U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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.
(Name of Registrant in its Charter) |
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(State or Other Jurisdiction of incorporation or organization) |
| (I.R.S. Employer I.D. No.) |
(Address of Principal Executive Offices)
(
(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.
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.)
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 | ☐ |
☒ | Smaller reporting company | ||
| 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 ☒
The number of shares of registrant’s common stock outstanding as of August 12, 2021 was
VNUE, INC.
QUARTERLY REPORT ON FORM 10-Q
June 30, 2021
TABLE OF CONTENTS
2 |
Table of Contents |
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. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
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Assets |
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Current assets: |
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Cash |
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Prepaid expenses |
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Total current assets |
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Total assets |
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Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: |
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Accounts payable and accrued expenses |
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Shares to be issued |
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Accrued payroll-officers |
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Advances from former officer |
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Notes payable |
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Deferred revenue |
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Convertible notes payable, net |
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Purchase liability |
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Derivative liability |
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Total current liabilities |
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Total liabilities |
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Commitments and Contingencies |
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Stockholders' Deficit |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' deficit |
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Total Liabilities and Stockholders' Deficit |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
3 |
Table of Contents |
VNUE, INC. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
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Revenues - related party |
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Direct costs of revenue |
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Gross margin (loss) |
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Operating expenses: |
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General and administrative |
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Total costs and expenses |
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Operating loss |
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Other income (expense), net |
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Change in fair value of derivative liability |
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Other income |
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Loss on the extinguishment of debt |
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Financing costs |
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Other income (expense), net |
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Net income (loss) |
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Net loss per common share - basic and diluted |
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Weighted average common shares outstanding: |
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Basic and diluted |
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The accompanying notes are an integral part of these consolidated financial statements. |
4 |
Table of Contents |
VNUE, INC. | ||||||||||||||||||||||||||||
(UNAUDITED) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT | ||||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 | ||||||||||||||||||||||||||||
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| Par value$0.001 |
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| Additional |
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| Preferred Shares |
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| Common Shares |
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Balance - December 31, 2019 |
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Shares issued on conversion of notes payable |
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Net (loss) |
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Balance, March 31, 2020 |
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Net income |
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Balance, June 30, 2020 |
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| Par value $0.001 |
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| Additional |
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Balance - December 31, 2020 |
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Net income |
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Beneficial conversion feature of convertible notes |
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Balance, March 31, 2021 |
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Shares issued upon conversion of convertible notes payable |
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Net income |
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Balance, June 30, 2021 |
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The accompanying notes are an integral part of these consolidated financial statements. |
5 |
Table of Contents |
VNUE, INC. | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(Unaudited) | ||||||||||
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Cash Flows From Operating Activities: |
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Net income (loss) |
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Adjustments to reconcile net income to net cash provided by (used for) operating activities |
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Change in the fair value of derivatives |
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Derivative value considered financing costs |
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Loss on the extinguishment of debt |
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Amortization of debt discount |
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Changes in operating assets and liabilities |
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Prepaid expenses |
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Accounts payable and accrued interest |
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Deferred revenue |
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Accrued payroll officers |
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Net cash used in operating activities |
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Cash Flows From Investing Activities: |
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Cash Flows From Financing Activities: |
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Payoff of convertible note |
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Proceeds from the issuance of convertible notes |
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Net cash provided by investing activities |
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Net Decrease In Cash |
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Cash At The Beginning Of The Period |
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Cash At The End Of The Period |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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Cash paid for income taxes |
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Supplemental disclosure of non-cash information: |
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Common shares issued upon conversion of notes payable and accrued interest |
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The accompanying notes are an integral part of these consolidated financial statements. |
6 |
Table of Contents |
VNUE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
History and Organization
VNUE, Inc. (formerly Tierra Grande Resources, Inc.) (“VNUE” or the “Company”) was incorporated under the laws of the State of Nevada on April 4, 2006.
On May 29, 2015, VNUE, Inc., known as Tierra Grande Resources, Inc. at the time, entered into a merger agreement with VNUE, Inc., a Washington corporation (VNUE Washington), and TGRI Merger Corp., a Nevada corporation and a wholly-owned subsidiary of VNUE, Inc. (“Merger Sub”). Pursuant to the terms of the Merger Agreement, VNUE Washington merged with and into Merger Sub, with Merger Sub continuing as the surviving entity that succeeded to all of the assets, liabilities and operations of VNUE Washington (the “Merger”). In connection with the Merger, all of the outstanding shares of any class or series of VNUE Washington were exchanged for an aggregate of
The Company is developing technology driven solutions for Artists, Venues and Festivals to automate the capturing, publishing, and monetization of their content, as well as protection of their rights.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2021, the Company used cash in operations of $
On June 30, 2021, the Company had cash on hand of $
On June 22, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with GHS Investments, LLC (the “Purchaser”), a Nevada limited liability company, pursuant to which the Company will have the right in its sole discretion for a period of one year from the date of the SPA, to sell up to $8 million of Common Stock (subject to certain limitations) to GHS Investments. The transaction is considered an Equity Line of Credit (“ELOC”)
In July 2021, the Company raised $
Management’s Representation of Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed 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 condensed consolidated 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. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2020, as presented in the Company’s Annual Report on Form 10-K filed on April 8, 2021 with the SEC.
7 |
Table of Contents |
NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
Basis of Consolidation
The Company consolidates all wholly-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 |
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VNUE Inc. (formerly TGRI) |
| The State of |
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VNUE Inc. (VNUE Washington) |
| The State of |
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VNUE LLC |
| The State of |
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Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company recognizes revenue on the sale CDs and USB drives that contain the recording of live concerts and made available to concert attendees immediately after the show and on-line. Revenue is recognized on the sale of a product when our performance obligation is completed which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates include the assumptions used for impairment testing of intangible assets, assumptions used to value the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
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. |
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| • | 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. |
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| • | 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. |
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NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES (continued)
Fair Value of Financial Instruments (continued)
The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying values of our notes payable approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
The fair value of the derivative liabilities of $-
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
Income (Loss) per Common Share
Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised, and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on June 30, 2021, because their impact was anti-dilutive. As of June 30, 2021, the Company had outstanding warrants to purchase
Recently Issued Accounting Pronouncements
On Dec. 18, 2019, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. The Company adopted this guidance on January 1, 2021 which had no impact on the Company’s financial statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month, or short-term rentals.
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NOTE 3 – PREPAID EXPENSE
On Jan 9, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty, to record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. As part of the deal,
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, Mr. Bair. On March 19, 2021, the Licensing Agreement was extended until March 2022, and will automatically extend unless either party notifies the other of cancellation.
Revenues of $
Accrued Payroll to Officers
Accrued payroll to officers was $
Advances from Officers/Stockholders
From time to time, officers/stockholders of the Company advance funds to the Company for working capital purposes. During the year ended December 31, 2019, a former employee and stockholder agreed to forgive $
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.
The following table sets forth the components of the Company’s accrued liabilities on June 30, 2021 and December 31, 2020.
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(a) See Note 9 related to the reversal of interest and penalties for Golock.
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NOTE 6 – PURCHASE LIABILITY
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc. (the “Seller”), whereby the Company acquired the digital live music distribution platform “Set.fm” from PledgeMusic. The purchase price for the acquisition was comprised of $
The Company has had no correspondence regarding this liability with Pledge Music who declared bankruptcy in 2019.
NOTE 7 – SHARES TO BE ISSUED
As of December 31, 2018, the Company had not yet issued
NOTE 8 – NOTES PAYABLE -PAST DUE
On December 17, 2015, the Company issued a Promissory Note in the principal amount of $
On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $
As of June 30, 2021, the accrued interest expense on these two Notes amounted to $
The principal balance of the Notes Payable outstanding was $
NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE, RELATED PARTIES
Convertible notes payable consists of the following:
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NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE, RELATED PARTIES (continued)
During the three months ended June 30, 2021 the Company converted major portions of its convertible debt to equity. The Company converted $
(a) In August 2014, the Company issued a series of convertible notes with various interest rates ranging up to 10% per annum. The balance of the notes outstanding was $
(b) On November 9, 2019 the Company and Ylimit, LLC entered into an amendment (“Ylimit Amendment One”) to the original secured convertible promissory note dated May 9, 2016 along with subsequent amendment and fundings that followed. Under the terms of Ylimit Amendment One, Ylimit extended maturity date of all outstanding convertible debt due to them by the company, to a new maturity date of February 09, 2020. Ylimit received no consideration for this amendment.
By verbal agreement Ylimit increased the Company’s borrowing limits by $
On February 9, 2020, the Company entered into another amendment with Ylimit (“Ylimit Amendment Two”) to further extend the maturity date of all of the Company’s outstanding debt to August 9, 2020 including the $175,000 that Ylimit funded in the fourth quarter of 2019. Ylimit received no consideration for the Ylimit Amendment Two.
On January 5, 2021 the Company entered into Amendment Three to extend the maturity of all notes until February 9, 2022. Ylimit received no consideration for Amendment Three.
During the six months ended June 30, 2021, Ylimit invested another $
(c) From September 1, 2017 to December 31, 2017, the Company issued convertible notes to Golock Capital, LLC (“Lender”) in the aggregate principal amount of $191,750 with an interest rate at
On February 2, 2018, the Company issued a convertible note to Golock Capital, LLC (“Lender”) in the principal amount of $
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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.
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 June 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.
(d) During the six months ended June 30, 2021, GHS Investments funded an 8%, $
(e) As of December 31, 2017 the Company had an outstanding convertible note payable of $61,000. During the year ended December 31, 2018, the Company entered into additional notes of $
As of June 30, 2021, $
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.
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NOTE 10 – DERIVATIVE LIABILITY
The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 6 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. As of June 30, 2021, and December 31, 2020, the derivative liabilities were valued using probability weighted option pricing models with the following assumptions:
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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.
As of June 30, 2021 and supported by a legal opinion which challenged the original transactions as void and advised the Company not to process any conversion notices from Golock , the Company stopped recording the derivative liability on the Golock convertible notes.
NOTE 11 – STOCKHOLDERS’ DEFICIT
On July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada. The Charter Amendment increased the Company’s capitalization to
Common stock
The Company has authorized
Preferred Stock Series A
As of June 30, 2021, and December 31, 2020, the Company had
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
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NOTE 11 – STOCKHOLDERS’ DEFICIT (continued)
Preferred Stock Series A (continued)
Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into
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.
Warrants
No warrants were issued during the three ended June 30, 2021.
A summary of warrants is as follows:
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The weighted-average remaining contractual life of all warrants outstanding and exercisable on June 30, 2021 is
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NOTE 12 – COMMITMENT AND CONTINGENCIES
Joint Venture Agreement – Music Reports, Inc.
On September 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com) will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform.
Litigation
None
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.
NOTE 13 – SUBSEQUENT EVENTS
In July 2021, the Company raised $
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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. Some forward-looking statements that we may use include, without limitation, those statements that relate to:
| • | Competition and market acceptance of our product, |
| • | Other risks and uncertainties related to the music industry and our business strategy and the impact of the Covid-19 pandemic on our operations |
| • | Our ability to penetrate the market and continually innovate useful technologies, |
| • | Our ability to negotiate and enter into license agreements, |
| • | Our ability to raise capital, |
| • | Our ability to protect our intellectual property rights, |
You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to facts differing from the assumptions underlying our estimates. Some of these risks and assumptions include those set forth in reports and other documents we have filed with or furnished to the United States Securities and Exchange Commission (“SEC”). We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. 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.
Impact of Current Coronavirus (COVID-19) Pandemic on the Company
Covid-19 has had a material adverse effect on our live recording business and the music industry in general. Substantially all of our future set.fm and DiscLive business is dependent on success of public events and gatherings. We believe that the vaccination efforts throughout the world are having a positive impact on the population that may enable more live music events to be held in the future which would be beneficial to our business, however, there can be no assurances on the timing of when this may occur or whether it will occur at all.
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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 artists, labels, publishers, and live venues but the fans as well.
Through VNUE, Inc., our wholly-owned subsidiary, we now carry on business as a live entertainment music technology company that offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music. Our two main product lines are:
| · | Set.fm™ / DiscLive Network™ - Our consumer app platform that allows fans to purchase the concert they just experienced instantly on their mobile device, and “instant” physical collectible products are recorded and sold at shows and online through the company’s exclusive partner DiscLive Network™, the 15-year pioneer in “instant live” recording. |
| · | Soundstr™ - Our technology which is a comprehensive music identification and rights management Cloud platform that, when fully deployed, can accurately track and audit public performances of music, creating a more transparent ecosystem for general music licensing and associated royalty payments, and will help to ensure the correct stakeholders are paid through the use of our “big data” collection. |
While Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive, and its related marks and names are not owned by the Company and are owned or utilized by RockHouse Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to Set.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to them.
On Jan 9, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty, 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 Matchbox Twenty and its affiliated companies, which was paid in full in installments, with the last installment of $40,000 paid on March 4, 2020.
Also as part of the transaction, Ticketmaster agreed to include the option for their customers to pre-purchase a double CD set at checkout, for a price to the customer of $25.00, resulting in a net payment to VNUE of approximately $20 after Ticketmaster’s fees and taxes. Additionally, Wonderful Union, the VIP package sales company utilized by Matchbox Twenty agreed to buy 5,000 digital download cards from VNUE for $7 each (to include in VIP packages that they send to fans) for $35,000, which has been paid full. As of May 11, 2020, Ticketmaster has paid via wire $40,378 toward the aforementioned pre-sales.
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The following discussion and analysis of our results of operations and financial condition for the three months ended June 30, 2021, and 2020, should be read in conjunction with our condensed consolidated financial statements and related notes included in this report.
Comparison for the three and six months ended June 30, 2021, and 2020
Revenues
In the three months ended June 30, 2021, we had revenue of $4,320 compared to $6,127 for the three months ended June 30, 2020, representing a decrease of $1,807. In the six months ended June 30, 2021, we had revenue of $6,581 compared to $18,186 for the six months ended June 30, 2020, representing a decrease of $11,605. The decrease in revenue is primarily attributable to the overall impact of COVID-19, preventing live concerts from taking place.
Direct Costs of Revenues
In the three months ended June 30, 2021, we had direct costs of revenue of $66 compared to $-0- for the three months ended June 30, 2020, representing an increase of $66. In the six months ended June 30, 2021, we had direct costs of revenue of $66 compared to $8,509 for the six months ended June 30, 2020, representing a decrease of $8,443. Due to the low volume of revenue, associated costs are not indicative of the costs and margins we expect to generate from higher sales volumes.
General and Administrative Expenses
In the three months ended June 30, 2021, we had general and administrative expense of $160,885 compared to $193,843 for the three months ended June 30, 2020, representing a decrease of $32,958. In the six months ended June 30, 2021, we had the general and administrative expense of $334,913 compared to $370,031 for the six months ended June 30, 2020, representing a decrease of $35,118. There was a reduction of $30,970 and $22,244 of legal and professional fees for the three- and six-months ending June 30, 2021, and a reduction of $20,500 and $-0- of officers compensation for the three- and six-months ending June 30, 2021. The decrease in general and administrative expense is primarily attributable to the overall impact of COVID-19, preventing live concerts from taking place.
Other Income (Expenses), Net
We recorded other income, net of $4,043,602 for the six months ended June 30, 2021, compared to other expense of $138,068 during the six month period ended June 30, 2021. The significant increase in other income net, in the 2021 period was primarily attributable to a reduction of $3,156,582 in the Company’s derivative liability related to convertible notes.
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 profit was $3,715,204 for the six months ended June 30, 2021, compared to a net loss for the six months ended June 30, 2020, of $498,422.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans.
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 six months ended June 30, 2021, the Company used cash in operations of $334,450, and as of June 30, 2021, had a stockholders’ deficit of $3,139,030 and negative working capital of $3,139,030. 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.
On June 30, 2021, the Company had cash on hand of $4,008.. 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.
On June 22, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with GHS Investments, LLC (the “Purchaser”), a Nevada limited liability company, pursuant to which the Company will have the right in its sole discretion for a period of one year from the date of the SPA, to sell up to $8 million of Common Stock (subject to certain limitations) to GHS Investments. The transaction is considered an Equity Line of Credit (“ELOC”)
In July 2021, the Company raised $587,429 on its equity line of credit through the sale of 64,387,194 shares of its common stock at a price of approximately $0.00912 per share. As result management estimates that the current funds on hand will be sufficient to continue operations through the next 12 months.
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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 the information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations. (See Note 1 - Significant and Critical Accounting Policies and Practices in the Company’s Form 10-K for the period ended December 31, 2020 filed with the SEC on April 8, 2021.
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.
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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 the net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Stock-Based Compensation
The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and 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.
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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, 2021. 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 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 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.
b) Internal Control over Financial Reporting
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 June 30, 2021, 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. |
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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. |
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4. | Lack of independent board member(s) |
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5. | Lack of independent audit committee |
Management is currently evaluating remediation plans for the above control deficiencies.
c) Changes in Internal Controls over Financial Reporting
During the fiscal quarter ended June 30, 2021, 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.
d) Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
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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
During the three months ended June 30, 2021, the Company converted major portions of its convertible debt to equity. The Company converted $1,162,800 in principal and $38,616 in accrued interest into 75,195,174 shares of common stock.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period ended June 30, 2021.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
There is no other information required to be disclosed under this item which was not previously disclosed.
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ITEM 6. EXHIBITS
Exhibits
Exhibit Number |
| Description of Exhibits |
| ||
|
101.INS* |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104* |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
___________
* | Filed herein |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant | VNUE, Inc. | ||
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Date: August 16, 2021 | By: | /s/ Zach Bair | |
| Zach Bair | ||
| Chief Executive Officer (Principal Executive Officer and Principal Accounting Officer) |
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