NOTES
TO UNAUDITED 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.
On
February 13, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VNUE Acquisition
Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“MergerCo”), Stage It Corp., a Delaware corporation
(“Stage It”), and the stockholders’ representative for Stage It, pursuant to which the Company will acquire Stage It
for up to $10 million (the “Merger Consideration”), by merging MergerCo with and into Stage It, with Stage It continuing
as the surviving entity and wholly-owned subsidiary of the Company (the “Merger”).
Pursuant
to the Merger Agreement, and subject to the terms and conditions set forth therein, at the closing of the Merger (the “Closing”),
each of Stage It’s outstanding shares (including common and preferred shares) will be converted into the right to receive the applicable
portion of the Merger Consideration. A portion of the Merger Consideration will be paid in cash and take the form of satisfying certain
outstanding debt obligations of Stage It, as outlined in a Closing Payment Certificate of the Merger Agreement, and the other portion
will be paid in shares of the Company’s common stock or preferred stock, with the actual number of such shares to be issued reduced
by the cash component outlaid in the transaction. A portion of the Merger Consideration, $1 million, will be held back for the purposes
of satisfying certain contingent obligations of Stage It.
The
Merger Agreement also allows for the issuance of earn-out shares, not to exceed the overall Merger Consideration, provided that certain
EBIDTA requirements are met over the course of 18 months. See Note 5. for additional information
NOTE
2 – GONING 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 three months ended March 31, 2022, the Company had cash on hand of $60,458, used cash in operations of $248,739,
and had an accumulated deficit of $15,028,400 as of March 31, 2022. In addition, the Company had negative working capital of $14,595,097.
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 March 31, 2022,
consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.
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.
NOTE
3 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
Basis
of Consolidation
The
accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”)
“FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in
conformity with generally accepted accounting principles (“GAAP”) in the United States.
The
Company consolidates its results with its wholly-owned subsidiary, Stage It Corp.
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.
Stage
It receives revenue through a percentage of ticket sales and tipping. This show-based revenue creates a pool that is shared with the
performing artist. Once a show is completed the revenue that has been created through tickets and tips is allocated. Typically, Stage
It retains 20% of the revenue as an agent and the artist receives 80% of the revenue as the performer, however, there are occasions when
the profit split has different ratios. Revenue is recognized once a show is complete and the performance obligation to the consumer has
been met. Since Stage It acts as an agent, revenue is recorded on a net basis only on the 20% portion, less direct expenses such as broadcast
costs, merchant processing fees, bank services charges, license fees and the cost of production.
The
Company also recognizes revenue on the sale of CDs and USB drives that contain the recording of live concerts and are made available
to concert attendees immediately after the show and online. 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.
As
of March 31, 2022 and December 31, 2021 deferred revenue amounted to $857,326 and $74,225, respectively.
Management’s
Representation of Interim Financial Statements
The
accompanying unaudited financial statements have been prepared by the Company without audit pursuant to the rules and regulations of
the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements
prepared in accordance with GAAP have been or omitted as allowed by such rules and regulations, and management believes that the disclosures
are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the
opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are
of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year.
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 the determination of goodwill and intangible assets, the valuation allowance for the deferred
tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
Stock
Purchase Warrants
The
Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities
from Equity.
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.
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
is 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 March 31, 2022, because their impact was anti-dilutive. As of March 31, 2022, the Company had 149,489,159
outstanding warrants and 20,333,526 shares related to convertible notes payables respectively, which were excluded from the computation
of net loss per share.
Property
and Equipment
Property
and equipment are stated at cost or fair value if acquired as part of a business combination. Depreciation is computed by the straight-line
method and is charged to operations over the estimated useful lives of the assets. The threshold for depreciating office equipment is
$200, and $1,000 for furniture and fixtures Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated
depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included
in the results of operations. The estimated useful lives of property and equipment are as follows:
Schedule of estimated useful lives of property and equipment |
|
|
Computers,
software, and office equipment |
|
3
years |
Furniture
and fixtures |
|
7
years |
As
of March 31, 2022, the Company’s property, which consisted solely of computers, amounted to $35,002 and -0-, respectively.
Depreciation expense for the three months ended March 31, 2022, and 2021, amounted to $1,880 and $-0-, respectively.
Goodwill
and Intangible Assets
Goodwill
represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized.
The goodwill arising from the Company’s acquisition is attributable to the value of the potential expanded market opportunity with
new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives
are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible
assets consist primarily of customer relationships, trademarks, and product formulations. The useful life of these customer relationships
is estimated to be three years.
Goodwill
is not amortized but is subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs
an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in
circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing compares the
fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income
approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances
surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of
the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows.
For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free
interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s
size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value,
growth rates, future capital expenditures, and changes in future working capital requirements. The market approaches use key multiples
from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than
its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then an impairment
loss is recognized in an amount equal to the excess.
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.
NOTE
4 – PREPAID EXPENSE
As
of March 31, 2022 and December 31, 2021, the balances in prepaid expenses was $100,000 and $464,336.
$100,000
of the prepaid expense in both periods relates to a January 9, 2020 agreement entered into by the Company 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 4, 2020. This tour which has
been delayed due to Covid-19 is expected to commence in summer of 2022.
NOTE
5 – 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 $5,049 and $2,261 for the periods ended
March 31, 2022, and 2021, respectively, were recorded using the assets licensed under this agreement. For the periods ended March 31,
2022, and 2021 the fees would have amounted to $252 and $113 respectively. The Company’s Chief Executive Officer agreed to waive
the right to receive these license fees for both years and has never taken any fees pursuant to this agreement.
Accrued
Payroll to Officers
Accrued
payroll to two officers was $231,750 and $233,750 respectively, as of March 31, 2022, and December 31, 2021, respectively.
The Chief Executive Officer’s compensation is $170,000 per year.
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,
2021, the Company’s CEO advanced $10,000 to the Company on an interest-free basis. That amount remained outstanding as of March 31, 2022.
NOTE
6 – BUSINESS ACQUISITION
On
February 13, 2022, VNUE, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with VNUE Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“MergerCo”), Stage It Corp.,
a Delaware corporation (“Stage It”), and the stockholders’ representative for Stage It, pursuant to which the Company
will acquire Stage It for up to $10 million (the “Merger Consideration”), by merging MergerCo with and into Stage It, with
Stage It continuing as the surviving entity and wholly owned subsidiary of the Company (the “Merger”).
Pursuant
to the Merger Agreement, and subject to the terms and conditions set forth therein, at the closing of the Merger (the “Closing”),
each of Stage It’s outstanding shares (including common and preferred shares) will be converted into the right to receive the applicable
portion of the Merger Consideration. A portion of the Merger Consideration will be paid in cash and take the form of satisfying certain
outstanding debt obligations of Stage It, as outlined in a Closing Payment Certificate of the Merger Agreement, and the other portion
will be paid in shares of the Company’s common stock or preferred stock, with the actual number of such shares to be issued reduced
by the cash component outlaid in the transaction. A portion of the Merger Consideration, $1 million, will be held back to satisfy certain
contingent obligations of Stage It.
The
Merger Agreement also allows for the issuance of earn-out shares, not to exceed the overall Merger Consideration, provided that certain
EBIDTA requirements are met over the course of 18 months.
On
February 13, 2022, the Company, Stage It and the shareholders of Stage It entered into a voting agreement concerning the Merger.
On
February 14, 2022, the Company completed the acquisition of Stage It. As a result of the Closing, Stage It became a wholly-owned
subsidiary of the Company. For the acquisition, the Company will issue the initial 135,000,000 shares and pay certain amounts as detailed
under Merger Consideration in the Merger Agreement. The price to be paid in cash and stock for the Earnout Shares and Holdback Shares
are set forth in the Merger Agreement.
The
Merger Agreement has been included to provide investors with information regarding its terms. The representations, warranties, and covenants
contained in the Merger Agreement were made only for the purposes of the Merger Agreement, were made as of specific dates, were made
solely for the benefit of the parties to the Merger Agreement, and may not have been intended to be statements of fact, but rather as
a method of allocating risk and governing the contractual rights and relationships among the parties to the Merger Agreement. In addition,
such representations, warranties, and covenants may have been qualified by certain disclosures not reflected in the text of the Merger
Agreement and may apply standards of materiality and other qualifications and limitations in a way that is different from what may be
viewed as material by the Company’s shareholders. None of the Company’s shareholders or any other third party should rely
on the representations, warranties, and covenants, or any descriptions thereof, as characterizations of the actual state of facts or
conditions of the Company, the Company, Merger Sub, or any of their respective subsidiaries or affiliates
For
the acquisition of Stage It the following table summarizes the acquisition date fair value of the consideration paid, identifiable assets
acquired and liabilities assumed:
Consideration
paid
Schedule of
fair value of consideration | |
| | |
Common
stock issued, 41,476,963 shares of the Company’s restricted common stock valued at $0.0101 per share | |
$ | 418,917 | |
Common
stock issuable, 93,523,037 shares of the Company’s restricted common stock valued at $0.0101 per share | |
| 944,583 | |
Net
liabilities assumed | |
| 2,871,066 | |
Earnout
liability | |
| 7,679,984 | |
Cash
paid | |
| 1,085,450 | |
Fair
value of total consideration paid | |
$ | 13,000,000 | |
Net
assets acquired and liabilities assumed
Schedule of
net asset acquired and liabilities assumed | |
| | |
Cash
and cash equivalents | |
$ | 107,689 | |
Property | |
| 36,882 | |
Total
assets | |
| 144,571 | |
| |
| | |
Accounts
payable and accrued liabilities | |
| 1,711,349 | |
Notes
payable | |
| 526,385 | |
Deferred
revenue | |
| 777,903 | |
Total
liabilities | |
$ | 3,015,637 | |
| |
| | |
Net
liabilities assumed | |
$ | 2,871,066 | |
The
Company has allocated the fair value of the total consideration paid of $10,400,000 to goodwill and $2,600,000 to intangible assets with
a life of three years. The value of goodwill represents Stage It’s ability to generate profitable operations going forward. Management
estimated the provisional fair values of the intangible assets and goodwill on March 31, 2022. The Company’s accounting for
the acquisition of Stage It is incomplete. Management is performing a valuation study to calculate the fair value of the acquired intangible
assets, which it plans to complete within the one-year measurement period.
NOTE
7 – INTANGIBLE ASSETS
As
of March 31, 2022, the balance of intangible assets was $2,491,677. During the year the three-month period ended March 31,
2022, the Company recorded $108,333 in amortization expense. As discussed in Note 6, the intangible assets have been valued based on
provisional estimates of fair value and are subject to change as the Company completes its valuation assessment by the completion of
the one-year measurement period. Amortization for the following fiscal years is estimated to be: 2022 - $650,000; 2023 - $866,666; and
2024 - $866,666, 2025 -$216,668.
NOTE
8 – 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 March 31, 2022, and December 31, 2021:
Schedule of accrued liabilities | |
| | | |
| | |
| |
March 31, 2022 | | |
December 31, 2021 | |
Accounts
payable and accrued expense | |
| 2,298,240 | | |
$ | 588,275 | |
Accrued
interest | |
| 259,179 | | |
| 189,527 | |
Soundstr
Obligation | |
| 145,529 | | |
| 145,259 | |
Total
accounts payable and accrued liabilities | |
| 2,702,948 | | |
$ | 923,061 | |
NOTE
9 – PURCHASE LIABILITY
The
balance of the company’s Purchase Liability at March 31, 2022, and December 31, 2021 was $7,979,984 and $300,000, respectively.
Under
the terms of the business acquisition of Stage It described in Note 6, during the three months ended March 31, 2022 the Company
had a contingent Earnout Liability of $7,679,984 due to the shareholders of Stage It if Stage It operations achieve certain operating
milestones. This liability will be subject to quarterly analysis.
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.
The
purchase liability was 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. The Company has had no correspondence
regarding this liability with Pledge Music who declared bankruptcy in 2019.
NOTE
10 – SHARES TO BE ISSUED
As
of December 31, 2021 the Company had not yet issued 5,204,352 shares of common stock with a value of $247,707 for past services
provided and for an acquisition. During the three months ended March 31, 2022, pursuant to the acquisition of Stage It described
throughout this Report, an additional 93,523,037 shares issuable to Stage It shareholders valued at $944,583 were added to the previous
balance of shares to be issued.
NOTE
11 – NOTES PAYABLE
The
balance of the Notes Payable outstanding as of March 31, 2022, and December 31, 2021, was $1,142,542 and $869,157, respectively.
The balances as of December 31, 2021 were comprised of two notes amounting to $12,000 and an 8% note for $857,157 due to Ylimit
payable on September 30, 2022. The two notes for $12,000 are past due an continue to accrue interest.
During
the three months ended March 31, 2022, the Company added $273,385 in note liabilities pursuant to the Stage It acquisition. These
notes currently are not accruing interest.
NOTE
12 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable consist of the following:
Schedule of Convertible notes payable | |
| | | |
| | |
| |
March 31,
2022 | | |
December 31,
2021 | |
Various
Convertible Notes | |
$ | 43,500 | | |
| 43,500 | |
Golock
Capital, LLC Convertible Notes (a) | |
| 339,011 | | |
| 339,011 | |
Other
Convertible Notes (b) | |
| 256,203 | | |
| 253,203 | |
Total
Convertible Notes | |
$ | 638,714 | | |
| 635,714 | |
| (a) | 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 the 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 requested 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 March 31, 2022
all of the Golock notes amounting to $339,011 were past due.
As
a result Golock has assessed the Company additional penalties and interest of $1,172,782. The Company disagrees with the accrued interest
and penalties due to Golock. Initially, the Company recorded this amount as a liability on its balance during the period ended March 31,
2021. Subsequent during the three month period ended September 30, 2021, the Company obtained a legal opinion supporting its position
that these charges were egregious, and reversed the liability on its balance sheet The Company intends to litigate this amount as well
as the validity of the principal and interest outstanding, if a settlement on a vastly reduced amount, cannot be reached.
| (b) | During
the year ended December 31, 2021, GHS Investments funded an 8%, $165,000 convertible
promissory note maturing on November 16, 2021. This note is past due as of the date
of this Report. The Company has continued accruing interest and no notice of default has
been sent to the Company by GHS. The Company is currently negotiating with GHS to convert
this loan to some form of Equity. The conversion price on the Note is fixed at $0.0171. |
As
of March 31, 2022, $73,204 of these notes due to one lender are past due. This lender is associated with Golock and the Company
is disputing the validity of this note.
Summary
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.
NOTE
14 – STOCKHOLDERS’ DEFICIT
Common
stock
The
Company has authorized 2,000,000,000 shares of $0.0001 par value common stock. As of March 31, 2022, and December 31, 2021,
there were 1,459,256,460 and 1,411,799,497 shares of common stock issued and outstanding respectively.
Preferred
Stock Series A
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.
As
of March 31, 2022 and 2021 the Company had 20,000,000 shares of $0.0001 par value preferred stock authorized and there were 4,250,579
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.
As
of March 31, 2022, and December 31, 2021, there were 4,250,579 shares of Series A Preferred issued and outstanding.
Preferred
Stock Series B
On
January 3, 2022, the Company authorized and designated a class of shares, par value $0.0001, of Series B Convertible Preferred
Stock (“Series B Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series
5 Designation”). It subsequently issued 1,535 restricted shares of Series B Preferred Stock to GHS Investments (“GHS”)
in return for $1,500,000 (less $130,000 in fees) in financing provided to the Company.
Pursuant
to the Series B Designation, each share of Series B Preferred Stock may be converted into $1,200 of common stock of the Company. In connection
with the issuance of the Series B Preferred Stock, the Company recorded $42,000 in financing fees and a $300,000 expense for the beneficial
conversion feature of Series B Preferred stock.
As
of March 31, 2022 and December 31, 2021, there were 1,535 and -0- shares of Series B Preferred outstanding, respectively
Warrants
In
connection with the issuance of Series B Preferred Stock to the Company described in Note 14, the Company issued 133,689,840 warrants,
with a five year life, at a strike price of $0.01122.
A
summary of warrants is as follows:
Schedule of warrants | |
| | | |
| | |
| |
Number
of Warrants | | |
Weighted
Average Exercise | |
Balance
outstanding, December 31, 2019 | |
| 23,805,027 | | |
| 0.079 | |
Warrants
expired or forfeited | |
| - | | |
| - | |
Balance
outstanding, December 31, 2020 | |
| 23,805,027 | | |
| 0.079 | |
Warrants
expired or forfeited | |
| (8,004,708 | ) | |
| - | |
Balance
outstanding and exercisable, December 31, 2021 | |
| 15,800,319 | | |
$ | 0.0079 | |
| |
| | | |
| | |
Warrants
granted March 31, 2022 | |
| 133,689,640 | | |
$ | 0.01122 | |
Balance
outstanding and exercisable, March 31, 2022 | |
| 149,489,959 | | |
$ | 0.0109 | |
Information
relating to outstanding warrants on March 31, 2022, summarized by exercise price, is as follows:
The
weighted-average remaining contractual life of all warrants outstanding and exercisable on March 31, 2022 is 4.42 years. The outstanding
and exercisable warrants outstanding on March 31, 2022, had no intrinsic value.
NOTE
15 – 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
the 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 March 31, 2022,
no net revenue was generated from the JV.
Artist
Agreement
On
October 27, 2015, the Company entered into an Artist Agreement with I Break Horses, a Swedish duo based in Stockholm. The Artist
Agreement is effective October 27, 2015, and has a term lasting as long as I Break Horses artist recordings are available via the
VNUE Service. Under the terms of the Artist Agreement, the Company shall handle rights clearing and distribution for I Break Horses recordings
and receive 30% of the Net Income generated thereby. As of March 31, 2022, the Company had not earned any revenue under this agreement.
Litigation
In
the matter of VNUE, Inc. v. Power Up Lending Group, Ltd. On October 6, 2021, the Company commenced an action against Power Up Lending
Group, Ltd. “Power Up”) and Curt Kramer (“Kramer”) (Power Up and Kramer together, the “Power Up Parties”)
in the United States District Court for the Eastern District of New York. The complaint alleges that: (1) Power Up is an unregistered
dealer acting in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”) and, pursuant to Section 29(b)
of the Act, the Company is entitled to recessionary relief from certain convertible promissory notes (“Notes”) and securities
purchase agreements (“SPAs”) entered into by the Company and Power Up; (2) Kramer is liable to the Company as the control
person of Power Up pursuant to Section 20(a) of the Act; and (3) Power Up is liable to the Company for unjust enrichment arising
from the Notes and SPAs.
On
December 10, 2021, the Power Up Parties filed their pre-motion conference request letter with the Court regarding their forthcoming
motion to dismiss the Company’s complaint. On December 17, 2021, the Company filed its opposition thereto. On January 26,
2022, the Company filed its amended complaint, which asserted the same causes of action set forth in the initial complaint, and further
alleged that that Power Up made material misstatements in connection with the purchase and sale of the Company’s securities in
violation of Section 10(b) of the Act and, thus, the Company is entitled to recessionary relief from the Notes and SPAs pursuant
to Section 29(b) of the Act.
On
February 9, 2022, the Court ordered an initial conference. The initial conference is currently scheduled for May 16, 2022,
at 12:00 p.m. (EST). As of the date hereof, the Company intends to litigate its claims for relief against the Power Up Parties.
Golock
Capital, LLC and DBW Investments, LLC v. VNUE, Inc. On September 29, 2021, Golock Capital, LLC (“Golock”) and DBW Investments,
LLC (“DBW”) (Golock and DBW together, the “Golock Plaintiffs”) commenced an action against the Company in the
United States District Court for the Southern District of New York. The Golock Plaintiffs’ complaint alleges that the Company is
in breach of certain convertible promissory notes and securities purchase agreements separately entered into with Golock and DBW, and
seeks declaratory judgment, injunctive relief, and specific performance against the Company.
On
December 2, 2021, the Golock Plaintiffs filed their amended complaint, which asserted the same causes of action set forth in the
initial complaint, and an additional cause of action for unjust enrichment. On January 19, 2022, the Company filed its answer with
affirmative defenses to the amended complaint. As to its affirmative defenses, the Company asserted that the Golock Plaintiffs claims
are barred because: (1) the Golock Plaintiffs are unregistered dealers acting in violation of Section 15(a) of the Securities Exchange
Act of 1934 (the “Act”), and, pursuant to Section 29(b) of the Act, that the Company is entitled to recessionary relief
from the certain convertible promissory notes and securities purchase agreements at issue in the amended complaint; and (2) that the
convertible promissory notes are, in fact, criminally usurious loans that impose interest onto the Company at a rate that violates New
York Penal Law § 190.40 and, therefore, the subject convertible notes are void ab initio pursuant to New York’s usury laws.
On
January 20, 2022, the Court ordered that the parties submit a joint letter in lieu of a pretrial conference on or before February 3,
2022. As of the date hereof, the Company intends to vigorously defend itself against the Golock Plaintiffs claims and has not recorded
any liability for Golock’s claims.
NOTE
16 – SUBSEQUENT EVENTS
On
April 19, 2022, the Company entered a Securities Purchase Agreement with GHS whereby GHS agreed to purchase, Two Hundred and Fifty
Thousand Dollars ($250,000) of the Company’s Series B Convertible Preferred Stock in exchange for Two Hundred and Fifty (250) shares
of Series B Convertible Preferred Stock.
The
Company issued to GHS commitment shares of Ten (10) shares of Series B Convertible Preferred Stock and a warrant (the “Warrant”)
to purchase the number of shares of common stock issuable upon conversion of the Series B Convertible Preferred Stock (the “Warrant
Shares”). The Company has agreed to register the shares of common stock issuable pursuant to the conversion of the Series B Convertible
Preferred Stock and the Warrant Shares.
In
connection with this issuance, the Company amended and restated its Certificate of Designation increasing the authorized Series B shares
from 1,600 shares to 2,500 shares.
Additionally, subsequent
to March 31, 2022 the Company issued 15,229,816 shares to shareholders of Stage It pursuant to the February 13, 2022 Merger Agreement
between the Company and Stage It.