Quarterly Report (10-q)

Date : 08/19/2019 @ 8:35PM
Source : Edgar (US Regulatory)
Stock : Vnue, Inc. (PC) (VNUE)
Quote : 0.0004  0.0 (0.00%) @ 12:00AM

Quarterly Report (10-q)

 

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

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

 

For the quarterly period ended June 30, 2019

 

¨

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

 

For the transition period from _________ to _________

 

Commission File No. 000-53462

 

VNUE, INC.

(Name of Registrant in its Charter)

 

Nevada

 

98-0543851

(State or Other Jurisdiction of incorporation or organization)

 

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

 

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

(Address of Principal Executive Offices)

 

(833) 937-5493

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

N/A

N/A

 

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

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Emerging growth company

¨

 

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

 

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

 

The number of shares of registrant’s common stock outstanding as of August 19, 2019, was 553,627,494.

 

 
 
 
 

 

VNUE, INC.

 

QUARTERLY REPORT ON FORM 10-Q

June 30, 2019

 

TABLE OF CONTENTS
 

 

PAGE

 

PART I - FINANCIAL INFORMATION

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

 

 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

3

 

 

Unaudited Condensed Consolidated Statement of Operations for the Three and Six Months Ended June 30, 2019 and 2018

4

 

 

Unaudited Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2019 and 2018

7

 

 

Unaudited Condensed Statements of Stockholder Equity (Deficit) for the Three and Six Months Ended June 30, 2019 and 2018

5

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 

Item 2.

Management Discussion & Analysis of Financial Condition and Results of Operations

18

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 

Item 4.

Controls and Procedures

23

 

 

 

PART II - OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

25

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

 

Item 3.

Defaults Upon Senior Securities

25

 

Item 4.

Mining Safety Disclosures

25

 

Item 5

Other information

25

 

Item 6.

Exhibits

26

 

 

 

SIGNATURES

27

 

 

 
2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements.

 

The following unaudited interim financial statements of VNUE, Inc. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this quarterly report on Form 10-Q:

 

VNUE, Inc.

 

Financial Statements for the Three and Six Months Ended June 30, 2019 and 2018

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

2019

 

 

December 31,

2018

 

 

 

(Unaudited)

 

 

 

 

Assets

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 24,455

 

 

$ 18,191

 

Prepaid expenses

 

 

-

 

 

 

667

 

Total current assets

 

 

24,455

 

 

 

18,858

 

 

 

 

 

 

 

 

 

 

Intangible assets, net

 

 

182,913

 

 

 

233,429

 

Total assets

 

$ 207,368

 

 

$ 252,287

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 955,218

 

 

$

953,305

 

Accrued payroll to officers

 

 

30,000

 

 

 

52,700

 

Advances from stockholders

 

 

720

 

 

 

14,720

 

Note payable

 

 

34,000

 

 

 

9,000

 

Convertible notes payable, net

 

 

1,295,826

 

 

 

1,202,290

 

Convertible notes payable, related parties, net

 

 

28,500

 

 

 

30,000

 

Derivative liabilities

 

 

1,507,614

 

 

 

1,744,601

 

Total current liabilities

 

 

3,851,878

 

 

 

4,006,616

 

 

 

 

 

 

 

 

 

 

Purchase liability

 

 

300,000

 

 

 

300,000

 

Total liabilities

 

 

4,151,878

 

 

 

4,306,616

 

 

 

 

 

 

 

 

 

 

Commitment and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

 

 

 

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

 

 

413

 

 

 

-

 

Common stock, par value $0.0001: 750,000,000 shares authorized; 383,570,162 and 105,635,816 shares issued and outstanding, respectively

 

 

38,356

 

 

 

10,564

 

Additional paid-in capital

 

 

7,871,483

 

 

 

6,493,069

 

Common stock to be issued, 5,084,352 shares and 3,964,352 shares, respectively

 

 

247,523

 

 

 

243,839

 

Accumulated deficit

 

 

(12,102,285 )

 

 

(10,801,801 )

Total Stockholders’ Deficit

 

 

(3,944,510 )

 

 

(4,054,329 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Deficit

 

$ 207,368

 

 

$ 252,287

 

  

See accompanying notes to the condensed consolidated financial statements.

 

 
3
 
Table of Contents

 

VNUE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months Ended

June 30,

2019

 

 

For the Three Months Ended

June 30,

2018

 

 

For the Six

Months Ended

June 30,

2019

 

 

For the Six

Months Ended

June 30,

201

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ 64,544

 

 

$ 5,341

 

 

$ 88,100

 

 

$ 20,824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs of revenues

 

 

39,530

 

 

 

14,278

 

 

 

97,968

 

 

 

37,402

 

Research and development

 

 

3,746

 

 

 

11,497

 

 

 

5,827

 

 

 

15,173

 

General and administrative

 

 

706,503

 

 

 

227,789

 

 

 

832,071

 

 

 

413,447

 

Total operating expenses

 

 

749,779

 

 

 

253,564

 

 

 

935,866

 

 

 

466,022

 

Loss from Operations

 

 

(685,235 )

 

 

(248,223 )

 

 

(847,766 )

 

 

(445,198 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income/(expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

(645,834 )

 

 

167,454

 

 

377,006

 

 

 

441,478

 

Loss on settlement of debt

 

 

(204,002 )

 

 

(44,248 )

 

 

(387,375

)

 

 

(44,248 )

Gain on settlement of obligations

 

 

12,046

 

 

 

41,111

 

 

 

9,143

 

 

 

41,111

 

Financing costs

 

 

(151,002 )

 

 

(82,910 )

 

 

(451,493

)

 

 

(353,640 )

Other income (expenses), net

 

 

(988,793 )

 

 

81,407

 

 

(452,719 )

 

 

85,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (1,674,028 )

 

$ (166,816 )

 

$ (1,300,485 )

 

$ (360,197 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - Basic and diluted

 

$ (0.01 )

 

$ (0.00 )

 

$ (0.01 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - Basic and diluted

 

 

322,251,427

 

 

 

87,842,954

 

 

 

245,570,640

 

 

 

81,141,410

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 
4
 
Table of Contents

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIT(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

 

 

 

Preferred stock,

par value

$0.0001

 

 

Common Stock,

par value

$0.0001

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Number of

 

 

 

 

 

Number of

 

 

 

 

 

Paid In

 

 

Shares to be

 

 

Accumulated

 

 

Stockholders’

 

 

 

shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Issued

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2019

 

 

-

 

 

$ -

 

 

 

105,635,816

 

 

$ 10,563

 

 

$ 6,493,069

 

 

 

243,839

 

 

$ (10,801,800 )

 

$ (4,054,329 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of accrued payroll to officer/shareholder

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

record as contributed capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,046

 

 

 

 

 

 

 

 

 

 

 

12,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares returned by former officer

 

 

 

 

 

 

 

 

 

 

(4,555,918 )

 

 

(456 )

 

 

456

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

184

 

 

 

 

 

 

 

184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for employee obligations

 

 

 

 

 

 

 

 

 

 

15,057,143

 

 

 

1,506

 

 

 

39,149

 

 

 

-

 

 

 

-

 

 

 

40,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for vendor obligations

 

 

 

 

 

 

 

 

 

 

11,428,571

 

 

 

1,143

 

 

 

29,714

 

 

 

-

 

 

 

-

 

 

 

30,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued on conversion of notes payable

 

 

 

 

 

 

 

 

 

 

127,152,659

 

 

 

12,715

 

 

 

388,232

 

 

 

-

 

 

 

-

 

 

 

400,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for financing costs

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,500

 

 

 

-

 

 

 

3,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

373,543

 

 

 

373,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019 (unaudited)

 

 

-

 

 

-

 

 

 

254,718,271

 

 

25,471

 

 

6,962,666

 

 

247,523

 

 

(10,428,257 )

 

(3,192,598 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Preferred Stock

 

 

4,127,766

 

 

 

413

 

 

 

 

 

 

 

 

 

 

 

589,716

 

 

 

 

 

 

 

 

 

 

 

590,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued on conversion of notes payable

 

 

 

 

 

 

 

 

 

 

128,851,891

 

 

 

12,885

 

 

 

282,568

 

 

 

 

 

 

 

 

 

 

 

295,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants for financing costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,533

 

 

 

 

 

 

 

 

 

 

 

36,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,674,028 )

 

 

(1,674,028 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2019 (unaudited)

 

 

4,127,766

 

 

$ 413

 

 

 

383,570,162

 

 

$ 38,356

 

 

$ 7,871,483

 

 

$ 247,523

 

 

$ (12,102,285 )

 

$ (3,944,510 )
 

See accompanying notes to the condensed consolidated financial statements.

 

 
5
 
Table of Contents

 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018

 

 

 

Preferred stock,

par value
$ 0.0001

 

 

Common Stock,

par value

$ 0.0001

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Number of

 

 

 

 

 

Paid In

 

 

Shares to be

 

 

Accumulated

 

 

Stockholders’

 

 

 

shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Issued

 

 

Deficit

 

 

Deficit

 

Balance, January 1, 2018

 

 

-

 

 

$ -

 

 

 

74,335,070

 

 

 

7,433

 

 

$ 4,755,719

 

 

$ 932,734

 

 

$ (8,445,524 )

 

 

(2,749,638 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,367

 

 

 

 

 

 

 

 

 

 

 

40,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193,380 )

 

 

(193,380 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2018 (unaudited)

 

 

-

 

 

 

-

 

 

 

74,335,070

 

 

7,433

 

 

4,796,086

 

 

932,734

 

 

(8,638,904 )

 

(2,902,651 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of accrued payroll to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

officers/shareholders recorded as contributed capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

419,003

 

 

 

 

 

 

 

 

 

 

 

419,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares to be issued for shares to be issued

 

 

 

 

 

 

 

 

 

 

3,813,000

 

 

 

381

 

 

 

707,514

 

 

 

(707,895 )

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares for employee obligations

 

 

 

 

 

 

 

 

 

 

3,746,660

 

 

 

375

 

 

 

74,558

 

 

 

 

 

 

 

 

 

 

 

74,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for vendor obligations

 

 

 

 

 

 

 

 

 

 

5,616,086

 

 

 

562

 

 

 

160,421

 

 

 

 

 

 

 

 

 

 

 

160,983

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services received

 

 

 

 

 

 

 

 

 

 

300,000

 

 

 

30

 

 

 

8,969

 

 

 

12,680

 

 

 

 

 

 

 

21,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued on conversion of notes payable

 

 

 

 

 

 

 

 

 

 

2,400,000

 

 

 

240

 

 

 

69,760

 

 

 

 

 

 

 

 

 

 

 

70,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issuable for acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68,250

 

 

 

 

 

 

 

68,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(166,816 )

 

 

(166,816 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2018, (unaudited)

 

 

-

 

 

 

-

 

 

 

90,210,816

 

 

$ 9,021

 

 

$ 6,236,311

 

 

$ 305,769

 

 

$ (8,805,720 )

 

$ (2,254,619 )

 

See accompanying notes to the condensed consolidated financial statements.

 

 
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VNUE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  

 

 

Six months ended June 30,

 

2019

 

2018

 

(Unaudited)

 

(Unaudited)

 

Cash flows from operating activities

 

Net loss

 

$

(1,300,485

)

 

(360,197

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

Change in fair value of derivative liabilities

 

(377,006

)

 

(441,778

)

Derivative value in excess of convertible notes considered financing costs

 

69,759

 

81,908

 

Gain on settlement of vendor obligations

 

(9,142

)

 

(41,111

)

Loss on extinguishment of debt

 

387,375

 

44,248

 

Amortization of debt discount

 

253,035

 

223,396

 

Amortization of intangible assets

 

50,516

 

77,186

 

Warrants issued for financing costs

 

36,533 

 

 

Financing cost for extension of the maturity date of convertible note

 

30,428

 

-

 

Stock-based compensation

 

590,129

 

 

Shares issued for financing costs

 

3,500

 

-

 

Shares issued for services

 

184

 

21,679

 

Changes in operating assets and liabilities:

 

Prepaid expense

 

667

 

(4,000

)

Accounts payable and accrued expenses

 

42,771

 

92,196

 

Accrued payroll to officer

 

30,000

 

27,670

 

Net cash used in operating activities

 

(191,736

)

 

(279,613

)

 

Cash flows from financing activities

 

Proceeds from notes payable

 

25,000

 

Proceeds from issuance of convertible notes payable

 

173,000

 

276,500

 

Net cash provided by financing activities

 

198,000

 

276,500

 

Net Change in Cash

 

6,264 

 

(3,113

)

 

Cash – Beginning of the Reporting Period

 

18,191

 

10,278

 

Cash – End of the Reporting Period

 

$

24,455

 

7,165

 

Supplemental Disclosure of Cash Flow Information:

 

Interest Paid

 

$

-

 

Income Tax Paid

 

$

-

 

Non-Cash Financing Activities

 

Common shares issued upon conversion of notes payable and accrued interest

 

$

696,400

 

$

25,752

 

Common shares issued in settlement of accounts payable and accrued expenses

 

$

30,857

 

$

235,916

 

Convertible note issued in settlement of accounts payable balance

 

15,000

 

Common shares issued upon conversion of accrued payroll

 

$

40,654

 

$

-

 

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

 

$

82,306

 

$

164,695

 

Fair value of shares to be issued and assumed liabilities upon the acquisition of Soundstr

 

40,367

 

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

 

$

-

 

$

302,737

 

Capital contribution upon conversion of accrued payroll for officer/shareholder

 

$

12,046

 

$

419,003

   

See accompanying notes to the condensed consolidated financial statements.

 

 
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  VNUE, INC.

THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of VNUE, Inc., a Nevada corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

 

History and Organization

 

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

 

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

 

Overview of Business

 

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

 

 
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Going Concern

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, during the six months ended June 30, 2019, the Company incurred an operating loss of $847,766, used cash in operations of $191,736 and had a stockholders’ deficit of $3,944,510 as of June 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2018, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At June 30, 2019, the Company had cash on hand in the amount of $24,455. Management estimates that the current funds on hand will be sufficient to continue operations through August 31, 2019. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.

 

NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES

 

Basis of Consolidation

 

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

 

Name of consolidated subsidiary or Entity

 

State or other jurisdiction of

incorporation or organization

 

Date of incorporation or formation

(date of acquisition/disposition, if

applicable)

 

Attributable

interest

 

 

 

 

 

 

 

 

 

VNUE Inc. (formerly TGRI)

 

The State of Nevada

 

April 4, 2006 (May 29, 2015)

 

 

100 %

 

 

 

 

 

 

 

 

 

VNUE Inc. (VNUE Washington)

 

The State of Washington

 

October 16, 2014

 

 

100 %

 

 

 

 

 

 

 

 

 

VNUE LLC

 

The State of Washington

 

August 1, 2013 (December 3, 2014)

 

 

100 %

 

 

 

 

 

 

 

 

 

VNUE Technology Inc.

 

The State of Washington

 

October 16, 2014

 

 

90 %

 

 

 

 

 

 

 

 

 

VNUE Media Inc.

 

The State of Washington

 

October 16, 2014

 

 

89 %

 

 
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VNUE Technology, Inc. and VNUE Media, Inc. were inactive corporations at June 30, 2019, and 2018, respectively. Inter-company balances and transactions have been eliminated.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts . The implementation of ASC 606 did not have a material impact on the Company’s consolidated financial statements. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

 

The Company recognizes revenue on the sale of digital video disks (DVD) that contain the recording of live concerts and made available to concert viewers immediately after the show and on-line. Revenue is recognized on the sale of a product when the risk of loss transfers to our customers, and collection of the receivable is reasonably assured, which generally occurs when the product is purchased.

 

Use of Estimates

 

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

 

Fair Value of Financial Instruments

 

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

 

 

·

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

 

·

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

 

·

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

 

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

 

The fair value of the derivative liabilities of $1,507,614 and $1,744,601 at June 30, 2019, and December 31, 2018, respectively, were valued using Level 3 inputs.

 

 
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Derivative Financial Instruments

 

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

 

Income (Loss) per Common Share

 

Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share at June 30, 2019, because their impact was anti-dilutive. As of June 30, 2019, the Company had 23,805,027 outstanding warrants and 921,618,840 shares related to convertible notes payables respectively, which were excluded from the computation of net loss per share.

 

Intangible Assets

 

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

 

The Company had intangible assets with a carrying value of $182,913 and $233,429 as of June 30, 2019, and December 31, 2018, respectively. In accordance with ASC Topic 350 – Goodwill and Other Intangible Assets, the Company assesses the carrying value of its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and records an impairment charge if the carrying value of such intangible assets is not recoverable and if it exceeds its fair value. While our fiscal year-to-date financial performance has not met our expectations, and the enterprise value of the Company based on the current price of our common stock may fluctuate at or near the recorded level of finite-lived intangible assets, management does not consider these to be events requiring the performance of an impairment test. The Company will continue to monitor its operating results for indicators of impairment and perform additional tests as necessary, which could result in an impairment charge to intangible assets.

 

 
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Recently Issued Accounting Pronouncements

 

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

 

NOTE 3 – INTANGIBLE ASSETS AND PURCHASE LIABILITY

 

Intangible assets as of June 30, 2019 and December 31, 2018, consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Intangible assets

 

$ 302,737

 

 

$ 302,737

 

Accumulated amortization

 

 

(119,824 )

 

 

(69,308 )

Balance

 

$ 182,913

 

 

$ 233,429

 

 

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

 

Total amortization expense during the three months ended June 30, 2019, and 2018 was $50,516 and $29,167, respectively, which is included in general and administrative expense in the condensed consolidated statements of operations.

 

NOTE 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 $88,100 and $20,824 and direct cost of revenues of $97,968 and $37,402 during the six months ended June 2019 and 2018, respectively, were recorded using the assets licensed under this agreement.

 

  
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Accrued Payroll to Officers

 

Accrued payroll to officers was $30,000 and $52,700, respectively, as of June 30, 2019, and December 31, 2018, respectively. During the six month months ended June 30, 2019, the Company entered into a conversion and cancellation of a debt agreement with its Chief Executive Officer. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’ stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. The difference between the total accrued payroll converted of $52,700, and the market value of the shares issued of $40,654, was recorded as contributed capital of $12,046 in the condensed consolidated statements of stockholders’ deficit for the six months ended June 30, 2019. The Chief Executive Officers compensation is $170,000 per year, and $85,000 was incurred during the six months ended June 30, 2019; of which $30,000 was outstanding as of June 30, 2019.

 

Advances from Employees

 

From time to time, stockholders of the Company advance funds to the Company for working capital purposes. The advances are unsecured, non-interest bearing and due on demand. At December 31, 2018, advances from employees were $14,720. During the six months ended June 30, 2019, a former employee and stockholder agreed to forgive $14,000 owed by the Company. The Company recorded the $14,000 as a gain on the settlement of debt, leaving a remaining balance of $720 at June 30, 2019.

 

Transactions with Former Director and Officer

 

On September 15, 2017, the Company entered into an Advisory Agreement with Louis Mann (“MANN”), a former officer and director with the Company who resigned as an officer and director on August 26, 2015. The Advisory Agreement provides for MANN’s continued and ongoing advisory services to the Company for a period of nine (6) months and with automatic nine (6) months renewals unless terminated in accordance with the agreement. MANN is to receive $5,000 per month and 20,000 shares of common stock per month.

 

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

 

During the six months ended June 30, 2019, the Company recorded $30,000 of compensation relating to the agreement and made payments of $3,750 leaving a balance owed to MANN of $26,250 at June 30, 2019, which is included in accounts payable and accrued expenses.

 

NOTE 5 – NOTE PAYABLE

 

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

 

On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $25,000 The Note is due and payable on August 30, 2019, along with $5,000 worth of interest. During the six month period ended June 30, 2019; the Company recorded $2,812 of accrued interest expense on these Notes.

 

The balance of the Notes Payable outstanding was $34,000 and $9,000 as of June 30, 2019, and December 31, 2018, respectively.

 

 
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NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consist of the following:

 

 

As of

 

June 30,

 

December 31,

 

2019

 

2018

 

Various Convertible Notes

(a)

$

43,500

 

$

45,000

 

Ylimit, LLCC convertible Notes

(b)

 

707,500

 

707,500

 

Golock Capital, LLC Convertible Notes

(c)

 

306,678

 

302,067

 

Other Convertible Notes

(d)

 

345,160

 

426,964

 

Total Convertible Notes

 

1,402,838

 

1,484,531

 

Discount

 

(78,512

)

 

(249,241

)

Convertible notes, net

 

$

1,324,326

 

$

1,232,290

_____________ 

(a)

In August 2014 the Company issued a series of convertible notes with various interest rates ranging up to 10% per annum. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a “pre-money” valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a “pre-money” valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The notes are due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The balance of the notes outstanding was $45,000 as of December 31, 2018. On March 4, 2019, a note holder elected to forgive and cancel their outstanding convertible note balance of $1,500, which the Company recorded as a gain on extinguishment of debt in the accompanying condensed consolidated statement of operations. The balance of the notes outstanding was $43,500 as of June 30, 2019, of which $28,500 was due to related parties.

 

(b)

On December 31, 2018, the aggregate convertible principal note balance to YLimit, LLC was $705,500 and the related debt discount was $70,078. The convertible notes have an interest rate of 10% per annum, a maturity date of May 9, 2019, and convertible into shares of common stock at 85% of the per-share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. The maturity date of the notes has been extended to November 9, 2019. At June 30, 2019, the balance of notes outstanding was $707,500.

  

(c)

At December 31, 2018, the aggregate convertible notes balance to Golock Capital, LLC (“Lender”) was $302,067. The convertible notes have an interest rate of 10% per annum and maturity dates ranging from June 1, 2018 to November 1, 2018, and were 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.

 

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 a period of 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. The balance of the notes outstanding at June 30, 2019, was $306,678.

 

(d)

At December 31, 2018, the aggregate convertible notes balance to five lenders was $426,964 and the related debt discount was $179,162. The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018, to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 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. During the six months ended June 30, 2019, the Company entered into additional notes of $173,000, interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020, to June 19, 2020, at conversion terms comparable to the terms above.

  

Convertible notes and accrued interest aggregating $293,525 were converted into 256,004,550 common shares and recognized loss on settlement of debt of $402,875 during the six months ended June 30, 2019. At June 30, 2019, the aggregate balance of the notes outstanding was $345,160 and the related debt discount was $78,512.

 

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

 

The balance of the unamortized note discount at June 30, 2019, and December 31, 2018, respectively, was $78,512 and $249,241. During the six months ended June 30, 2019, the Company issued $173,000 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $152,065, of which $82,306 was recorded as a valuation discount, and the remaining $69,759 was recorded as a financing cost. During the six months ended June 30, 2019, amortization of debt discount was $170,728 which is included in financing costs on the Company’s statement of operations.

 

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

 

 

 

June 30,

2019

 

 

December 31,

2018

 

Convertible notes payable, net

 

$ 1,295,826

 

 

$ 1,202,290

 

Convertible notes payable, related party, net

 

 

28,500

 

 

 

30,000

 

Total

 

$

1,324,326

 

 

$ 1,232,290

 

 

NOTE 7 – DERIVATIVE LIABILITY

 

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

 

As of June 30, 2019, and December 31, 2018, the derivative liabilities were valued using a probability-weighted average Black-Scholes-Merton pricing model with the following assumptions:

 

 

 

June 30,

2019

 

 

Issued During

2019

 

 

December 31,

2018

 

 

 

 

 

 

 

 

 

 

 

Exercise Price

 

$0.0009–0.035

 

 

$

0.001–0.035

 

 

$

0.005–0.035

 

Stock Price

 

$

0.0014

 

 

$0.020-0.004

 

 

$

0.016

 

Risk-free interest rate

 

 

2.13

%

 

2.41 – 2.575

 

 

 

2.59

%

Expected volatility

 

 

377

%

 

385% - 388

 

 

293

%

Expected life (in years)

 

 

1.00

 

 

1.00 – 1.36

 

 

 

1.00

 

Expected dividend yield

 

 

0

%

 

 

0

%

 

 

0

%

Fair Value:

 

$

1,507,614

 

 

$

331,194

 

 

$

1,744,601

 

 

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

 

During the six months ended June 30, 2019, the Company recognized $377,006 as other income, which represented the net change in the value of the derivative liability at December 31, 2018 plus new derivative liabilities of $331,194 upon the issuance of new convertible notes and amendment of one convertible note in 2019, less the ending balance of the derivative liability as of June 30, 2019.

 

NOTE 8 – 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.

 

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.

 

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.

 

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

 

The Company determined the fair value of the preferred shares to be $590,129 which is included as stock-based compensation in general and administrative expense on the Company’s statements of operations for the six months ended June 30,2019.

 

Common stock returned by a director or officer

 

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

 

Shares to be issued

 

As of December 31, 2018, the Company had not yet issued 3,964,352 shares of common stock with a value of $243,839 for past services provided and an acquisition. During the three months ended March 31, 2019, the Company became obligated to issue an additional 60,000 shares of common, valued at $184, per the terms of a consulting agreement (see Note 4), and 1,000,000 shares of common stock valued at $3,500, as consideration for amending an existing convertible note. As of June 30, 2019, the Company had not yet issued 5,084,352 shares of common stock with a value of $247,523.

 

Warrants

 

During the six month period ended June 30, 2019, the Company issued 15,800,319 warrants to two convertible noteholders as consideration for extending the term of their convertible notes. The warrants are exercisable for a period of four years at a strike price of $0.00475. As a result of the issuance of these warrants, the company recorded a financing expense of $36,533.

 

A summary of warrants for the six months and year ended June 30, 2018 and December 31, 2018, is as follows:

 

 

 

 

 

 

Weighted

 

 

 

Number

 

 

Average

 

 

 

of

 

 

Exercise

 

 

 

Warrants

 

 

Price

 

Balance outstanding, December 31, 2018

 

 

8,004,708

 

 

 

0.014

 

Warrants granted

 

 

15,800,319

 

 

 

.00475

 

Warrants exercised

 

 

-

 

 

 

-

 

Warrants expired or forfeited

 

 

-

 

 

 

-

 

Balance outstanding and exercisable, June 30, 2019

 

 

23,805,027

 

 

$ 0.0079

 

 

Information relating to outstanding warrants at June 30, 2019, summarized by exercise price, is as follows:

 

 

 

 

Outstanding and Exercisable

 

 

 

 

 

 

 

 

Weighted

 

Exercise Price Per

 

 

 

 

 

 

Average

 

Share

 

 

Shares

 

 

Life (Years)

 

 

Exercise Price

 

$0.010-0.015

 

 

 

8,004,708

 

 

 

1.39

 

 

$ 0.014

 

$

0.004750

 

 

 

5,800,319

 

 

 

3.83

 

 

$ 0.00475

 

  

  
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The weighted-average remaining contractual life of all warrants outstanding and exercisable at June 30, 2019, is 2.21 years. Both the outstanding and exercisable warrants outstanding at June 30, 2019, had no intrinsic value.

 

NOTE 9 – COMMITMENT AND CONTINGENCIES

 

Joint Venture Agreement – Music Reports, Inc.

 

On September 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com) will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform. The initial term of the JV is for six (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue on a quarterly basis. As of June 30, 2019, no net revenue was generated from the JV.

 

Litigation

 

On November 27, 2018, Stout Law Group, P.A., the former counsel for the company and an affiliate of Matheau J. Stout, filed a Federal Complaint in the United States District Court for the District of Maryland (Stout Law Group, PA, v. VNUE, Inc.”, Civil Action No 1:18-CV-03614 JKB) for outstanding legal fees and other damages for work provided during the 2015 and 2016 fiscal years. The Company denies any liability therein and after negotiation with the plaintiff, the foregoing action was voluntarily withdrawn on February 27, 2019, by the plaintiff. The Company has a recorded liability of approximately $72,000 as of June 30, 2019, and December 31, 2018, to Stout Law Group, S.A. for services rendered which are the subject of settlement negotiations.

 

Artist Agreement

 

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

 

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent to June 30, 2019, several convertible note holders (see Note 6) elected to convert $64,817 of outstanding principal and interest into 167,027,820 shares of the Company’s common at $0.0008 per share.

 

Subsequent to June 30, 2019 the Company entered into a new convertible note agreement for $30,000 with one lender with a variable conversion price equal to 58% of the lowest closing price of the Company’s stock twenty-day prior to conversion. The Note matures on August 2, 2020 at an interest rate of twelve percent (12%). Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. Additionally, this Note may not be prepaid.

 

Additionally subsequent to June 30, 2019, the Company issued 3,041,192 shares value at approximately $2,500 to two service providers.

 

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

 

Forward-Looking Statements

 

The statements in this quarterly report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 , as amended. These statements appear in a number of different places in this report and can be identified by words such as “estimates”, “projects”, “expects”, “intends”, “believes”, “plans”, or their negatives or other comparable words. Also, look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include, among others, statements regarding our business plans and availability of financing for our business.

 

You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to actual facts differing from the assumptions underlying our estimates. Some of these risks and assumptions include those set forth in reports and other documents we have filed with or furnished to the United States Securities and Exchange Commission (“SEC”). We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.

 

Presentation of Information

 

As used in this annual report, the terms “we”, “us”, “our” and the “Company” mean VNUE, Inc. and its subsidiaries, unless the context requires otherwise.

 

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

 

Overview

 

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

 

Overview of our Current Business

 

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

 

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

 

 

·

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

 

·

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

 

While Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive, and its related marks and names are not owned by the Company and are owned or utilized by 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.

 

 
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The following discussion and analysis of our results of operations and financial condition for the three months ended June 30, 2019, and 2018, should be read in conjunction with our condensed consolidated financial statements and related notes included in this report. We are in the process of completing the development of our products and services and therefore had minimal revenues during this quarter.

 

Three Months Ended June 30, 2019, Compared to Three Months Ended June 30, 2018

 

Revenues

 

Our revenues for the three months ended June 30, 2019, and 2018, was $64,544 and $5,341, respectively. The large increase in revenues resulted from the use of the assets licensed from DiscLive discussed above, for our live music recordings, and our set.fm mobile content platform. As we continue to ramp up our services and add additional clients and content, we believe this increase in revenue will continue and further improve.

 

Costs of Revenues

 

Our direct costs of revenues for the three months ended June 30, 2019, and 2018, was $39,530 and $14,278 respectively. Gross margin is calculated by subtracting direct costs from revenue. Gross margin percentage is calculated by dividing gross margins by revenue. Our gross margin percentage for the period ended June 30, 2019, was 39% compared to negative 167% for the same period in 2018. The gross margin improvement resulted from the increased use of the assets licensed from DiscLive and the set.fm mobile platform described above. As our client base continues to grow, and we book more tours, we expect these types of margins to be our normalized margins and in fact, we expect them to further improve.

 

Research and Development

 

Our research and development expenses for the three months ended June 30, 2019, and 2018, was $3,746 and $11,497 respectively. The decrease in research and development expenses relative to last year reflected the decrease in full-time personnel and contract labor caused by our lack of sufficient working capital.

 

General and Administrative Expenses

 

Our general and administrative expenses for the three months ended June 30, 2019, and 2018, was $706,503 and $227,789 respectively. The three months ended June 30, 2019, includes a non-cash stock-based compensation expense of $590,129 related to the issuance of our Series A Preferred stock (See Footnote 8 - Stockholders Deficit). Excluding this charge, our administrative expenses were $116,374. This compares to $227,789 during the comparable period ended June 30, 2019, The significant decrease in general and administrative expenses (excluding this item), relative to last year, was due to decreased professional fees and the reduction of full-time and contract personnel.

 

Other Income (Expenses), Net

 

We recorded other expenses, net, of $988,793 for the three months ended June 30, 2019, compared to other expenses, net of $81,407 for the three months ended June 2018. The increase in expenses, net, in 2019 was primarily attributable to an increase in the fair value of derivative liabilities of $478,380, an increase in loss on extinguishment of debt of $159,754, and increased financing costs of 68,092; when compared to the same period in 2019.

 

Net Income (Loss)

 

As a result of the foregoing revenues, direct costs of revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net loss for the three months ended June 30, 2019 was $988,793, compared to a net profit for the three months ended June 30, 2018 of $46,878.

 

 
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Six Months Ended June 30, 2019, Compared to Six Months Ended June 30, 2018

 

Revenues

 

Our revenues for the six months ended June 30, 2019, and 2018, was $88,100 and $20,824, respectively. The large increase in revenues resulted from the use of the assets licensed from DiscLive discussed above, for our live music recordings, and our set.fm mobile content platform. As we continue to ramp up our services and add additional clients and content, we believe this increase in revenue will continue and further improve.

 

Direct Costs of Revenues

 

Our direct costs of revenues for the six months ended June 30, 2019, and 2018, was $97,968 and $37,402, respectively. Gross margin is calculated by subtracting direct costs from revenue. Gross margin percentage is calculated by dividing gross margins by revenue. Our gross margin percentage for the period ended June 30, 2019, was negative 11% compared to negative 80% for the same period in 2018. The gross margin improvement resulted from the increased use of the assets licensed from DiscLive and the set.fm mobile platform described above during the second quarter in which our margin were positive.

 

Research and Development

 

Our research and development expenses for the six months ended June 30, 2019 and 2018, was $5,827 and $15,173, respectively. The decrease in research and development expenses relative to last year reflected the decrease in full-time personnel and contract labor caused by our lack of sufficient working capital.

 

General and Administrative Expenses

 

Our general and administrative expenses for the six months ended June 30, 2019 and 2018, was $832,071 and $413,447, respectively. As noted above during the three month period ended June 30, 2019, the Company incurred a one -time non-cash of $590,129. Excluding this charge general and administrative expense for the six months ended June 30, 2019 would have been $241,942. The decrease in general and administrative expenses relative to last year excluding this item was due to decreased professional fees and the reduction of full-time and contract personnel.

 

Other Income (Expenses), Net

 

We recorded other expense, net, of 452,179 for the six months ended June 30, 2019, compared to other income of $85,001 for the three months ended June 2018. The decrease in other income (expenses), net, in the 2019 was primarily attributable to an increase in the loss on extinguishment of debt of $343,127 and an increase of $96,853 in financing charges when compared to the same period in 2018.

 

Net Income (Loss)

 

As a result of the foregoing revenues, direct costs of revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net loss for the six months ended June 30, 2019 was $1,300,485 compared to our net loss for the six months ended June 30, 2018 of $360,197.

 

 
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Liquidity and Capital Resources

 

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

 

As of June 30, 2019, we had cash and cash equivalents of $24,455.

 

We had negative cash flows from operating activities of $191,736 for the six months ended June 30, 2019, compared with negative cash flows from operating activities of $279,613 for the six months ended June 30, 2018. Our negative cash flows were to fund our operating losses.

 

We generated cash flows from financing activities of $198,000 for the six months ended June 30, 2019, as compared to $276,500 for the six months ended June 30, 2018. The cash flows from financing activities for both the six months ended June 30, 2019, and 2018, was from proceeds received from the issuance of convertible notes, and from the issuance of a $25,000 note during the six month period ended June 30, 2019.

  

Going Concern

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, during the six months ended June 30, 2019, the Company incurred an operating loss of $847,766, used cash in operations of $191,736 and had a stockholders’ deficit of $3,944,510 as of June 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2018, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At June 30, 2019, the Company had cash on hand in the amount of $24,455. Management estimates that the current funds on hand will be sufficient to continue operations through August 31, 2019. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.

 

 
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Critical Accounting Policies and Estimates

 

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

 

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

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

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

 

Derivative Financial Instruments

 

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

 

 
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Stock-Based Compensation

 

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

 

The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

 

Recent Accounting Pronouncements

 

See Note 2 of the Condensed Consolidated Financial Statement herein for management’s discussion of recent accounting pronouncements.

 

Selected Financial Data

 

Not applicable.

 

Off-Balance Sheet Arrangements

 

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

 

Item 3. Quantitative and Qualitative Disclosures of Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

a) Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this quarterly report, an evaluation was carried out by our management, with the participation of our principal executive officer and principal accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2019. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

 

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

 

 
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b) Internal Control over Financial Reporting

 

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

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2018, the Company determined that there were deficiencies that constituted material weaknesses, as described below.

 

1.

Lack of proper segregation of duties due to limited personnel.

 

2.

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

 

3.

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

 

4.

Lack of independent board member(s)

 

5.

Lack of independent audit committee

 

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

 

In light of the existence of these material weaknesses, management concluded that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by COSO.

 

c) Changes in Internal Controls over Financial Reporting  

 

During the fiscal quarter ended June 30, 2019, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

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

 

During the six month period ended June 30, 2019, the Company issued 15,800,319 warrants to two convertible noteholders as consideration for extending the term of their convertible notes. The warrants are exercisable for a period of four years at a strike price of $0.00475.

 

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

  

On April 29, 2019, the Company entered into an amendment with a noteholder to extend the maturity of the Notes until July 31, 2019. In return, the noteholder received several concessions. They received (a) a warrant to purchase 12,833,333 shares of the Company’s stock for a period of 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants, and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the noteholder request conversion. The balance of the notes outstanding at June 30, 2019, was $306,678.

  

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

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

There were no defaults upon senior securities during the period ended June 30, 2019.

 

ITEM 4. MINING SAFETY DISCLOSURES

 

N/A

 

ITEM 5. OTHER INFORMATION

 

There is no other information required to be disclosed under this item which was not previously disclosed. 

  

 
25
 
Table of Contents

  

ITEM 6. EXHIBITS

 

Exhibits

 

Exhibit Number

 

Description of Exhibits

3.1

 

Articles of Incorporation (1)

3.2

 

Bylaws (2)

3.3

 

Series A Certificate of Designation, filed with the Secretary of State of Nevada on May 22, 2019 (3)  

3.4

 

Certificate of Amendment to Articles of Incorporation, filed with the Secretary of State of Nevada on July 2, 2019 (4)

31.1*

 

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

32.1*

 

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

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Schema

101.CAL

 

XBRL Taxonomy Calculation Linkbase

101.DEF

 

XBRL Taxonomy Definition Linkbase

101.LAB

 

XBRL Taxonomy Label Linkbase

101.PRE

 

XBRL Taxonomy Presentation Linkbase

___________ 

*

Filed herein

 

(1)

Included as an exhibit with our Form SB-2 filed with the Securities and Exchange Commission on October 13, 2006.

(2)

Included as an exhibit with our Form 8-K filed with the Securities and Exchange Commission on February 1, 2011.

(3)

Included as an Exhibit with our Form 8-K filed with the Securities and Exchange Commission on June 26, 2019.

(4)

Included as an Exhibit with our Form 8-K filed with the Securities and Exchange Commission on August 1, 2019.

  

 
26
 
Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant

VNUE, Inc.

   

 

Date: August 19, 2019

By:

/s/ Zach Bair

 

Zach Bair

 

Chief Executive Officer

(Principal Executive Officer and Principal Accounting Officer)

 

 

27

 

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