UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
Commission
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| (State
or other jurisdiction of incorporation or organization) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each Exchange on which registered | ||
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Securities registered pursuant to Section 12(g) of the Act: Common stock, $.0001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
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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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
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The number of shares of registrant’s common stock outstanding as of August 18, 2023 was .
VNUE, INC.
QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 2023
TABLE OF CONTENTS
i
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.
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Shares to be issued | ||||||||
| Accrued payroll-officers | ||||||||
| Dividends payable | ||||||||
| Notes payable | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable, net | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred A stock, par value $: shares authorized; and issued and outstanding as of June 30, 2023 and December 31, 2022 | ||||||||
| Preferred B stock, par value $: shares authorized; and issued and outstanding as of June 30, 2023 and December 31, 2022 | ||||||||
| Preferred C stock, par value $: shares authorized; and issued and outstanding as of June 30, 2023 and December 31, 2022 | ||||||||
| Common stock, par value $, shares authorized; and shares issued and outstanding, as of June 30, 2023, and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
VNUE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For
the three months ended | For
the six months ended | |||||||||||||||
| March 31, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues - related party | $ | $ | $ | $ | ||||||||||||
| Revenue, net | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Direct costs of revenue | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Payroll expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss on the extinguishment of debt | ( | ) | ( | ) | ||||||||||||
| Financing costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Preferred B Stock dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) available to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
VNUE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2021
(Unaudited)
| Preferred A Shares | Preferred B Shares | Preferred C Shares | Par
value $0.001 Common Shares | Additional Paid- in | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Issuance of Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Financing fee paid in Pref B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of Pref B shares convertible notes | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued upon conversion of convertible notes payable | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of Preferred B Shares for cash | - | |||||||||||||||||||||||||||||||||||||||||||
| Financing fee paid in Preferred B shares | - | |||||||||||||||||||||||||||||||||||||||||||
| Series B dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of debt to Preferred B shares | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of Preferred C shares to related parties | ||||||||||||||||||||||||||||||||||||||||||||
| Acquisition shares issued for Stage It purchase | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Preferred A Shares | Preferred B Shares | Preferred C Shares | Par
value $0.001 Common Shares | Additional Paid- in | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of Preferred B Shares for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Financing fee paid in Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Series B dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Shares issued from the Company's equity line for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of Preferred B Shares for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Financing fee paid in Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Series B dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Shares issued from the Company's equity line for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
VNUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the six months ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Loss on the extinguishment of debt | ||||||||
| Beneficial conversion feature of Preferred B stock | ||||||||
| Issuance of Preferred C voting stock | ||||||||
| Shares issued for financing costs | ||||||||
| Shares issued for services | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued interest | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Accrued payroll officers | ( | ) | ||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Acquisition of a business net of cash received | ( | ) | ||||||
| Net cash (used in) investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from the Company's equity line from the sale of common stock | ||||||||
| Payments on promissory notes | ( | ) | ||||||
| Proceeds from the sale of Series B Preferred Stock | ||||||||
| Proceeds from the issuance of promissory notes | ||||||||
| Net cash provided by investing activities | ||||||||
| Net Increase (Decrease) In Cash | ( | ) | ( | ) | ||||
| Cash At The Beginning Of The Period | ||||||||
| Cash At The End Of The Period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash information: | ||||||||
| Common shares issued for the Stage It acquisition | $ | $ | ||||||
| Issuance of Preferred C voting shares | $ | $ | ||||||
| Preferred B shares issued upon the conversion of debt and accrued interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
VNUE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
History and Organization
VNUE, Inc. (formerly Tierra Grande Resources, Inc.) (“VNUE”, “TGRI”, or the “Company”) was incorporated under the laws of the State of Nevada on April 4, 2006.
On May 29, 2015, VNUE, Inc. entered into a merger agreement with VNUE Washington, Inc. Pursuant to the terms of the Merger Agreement, all of the outstanding shares of any class or series of VNUE Washington were exchanged for an aggregate of shares of TGRI common stock. As a result of the Merger, VNUE Washington became a wholly-owned subsidiary of the Company, and the transaction was accounted for as a reverse merger with VNUE Washington deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer.
The Company is developing technology-driven solutions for Artists, Venues, and Festivals to automate the capturing, publishing, and monetization of their content, as well as protection of their rights.
On February 13, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VNUE Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“MergerCo”), Stage It Corp., a Delaware corporation (“Stage It”), and the stockholders’ representative for Stage It, pursuant to which the Company will acquire Stage It for up to $10 million (the “Merger Consideration”), by merging MergerCo with and into Stage It, with Stage It continuing as the surviving entity and wholly-owned subsidiary of the Company (the “Merger”).
On February 13, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VNUE Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“MergerCo”), Stage It Corp., a Delaware corporation (“Stage It”), and the stockholders’ representative for Stage It, pursuant to which the Company contracted to acquire Stage It for up to $10 million (the “Merger Consideration”), by merging MergerCo with and into Stage It, with Stage It continuing as the surviving entity and wholly-owned subsidiary of the Company (the “Merger”). At the same time, Stage It and several of the shareholders of Stage It entered into a voting agreement concerning the Merger.
Pursuant
to the Merger Agreement, at the closing of the Merger (the “Closing”), each of Stage It’s outstanding shares (including
common and preferred shares) were converted into the right to receive the applicable portion of the Merger Consideration. $
The Merger Agreement provides for the issuance of earnout shares which the company estimates will not be achieved.
On February 14 2022, the Company completed the acquisition of Stage It. As a result of the Closing, Stage It became a wholly-owned subsidiary of the Company. For the acquisition, the Company issued the initial shares, paid certain amounts to Stage It vendors and will potentially pay additional amounts as detailed under Merger Consideration in the Merger Agreement.
5
NOTE 2 – 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 as of June 30, 2023, the Company had $
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 June 30, 2023, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.
The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the Company has been able to fund its operations from the proceeds of notes payable and convertible notes. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
NOTE 3 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
Basis of Consolidation
The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”), which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
The Company consolidates its results with its wholly-owned subsidiary, Stage It Corp.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
Stage It receives revenue through a percentage of ticket sales and tipping. This show-based revenue creates a pool that is shared with the performing artist. Once a show is completed, the revenue that has been created through tickets and tips is allocated. Typically, Stage It retains 20% of the revenue as an agent and the artist receives 80% of the revenue as the performer; however, there are occasions when the profit split has different ratios. Revenue is recognized once a show is complete and the performance obligation to the consumer has been met. Since Stage It acts as an agent, revenue is recorded on a net basis only on the 20% portion, less direct expenses such as broadcast costs, merchant processing fees, bank services charges, license fees and the cost of production.
The Company also recognizes revenue from the sale of CDs and USB drives that contain the recording of live concerts and are made available to concert attendees immediately after the show and online. Revenue is recognized on the sale of a product when our performance obligation is completed, which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.
6
As
of June 30, 2023 deferred revenue amounted to $
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 valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
Stock Purchase Warrants
The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.
Fair Value of Financial Instruments
The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:
| ● | Level 1 — Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
| ● | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amounts of financial instruments, such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying values of our notes payable approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
Derivative Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded
at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements
of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or
as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as
current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within twelve months
of the balance sheet date. There were
7
Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that is then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on June 30, 2023, because their impact would have been anti-dilutive.
Property and Equipment
Property and equipment are stated at cost or fair value if acquired as part of a business combination. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in the results of operations. The estimated useful lives of property and equipment are as follows:
| Computers, software, and office equipment | |||
| Furniture and fixtures |
As
of June 30, 2023, the Company’s property was fully depreciated. Depreciation expense for the six months ended June 30,
2023, and 2022, amounted to $
Goodwill and Intangible Assets
Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist primarily of customer relationships, trademarks, and product formulations. The useful life of these customer relationships is estimated to be three years.
Goodwill
is not amortized but is subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs
an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in
circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing compares the
fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income
approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances
surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of
the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows.
For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free
interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s
size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value,
growth rates, future capital expenditures, and changes in future working capital requirements. The market approaches use key multiples
from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than
its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then an impairment
loss is recognized in an amount equal to the excess. As of December 31, 2022, the Company determined that its goodwill and intangibles
were fully impaired, and as a result, recorded an impairment of goodwill and intangible assets amounting to $
8
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The Company will be required to adopt this ASU for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of Topic 326 is not expected to have a material effect on the Company’s financial statements and financial statement disclosures.
NOTE 4 – PREPAID EXPENSE
As
of June 30, 2023 and December 31, 2022, the balances in prepaid expenses was $________ and $
| June 30, 2023 | December 31, 2022 | |||||||
| Matchbox Twenty (“MT”) agreement | $ | $ | ||||||
| Deposit with joint venture partner | ||||||||
| Total prepaid expenses | $ | $ | ||||||
The
MT prepaid expense in both periods relates to a January 9, 2020 agreement entered into by the Company with recording and performance
artist, Matchbox Twenty (“MT Agreement”), to record its 2020 tour and sell limited edition double CD sets, download cards,
and digital downloads. As part of the deal, the
NOTE 5 – RELATED PARTY TRANSACTIONS
DiscLive Network
On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license.
In
exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of
the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $
Advances from Officers/Stockholders
From
time to time, officers/stockholders of the Company advance funds to the Company for working capital purposes. During the year ended December 31,
2021, the Company’s Chief Executive Officer advanced $
9
NOTE 6 – BUSINESS ACQUISITION
On February 13, 2022, VNUE, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VNUE Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“MergerCo”), Stage It Corp., a Delaware corporation (“Stage It”), and the stockholders’ representative for Stage It, pursuant to which the Company will acquire Stage It for up to $10 million (the “Merger Consideration”), by merging MergerCo with and into Stage It, with Stage It continuing as the surviving entity and wholly owned subsidiary of the Company (the “Merger”).
Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, at the closing of the Merger (the “Closing”), each of Stage It’s outstanding shares (including common and preferred shares) will be converted into the right to receive the applicable portion of the Merger Consideration. A portion of the Merger Consideration will be paid in cash and take the form of satisfying certain outstanding debt obligations of Stage It, as outlined in a Closing Payment Certificate of the Merger Agreement, and the other portion will be paid in shares of the Company’s common stock or preferred stock, with the actual number of such shares to be issued reduced by the cash component outlaid in the transaction. A portion of the Merger Consideration, $1 million, will be held back to satisfy certain contingent obligations of Stage It.
The Merger Agreement also allows for the issuance of earn-out shares, not to exceed the overall Merger Consideration, provided that certain EBIDTA requirements are met over the course of 18 months.
On February 13, 2022, the Company, Stage It and the shareholders of Stage It entered into a voting agreement concerning the Merger.
On February 14, 2022, the Company completed the acquisition of Stage It. As a result of the Closing, Stage It became a wholly-owned subsidiary of the Company. For the acquisition, the Company will issue the initial shares and pay certain amounts as detailed under Merger Consideration in the Merger Agreement. The price to be paid in cash and stock for the Earnout Shares and Holdback Shares are set forth in the Merger Agreement.
The Merger Agreement has been included to provide investors with information regarding its terms. The representations, warranties, and covenants contained in the Merger Agreement were made only for the purposes of the Merger Agreement, were made as of specific dates, were made solely for the benefit of the parties to the Merger Agreement, and may not have been intended to be statements of fact, but rather as a method of allocating risk and governing the contractual rights and relationships among the parties to the Merger Agreement. In addition, such representations, warranties, and covenants may have been qualified by certain disclosures not reflected in the text of the Merger Agreement and may apply standards of materiality and other qualifications and limitations in a way that is different from what may be viewed as material by the Company’s shareholders. None of the Company’s shareholders or any other third party should rely on the representations, warranties, and covenants, or any descriptions thereof, as characterizations of the actual state of facts or conditions of the Company, the Company, Merger Sub, or any of their respective subsidiaries or affiliates
10
For the acquisition of Stage It, the following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired and liabilities assumed:
Consideration paid
| Common stock issued, 41,476,963 shares of the Company’s restricted common stock valued at $0.0101 per share | $ | |||
| Common stock issuable, 93,523,037 shares of the Company’s restricted common stock valued at $0.0101 per share | ||||
| Net liabilities assumed | ||||
| Cash paid | ||||
| Fair value of total consideration paid | $ |
Net assets acquired and liabilities assumed
| Cash and cash equivalents | $ | |||
| Computer equipment | ||||
| Total assets | ||||
| Accounts payable and accrued liabilities | ||||
| Notes payable | ||||
| Deferred revenue | ||||
| Total liabilities | $ | |||
| Net liabilities assumed | $ |
The
Company has allocated the fair value of the total consideration paid of $
On
December 31, 2022, the Company, based on its internal analysis, estimated that its Stage It subsidiary would not achieve its Earnout
and that all of the goodwill and intangible assets relating to the acquisition of Stage It was fully impaired. As a result, the Company
recorded an impairment of goodwill and intangible assets charge net of the earnout reversal of $
The amount of $4,262,683 was calculated as follows:
| Goodwill impairment | $ | |||
| Intangible assets impairment | ||||
| Reversal of Earnout liability | ( | ) | ||
| Net impairment | $ |
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NOTE 7 – DEFERRED REVENUE
As
of June 30, 2023 deferred revenue amount to $
NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.
The following table sets forth the components of the Company’s accrued liabilities on June 30, 2023, and December 31, 2022:
June 30, 2023 | December 31, 2022 | |||||||
| Accounts payable and accrued expense | $ | $ | ||||||
| Accrued interest | ||||||||
| Soundstr Obligation | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
As
of June 30, 2023 and December 31, 2022, the balances of shares to be issued were
| ● | As of December 31, 2022, the Company had not yet issued shares of common stock with a value of $ for past services provided and for an acquisition in previous years. |
| ● | During
the year ended December 31, 2022, pursuant to the acquisition of Stage It described
throughout this Report, an additional shares remain issuable to Stage It shareholders
valued at $ |
NOTE 10 – NOTES PAYABLE
The
balance of the Notes Payable outstanding as of June 30, 2023, and December 31, 2022, was $
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NOTE 11 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable consist of the following:
| June 30, 2023 | December 31, 2022 | |||||||
| Various Convertible Notes(a) | $ | |||||||
| Golock Capital, LLC Convertible Notes(b) | ||||||||
| Total Convertible Notes | $ | |||||||
| (a) | |
| (b) |
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 $
13
NOTE 12 – STOCKHOLDERS’ DEFICIT
Common stock
The
Company has authorized shares of $ par value common stock. As of June 30, 2023, and December 31, 2022,
there were and shares of common stock issued and outstanding, respectively. During the six months ended June 30,
2023, the Company sold common shares pursuant to the terms of its equity line and raised $
Preferred Stock Series A
On
July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles
of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada.
The Charter Amendment increased the Company’s capitalization to
As of June 30, 2023 and 2022 the Company had shares of $ par value preferred stock authorized and there were shares of Series A Preferred Stock issued and outstanding.
On
May 22, 2019, the Company authorized and designated a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”),
in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently
issued
Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders shall be entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders shall vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock have no liquidation or redemption preference rights but get treated as common stockholders on an as converted basis.
The Company believes that the issuance of the Series A Preferred Stock was exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act in that said transaction did not involve a public solicitation and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
As of June 30, 2023, and December 31, 2022, there were shares of Series A Preferred issued and outstanding.
Preferred Stock Series B (Update)
On January 3, 2022, the Company authorized and designated a class of shares, par value $, of Series B Convertible Preferred Stock (“Series B Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series 5 Designation”).
As of June 30, 2023 there were shares of Series B Preferred Stock Outstanding.
During
the six months ended June 30, 2023, the Company issued Preferred B shares to GHS and raised $
14
Warrants
In
connection with the issuance of Series B Preferred Stock to the Company described in Note 14, the Company issued
A summary of warrants is as follows:
| Number
of Warrants | Weighted Average Exercise | |||||||
| Balance outstanding, December 31, 2020 | ||||||||
| Warrants expired or forfeited | ( | ) | ||||||
| Balance outstanding and exercisable, December 31, 2021 | ||||||||
| Warrants exercised or forfeited | ( | ) | ||||||
| Warrants granted during the year ended December 31, 2022 | ||||||||
| Balance outstanding and exercisable, December 31, 2022 | ||||||||
| Warrants exercised or forfeited | ||||||||
| Warrants granted during the six months ended June 30, 2023 | ||||||||
| Balance outstanding and exercisable, June 30, 2023 | (a) | |||||||
| (a) |
Information relating to outstanding warrants on June 30, 2023, summarized by exercise price, is as follows:
The weighted-average remaining contractual life of all warrants outstanding and exercisable on June 30, 2023 is approximately years. As of June 30, 2023 these warrants has no intrinsic value.
Preferred Stock Series C
On
May 25, 2022, the Company authorized and designated a class of
As of June 30, 2023 and December 31, 2022, there were shares of Series C Preferred Stock outstanding.
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NOTE 13 – COMMITMENT AND CONTINGENCIES
Litigation
Legal Matters
In the matter of VNUE, Inc. v. Power Up Lending Group, Ltd. On October 6, 2021, the Company commenced an action against Power Up Lending Group, Ltd. (“Power Up”) and Curt Kramer (“Kramer”) (Power Up and Kramer together, the “Power Up Parties”) in the United States District Court for the Eastern District of New York. The complaint alleges that: (1) Power Up is an unregistered dealer acting in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”) and, pursuant to Section 29(b) of the Act, the Company is entitled to recessionary relief from certain convertible promissory notes (“Notes”) and securities purchase agreements (“SPAs”) entered into by the Company and Power Up; (2) Kramer is liable to the Company as the control person of Power Up pursuant to Section 20(a) of the Act; and (3) Power Up is liable to the Company for unjust enrichment arising from the Notes and SPAs.
On December 10, 2021, the Power Up Parties filed their pre-motion conference request letter with the Court regarding their forthcoming motion to dismiss the Company’s complaint. On December 17, 2021, the Company filed its opposition thereto. On January 26, 2022, the Company filed its amended complaint, which asserted the same causes of action set forth in the initial complaint, and further alleged that Power Up made material misstatements in connection with the purchase and sale of the Company’s securities in violation of Section 10(b) of the Act and, thus, the Company is entitled to recessionary relief from the Notes and SPAs pursuant to Section 29(b) of the Act.
On February 9, 2022, the Court ordered an initial conference. The initial conference is currently scheduled for May 16, 2022, at 12:00 p.m. (EST). As of the date hereof, the Company intends to litigate its claims for relief against the Power Up Parties.
On June 7, 2022, the Company filed a voluntary dismissal of the action because the parties reached a confidential settlement.
Golock Capital, LLC and DBW Investments, LLC v. VNUE, Inc. On September 29, 2021, Golock Capital, LLC (“Golock”) and DBW Investments, LLC (“DBW”) (Golock and DBW together, the “Golock Plaintiffs”) commenced an action against the Company in the United States District Court for the Southern District of New York. The Golock Plaintiffs’ complaint alleges that the Company is in breach of certain convertible promissory notes and securities purchase agreements separately entered into with Golock and DBW and seeks declaratory judgment, injunctive relief, and specific performance against the Company.
On December 2, 2021, the Golock Plaintiffs filed their amended complaint, which asserted the same causes of action set forth in the initial complaint and an additional cause of action for unjust enrichment. On January 19, 2022, the Company filed its answer with affirmative defenses to the amended complaint. As to its affirmative defenses, the Company asserted that the Golock Plaintiff’s claims are barred because: (1) the Golock Plaintiffs are unregistered dealers acting in violation of Section 15(a) of the Securities Exchange Act of 1934 (the “Act”), and, pursuant to Section 29(b) of the Act, that the Company is entitled to recessionary relief from the certain convertible promissory notes and securities purchase agreements at issue in the amended complaint; and (2) that the convertible promissory notes are, in fact, criminally usurious loans that impose interest onto the Company at a rate that violates New York Penal Law § 190.40 and, therefore, the subject convertible notes are void ab initio pursuant to New York’s usury laws.
On January 20, 2022, the Court ordered that the parties submit a joint letter in lieu of a pretrial conference on or before February 3, 2022. As of the date hereof, the Company intends to vigorously defend itself against the Golock Plaintiff’s claims.
On September 1, 2022, the Company filed an amended answer with counterclaims against the Golock Plaintiffs and their control persons asserting claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Act. On September 23, the Golock Plaintiffs filed a motion to dismiss the counterclaims.
On February 14, 2023, the Court granted the motion to dismiss and also dismissed all claims against the Golock Plaintiff’s control persons. The Company remains committed to actively litigating its affirmative defenses under the Act of and RICO.
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DBW Investments, LLC et al – Trial Court
As disclosed in greater detail in the Company’s Form 10-Q, filed May 19, 2023, the Company remains in active litigation with DBW Investments, LLC (“DBW”) and Golock Capital, LLC (“Golock”).
On May 22, 2023, a bench trial was held in this dispute. On June 1, 2023, the Court published its opinion and order, wherein the Court found the Company did not successfully establish its criminal usury defense and, thus, ruled in DBW and Golock’s favor on their breach of contract claims.
On June 16, 2023, the Court entered an order awarding (a) $1,218,897.62 in favor of Golock, and (b) $268,211.18 in favor of DBW. On July 5, 2023, the Court entered an order awarding Golock and DBW $223,328.20 in attorney’s fees and costs.
DBW Investments, LLC et al – Circuit Court
On June 2, 2023, the Company appealed the trial court’s decision in favor of DBW Investments, LLC (“DBW”) and Golock Capital, LLC (“Golock”) to the United States Court of Appeals for the Second Circuit, and moved the Second Circuit for a stay of the trial court’s order pending the appeal.
On July 27, 2023, the Second Circuit entered an administrative stay of the trial court’s order pending further review by the Second Circuit.
The Company’s opening memoranda in support of the appeal is currently due September 13, 2023. The Company remains committed to vigorously defending itself against DBW and Golock. The Company believes its appeal will be successful and has not recorded any liability related to this matter in its financial statements.
NOTE 14 – SUBSEQUENT EVENTS
Subsequent
to June 30, 2023, the Company sold common shares pursuant to its equity line of credit with GHS and raised approximately
$
17
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, and | |
| ● | 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 quarterly report, the terms “we”, “us”, “our” and the “Company” mean VNUE, Inc. and its subsidiaries unless the context requires otherwise.
All dollar amounts in this 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 the 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.
18
Overview
Our Business
We are a music technology company that utilizes our platforms to record live concerts and then sell the content to consumers. We make the content we record available to the set.fm platform, as well as our website, immediately after the show is finished. Our technology helps artists and record labels generate alternative income from the recorded content. We also offer high-end collectible products such as CDs, USB drives and laminates, which feature our fully mixed and mastered live concert content.
Until the acquisition of Stage It, described below, we had two products:
| ● | Set.fm™ / DiscLive Network™ - Our consumer app platform allows customers to download and purchase, via their individual mobile device, the concert they just attended. There are also physical collectible products that are recorded and sold at shows as well as online through the Company’s exclusive partner DiscLive Network™. The app itself is free to download and allows for in-app purchases regarding the content. (Currently, this is the only platform that generates any revenue for the Company.) |
| ● | Soundstr™ - a comprehensive music identification and rights management Cloud platform that we are developing, 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, which will help ensure the correct stakeholders are compensated 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 and 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.
The Company currently only generates revenue from Set.fm and from DiscLive by (a) recording the audio of live concerts and then selling the content “instantly” through its set.fm website, as well as the IOS Set.fm mobile application, and (b) selling content on physical products such as CDs, which are burned on-site where customers can purchase them. Our customers are fans of live music and the bands which we record.
Customers want to “take home” their experience of the concerts they attend. Our Company enters into agreements with certain bands and artists and record labels if a particular artist is under contract with the label. Our teams then follow that artist or band while they are on tour and record every show on that tour. Our Company uses its own recording and sound equipment while recording concerts.
As we partner with both artists and labels, we market our services on their websites, social media platforms, and mailing lists, as well as our own websites and social networks. Furthermore, partnerships with companies similar to Ticketmaster allow us to market to customers when they buy tickets to see certain artists in concert.
On February 13, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VNUE Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“MergerCo”), Stage It Corp., a Delaware corporation (“Stage It”), and the stockholders’ representative for Stage It, pursuant to which the Company agreed to acquire Stage It for $10 million (the “Merger Consideration”), by merging MergerCo with and into Stage It, with Stage It continuing as the surviving entity and wholly owned subsidiary of the Company (the “Merger”).
Pursuant to the Merger Agreement, each of Stage It’s outstanding shares (including common and preferred shares) will be converted into the right to receive the applicable portion of the Merger Consideration. A portion of the Merger Consideration will be paid in cash and take the form of satisfying certain outstanding debt obligations of Stage It, as outlined in a Closing Payment Certificate to the Merger Agreement, and the other portion will be paid in shares of the Company’s common stock or preferred stock, with the actual number of such shares to be issued reduced by the cash component outlaid in the transaction. A portion of the Merger Consideration, $1 million, will be held back for the purposes of satisfying certain contingent obligations of Stage It. Though the period ended June 30, 2023, the Company has paid approximately $1,568,000 in purchase consideration and expenses related to the acquisition.
19
The Merger Agreement also allows for the issuance of earn out shares, not to exceed the overall Merger Consideration, provided that certain EBIDTA requirements are met over the course of 18 months.
On February 14, 2022, the Company completed the acquisition of Stage It. As a result of the Closing, Stage It became a wholly-owned subsidiary of the Company. For the acquisition, the Company will issue the initial 135,000,000 shares and pay certain amounts as detailed under Merger Consideration in the Merger Agreement. The price to be paid in cash and stock for the Earnout Shares and Holdback Shares are set forth in the Merger Agreement.
With the addition of Stage It (Stage It.com), VNUE will have the ability to livestream concerts and other events, adding to the pool of other live music-focused technology services. Stage It is an established platform where concerts or other live events may be ticketed (just like an in-person event), and fans who pay for tickets may enjoy a performance or other engagement by watching digital video as it occurs on their web browser. For example, an artist can create an event through the platform, then, in advance, let their fans know they can purchase the ability to view the concerts on the Stage It platform. Fans then buy the ability to access these concerts, and at the designated time, the fan may then observe the live performance on Stage It.com.
Recent Developments
In late July, we announced that the Company is launching an aggressive campaign to deploy its Soundstr Music Recognition Technology in every bar, restaurant and hotel in Key West, FL, and has brought on local resources to have “boots on the ground” for the rollout.
Key West is one of the most sought-after vacation spots in the world, attracting around five million tourists per year by planes, boats (including cruise ships), and automobiles. It also boasts a large number of businesses that utilize music. In fact, the famed Duval Street is lined with no less than 143 bars – in less than two miles.
Interested businesses may receive the Soundstr Pulse devices for no cost whatsoever. Additionally, in the next several months, VNUE will be offering both playlist functionality – meaning clients will be able to play fully-licensed music directly from Soundstr – as well as the ability to opt-in for advertising, which will help to offset licensing costs that businesses pay. One of the strongest points about Soundstr Pulse is that it does have high-quality audio output capabilities (for use with advertising and for playlists), as well as Bluetooth beacon technology that will be leveraged for non-invasive advertising.
Also, in late July, we announced the Company is partnering with Key West’s Barefoot Radio 104.9 and RockHouse Live Key West in collaboration on a new music show centered around local artists and those artists who pass through the exotic and beautiful island on tour.
Live and Local at RockHouse Live Key West™ will air every Thursday night, starting September 1, 2022, from 8 PM to 10 PM, 100% live from RockHouse Live Key West’s exclusive Rock Room.
In addition to being carried on terrestrial radio by Barefoot 104.9, the show will also air on VNUE’s online and app-based radio station, VNUE Radio, and it will be professionally livestreamed on VNUE’s StageIt.com platform, both of which reach a global audience, and the latter with over a million subscribers. And it will also air on select screens at each of the other RockHouse Live locations in Clearwater Beach, Oxford, MS, and Memphis, TN.
Two musical artists, which will range from solo artists to full bands, will be featured every week, and will each be interviewed on-site in the RockHouse Live Rock Room, in front of a live audience. Each artist will also take the stage, and during their performance, the radio station will play recordings by each of the featured artists, as well as other local artists who have submitted material for consideration.
The Company has been working with Matchbox Twenty, a tour that was to commence in 2020 but has been subsequently delayed until this year due to COVID. The tour commenced in May 2023. As of June 30th, the Company had recorded approximately 29 shows (roughly half of the tour) and has been selling limited edition live CD sets. Together with presales enabled with our “upsell” agreement with Ticketmaster, our sales have been along the lines of our expectations, in the area of 200-300 units per show being sold, sometimes more, not including digital formats which will be introduced for sale upon the completion of the actual tour, and “box sets” which will be offered. Over the course of the tour dates, our crew only encountered a few issues where our services could not be performed, such as weather, or inappropriately excessive fees being imposted by the stagehand union. Overall the tour has been successful.
In Q3 we will be putting digital formats and box sets online for sale from the tour and expect a robust interest in these formats.
20
Results of Operations for the three months ended June 30, 2023, and 2022
The following discussion and analysis of our results of operations and financial condition for the three months ended June 30, 2023, and 2022, should be read in conjunction with our consolidated financial statements and related notes included in this report.
Revenues
For the three months ended June 30, 2023, we had revenue of $143,284 compared to $93,021 in revenue for the same period ended June 30, 2022, an increase of $50,263. The increase in revenue for the period is attributable to a material increase in revenues at VNUE due to the commencement of the Rob Thomas tour, offset by a decline in net revenue at Stage It We expect that our revenues will increase in future quarters as a result of the decreased impact of Covid-19 and the accompanying lockdowns on businesses, which has been an obstacle for live performances; however, there can be no assurances.
Direct Costs of Revenues
For the three months ended June 30, 2023, we had direct costs of revenue of $101,077, compared to $112,113 for the same period ended June 30, 2022, representing a decrease of 11,136.
Operating Expenses
We incurred operating expenses of $407,948 for the three months ended June 30, 2023, as compared with $15,828,980 for the same period ended June 30, 2022, a decrease of $15,421,032. The operating expense in 2022 include two non- recurring items, $15,300,000 in stock based compensation related to the issuance of Series C voting stock, and $216,667 in amortization of intangible assets. Excluding these two items, the operating expenses in 2022 would have been $312,313. The increase in operating expenses the 2023 period compared to 2022 excluding these two items amounts to $88,377. The increase is attributable to increases in professional fees and general and administrative expenses, partially offset by a decrease in payroll expenses.
We expect our general and administrative expenses to increase in future quarters with our reporting obligations and the increased expenses associated with increased activity with Stage It operations.
Other Income / Expenses, Net
We recorded other expenses of $79,359 for the three months ended June 30, 2023, compared to other expense of $314,949 for the same period ended June 30, 2022, a decrease of $235,590. Our other expenses in the 2022 period were mainly attributable to high levels of financing costs associated with debt compared to equity-based financing in the 2023 period, resulting in a material decrease in financing costs. Additionally, we incurred a loss of $154,200 from the extinguishment of debt in 2022 compared to zero in 2023 period.
Net Income (Loss)
As a result of the foregoing, we recorded a net loss available to common shareholders of $528,206 for the three months ended June 30, 2023, compared with a net loss available to common shareholders of $16,215,037 for the same period ended June 30, 2022.
Results of Operations for the six months ended June 30, 2023, and 2022
The following discussion and analysis of our results of operations and financial condition for the six months ended June 30, 2023, and 2022, should be read in conjunction with our consolidated financial statements and related notes included in this Report.
Revenues
For the six months ended June 30, 2023, we had revenue of $232,030 compared to $134,691 in revenue for the same period ended June 30, 2022, an increase of $97,399. The increase in revenue for the period is attributable to a material increase in revenues at VNUE due to the commencement of the Rob Thomas tour, offset by a decline in net revenue at Stage It We expect that our revenues will increase in future quarters as a result of the decreased impact of Covid-19 and the accompanying lockdowns on businesses, which has been an obstacle for live performances; however, there can be no assurances.
21
Direct Costs of Revenues
For the six months ended June 30, 2023, we had direct costs of revenue of $149,279 compared to $152,726 for the same period ended June 30, 2022.
Operating Expenses
We incurred operating expenses of $760,642 for the three months ended June 30, 2023, as compared with $16,474,019 for the same period ended June 30, 2022, a decrease of $15,713,377. The operating expense in 2022 include two non- recurring items, $15,300,000 in stock based compensation related to the issuance of Series C voting stock, and $325,000 in amortization of intangible assets. Excluding these two items, the operating expenses in 2022 would have been $312,313. The increase in operating expenses the 2023 period compared to 2022 excluding these two items amounts to $95,635. The increase is attributable to increases in professional fees and general and administrative expenses, partially offset by a decrease in payroll expenses.
We expect our general and administrative expenses to increase in future quarters with our reporting obligations and the increased expenses associated with increased activity with Stage It operations.
Other Income / Expenses, Net
We recorded other expenses of $140,613 for the six months ended June 30, 2023, compared to other expense of $833,105 for the same period ended June 30, 2022, a decrease of $692,492. The material decrease in other expense in the 2023 period compared to 2022 were mainly attributable to a reduction in financing cost of $538,292 in 2023 due to equity based financing in the 2023 period compared to high levels of debt based financing in the 2022 period. Additionally, we incurred a loss of $154,200 from the extinguishment of debt in 2022 compared to zero in 2023 period.
Net Income (Loss)
As a result of the foregoing, we recorded a net loss available to common shareholders of $967,207 for the six months ended June 30, 2023, compared with a net loss available to common shareholders of $17,408,143 for the same period ended June 30, 2022.
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, 2023, the Company used cash in operations of $704,838 and, as of June 30, 2023, had a stockholders’ deficit of $37,775,610 and negative working capital of $6,685,915. 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 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, 2023, the Company had cash on hand of $15,085 as compared with cash on hand of $82,807 as of December 31, 2022.
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.
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More recently, the Company has been relying on issuances of its preferred stock and its equity line of credit with GHS Investments, LLC (“GHS”), described below, to fund its operations. All other financial commitments have been terminated, and we are looking for new opportunities to fund the Company to supplement our preferred stock and credit line funding. 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.
During the six months ended June 30, 2023, the Company utilized its equity line of credit and received $515,438 in gross proceeds from the issuance of 214,463,051 shares of common stock. The Company intends to continue to use its credit line to fund its operations, although there can be no assurance that there will be sufficient availability under the terms of the Equity Financing Agreement.
Additionally, the Company issued 82 shares of Preferred B stock to GHS and received $164,400 in gross proceeds.
The Company is currently looking for other opportunities to fund the Company to supplement its credit line. 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.
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, 2022, filed with the SEC on April 17, 2023.)
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 a 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 September 30, 2022. 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 September 30, 2022, 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.
Changes in Internal Controls over Financial Reporting
During the fiscal quarter ended June 30, 2023, 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.
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
Please see section titled “Liquidity and Capital Resources” above for unregistered sales of equity issuances.
During the six months ended June 30, 2023, the Company issued 214,463,051 shares of common stock and 82 shares of Series B Preferred to GHS Investments, LLC under its equity line.
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, 2023.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
There is no other information required to be disclosed under this item that was not previously disclosed.
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ITEM 6. Exhibits
Exhibits
| * | 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
Date: August 21, 2023
| By: | /s/ Zach Bair | |
| Zach Bair | ||
| Chief Executive Officer and Principal Accounting Officer |
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