2013, we adopted a 2012 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the long-term success of our company and the creation of stockholder value by encouraging the attraction and retention of qualified employees and non-employee directors, encouraging them to focus on critical long-range objectives of our company and linking their interests directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for various types of incentive awards to participants. We believe it is important to have the flexibility to grant various types of equity awards to our employees so that we can react appropriately to the changing environment. While the Plan authorizes the issuance of up to 15,000,000 shares of our common stock, no securities have been issued under the Plan to date.

 

The Plan shall be administered by our Board until the appointment of an appropriate committee (the “Committee”). The Committee has the discretion to determine the types and terms of awards made under the Plan. The Plan allows the Company to grant stock options; restricted stock rights; restricted stock; performance shares; performance share units; and stock appreciation rights to employees, officers, consultants to, and non-employee directors of, our company on the grant date of the award. The total number of shares subject to all awards under the Plan is fifteen million, subject to adjustment as provided in the Plan for stock splits, dividends, distributions, recapitalizations and other similar transactions or events. The maximum number of shares that may be granted to a participant in any year is three million. If any shares subject to an award are forfeited, expire, lapse, or otherwise terminate without the issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, lapse, or termination, again be available for issuance under the Plan rules, other than for non-substantive amendments to the Plan. The Plan also sets out provisions relating to a change in control of the Company, the non-transferability of awards, the forfeiture and substitution of awards, as well as other provisions customary for plans of this type.

 

 
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Equity Compensation Plan Information

 

 

 

As of December 31, 2020

 

 

 

Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights

 

 

Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights ($)

 

 

Number of

Common

Shares

Remaining

Available

for Future

Issuance

Under Equity

Compensation

Plans

 

Equity compensation plans not approved by shareholders

 

 

-

 

 

 

-

 

 

 

-

 

Equity compensation plans approved by shareholders

 

 

-

 

 

 

-

 

 

 

15,000,000

 

Total

 

 

-

 

 

 

-

 

 

 

15,000,000

 

   

On May 22, 2019, the Company issued 4,126,776 restricted shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) to various employees and service providers to compensate and reward them for past services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock will receive relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.

 

In connection with the Series A Designation, the Company authorized 5,000,000 shares of its restricted Series A Preferred Stock. Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders are also entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock shall have no liquidation or redemption rights.

 

The issuance of the Series A Preferred Stock was exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) as the transaction that did not involve a public offering, and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.

 

Recent Sales of Unregistered Securities

 

During the year ended December 31, 2020, the Company entered into the following transactions:

 

 

·

Issued 500,000 shares to pay for services valued at $150.00.

 

·

Issued 17,539,543 shares valued at $11,084 to pay interest expense.

 

·

Issued 422,572,017 shares upon the conversion of convertible notes resulting in a paydown of $56,466 and a loss of $263,609 on the extinguishment of debt.

 

·

Issued $453,708 in convertible notes with a fixed conversion price of $0.001 if a qualified offering occurs.

   

All the above securities issued were offered and issued in reliance upon the exemption from registration pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation S promulgated thereunder.

 

Issuer Purchases of Equity Securities

 

The Company has not purchased any of its securities.

  

Item 6. Selected Financial Data

 

Not applicable.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis should be read in conjunction with our audited financial statements, including the notes thereto, appearing elsewhere in this annual report, as well as the section in this annual report entitled “Description of Business”. These financial statements have been prepared in accordance with U.S. GAAP and are presented in U.S. dollars.

 

 
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Cautionary Statement Regarding Forward-Looking Information

 

The statements in this annual 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.

 

Among our forward-looking statements are those statements that relate to our plans, expenditures, and obligations. As we are a pre-revenue company we are completely dependent on capital raising activities in order to effectuate these plans or fulfill our capital obligations. Other forward-looking statements include those statements that relate to consumer acceptance of our products as well as music and entertainment industry acceptance of our services and revenue models and, our ability to implement this model.

 

You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to 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”) or may file from time to time. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.

 

The following discussion includes forward-looking statements about our business, financial condition, and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Cautionary Note Regarding Forward-Looking Statements.” The following discussion should also be read in conjunction with our audited consolidated financial statements including the notes thereto appearing elsewhere in this filing.

 

Overview

 

Following the Merger on May 29, 2015, we now carry on business as a live entertainment music technology company that offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music.

 

The company’s Set.fm™ consumer app platform allows fans to purchase the concert they just experienced instantly on their mobile device, and “instant” physical collectible products are recorded and sold at shows and online through the company’s exclusive partner DiscLive Network™, the 15-year pioneer in “instant live” recording.

 

The company’s Soundstr™, technology is a comprehensive music identification and rights management Cloud platform that, when fully deployed, will accurately track and audit public performances of music, creating a more transparent ecosystem for general music licensing and associated royalty payments, and will help to ensure the correct stakeholders are paid through the use of our “big data” collection.

     

In 2016, Zach Bair was appointed as CEO of the Company, and, after deliberation with management, the Company determined that the Lively IP previously owned by the Company, although not valueless, had not been developed to the point where it could be deployed with major recording artist clients, and the decision was made to build and/or acquire other technologies which would help the company realize its goals.

 

On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive receives a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer.

 

On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc., whereby the Company acquired acquire the assets of the digital live music distribution platform Set.fm from PledgeMusic . Set.fm is a do-it-yourself (DIY) platform that makes it easy for artists to record and sell their live shows directly to fans’ mobile devices, uploading simultaneously with their performance, and a platform which VNUE has already successfully utilized to record and sell digital content for major artists. The platform, which also features an innovative and easy-to-use studio app, already boasts thousands of artists and tens of thousands of fans using it.

 

 
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On April 23, 2018, the Company entered into an agreement with MusicPlay Analytics, LLC (d/b/a Soundstr) (“Soundstr”) whereby the Company acquired the assets of Soundstr, a technology that aims to help businesses pay fairer music license fees based on actual music usage.

 

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

 

Through VNUE, Inc., our wholly-owned subsidiary, we now carry on business as a live entertainment music technology company that offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music. The onset of Covid-19 in March 2020 has had a material adverse impact on our business as described throughout this Report. Our two main product lines are:

 

 

Set.fm™ / DiscLive Network™ - Our consumer app platform that allows fans to purchase the concert they just experienced instantly on their mobile device, and “instant” physical collectible products are recorded and sold at shows and online through the company’s exclusive partner DiscLive Network™, the 15-year pioneer in “instant live” recording.

 

Soundstr™ - Our technology which is a comprehensive music identification and rights management Cloud platform that, when fully deployed, can accurately track and audit public performances of music, creating a more transparent ecosystem for general music licensing and associated royalty payments, and will help to ensure the correct stakeholders are paid through the use of our “big data” collection.

 

While Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive, and its related marks and names are not owned by the Company and are owned or utilized by RockHouse Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to Set.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to them.

 

On Jan 9th, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty “MT Agreement”), to record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. As part of the deal, the Company agreed to pay an advance of $100,000 against sales, to MT and its affiliated companies, which was paid in full in installments, with the last installment of $40,000 paid on March 4th. We have recorded this amount as a prepaid expense on our balance sheet as of 12.31.2020

 

Also as part of the transaction, Ticketmaster agreed to include the option for their customers to pre-purchase a double CD set at checkout, for a price to the customer of $25.00, resulting in a net payment to VNUE of approximately $20 after Ticketmaster’s fees and taxes. Additionally, Wonderful Union, the VIP package sales company utilized by MT agreed to buy 5000 digital download cards from VNUE for $7 each (to include in VIP packages that they send to fans) for $35,000 which has been paid full. As of May 11, 2020, Ticketmaster has paid via wire $40,378 toward the aforementioned pre-sales.

 

Results of Operations

 

The following discussion and analysis of our results of operations and financial condition for the twelve months ended December 31, 2020 should be read in conjunction with our audited consolidated financial statements and related notes included in this report. We are in the process of completing the development of our products and services and therefore have only nominal revenues or income. Accordingly, we are completely dependent on our capital raising efforts in order to complete development and roll out our products.

 

Twelve Months Ended December 31, 2020 Compared to Twelve Months Ended December 31, 2019

 

Revenues

  

Our revenues for the twelve months ended December 31, 2020 and 2019, amount to $22,474 and $206,161, respectively, a decrease of $183,687. The decrease in revenues in 2020 compared to 2019 is primarily attributable to the onset of Covid-19 which eliminated the possibility of holding live music events which is the essential element of the Company’s business and is necessary to generate revenues. If the Covid-19 pandemic is mitigated the Company expects to resume its tour that was cancelled in 202 with Matchbox Twenty and generate revenue, however, there can be no assurances this will occur.

  

Direct Costs of Revenues

 

Our direct costs of revenues for the twelve months ended December 31, 2020 and 2019, amounted to $8,509 and $211,031, respectively, a decrease of $202,522. The decrease in costs resulted from decreased sales volumes.

 

 
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Research and Development

 

Our research and development expenses for the twelve months ended December 31, 2020 amounted to $-0- compared to $12,404 for the twelve months ended December 31, 2019. We believe that R&D is a material portion of our business plan and if we are unable to raise sufficient capital or to implement a proper R&D program we will be adversely affected. As we continue to move forward, we expect to spend more on R&D due to our product roadmap and in further developing solutions that will invoke both consumer interest as well as further automation and usability of our products.

  

General and Administrative Expenses

  

Our general and administrative expenses for the twelve months ended December 31, 2020 and 2019, amounted to $601,022 and $1,177,756 respectively. The increase in general and administrative expenses in 2020 compared to the same period in 2019 was due primarily to a one-time non-cash stock based compensation charge of $590,129 in 2019 related to the issuance of preferred stock, compared to $-0- in stock based compensation in 2020. Excluding stock-based compensation, general and administrative expense in 2020 was $587,627, or at level substantially equivalent to 2019 levels.

  

Intangible Asset Impairment

 

On December 31, 2019, we conducted an impairment analysis and although we believe that we will be able to generate revenues in the future from our Sounstr asset, based on the lack of any historical sales to date or lack of any pending contracts, we determined that we could not substantiate any anticipated future revenues, and determined that the remaining book value of the intangible of $132,397 should be impaired as of December 31, 2019.

 

Other Income (Expenses), Net

 

We recorded other expense, net, for the twelve months ended December 31, 2020 of $3,996,719 compared to other expense, net, of $72,671 for the year ended December 31, 2019. The significant increase in other expense, net, in 2020 compared to 2019 levels was primarily due to an increase in expense based on the increase in the fair value of the derivative liability of $3,413,629, an increase in financing costs in 2020 of $713,805; offset by a decrease in the loss on the extinguishment of debt of $268,920 in 2020.

 

Net Loss from Operations

 

As a result of the foregoing revenues, direct costs of revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net loss for the twelve months ended December 31, 2020 and 2019, was $4,553,777 and $1,400,098, respectively.

 

Liquidity and Capital Resources

 

Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans, including convertible debt. Our ability to raise capital in the form of equity or convertible debt will be hindered if and as our stock price decreases or we are required to increase our capitalization.

 

As of December 31, 2020, we had cash and cash equivalents of $4,458.

 

We had negative cash flow from operating activities of $518,493 for the twelve months ended December 31, 2020, compared with negative cash flow from operating activities of $501,905 for the twelve months ended December 31, 2019.

 

We had no cash used for investing activity in either 2020 or 2019.

 

Cash flow provided by financing activities was $470,855 for the year ended December 31, 2020 as compared to $535,810 for the twelve months ended December 31, 2019. The decrease in cash flow provided from financing activities is primarily attributable to a reduction in proceeds from the issuance of convertible notes and promissory notes of approximately $65,000 in 2020 compared to 2019 levels.

 

 
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Off-Balance Sheet Arrangements

 

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

 

Going Concern

 

The Company’s auditors have expressed doubt as to the ability of the Company to continue as a going concern. The Company had a stockholders’ deficit of $16,755,676 and negative working of $8,247,522 as of December 31, 2020. Certain of the Company’s notes payable are also past due, however, we have negotiated extensions for them and continue to honor them. One of our vendors claims that we owe them $1,172,781 in unpaid interest and penalties above the principal amount due. We intend to dispute this claim. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements were issued. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management estimates that the current funds on hand will only be sufficient to continue operations through July, 2021. Historically, the Company has used the proceeds of convertible notes to fund its operations. The Company believes that it can continue to raise proceeds during 2021, however, there can be no assurances. The ability of the Company to continue as a going concern is dependent on the Company’s ability to execute its strategy and in its ability to raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity or convertible debt securities for cash to operate our business. However, among other risks and uncertainties, given our low stock price, and limited number of authorized common shares available for issuance, we will likely be required to increase our authorized capital in order to accommodate these financings, which action will require shareholder approval. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

 

We have generated minimal revenues, have incurred losses since our inception, and rely upon the issuance of convertible notes to fund our operations. If we are unable to continue issuing convertible debt or raise equity or secure alternative financing, we may not be able to pursue our plans and our business may fail.

 

Critical Accounting Policies and Estimates

 

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

 

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this prospectus, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because the information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations. (See Note 2 - Significant and Critical Accounting Policies and Practices page F-7 herein).

 

 
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Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include the assumptions used to determine the value of the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities.

 

Derivative Financial Instruments

 

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

 

Stock-Based Compensation

 

The Company accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur.

 

Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin No. 107’s Simplified Method for Estimate Expected Term. The risk-free interest rate is estimated using comparable published federal funds rates.

 

Recent Accounting Pronouncements

 

See Note 2 of the consolidated financial statement for management’s discussion of recent accounting pronouncements.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

Not Applicable.

 

 
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Item 8. Financial Statements and Supplementary Data

 

VNUE, Inc.

December 31, 2020

 

Report of Independent Registered Public Accounting Firm

 

F-1

 

Consolidated Balance Sheets

 

F-3

 

Consolidated Statements of Operations

 

F-4

 

Consolidated Statements of Stockholders’ Deficit

 

F-5

 

Consolidated Statements of Cash Flows

 

F-6

 

Notes to the Consolidated Financial Statements

 

F-7

 

 

 

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Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of VNUE, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of VNUE, Inc. (the "Company") as of December 31, 2020, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company's auditor since 2020

Lakewood, CO

April 8, 2021

 

 
F-1

Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

VNUE, Inc. and Subsidiaries

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of VNUE, Inc. (the "Company") as of December 31, 2019 and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company experienced a net loss and utilized cash from operations during the year ended December 31, 2019 and has a stockholders’ deficit as of that date. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the consolidated financial statements. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

We have served as the Company's auditor since 2016.

 

 

Weinberg & Company  P.A

Los Angeles, California

May 19, 2020

  

 
F-2

Table of Contents

   

VNUE, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

 

Assets

Current assets:

 

 

 

 

 

 

Cash

 

$ 4,458

 

 

$ 52,096

 

Prepaid expenses

 

 

100,000

 

 

 

-

 

Total current assets

 

 

104,458

 

 

 

52,096

 

Total assets

 

$ 104,458

 

 

$ 52,096

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficit

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 2,372,072

 

 

$

1,018,145

 

Shares to be issued

 

 

247,707

 

 

 

-

 

Accrued payroll-officers

 

 

209,750

 

 

 

68,000

 

Advances from former officer

 

 

720

 

 

 

720

 

Notes payable

 

 

34,000

 

 

 

34,000

 

Deferred revenue

 

 

74,225

 

 

 

-

 

Convertible notes payable, net

 

 

1,956,922

 

 

 

1,486,067

 

Purchase liability

 

 

300,000

 

 

 

300,000

 

Derivative liability

 

 

3,156,582

 

 

 

922,509

 

Total current liabilities

 

 

8,351,979

 

 

 

3,829,441

 

Total liabilities

 

 

8,351,979

 

 

 

3,829,441

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

Preferred stock, par value $0.0001: 20,000,000 shares authorized 4,126,776 issued and outstanding

 

 

413

 

 

 

413

 

Common stock, par value $0.0001, 2,000,000,000 shares authorized; 1,211,495,162 and 770,883,602 shares issued and outstanding, respectively

 

 

121,149

 

 

 

77,088

 

Additional paid-in capital

 

 

8,386,593

 

 

 

8,099,346

 

Common stock to be issued, 5,204,352 and 5,204,352 shares, respectively

 

 

-

 

 

 

247,707

 

Accumulated deficit

 

 

(16,755,676 )

 

 

(12,201,899 )

Total stockholders' deficit

 

 

(8,247,521 )

 

 

(3,777,345

)

Total Liabilities and Stockholders' Deficit

 

$ 104,458

 

 

$ 52,096

 

 

The accompanying notes are an integral part of these consolidated financial statements.      

 

 
F-3

Table of Contents

 

VNUE, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For the year

 

 

For the year

 

 

 

Ended

 

 

Ended

 

 

 

December 31, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

 

Revenues - related party

 

$ 22,474

 

 

$ 206,161

 

Direct costs of revenue

 

 

8,509

 

 

 

211,031

 

Gross margin (loss)

 

 

13,965

 

 

 

(4,870 )

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

-

 

 

 

12,404

 

General and administrative

 

 

601,022

 

 

 

1,177,756

 

Intangible asset impairment

 

 

-

 

 

 

132,397

 

Total costs and expenses

 

 

601,022

 

 

 

1,322,557

 

Operating loss

 

 

(587,058 )

 

 

(1,327,427 )

Other income (expense), net

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

(2,234,073 )

 

 

1,179,556

 

Loss on the extinguishment of debt

 

 

(263,609 )

 

 

(532,529 )

Gain on settlement of obligations

 

 

-

 

 

 

35,534

 

Financing costs

 

 

(1,469,037 )

 

 

(755,232 )

Other income (expense), net

 

 

(3,966,719 )

 

 

(72,671 )

Net income (loss)

 

$ (4,553,777 )

 

$ (1,400,098 )

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$ (0.00 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

1,135,193,463

 

 

 

447,194,161

 

 

The accompanying notes are an integral part of these consolidated financial statements.     

 

 
F-4

Table of Contents

    

VNUE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

Par value $0.001

 

 

Additional

 

 

Shares to be

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common Shares

 

 

Paid- in

 

 

Issued

 

 

 

 

 

 

 

 

 

Number

 

 

Amount

 

 

Number

 

 

Amount

 

 

Capital

 

 

Amount

 

 

Deficit

 

 

Total

 

Balance - December 31, 2018

 

 

-

 

 

 

-

 

 

 

105,635,816

 

 

$ 10,563

 

 

$ 6,493,070

 

 

$ 243,839

 

 

 

(10,801,801 )

 

 

(4,054,329 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued upon conversion of notes payable

 

 

 

 

 

 

 

 

 

 

640,276,078

 

 

 

64,028

 

 

 

895,262

 

 

 

 

 

 

 

 

 

 

 

959,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Preferred Stock

 

 

4,127,776

 

 

 

413

 

 

 

 

 

 

 

 

 

 

 

589,716

 

 

 

 

 

 

 

 

 

 

 

590,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for settlement of accounts payable to former officer

 

 

 

 

 

 

 

 

 

 

11,428,571

 

 

 

1,143

 

 

 

29,714

 

 

 

 

 

 

 

 

 

 

 

30,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for settlement of accounts payable

 

 

 

 

 

 

 

 

 

 

541,912

 

 

 

54

 

 

 

650

 

 

 

 

 

 

 

 

 

 

 

704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued on conversion of accrued payroll to officers

 

 

 

 

 

 

 

 

 

 

15,057,143

 

 

 

1,506

 

 

 

39,149

 

 

 

 

 

 

 

 

 

 

 

40,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of accrued payroll to officers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded as contributed capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,046

 

 

 

 

 

 

 

 

 

 

 

12,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares to be issued for financing cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,500

 

 

 

 

 

 

 

3,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares to be issued for services

 

 

 

 

 

 

 

 

 

 

2,500,000

 

 

 

250

 

 

 

2,750

 

 

 

368

 

 

 

 

 

 

 

3,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares returned by former officer

 

 

 

 

 

 

 

 

 

 

(4,555,918 )

 

 

(456 )

 

 

456

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants issued for notes amendment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,533

 

 

 

 

 

 

 

 

 

 

 

36,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,400,098 )

 

 

(1,400,098 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

 

4,127,776

 

 

$ 413

 

 

 

770,883,602

 

 

$ 77,088

 

 

$ 8,099,346

 

 

$ 247,707

 

 

$ (12,201,899 )

 

$ (3,777,345 )

   

 

 

 

 

 

 

 

 

Par value $0.001

 

 

Additional

 

 

Shares to be

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common Shares

 

 

Paid- in

 

 

Issued

 

 

 

 

 

 

 

 

 

Number

 

 

Amount

 

 

Number

 

 

Amount

 

 

Capital

 

 

Amount

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2019

 

 

4,126,776

 

 

$ 413

 

 

 

770,883,602

 

 

$ 77,088

 

 

$ 8,099,346

 

 

$ 247,707

 

 

$ (12,201,899 )

 

$ (3,777,345 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To reclassify shares to be issued to a liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(247,707 )

 

 

 

 

 

 

(247,707 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of notes payable to common shares

 

 

 

 

 

 

 

 

 

 

422,572,017

 

 

 

42,257

 

 

 

277,817

 

 

 

 

 

 

 

 

 

 

 

320,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued to pay interest expense

 

 

 

 

 

 

 

 

 

 

17,539,543

 

 

 

1,754

 

 

 

9,330

 

 

 

 

 

 

 

 

 

 

 

11,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,553,777 )

 

 

(4,553,777 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

4,126,776

 

 

$ 413

 

 

 

1,211,495,162

 

 

$ 121,149

 

 

$ 8,386,593

 

 

$ -

 

 

$ (16,755,676 )

 

$ (8,247,521 )

    

The accompanying notes are an integral part of these financial statements

   

 
F-5

Table of Contents

 

VNUE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Year

 

 

For the Year

 

 

 

Ended

 

 

Ended

 

 

 

December 31, 2020

 

 

December 31, 2019

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

$ (4,553,777 )

 

$ (1,400,098 )

Adjustments to reconcile net income to net cash provided by (used for) operating activities

 

 

 

 

 

 

 

 

Change in the fair value of derivatives

 

 

2,234,073

 

 

 

(1,179,556 )

Derivative value considered financing costs

 

 

 

 

 

 

138,828

 

Gain on the settlement of vendor obligations

 

 

 

 

 

 

(35,534 )

Loss on the extinguishment of debt

 

 

 

 

 

 

532,529

 

Amortization of debt discount

 

 

78,013

 

 

 

389,793

 

Amortization of intangible assets

 

 

 

 

 

 

101,032

 

Impairment of intangible assets

 

 

 

 

 

 

132,397

 

Warrants issued for financing costs

 

 

 

 

 

 

36,533

 

Issuance of preferred stock for services

 

 

 

 

 

 

590,129

 

Shares issued for financing costs

 

 

253,194

 

 

 

3,500

 

Shares issued for services

 

 

100

 

 

 

3,368

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Gain on debt forgiveness

 

 

 

 

 

 

(15,500 )

Prepaid expenses

 

 

(100,000 )

 

 

666

 

Accounts payable and accrued interest

 

 

1,395,177

 

 

 

132,008

 

Shares to be issued

 

 

 

 

 

 

 

 

Deferred revenue

 

 

74,225

 

 

 

-

 

Accrued payroll officers

 

 

100,500

 

 

 

68,000

 

Net cash (used in) operating activities

 

 

(518,493 )

 

 

(501,905 )

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

 

 

 

 

25,000

 

Payoff of convertible note

 

 

(45,134 )

 

 

(30,000 )

Proceeds from the issuance of convertible notes

 

 

515,989

 

 

 

540,810

 

Net cash provided by investing activities

 

 

470,855

 

 

 

535,810

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) In Cash

 

 

(47,638 )

 

 

33,905

 

Cash At The Beginning Of The Period

 

 

52,096

 

 

 

18,191

 

Cash At The End Of The Period

 

$ 4,458

 

 

$ 52,096

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-Cash Financing Activities

 

 

 

 

 

 

 

 

Common shares issued upon conversion of notes payable and accrued interest

 

 

 

 

 

$

959,290

 

Common shares issued in settlement of accounts payable and accrued expenses

 

$ -

 

 

$ 31,561

 

Common shares issued upon conversion of accrued payroll

 

$ -

 

 

$ 40,654

 

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

 

$ -

 

 

$ 218,637

 

Capital contribution upon conversion of accrued payroll for officer/shareholder

 

$ -

 

 

$ 12,046

 

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 
F-6

Table of Contents

 

VNUE, INC.

YEARS ENDED DECEMBER 31, 2020 AND 2019

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

 

History and Organization

 

VNUE, Inc. (formerly Tierra Grande Resources, Inc.) (“VNUE”, “TGRI”, or the “Company”) was incorporated under the laws of the State of Nevada on April 4, 2006.

 

On May 29, 2015, VNUE, Inc. entered into a merger agreement with VNUE Washington, Inc. Pursuant to the terms of the Merger Agreement, all of the outstanding shares of any class or series of VNUE Washington were exchanged for an aggregate of 50,762,987 shares of TGRI common stock. As a result of the Merger, VNUE Washington became a wholly-owned subsidiary of the Company, and the transaction was accounted for as a reverse merger with VNUE Washington deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer.

 

The Company is developing technology driven solutions for Artists, Venues and Festivals to automate the capturing, publishing, and monetization of their content, as well as protection of their rights.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the year ended December 31, 2020 the Company incurred a net operating loss of $4,553,777 used cash in operations of $518,493 and had a stockholders’ deficit of $16,755,676 as of December 31, 2020. In addition we had negative working capital of $8,247,522. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2020, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

On December 31, 2020, the Company had cash on hand of $4,458. In February 2021, the Company raised an additional $150,000 from the issuance of notes payable that was used for corporate operating purposes. Management estimates that the current funds on hand will be sufficient to continue operations through July, 2021. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the Company has been able to fund its operations from the proceeds of notes payable and convertible notes. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.

 

 
F-7

Table of Contents

   

NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES

 

Basis of Consolidation

 

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

 

Name of consolidated subsidiary or Entity

 

State or other

jurisdiction of

incorporation or

organization

 

Date of incorporation

or formation

(date of acquisition/

disposition, if

applicable)

 

Attributable

interest

 

 

 

 

 

 

 

 

 

VNUE Inc. (formerly TGRI)

 

The State of Nevada

 

April 4, 2006 (May 29, 2015)

 

 

100

%

 

 

 

 

 

 

 

 

 

VNUE Inc. (VNUE Washington)

 

The State of Washington

 

October 16, 2014

 

 

100

%

 

 

 

 

 

 

 

 

 

VNUE LLC

 

The State of Washington

 

August 1, 2013 (December 3, 2014)

 

 

100

%

    

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

 

The Company recognizes revenue on the sale CDs and USB drives that contain the recording of live concerts and made available to concert attendees immediately after the show and on-line. Revenue is recognized on the sale of a product when our performance obligation is completed which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates include the assumptions used for impairment testing of intangible assets, assumptions used to value the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.

 

 
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Fair Value of Financial Instruments

 

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

 

 

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

 

 

 

 

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

 

 

 

 

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

   

The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying values of our notes payable approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

 

The fair value of the derivative liabilities of $3,156,582 and $922,509 on December 31, 2020, and December 31, 2019, respectively, were valued using Level 3 inputs.

 

Derivative Financial Instruments

 

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

 

Income (Loss) per Common Share

 

Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on December 31, 2020, because their impact was anti-dilutive. As of December 31, 2020, the Company had 23,805,027 outstanding warrants and 1,948,265,842 shares related to convertible notes payables respectively, which were excluded from the computation of net loss per share.

 

Intangible Assets

 

The Company accounts for intangible assets in accordance with the authoritative guidance issued by the FASB. Intangibles are valued at their fair market value and are amortized taking into account the character of the acquired intangible asset and the expected period of benefit. The Company evaluates intangible assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated undiscounted future cash flows. Recoverability of intangible assets is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors, including past operating results, budgets, economic projections, market trends, and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. As of December 31, 2020 based on the assessment of Management, the Company determined that its intangible asset had been impaired.

 

 
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Segments

 

The Company operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

 

Recently Issued Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month, or short-term rentals.

 

NOTE 3 – PREPAID EXPENSE

 

On Jan 9th, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty “MT Agreement”), to record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. As part of the deal, the Company agreed to pay an advance of $100,000 against sales, to MT and its affiliated companies, which was paid in full in installments, with the last installment of $40,000 paid on March 4th. We have recorded this amount as a prepaid expense on our consolidated balance sheet as of December 31, 2020.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

DiscLive Network

 

On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $22,474 and $206,161 and direct cost of revenues of$8,509 and $211,031 during the years ended December 31, 2020, and 2019, respectively, were recorded using the assets licensed under this agreement. For the periods ended December 31, 2020 and 2019. The fees would have amounted to $1,124 and $10,308 respectively. Our Chief Executive Officer agreed to waive the right to receive these license fees for both years.

    

 
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Accrued Payroll to Officers

 

Accrued payroll to officers was $209,750 and $68,000 respectively, as of December 31, 2020, and December 31, 2019, respectively. During the year ended December 31, 2019, the Company entered into a conversion and cancellation of a debt agreement with its Chief Executive Officer. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’s stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. The difference between the total accrued payroll converted of $52,700, and the market value of the shares issued of $40,654, was recorded as contributed capital of $12,046 in the consolidated statements of stockholders’ deficit for the year ended December 31, 2019.

  

The Chief Executive Officers’ compensation is $170,000 per year all of which was expensed during the years ended December 31, 2020 and 2019; of which $129,500 and $102,000 has been paid and $108,500 and $68,000 was outstanding as of December 31, 2020 and 2019, respectively.

  

Advances from Officers/Stockholders

 

From time to time, officers/stockholders of the Company advance funds to the Company for working capital purposes. During the year ended December 31, 2019, a former employee and stockholder agreed to forgive $14,000 owed by the Company. The Company recorded the $14,000 as a gain on the settlement of debt, leaving a remaining balance of $720 on December 31, 2019.

 

Transactions with Former Director and Officer

 

On September 15, 2017, the Company entered into an Advisory Agreement with Louis Mann (“MANN”), a former officer and director with the Company who previously resigned as an officer and director on August 26, 2015 after a short stint. He was re-appointed to the board on June 23, 2018, while continuing to serve in under the Advisory agreement. The Advisory Agreement provides for MANN’s continued and ongoing advisory services to the Company for nine (9) months and with automatic nine (9) months renewals unless terminated per the agreement. MANN is to receive $5,000 per month and 20,000 shares of common stock per month. Mann is still currently still engaged with the company, and serves as Executive Vice President as well as Director, as noted above.

 

As of December 31, 2018, $40,000 of cash compensation was owed to MANN under the Advisory Agreements and included in accounts payable and accrued expenses. On March 4, 2019, the Company and MANN entered into a conversion and cancellation of debt agreement relating to the $40,000 cash compensation balance outstanding on December 31, 2018. The Company issued 11,428,571 shares of common stock, at $0.0035 per share, as payment in full for the $40,000 balance outstanding on December 31, 2018. The difference between the total obligations of $40,000 that MANN converted, and the market value of the shares issued of $30,857, was recorded as a gain on settlement of obligations of $9,143 in other income in the consolidated statements of operations for the year ended December 31, 2019.

 

During the year ended December 31, 2019, the Company recorded $45,000 of compensation relating to the agreement and made payments of $3,750 leaving a balance owed to MANN of $41,250 on December 31, 2019, which is included in accounts payable and accrued expenses. In May 2019, the Company awarded MANN, 748,429 shares of Series A Preferred Stock.

 

During the year ended December 31, 2020, $60,000 in compensation was accrued for MANN and no payments were made to him.

 

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.

 

The following table sets forth the components of the Company’s accrued liabilities on December 31, 2020, and December 31, 2019.

 

 

 

December 31,

2020

 

 

December 31,

2019

 

Accounts payable and accrued expense (includes $41,250 to a former officer and director at December 31, 2019, Note 4)

 

$ 587,230

 

 

 

577,115

 

Accrued interest

 

 

466,801

 

 

 

271,621

 

Accrued interest and penalties Golock(a)

 

 

1,172,782

 

 

 

-

 

Soundstr Obligation

 

 

145,259

 

 

 

169,409

 

Total accounts payable and accrued liabilities

 

$ 2,372,072

 

 

 

1,018,145

 

  

 

(a)

The Company strongly disagrees with the accrued interest and penalties claimed by Golock in regard to their notes, and intends to arbitrate or litigate this amount if a settlement on a vastly reduced amount cannot be reached.

 

 
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NOTE 6 – PURCHASE LIABILITY

 

On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc. (the “Seller”), whereby the Company acquired the digital live music distribution platform “Set.fm” from PledgeMusic.The purchase price for the acquisition was comprised of $50,000 paid in cash, and a purchase liability of $300,000, for an aggregate purchase price of $350,000. The Company assigned $350,000 of the purchase price to intellectual property, of which $116,668 was amortized in 2018. As of December 31, 2018, the Company recorded an impairment charge of the remaining balance of $204,165. The purchase liability is payable on the net revenues derived from VNUE’s live recording and content business and must be paid in full to the Seller no later than the three (3) year anniversary of the date of the agreement, or October 16, 2020. If the Company fails to pay the Seller the purchase liability on time, the Seller may request at any time within one hundred eighty days (180) days following the (3) year anniversary of the asset purchase agreement, that the Company immediately forfeit, convey, assign, and transfer to the Seller all or any of the Purchased Assets so requested by the Seller for no additional consideration. For the years ended December 31, 2019 and 2018, there was no net revenue derived from the acquired assets and accordingly, no payments were made on the earnout. The balance due on December 31, 2020 and 2019 was $300,000.

 

NOTE 7 – SHARES TO BE ISSUED

 

As of December 31, 2018, the Company had not yet issued 3,964,352 shares of common stock with a value of $243,839 for past services provided and for an acquisition. During the year ended December 31, 2019 the Company became obligated to issue an additional 240,000 shares of common, valued at $184, per the terms of a consulting agreement , and 1,000,000 shares of common stock valued at $3,500, as consideration for amending an existing convertible note. As of December 31, 2020 and 2019, the Company had not yet issued 5,204,352 shares of common stock with a value of $247,707.

 

NOTE 8 – NOTES PAYABLE -PAST DUE

 

On December 17, 2015, the Company issued a Promissory Note in the principal amount of $9,000. The note was due within 10 business days of the Company receiving notice of the effectiveness of its Form S-1 filed on February 22, 2016. Failure to make payment during that 10 business day period shall constitute an Event of Default, as a result of which the note will become immediately due and payable and the balance will bear interest at 7%. The Company’s Form S-1 was declared effective on March 8, 2016, and payment was due before March 22, 2016. The Company did not repay the note before March 22, 2016; therefore, the note is in default with an interest rate of 7%.

 

On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $25,000. The Note is due and payable on August 30, 2019, along with $5,000 worth of interest. The Promissory Note is past due, however, the maker of the Note has verbally agreed not to call a default.

 

During the years ended December 31, 2020 and 2019; the Company recorded $15,630 and $5,630, respectively, of accrued interest expense on these two Notes.

 

The balance of the Notes Payable outstanding was $34,000 and $9,000 as of December 31, 2020, and December 31, 2019, respectively and are past due.

 

 
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NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE, RELATED PARTIES

 

Convertible notes payable consist of the following:

 

 

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Various Convertible Notes(a)

 

$ 43,500

 

 

$ 43,500

 

Ylimit, LLC Convertible Notes (b)

 

 

1,336,208

 

 

 

882,500

 

Golock Capital, LLC Convertible Notes(c)

 

 

339,011

 

 

 

339,011

 

Other Convertible Notes(d)

 

 

238,203

 

 

 

299,069

 

Total Convertible Notes

 

 

1,956,922

 

 

 

1,564,080

 

Debt discount

 

 

-

 

 

 

(78,013 )

Convertible notes, net

 

$ 1,956,922

 

 

$ 1,486,067

 

  

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

 

(b) On May 9, 2016, the Company issued a convertible note to YLimit, LLC in the principal amount of $100,000 with interest at 10% per annum and due on May 9, 2018. The note is secured by the Company’s rights, titles and interests in all the Company’s tangible and intangible assets, including intellectual property and proprietary software whether existing now or created in the future. On August 25, 2017, the Note was amended to authorize total borrowings on this Note to $517,000, The balance of the notes outstanding was $517,000 as of December 31, 2017 and the balance of the debt discount was $137,358.

 

On April 12, 2018, and again on August 15, 2018, the Company and Ylimit, LLC entered into an amendment to the original secured convertible promissory note. The amendments increased the borrowing limits by $190,500 to a total of $707,500, and extended the maturity date to May 9, 2019. In addition, the amendment on April 12, 2018 modified the conversion feature to state that all borrowings under the note will be converted at 75% of the per share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. This feature gave rise to a derivative liability of $135,900 during the period ended December 31, 2018 that is discussed below. During the year ended December 31, 2018, the Company borrowed an additional $190,500. The balance of notes outstanding was $707,500 as of December 31, 2018 and the balance of the debt discount was $70,078.

 

On November 9, 2019 the Company and Ylimit, LLC entered into an amendment (“Ylimit Amendment One”) to the original secured convertible promissory note dated May 9, 2016 along with subsequent amendment and fundings that followed. Under the terms of Ylimit Amendment One, Ylimit extended maturity date of all outstanding convertible debt due to them by the company, to a new maturity date of February 09, 2020. Ylimit received no consideration for this amendment.

 

By verbal agreement Ylimit increased the Company’s borrowing limits by $175,000 and extended this amount of additional funding to the Company during the last three months of 2019 bring the total convertible note balance due to YLimit to a total of $882,500 as December 31, 2019. All note discount related to Ylimit was fully amortized as of December 31, 2019.

 

On February 9, 2020, the Company entered into another amendment with Ylimit (“Ylimit Amendment Two”) to further extend the maturity date of all of the Company’s outstanding debt to August 9, 2020 including the $175,000 that Ylimit funded in the fourth quarter of 2019. Ylimit received no consideration for the Ylimit Amendment Two.

 

During the year ended December 31, 2020, Ylimit provided another $453,708 in funding to the Company bringing their balance to $1,366,208 as of December 31, 2020. On January 5, 2021 the Company entered into Amendment Three to extend the maturity of all notes until February 9, 2022. Ylimit received no consideration for Amendment Three.

 

 
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(c) From September 1, 2017 to December 31, 2017, the Company issued convertible notes to Golock Capital, LLC (“Lender”) in the aggregate principal amount of $191,750 with an interest rate at 10% per annum and maturity dates between June 1, 2018 and August 31, 2018. The notes are convertible into shares of the Company’s common stock at prices between $0.015 and $0.02 per share. As additional consideration for the Lender to enter into these agreements with the Company, the Company issued warrants to the Lender to acquire in the aggregate 4,804,708 shares of the Company’s common stock at a weighted average exercise price of $0.014 per share. In addition, the Lender shall have the first right of refusal as to any future funding of Borrower in that Lender shall have the right to provide all or a portion of the funding upon the same terms as those offered in writing by any third party or contained in any private placement of borrower. The Lender, upon conversion, shall have piggyback registration rights for all of its common stock shares in any registration or post-effective amendment to any registration initiated by Borrower with the Securities and Exchange Commission. The balance of the notes outstanding and the related debt discount was $191,750 and $19,652, respectively, as of December 31, 2017.

 

On February 2, 2018, the Company issued a convertible note to Golock Capital, LLC (“Lender”) in the principal amount of $40,000 with an interest rate at 10% per annum and a maturity date of November 2, 2018. The note included an original issue discount of $5,000. The note is convertible into shares of the Company’s common stock at $0.015 per share. As additional consideration for the Lender to enter into this agreement with the Company, the Company issued warrants to the Lender to acquire in the aggregate 2,500,000 shares of the Company’s common stock at an exercise price of $0.015 per share that expire three years from the date of grant. The relative fair value of the warrants, the original issue discount, and the beneficial conversion feature totaling $40,000 was recorded as a debt discount and will be amortized to interest expense over the term of the note. On November 5, 2018, the Company amended the notes above by changing the conversion feature for the aggregate notes to be convertible into shares of common stock of the Company at the lower of (i) $0.015 per share or, (ii) 58% of the lowest closing bid price in the 20 trading days prior to the day that the Lender requests conversion. This feature gave rise to a derivative liability of $553,000 at date of issuance as discussed below. The amendment also increased the principal face amount of notes to include accrued interest, and an additional $43,250 was added to principal, which was recorded to financing costs. The aggregate balance of the notes outstanding, and the related debt discount was $302,067 and $0, respectively, as of December 31, 2018.

  

On April 29, 2019, Golock entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, Golock received several concessions. They received (a) a warrant to purchase 12,833,333 shares of the Company’s common stock for 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ending December 31, 2019 the Company issued new notes payable of $53,331 and $23,102 of notes and accrued interest were converted into 100,000,000 shares of common stock. The balance of the notes outstanding on December 31, 2019, was $339,010. As of December 31, 2019, $285,679 of these notes were past due. As of December 31, 2020 all of the Golock notes amounting to $339,011 were past due. As a result Golock has assessed the Company additional penalties and interest pf $1,172,782. The Company has recorded this amount as an accrued liability as of December 1, 2020. The Company disagrees with the accrued interest and penalties due to Golock and intends to litigate this amount if a settlement on a vastly reduced amount, cannot be reached.

 

(d) As of December 31, 2017 the Company had an outstanding convertible note payable of $61,000. During the year ended December 31, 2018, the Company entered into additional notes of $369,250. The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018, to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 50% of the lowest trading price for the Company s common stock during the prior twenty (20) trading day period, and for one lender, no lower than $0.035 per share. The issuance of notes with conversion features gave rise to derivative liabilities of $559,397 (see discussion below). As of December 31, 2018, the aggregate convertible notes balance to the five lenders was $426,964 and the related debt discount was $179,162. As of December 31, 2020 all $238,303 were past due.

 

During the year ended December 31, 2019, the Company entered into additional notes of $256,000, with interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020, to August 2, 2020, at conversion terms comparable to the terms above. The issuance of notes with conversion features gave rise to derivative liabilities of $357,465 (see discussion below). In addition, On April 29, 2019, one of the lenders entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, the Company issued (a) a warrant to purchase 2,966,986 shares of the Company’s common stock for a period of 48 months exercisable at a strike price of $.00475 with a fair value of $5,934, and (b) the conversion price of outstanding notes was changed from $.015 to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ended December 31, 2019, convertible notes of $388,207 and accrued interest were converted into 540,276,078 shares of common stock. As of December 31, 2019, the aggregate convertible notes balance to the five lenders was $299,069 and the related debt discount was $ 33,667. As of December 31, 2019, $96,069 of these notes were past due.

 

 
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In total, during 2019 convertible notes and accrued interest aggregating $411,309 were converted into 640,276,078 common shares with a fair value of $959,290 and recognized loss on settlement of debt of $548,029 during the year ended December 31, 2019. On December 31, 2019, the aggregate balance of the fair value of the notes outstanding was $1,564,080 and the related debt discount was $78,013. As of December 31, 2019, the above notes are convertible into 3,334,494,813 shares of common stock.

 

During the year ended December 31, 2020, $56,466 of the principal balance and $8,600 of interest was converted to 440,111,560 shares of common stock. The Company recorded a loss on the extinguishment of debt on these two conversions of $263,609. Additionally, the Company paid $4,400 to reduce the principal balance. These were the only note conversions during the year ended December 31, 2020.

 

Summary

 

On December 31, 2020, the aggregate balance of the fair value of all convertible notes outstanding was 1,956,922 and the related debt discount was $-0-, or a net balance of $1,956,922. Of this amount, $620,714 in principal was past due. As of December 31, 2020, the above notes are convertible into 1,948,265,842 shares of common stock.

 

The Company considered the current FASB guidance of “Contracts in Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers’ control means the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or the conversion price was variable. As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Notes, the initial fair value of the embedded conversion feature was recorded as debt discount offsetting the fair value of the Notes and the remainder recorded as financing costs in the Consolidated Statement of Operations. The discount is being amortized using the effective interest rate method over the life of the debt instruments.

 

The balance of the unamortized note discount on December 31, 2017 was $198,025. During the year ended December 31, 2018, the Company issued $583,750 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $1,329,389 of which $483,635 was recorded as a debt discount, and the remaining $845,754 was recorded as a financing cost. During the year ended December 31, 2018, the amortization of debt discount was $432,419 which is included in financing costs on the Company’s statement of operations. The balance of the unamortized note discount on December 31, 2018 was $249,241.

 

During the year ended December 31, 2019, the Company issued $484,331 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $357,465 of which $218,637 was recorded as a debt discount, and the remaining $138,828 was recorded as a financing cost. During the year ended December 31, 2019, the amortization of debt discount was $389,793 which is included in financing costs on the Company’s statement of operations. The balance of the unamortized note discount on December 31, 2019 was $78,013.

 

NOTE 10 – DERIVATIVE LIABILITY

 

The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 6 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. As of December 31, 2020 and 2019, the derivative liabilities were valued using probability weighted option pricing models with the following assumptions:

 

 

 

December 31,

2020

 

 

December 31,

2019

 

 

 

 

 

 

Exercise Price

 

$

0.0015-0.0018

 

 

$

0.00015–0.00018

 

Stock Price

 

 

.0114

 

 

$ 0.0003

 

Risk-free interest rate

 

 

.17 %

 

 

1.59 %

Expected volatility

 

 

737.80

 

 

 

236 %

Expected life (in years)

 

 

1.00

 

 

 

1.00

 

Expected dividend yield

 

 

0 %

 

 

0 %

Fair Value:

 

$ 3,156,582

 

 

$ 922,509

 

 

 
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Table of Contents

   

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

 

During the year ended December 31, 2019, the Company recorded derivative liabilities of $357,465 related to the issuance of certain new convertible notes, a modification of $189,186 relating to an additional derivative, and recognized $1,179,556 as other income, which represented the net change in the value of the derivative liability at December 31, 2019.

 

NOTE 11 – STOCKHOLDERS’ DEFICIT

 

On July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada. The Charter Amendment increased the Company’s capitalization to 2,000,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock, of which, 5,000,000 were designated as Series A Convertible Preferred Stock.

    

Common stock

 

The Company has authorized 2,000,000,000 shares of $0.0001 par value common stock. As of December 31, 2020 and December 31, 2019 there were 1,211,495,162 and 770,883,062 shares of common stock issued and outstanding respectively.

 

Common stock returned by a director or officer

 

During the year ended December 31, 2019, a former Company director voluntarily returned 4,555,918 shares of Company common stock to Treasury. These shares were valued at par value of $456 and decreased common stock and increased paid-in capital by the same amount, so the transaction had no impact on the Company’s equity.

 

Shares issued for services

 

During the year ended December 31, 2020, the Company issued 500,000 shares to the vendor who supplied consulting services to the Company. The Company recorded consulting expense of $150 related to this issuance.

 

During the year ended December 31, 2019, the Company issued 2,500,000 shares to the vendor who supplied consulting services to the Company. The Company recorded consulting expense of $3,368 related to this issuance.

 

Shares issued to retire trade debt

 

During the year ended December 31, 2019, the Company reached agreement with a vendor to retire approximately $27,096 in debt at a price of $0.05 per share and issued the vendor 541,912 shares pursuant to the agreement. At the time of the settlement of the debt the Company’s common stock was trading at a price of $.0013, so the Company recognized a profit of $26,391 upon the extinguishment of the debt

   

Preferred Stock Series A

 

As of December 31, 2020 and 2019, the Company had 20,000,000 shares of $0.0001 par value preferred stock authorized and there were 4,126,776 shares of Series A Preferred Stock issued and outstanding.

 

On May 22, 2019, the Company authorized and designated a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently issued 4,126,776 restricted shares of Series A Preferred Stock to various employees and service providers to compensate and reward them for services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock receives relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.

 

Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders shall be entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders shall vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock have no liquidation or redemption preference rights but get treated as common stockholders on an as converted basis.

 

The Company believes that the issuance of the Series A Preferred Stock was exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act in that said transaction did not involve a public solicitation and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.

 

The Company determined the fair value of the preferred shares to be $590,129 which is included as stock-based compensation in general and administrative expense on the Company’s statements of operations for the year ended December 31, 2019.

 

 
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Table of Contents

  

Warrants

 

No warrants were issued during the year ended December 31, 2020.

 

During the year ended December 31, 2019, the Company issued 15,800,319 warrants to two convertible noteholders as consideration for extending the term of their convertible notes. The warrants are exercisable for a period of four years at a strike price of $0.00475. As a result of the issuance of these warrants, the company recorded a financing expense of $36,533.

 

A summary of warrants for the years ended December 31, 2020 and December 31, 2019, is as follows:

 

 

 

Number

 

 

Weighted

 

 

 

of

 

 

Average

 

 

 

Warrants

 

 

Exercise

 

Balance outstanding, December 31, 2018

 

 

8,004,708

 

 

 

0.014

 

Warrants granted

 

 

15,800,319

 

 

 

.00475

 

Warrants exercised

 

 

-

 

 

 

-

 

Warrants expired or forfeited

 

 

-

 

 

 

-

 

Balance outstanding, December 31, 2019

 

 

23,805,027

 

 

 

0.079

 

Warrants granted

 

 

-

 

 

 

-

 

Warrants exercised

 

 

-

 

 

 

-

 

Warrants expired or forfeited

 

 

-

 

 

 

-

 

Balance outstanding and exercisable, December 31, 2020

 

 

23,805,027

 

 

$ 0.0079

 

  

Information relating to outstanding warrants on December 31, 2020, summarized by exercise price, is as follows:

 

 

 

 

Outstanding and Exercisable

 

 

 

 

 

 

 

 

Weighted

 

Exercise Price Per

 

 

 

 

 

 

Average

 

Share

 

 

Shares

 

 

Life (Years)

 

 

Exercise Price

 

$

0.010-0.015

 

 

 

8,004,708

 

 

 

0.14

 

 

$ 0.014

 

$

0.004750

 

 

 

15,800,319

 

 

 

2.58

 

 

$ 0.00475

 

  

The weighted-average remaining contractual life of all warrants outstanding and exercisable on December 31, 2020, is .96 years. The outstanding and exercisable warrants outstanding on December 31, 2020, had no intrinsic value.

 

NOTE 12 – COMMITMENT AND CONTINGENCIES

 

Joint Venture Agreement – Music Reports, Inc.

 

On September 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com) will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform. The initial term of the JV is for nine (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue every quarter. As of December 31, 2020, no net revenue was generated from the JV.

 

Litigation

 

None

 

 
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Table of Contents

   

Artist Agreement

 

On October 27, 2015, the Company entered into an Artist Agreement with I Break Horses, a Swedish duo based in Stockholm. The Artist Agreement is effective October 27, 2015, and has a term lasting as long as I Break Horses artist recordings are available via the VNUE Service. Under the terms of the Artist Agreement, the Company shall handle rights clearing and distribution for I Break Horses recordings and receive 30% of the Net Income generated thereby. As of December 31, 2020, the Company had not earned any revenue under this agreement.

   

NOTE 13 – INCOME TAXES

 

Reconciliation between the expected federal income tax rate and the actual tax rate is as follows:

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Federal statutory tax rate

 

 

21 %

 

 

21 %

State tax, net of federal benefit

 

 

6 %

 

 

6 %

Total tax rate

 

 

27 %

 

 

27 %

Allowance

 

 

(27 )%

 

 

(27 )%

Effective tax rate

 

-

%

 

-

  

The following is a summary of the deferred tax assets:

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$ 3,060,000

 

 

 

2,434,000

 

Accrued compensation

 

 

-

 

 

 

-

 

Deferred tax asset

 

 

3,060,000

 

 

 

2,434,000

 

Valuation allowance

 

 

(3,060,000 )

 

 

(2,434,000 )

Net deferred tax asset

 

$ -

 

 

$ -

 

  

The Company has no tax provision for any period presented due to our history of operating losses. As of December 31, 2020, the Company had estimated net operating loss carry forwards of approximately $11,333,000 that may be available to reduce future years’ taxable income through 2032 subject to Section 382 limitations. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as management has determined that their realization is not likely to occur and accordingly, the Company has recorded a valuation allowance for the full value of the deferred tax asset relating to these tax loss carry-forwards. Additionally, the Company has not filed tax returns, therefore the potential realizability of this loss in future periods is indeterminable.

 

The Company adopted accounting rules which address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under these rules, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. These accounting rules also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2017 no liability for unrecognized tax benefits was required to be recorded.

 

NOTE 14 – SUBSEQUENT EVENTS

 

In February 2021, the Company entered into a $165,000 8% Convertible Note Agreement with an accredited investor that matures on November 16, 2021. The Note carried an original issue discount (OID) of 10% so the amount funded to the Company was $150,000.The note contains a conversion Price shall equal $.0171 (fixed price equaling 90% of the lowest variable weighted average price (“VWAP”) for 10 days preceding the Issue Date) (the “Fixed Conversion Price”), subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower.

 

 
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Table of Contents

  

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this annual report, an evaluation was carried out by our management, with the participation of our principal executive officer and principal accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15c and 15d-15c under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of December 31, 2020. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

 

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

 

Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Under the supervision of our principal executive officer and principal accounting officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 using the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

 
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Table of Contents

  

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2020, the Company determined that there were deficiencies that constituted material weaknesses, as described below.

 

1.

Lack of proper segregation of duties due to limited personnel.

 

 

2.

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

   

3.

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

 

 

4.

Lack of independent board member(s)

 

 

5.

Lack of independent audit committee

   

Management is currently evaluating remediation plans for the above material weaknesses.

 

In light of the existence of these material weaknesses, management concluded that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control-Integrated Framework issued by COSO.

 

Weinberg & Company, an independent registered public accounting firm, is not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, 2020 pursuant to rules of the SEC.

 

Changes in Internal Control

 

During the year ended December 31, 2020, there were no other changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

 
21

Table of Contents

 

PART III

 

Item 10. Directors, Executive Officers, Promoters and Corporate Governance

 

Management and Directors

 

Our current directors and executive officers are as follows.

 

Name

 

Age

 

Position

M. Zach Bair

 

59

 

Chairman of the Board of Directors, Chief Executive Officer and Chief Accounting Officer

Anthony Cardenas

 

55

 

Director, Chief Creative Officer and Vice President of Artist Relation

Louis Mann

 

70

 

Executive Vice President

  

Our directors’ serve as directors until our next annual shareholders’ meeting or until a successor is elected and qualified. Officers hold their positions at the discretion of the Board of Directors. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.

 

M. Zach Bair, 58, Chairman of the Board of Directors, Chief Executive Officer and Chief Accounting Officer joined VNUE, Inc. in May 2016. Prior to his employment with VNUE, Mr. Bair was founder, president and chief executive officer for DiscLive Network/RockHouse Live Media Productions, Inc. from January 2007 to May 2016. From March 2001 to December 2006 Mr. Bair was founder, chairman and chief executive officer of Immediatek, Inc. a music tech company Mr. Bair took public in 2002. Bair is an accomplished audio and video producer, and is a voting member of the Recording Academy (the Grammys™) since 2012. Bair has a significant history of implementing and commercializing the “instant media” business model, acquiring pioneer DiscLive in 2004. After selling the original DiscLive in 2006 as part of Immediatek, Mr. Bair started a similar instant media company in 2007 under the RockHouse brand. From 2009-2012, Bair aligned RockHouse with EMI Music, under the Abbey Road Live moniker, and in April of 2012, Bair rebranded the live operation “DiscLive Network”. Our board of directors believes Mr. Bair’s industry experience uniquely position him to lead the Company through our next phase as a company.

  

Anthony Cardenas, 54, Director and Chief Creative Officer-Vice President of Artist Relations joined VNUE, Inc. in May, 2016. Before his engagement with the company, Mr. Cardenas was employed by DiscLive Network/RockHouse Live Media Productions, Inc. from January 2012 to May 2016 in product development and marketing and from January 2002 to January 2012 was employed by DiskFactory.com, Inc. where he was president and co-founder of the enterprise. We believe that Mr. Cardenas’ in-depth knowledge and extensive experience makes him a valuable member of our board of directors.

 

Significant Employees

 

Louis Mann, 69, Executive Vice President, joined VNUE in September, 2017. Prior to joining VNUE, Mann had been President of the Media Properties division of House of Blues International since June 1999. During his illustrious musical career, Mr. Mann was responsible for helping to develop new artists such as Whitney Houston, Alan Parsons Project, and Barry Manilow. He served as Senior Vice President of Capital Records, Inc., Hollywood, California from October 1988 to December 2002, and as General Manager. Mr. Mann created the Third Day Partnership, LLC. As Senior Vice President of Marketing for MCA Records, a division of Universal Studios, Inc., he directed the marketing and strategic initiatives for the entire MCA music division. During his ten years at Capitol Records, he served as Executive Vice President and General Manager for this subsidiary of EMI and was part of the team developing the strategic vision for Capitol Records and the music industry.

 

James A. King (Jim), 59, Chief Technology Officer (CTO), joined VNUE in March, 2019. Prior to joining the VNUE team as an adviser, King has held numerous business leadership roles, technology, and operations roles, and is involved in a number of start-up efforts. Over a 33 year career, positions held included officer roles as CIO, CTO, COO/Ops roles for The McGraw-Hill Companies, Reed Elsevier, plc and LexisNexis, United Business Media’s PRNewswire, Broadcast Music Incorporated, Brightpoint Mobile, Microsoft Corporation, and AT&T/NCR Corporation. Mr. King is also the CEO for Spoken Giants, LLC and Core Rights, LLC, and provides consulting services for companies such as Outsell, Inc, Capital Investment Partners, Inc., and others.

 

Jock Weaver, Special Advisor to the company, joined VNUE in December of 2018. Weaver founded and serves as chairman of Heritage Trust Company, a private equity firm that provides advisory services to growing businesses, and can efficiently access debt and equity capital. Mr. Weaver is the youngest person in history to list a company on the London Stock Exchange and the American Stock Exchange. He has over 35 years’ business experience in mergers, acquisitions, and the development of growth companies on an international basis. Mr. Weaver has been involved in over 50 merger and/or acquisition transactions. Mr. Weaver founded TBA Entertainment Company, one of the nation’s larger live event companies, and Mr. Weaver served as president of Hard Rock Café International, an English public company.

 

Jeff Zakim, 48, Vice President-Business Development and Content Curation, joined VNUE, Inc. in October 2017. Prior to his employment with the Company, Mr. Zakim was self-employed as a consultant from July 2015 to October 2017 and NAPC from September 2014 to July 2015. Mr. Zakim was employed by Eleven Seven Music Group, Inc. from January 2014 to August 2014 and Razor and Tie Enterprises, LLC from October 2012 to December 2013. From January 2011 to November 2011 Mr. Zakim was employed by Ruckus Media Group, LLC and from 2001 to November 2011 he was employed by EMI Music, Inc. Mr. Zakim has a Bachelor of Science degree in communications from Towson State University.

 

Term of Office

 

Our directors are appointed until which time they resign or are replaced by the Chairman.

 

 
22

Table of Contents

  

Family Relationships

 

There are no family relationships among our directors and officers.

 

Other Directorships

 

None of our directors or proposed directors currently hold, or within the past five years have held, directorships in companies with a class of securities registered pursuant to Section 12 of the Exchange Act or that are subject to the requirements of Section 15(d) of such Act.

 

Involvement in Certain Legal Proceedings

 

No director, officer or affiliate of the Company, any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries in any material legal proceeding.

 

None of our directors, executive officers, promoters, or control persons have been involved in any of the following events during the past five years:

 

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

being subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, or banking activities; or

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

  

Corporate Governance

 

Director Independence

 

Our securities are not listed on a national securities exchange or on any inter-dealer quotation system which has a requirement that a majority of directors be independent. We evaluate independence by the standards for director independence set forth in the NYSE MKT Marketplace Rules.

 

Board of Directors’ Meetings

 

During the fiscal year ended December 31, 2020 our board of directors did not formally meet. Our board conducted all business and approved all corporate actions during the fiscal year ended December 31, 2020 by the unanimous written consent of its members in the absence of formal board meetings.

 

Committees of the Board of Directors

 

As our common stock is not presently listed for trading on a national securities exchange, we are not presently required to have board committees.

 

We currently have an audit committee comprised of all of our current directors. We do not have a “financial expert” under applicable rules. We do not have a separate audit committee charter. We believe the cost related to retaining a financial expert at this time is prohibitive.

 

The purpose of the audit committee is, among other things, to assist the board in its oversight of the integrity of our financial statements and other relevant public disclosures, our compliance with legal and regulatory requirements relating to financial reporting, the external auditors’ qualifications and independence and the performance of the internal audit function and the external auditors. As there is no audit committee these tasks were overseen by the entire Board. The Board has reviewed and discussed the audited financial statements with management. The board has had the opportunity to discuss with the independent auditors the matters required to be discussed by the applicable requirements of the PCAOB and received written disclosures and the letter from the independent accountant required by applicable requirements of the PCAOB relating to independent accountant communications with each board member. The board has approved the audited financial statements for inclusion in this annual report.

 

 
23

Table of Contents

  

Due to our small size and limited operations to date, we do not presently have a nominating committee, compensation committee or other committee performing similar functions. We have not adopted any procedures by which security holders may recommend nominees to our board, and we do not have a diversity policy.

 

Code of Ethics

 

Our securities are not listed on a national securities exchange, and we are, therefore, not required and do not have a written code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer, principal accounting officer or controller or persons performing similar functions. Our Board has found that the fiduciary duties placed on individual directors by applicable legislation and the restrictions placed by applicable legislation on an individual director’s participation in decisions of the Board in which the director has an interest have been sufficient to ensure that the Board operates independently of management and in the best interests of our company. The value of purchases amounted to $1,004.

 

Other Information

 

We are required to file periodic reports, proxy statements and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of these reports by accessing the SEC’s website at http://www.sec.gov. You may also send communications to our board of directors at VNUE Inc., Attention: Chief Executive Officer, 104 W. 29th Street, 11th Floor, New York, NY 10001.

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires our executive officers, directors, and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on our review of the copies of these reports, we believe that during the fiscal year ended December 31, 2020, Mr. Bair failed to timely file to report one hundred and one (101) market purchases of an aggregate of 702,532 shares.

 

 
24

Table of Contents

  

Item 11. Executive Compensation

 

Summary Compensation Table

 

The following table sets forth the compensation paid to our principal executive officers during the last two completed fiscal years.

  

Summary Compensation Table

 

Name and

Principal

Position

 

Year

 

 

 

Salary

 

 

 

Bonus

 

 

 

Stock

Awards

 

 

 

Option

Awards

 

 

Non-Equity

Incentive

Plan

Compensation

 

 

Nonqualified

Deferred

Compensation

Earnings

 

 

 

All Other Compensation

 

 

 

Total

 

 

 

 

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

 

 

 

($)

 

 

($)(3)

 

 

($)

 

Zach Bair, CEO(2)

 

2020

 

 

 

170,000

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

170,000

 

 

 

2019

 

 

 

170,000

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

214,264

 

 

 

384,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Louis Mann, EVP (1)(4)

 

2020

 

 

$

60,000

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

60,000

 

 

 

2019

 

 

$

60,000

 

 

 

0

 

 

 

3,050

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

109,964

 

 

 

170,014

 

___________

(1)

Mr. Louis Mann, 68, Executive Vice President, joined VNUE, Inc. in September 2017.

(2)

$68,000 of Mr. Bair’s compensation was deferred as of December 31, 2019.

(3)

Represents the fair value of preferred stock awards granted in 2019.

(4)

$41,250 of Mr. Mann’s compensation was deferred as of December 31, 2019.

  

Option Grants

 

We did not grant any stock options or other similar securities to our directors or officers during the years ended December 31, 2019 or 2018. Our directors and officers do not own any stock options or other similar securities of our company.

 

Management Agreements

 

We currently have not entered into any management agreements.

 

Compensation upon Change of Control

 

As of December 31, 2020, we had no pension plans or compensatory plans or other arrangements, which provide compensation in the event of the termination of directors, officers or employees or a change in control of our company.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans pursuant to which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

 

Compensation of Directors

 

We did not pay director’s fees or other cash compensation to our directors for services rendered as directors in the year ended December 31, 2020 or 2019. We have no standard arrangements pursuant to which our directors are compensated for their services in their capacity as directors. The Board of Directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. No director has received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.

 

 
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Table of Contents

   

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table set forth the ownership, as of the date of this Annual Report, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.

 

The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security even though they may not rightfully “own” those shares. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option, or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The mailing address for all persons is at 104 W. 29th Street, 11th Floor, New York, NY 10001. This table is based upon 1,211,482,789 shares outstanding as of March 19, 2021.

   

Shareholders

 

# of Shares

 

 

Percentage

 

Zach Bair, Chief Executive Officer

 

 

181,187,272

(1)

 

 

15.0

%

Anthony Cardenas, Chief Creative Officer

 

 

27,000,000

(2)

 

 

2.2

%

Louis Mann, Executive Vice President

 

 

89,921,491

(3)

 

 

7.4

%

All directors and executive officers as a group

 

 

298,118,763

(4)

 

 

24.6

%

Christopher Mann

 

 

8,185,886

 

 

 

.7

%

Thomas Jackson Weaver III

 

 

105,000,000

(5)

 

 

8.7

%

   

This table is based upon information derived from our stock records. The shareholder named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based upon 1,149,756,152 shares of common stock outstanding as of May 9, 2020. The common shares outstanding include voting power of shares of Series A Preferred Stock owned by such officer or director. The Series A Preferred Stock vote on a 100:1 basis with common stockholders and convert on a 50:1 basis into common stock.

 

 

(1)

Includes  31,352,572 shares of common stock and the voting power of 1,498,347 Series A Preferred Stock which cast votes as 149,834,700 shares of common stock. The Series A Preferred Stock owned by Mr. Cardenas converts into 74,917,350 shares of common stock.

 

(2)

Includes 1,000,000 shares of common stock and voting power of 260,000 shares of Series A Preferred Stock which vote as 26,000,000 shares of common stock. The Series A Preferred Stock owned by Mr. Cardenas converts into 13,000,000 shares of common stock.

 

(3)

Includes 15,078,591 shares of common stock and the voting power of 748,000 shares of Series A Preferred Stock which vote as 74,842,900 shares of common stock. The Series A Preferred Stock owned by Mr. Louis Mann convert into 37,421,450 shares of common stock.

 

(4)

Includes all common stock held by such directors or officers as a group, as well as the voting power of all Series A Preferred Stock owned by such persons.

 

(5)

Includes the voting power of 1,050,000 shares of Series A Preferred Stock which vote as 105,000,000 shares of common stock. Mr. Weaver’s Series A Preferred Stock convert into 52,500,000 shares of common stock.

 

 
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Table of Contents

  

Item 13. Certain Relationships and Related Transactions, and Director Independence -

  

Except as disclosed below, since the beginning of January 1, 2018, none of the following persons has had any direct or indirect material interest in any transaction to which our Company was or is a party, or in any proposed transaction to which our Company proposes to be a party:

 

 

any Director or officer of our Company;

 

 

any proposed Director of officer of our Company;

 

 

any person who beneficially owns, directly or indirectly, shares carrying more than 5 percent of the voting rights attached to our common stock; or

 

 

any member of the immediate family of any of the foregoing persons (including a spouse, parents, children, siblings, and in-laws).

  

On March 4, 2019, the Company entered into a conversion and cancellation of a debt agreement with its Chief Executive Officer, Mr. Zach Bair. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’s stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. During the year ended December 31, 2019, the Company accrued unpaid salary to Mr. Bair of $68,000.

 

DiscLive Network

 

On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $22,474 and $206,161 and direct cost of revenues of $8,509 and $211,031 during the year ended December 31, 2020, and 2019, respectively, were recorded using the assets licensed under this agreement. For the periods ended December 31, 2020 and 2019. The fees would have amounted to $1,124 and $10,308, respectively. Our Chief Executive Officer agreed to waive the right to receive these license fees for both years. This Agreement was renewed under the same terms on March 1, 2021.

 

Stock Bonus Issuances

 

On May 22, 2019, the Company authorized and designated a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently issued 1.49 million shares of restricted Series A Preferred Stock to Mr. Bair; 260,000 shares of restricted Series A preferred Stock to Mr. Cardenas; 748,000 shares of restricted Series A Preferred Stock to Mr. Louis Mann. These were issued as stock bonuses at a presumed value of $0.14 per share.

 

 
27

Table of Contents

   

Limitation of Liability and Indemnification Matters

 

Our officers and directors are indemnified as provided by the Nevada Revised Statutes and our Bylaws. We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officer, or controlling person in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to the court of appropriate jurisdiction. We will then be governed by the court's decision.

 

Item 14. Principal Accountant Fees and Services

 

Audit and Non-Audit Fees

 

The following table represents fees for the professional audit services and fees billed for other services rendered by our auditors, Weinberg, and Company PC, for the audit of our annual financial statements for the years ended December 31, 2020 and 2019.

 

 

 

Year Ended

December 31,

2020

 

 

Year Ended

December 31,

2019

 

Audit fees

 

$ 48,000

 

 

$ 78,872

 

Total

 

$ 48,000

 

 

$ 78,872

 

   

Since our inception, our Board of Directors, performing the duties of the Audit Committee, reviews all audit and non-audit related fees at least annually. The Board of Directors as the Audit Committee pre-approved all audit-related services in fiscal 2020.

 

 
28

Table of Contents

   

PART IV

 

Item 15. Exhibits and Financial Statement Schedules Financial Statement Schedules

 

None.

 

Exhibits

 

Exhibit

 

Exhibit

Number

 

Description

3.1

 

Articles of Incorporation(1)

3.2

 

Amendment to Articles of Incorporation(2)

3.3

 

Bylaws(2)

4.1

 

2012 Stock Incentive Plan (3)

10.1

 

Equity Purchase Agreement with Tarpon Bay Partners, LLC dated February 18, 2016 (4)

10.2

 

Registration Rights Agreement with Tarpon Bay Partners, LLC dated February 18, 2016 (5)

10.3

 

Promissory Note issued to Tarpon Bay Partners; LLC dated February 18, 2016 (6)

16.1

 

Letter Re: Change in Certifying Accountant (7)

21.1*

 

Subsidiaries of the Registrant

31.1*

 

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

32.1*

 

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

101.1NS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definitions Linkbase Document

________

* Filed herein

 

(1)

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

 

 

(2)

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

 

 

(3)

Included as an exhibit with our Form 8-K filed April 11, 2013.

 

 

(4)

Included as an exhibit with our Form S-1 filed September 16, 2016.

 

 

(5)

Included as an exhibit with our Form S-1 filed September 16, 2016

 

 

(6)

Included as an exhibit with our Form S-1 filed September 16, 2016.

 

 

(7)

Included as an exhibit with our Form 8-K filed on November 9, 2015

   

Item 16. FORM 10-K SUMMARY

 

None.

 

 
29

Table of Contents

  

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

VNUE, INC.

 

 

 

 

 

Date: April 8, 2021

By:

/s/ Zach Bair

 

 

 

Zach Bair

 

 

 

Chief Executive Officer and Principal Accounting Officer

 

  

Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURES

 

TITLE

 

DATE

 

 

 

 

 

/s/ Zach Bair

 

Chief Executive Officer, Principal

 

April 8, 2021

Zach Bair

 

Accounting Officer and Chairman

 

 

 

 

 

 

 

/s/ Anthony Cardenas

 

Director

 

April 8, 2021

Anthony Cardenas

 

 

 

 

 

 
30

 

 

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