VNUE, Inc 10-Q for FY2022 Q3
VNUE, Inc. (RDCT)
About this 10-Q
VNUE, Inc filed this 10-Q on November 18, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $99.18K
- up 3554.4% from $2714 a year earlier
- Net loss
- $611.89K
- compared with a net loss of $365.16K a year earlier
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from _________ to _________
Commission
File No.
| (Name of Registrant in its Charter) |
(State
or Other Jurisdiction of |
(I.R.S.
Employer |
(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 ☐
The number of shares of registrant’s common stock outstanding as of November 17, 2022 was .
VNUE, INC.
QUARTERLY REPORT ON FORM 10-Q
September 30, 2022
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:
1
VNUE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Goodwill | ||||||||
| Intangible Assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Shares to be issued | ||||||||
| Accrued payroll-officers | ||||||||
| Advances from officer | ||||||||
| Dividends payable | ||||||||
| Notes payable | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable, net | ||||||||
| Purchase liability | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred A stock, par value $: shares authorized; and issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Preferred B stock, par value $: shares authorized; and -- issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Preferred C stock, par value $: shares authorized; and -- issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Common stock, par value $, shares authorized; and and shares issued and outstanding, as of September 30, 2022, and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
VNUE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For
the three months | For
the nine months | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues - related party | $ | $ | $ | $ | ||||||||||||
| Revenue, net | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Direct costs of revenue | ||||||||||||||||
| Gross margin (loss) | ( | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| Stock based compensation -related party | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Payroll expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ||||||||||||||||
| Change in fair value of derivative liability | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss on the extinguishment of debt | ( | ) | ( | ) | ||||||||||||
| Financing costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ( | ) | $ | |||||||
| Preferred B Stock dividends | ( | ) | ( | ) | ||||||||||||
| Net income (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 consolidated financial statements.
3
VNUE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(unaudited)
| Par value $0.001 | Additional | |||||||||||||||||||||||||||||||||||||||||||
| Preferred A Shares | Preferred B Shares | Preferred C Shares | Common Shares | Paid- in | ||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of convertible notes | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued upon conversion of convertible notes payable | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Private placement of common shares | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
4
| Par value $0.001 | Additional | |||||||||||||||||||||||||||||||||||||||||||
| Preferred A Shares | Preferred B Shares | Preferred C Shares | Common Shares | Paid- in | ||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of Preferred B Shares for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Financing fee paid in Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Series B dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||||||||||||||
| Acquisition shares issued for Stage It purchase | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of Preferred B Shares for cash | ||||||||||||||||||||||||||||||||||||||||||||
| Financing fee paid in Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to the Company’s equity line of credit | ||||||||||||||||||||||||||||||||||||||||||||
| Series B dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of Preferred B shares | ||||||||||||||||||||||||||||||||||||||||||||
| Acquisition shares issued for Stage It purchase | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
VNUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For
the nine months ended | ||||||||
| September | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities | ||||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Change in the fair value of derivatives | ( | ) | ||||||
| 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 | ||||||||
| Amortization of debt discount | ||||||||
| 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: | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Acquisition of a business net of cash received | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Advances from officers | ||||||||
| Payments on promissory note | ( | ) | ( | ) | ||||
| Proceeds from the private placement of common shares | ||||||||
| Proceeds from the of Series B Preferred Stock | ||||||||
| Proceeds from the issuance of convertible 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 upon conversion of debt and accrued interest | $ | $ | ||||||
| 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 consolidated financial statements.
6
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”).
Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, at the closing of the Merger (the “Closing”), each of Stage It’s outstanding shares (including common and preferred shares) will be converted into the right to receive the applicable portion of the Merger Consideration. A portion of the Merger Consideration will be paid in cash and take the form of satisfying certain outstanding debt obligations of Stage It, as outlined in a Closing Payment Certificate of the Merger Agreement, and the other portion will be paid in shares of the Company’s common stock or preferred stock, with the actual number of such shares to be issued reduced by the cash component outlaid in the transaction. A portion of the Merger Consideration, $1 million, will be held back for the purposes of satisfying certain contingent obligations of Stage It.
The Merger Agreement also allows for the issuance of earn-out shares, not to exceed the overall Merger Consideration, provided that certain EBIDTA requirements are met over the course of 18 months. See Note 5. for additional information
NOTE 2 – 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 September 30, 2022, the Company had $
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.
7
NOTE 3 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
Basis of Consolidation
The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
The Company consolidates its results with its wholly-owned subsidiary, Stage It Corp.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
Stage It receives revenue through a percentage of ticket sales and tipping. This show-based revenue creates a pool that is shared with the performing artist. Once a show is completed the revenue that has been created through tickets and tips is allocated. Typically, Stage It retains 20% of the revenue as an agent and the artist receives 80% of the revenue as the performer, however, there are occasions when the profit split has different ratios. Revenue is recognized once a show is complete and the performance obligation to the consumer has been met. Since Stage It acts as an agent, revenue is recorded on a net basis only on the 20% portion, less direct expenses such as broadcast costs, merchant processing fees, bank services charges, license fees and the cost of production.
The Company also recognizes revenue on the sale of CDs and USB drives that contain the recording of live concerts and are made available to concert attendees immediately after the show and online. Revenue is recognized on the sale of a product when our performance obligation is completed which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.
As
of September 30, 2022 and December 31, 2021 deferred revenue amounted to $
Management’s Representation of Interim Financial Statements
The accompanying unaudited financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates include the assumptions used for the determination of goodwill and intangible assets, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
8
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
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 September 30, 2022, because their impact was anti-dilutive. As of September 30, 2022, the Company had outstanding warrants and shares related to convertible notes payables respectively, which were excluded from the computation of net loss per share.
9
Property and Equipment
Property
and equipment are stated at cost or fair value if acquired as part of a business combination. Depreciation is computed by the straight-line
method and is charged to operations over the estimated useful lives of the assets. The threshold for depreciating office equipment is
$
| Schedule of Property Plant Equipment Estimated Useful Lives | ||||
| Computers, software, and office equipment | ||||
| Furniture and fixtures |
As
of September 30, 2022, the Company’s property, which consisted solely of computers, 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.
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.
10
NOTE 4 – PREPAID EXPENSE
As
of September 30, 2022 and December 31, 2021, the balances in prepaid expenses was $
$
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 $
Accrued Payroll to Officers
Accrued
payroll to two 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,
2021, the Company’s CEO advanced $
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.
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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
For the acquisition of Stage It the following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired and liabilities assumed:
Consideration paid
| Schedule of fair value of consideration | ||||
| Common stock issued, 41,476,963 shares of the Company’s restricted common stock valued at $0.0101 per share | $ | |||
| Common stock issuable, 93,523,037 shares of the Company’s restricted common stock valued at $0.0101 per share | ||||
| Net liabilities assumed | ||||
| Earnout liability | ||||
| Cash paid | ||||
| Fair value of total consideration paid | $ |
Net assets acquired and liabilities assumed
| Schedule of net asset acquired and liabilities assumed | ||||
| Cash and cash equivalents | $ | |||
| Property | ||||
| 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 $
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NOTE 7 – INTANGIBLE ASSETS
As
of September 30, 2022, the balance of intangible assets was $
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 September 30, 2022, and December 31, 2021:
| Schedule of accrued liabilities | ||||||||
September 30, 2022 | December 31, 2021 | |||||||
| Accounts payable and accrued expense | $ | $ | ||||||
| Accrued interest | ||||||||
| Soundstr Obligation | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
NOTE 9 – PURCHASE LIABILITY
The
balance of the company’s Purchase Liability at September 30, 2022, and December 31, 2021 was $
Under
the terms of the business acquisition of Stage It described in Note 6, during the three months ended September 30, 2022 the Company had
a contingent Earnout Liability of $
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 purchase liability was payable on the net revenues derived from VNUE’s live recording and content business and must be paid in full to the Seller no later than the three (3) year anniversary of the date of the agreement, or October 16, 2020. If the Company fails to pay the Seller the purchase liability on time, the Seller may request at any time within one hundred eighty days (180) days following the (3) year anniversary of the asset purchase agreement, that the Company immediately forfeit, convey, assign, and transfer to the Seller all or any of the Purchased Assets so requested by the Seller for no additional consideration. The Company has had no correspondence regarding this liability with Pledge Music who declared bankruptcy in 2019.
As
of September 30, 2022 and December 31, 2021 the balances of shares to be issued were $
| ● | As of December 31,
2021 the Company had not yet issued shares of common stock with a value of $ |
| ● | During the nine months
ended September 30, 2022, pursuant to the acquisition of Stage It described throughout this Report, an additional shares
remain issuable to Stage It shareholders valued at $ |
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NOTE 11 – NOTES PAYABLE
The
balance of the Notes Payable outstanding as of September 30, 2022, and December 31, 2021, was $
The two notes for $12,000 are past due an continue to accrue interest.
During
the nine months ended September 30, 2022, the Company added $
NOTE 12 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable consist of the following:
| Schedule of Convertible notes payable | ||||||||
| September 30, 2022 | December 31, 2021 | |||||||
| Various Convertible Notes | $ | |||||||
| Golock Capital, LLC Convertible Notes (a) | ||||||||
| Other Convertible Notes (b) | ||||||||
| Total Convertible Notes | $ |
| ||||||
| (a) |
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 $
| (b) |
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Summary
The Company considered the current FASB guidance of “Contracts in Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers’ control means the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or the conversion price was variable. As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Notes, the initial fair value of the embedded conversion feature was recorded as debt discount offsetting the fair value of the Notes and the remainder recorded as financing costs in the Consolidated Statement of Operations.
NOTE 13 – STOCKHOLDERS’ DEFICIT
Common stock
The Company has authorized shares of $ par value common stock. As of September 30, 2022, and December 31, 2021, there were and shares of common stock issued and outstanding respectively.
Preferred Stock Series A
On
July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles
of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada.
The Charter Amendment increased the Company’s capitalization to
As of September 30, 2022 and 2021 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 September 30, 2022, and December 31, 2021, there were shares of Series A Preferred issued and outstanding.
Preferred Stock Series B
On
January 3, 2022, the Company authorized and designated a class of
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During
the three months ended March 31, 2022 the Company issued 1,535 restricted shares of Series B Preferred Stock to GHS Investments (“GHS”)
in return for $
Pursuant
to the Series B Designation, each share of Series B Preferred Stock may be converted into $
During
the three months ended June 30, 2022 the Company issued an additional Series B Preferred Shares. of these shares were issued
for gross cash proceeds of $
During the three months ended September
30, 2022 the Company issued an additional Series B Preferred Shares. of these shares were issued for gross cash proceeds
of $
As of September 30, 2022, and December 31, 2021, there were and -- shares of Series B Preferred outstanding, respectively.
Preferred Stock Series C
On
May 25, 2022 the Company authorized and designated a class of
As of September 30, 2022 and December 31, 2021, there were and -- shares of Series C Preferred Stock outstanding.
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:
| Schedule of warrants | ||||||||
| 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 nine months ended September 30, 2022 | $ | (a) | ||||||
| Balance outstanding and exercisable, September 30, 2022 | ||||||||
| (a) |
Information relating to outstanding warrants on September 30, 2022, summarized by exercise price, is as follows:
The
weighted-average remaining contractual life of all warrants outstanding and exercisable on September 30, 2022 is approximately years.
The outstanding and exercisable warrants outstanding on September 30, 2022, had
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NOTE 14 – COMMITMENT AND CONTINGENCIES
Litigation
Legal Matters
DBW Investments, LLC et al
As disclosed in greater detail in the Company’s Form 10-Q, filed May 23, 2022, the Company remains in active litigation with DBW Investments, LLC (“DBW”) and Golock Capital, LLC (“Golock”). The remainder of this disclosure will address all material updates since the aforementioned Form 10-Q.
On May 6, 2022, the Company filed a motion for leave to amend its answer, affirmative defenses, and counterclaims. As of the date hereof, the Company’s motion is fully submitted to the Court, but no decision has been made.
On August 17, 2022, the Company was informed that the case was reassigned from Judge Vernon S. Broderick to Judge Denise L. Cote.
The Company remains committed to vigorously defending itself against DBW and Golock
LG Capital, LLC et al
On June 15, 2022, the Company commenced an action against LG Capital, LLC (“LG Capital”), Joseph Lerman (“Lerman”), Boruch Greenberg (“Greenberg”), and Daniel Gellman (“Gellman”) (LG, Lerman, Greenberg, and Gellman, together, the “LG Defendants”) in the U.S. District Court for the Eastern District of New York.
The Company’s complaint alleges that: (i) LG is an unregistered dealer acting in contravention of federal securities laws and, thus, the Company is entitled to rescission—pursuant to Section 29(b) of the Securities Exchange Act of 1934—of all unlawful securities transactions by and between the Company and LG, including the Convertible Promissory Note, dated October 23, 2018 (the “Note”), the Securities Purchase Agreement, dated October 23, 2018 (“SPA”), and all conversions made pursuant to the Note (“Conversions”); (ii) Lerman, Greenberg, and Gellman are liable to the Company as control persons of LG Capital for its violations of federal securities laws; (iii) LG Capital is a RICO enterprise, that Lerman, Greenberg, and Gellman are RICO culpable persons who controlled LG Capital, and the LG Defendants violated RICO by engaging in unlawful debt collection through the Note and Conversions; (iv) Lerman, Greenberg, and Gellman conspired to violate RICO through unlawful debt collection; (v) the LG Defendants have been unjustly enriched at the expense of the Company through the Note, SPA, and Conversions; and (vi) a constructive trust be imposed against the LG Defendants.
The LG Defendants are obligated to answer or otherwise respond to the Company’s complaint on or before August 30, 2022.
The Company remains committed to vigorously asserting its legal claims against the LG Defendants.
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NOTE 15 – SUBSEQUENT EVENTS
Subsequent
to September 30. 2022 the Company raise $
On October 12, 2022 the Company entered into a joint venture agreement with Kokku Games Ltda., South America’s largest gaming and entertainment co-development firm to provide entertainers and their team tools and services needed to streamline, production, management and promotion.
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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, 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 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
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 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 which 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 agreement with certain bands and artists, and record labels if a particular artist 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, their social media platforms, their 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 March 31,, 2022 the Company has paid approximately $1,568,000 in purchase consideration and expenses related to the acquisition.
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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, and 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 8PM to 10PM, 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.
Results of Operations for the three and nine months ended September 30, 2022, and 2021
The following discussion and analysis of our results of operations and financial condition for the three and nine months ended September 30, 2022, and 2021, should be read in conjunction with our condensed consolidated financial statements and related notes included in this report.
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Revenues
For the three months ended September 30, 2022 we had revenue of $99,181 compared to $2,714 in revenue for the same period ended September 30, 2021, an increase of $96,467. In the nine months ended September 30, 2022, we had revenue of $233,871 compared to $9,295 for the nine months ended September 30, 2021, representing an increase of $224,576. The increase in revenue in both the three and nine month period is attributable to the inclusion of Stage It revenues in the three and nine months ended September 30, 2022 compared to zero during the same periods ended September 30, 2021.
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
In the nine months ended September 30, 2022, we had direct costs of revenue of $224,786 compared to $5,446 for the nine months ended September 30, 2021, representing an increase of $219,340. For the three months compared for each year, it represented an increase of $66,679.
The increase in costs is attributable to Stage It. We expect to generate positive gross margins from higher sales volumes in the future, although there can be no assurances.
Operating Expenses
We incurred operating expenses in the amount of $17,014,634 for the nine months ended September 30, 2022, as compared with $614,976 for the same period ended September 30, 2021, primarily as a result of a non-cash charge of $15,300,000 representing the fair market value of the Series C Preferred Stock voting stock received as compensation by our management. We do not expect to have this expense in future quarters.
The balance of our operating expenses for all periods consisted of the following for the nine months ended September 30, 2022 and 2021.
| Nine
Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| General and administrative expenses | $ | 171,896 | $ | 121,404 | ||||
| Payroll expenses | $ | 419,204 | $ | 205,120 | ||||
| Professional Fees | $ | 581,867 | $ | 288,272 | ||||
| Amortization of intangible assets | $ | 541,667 | $ | - | ||||
The increase of $50,492 in our general and administrative expenses for the nine months ended September 30, 2022 versus the same period ended 2021 is largely the result of the inclusion of Stage It expenses in 2022 compared to $-0- in the prior year. We expect our general and administrative expenses to increase in future quarters with our reporting obligations with the SEC and the increased expenses associated with increased activity with Stage It operations, which is expected for the balance of the year.
The increase of $214,84 in our payroll expenses for the nine months ended September 30, 2022 versus the same period ended 2021 is largely the result salaries, wages, benefits and other human resource related costs due to the acquisition of StageIt and the team to support additional growth.
We expect that our payroll will increase in future quarters as we take on more operations that require most human resources.
The increase of $293,595 in our professional fees for the nine months ended September 30, 2022 versus the same period ended 2021 is largely the result of the added cost of legal and accounting compliance in connection with the merger with StageIt and the increased costs associated with our newly acquired subsidiary.
We recorded amortization and intangible expense of $541,667 for the nine months ended September 30, 2022 with none in the same period ended September 30, 2021 as a result of the acquisition of Stage It.
22
Other Income / Expenses, Net
We recorded other expense of $931,498 for the nine months ended September 30, 2022, compared to other income of $3,960,990 for the nine months ended September 30, 2021. Our other expenses in the 2022 period was mainly attributable to financing costs and a loss on the extinguishment of debt. Our other income in the 2021 period was mainly attributable to a change in the fair market value of a derivative liability of $3,156, 582 and from other income of $1,172,782 due to the reversal of an accrued liability..
We expect to incur other expenses in future quarters as a result of financing transactions.
Net Income (Loss)
As a result of the foregoing we recorded a net loss available to common shareholders of $18,082,151 for the nine months ended September 30, 2022, compared with net income available to common shareholders of $3,350,043 for the nine months ended September 30, 2021.
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 nine months ended September 30, 2022, the Company used cash in operations of $557,538, and as of September 30, 2022, had a stockholders’ deficit of $31,243,437 and negative working capital of $ 14,433,505. 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 September 30, 2022, the Company had cash on hand of $112,193, as compared with cash on hand of $36,958 as of December 31, 2021.
The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the Company has been able to fund its operations from the proceeds of notes payable and convertible notes.
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.
On January 3, 2022, the Company authorized and designated a class of 1,600 shares, par value $0.0001 of Series B Convertible Preferred Stock (“Series B Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series 5 Designation”).
During the three months ended March 31, 2022 the Company issued 1,535 restricted shares of Series B Preferred Stock to GHS Investments (“GHS”) in return for $1,500,000 (less $130,000 in fees) in financing provided to the Company.
Pursuant to the Series B Designation, each share of Series B Preferred Stock may be converted into $1,200 of common stock of the Company. In connection with the issuance of the Series B Preferred Stock, the Company recorded $42,000 in financing fees and a $300,000 expense for the beneficial conversion feature of Series B Preferred stock.
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During the three months ended June 30, 2022 the Company issued an additional 556 Series B Preferred Shares. 280 of these shares were issued for gross cash proceeds of $280,000. 10 of these shares were issued as a commitment fee, and 266 of these shares were issued to retire debt. In connection with these issuances the Company recorded $12,000 in financing fees, a beneficial conversion feature of $87,000 and a loss of $154,200 on the retirement of debt.
During the three months ended September 30, 2022 the Company issued an additional 176 Series B Preferred Shares. 164 of these shares were issued for gross cash proceeds of $151,600 shares. 12 of these shares were issued as a commitment feet. In connection with these issuances the Company recorded $14,400 in financing fees and a beneficial conversion feature of $45,200. Though the nine months ended September 30, 2022 the Company has accrued $145,103 in dividends on these Series B Preferred Issuances.
There can be no assurances that GHS will continue to purchase Series B Preferred Shares
On August 8, 2022, we filed an amendment to our Articles of Incorporation to increase our authorized shares of common stock from 2,000,000,000 to 4,000,000,000 shares with par value remaining at $0.0001 per share. There was no change to the number of our authorized preferred stock.
We filed the amendment, after approval of our board and shareholders, to reserve sufficient shares of our common stock for issuance upon conversion or exercise of our outstanding debt and equity securities and to provide us with greater flexibility for future financings and potential acquisitions. As a result of the amendment, we are now able to supply shares of common stock to update our reserve commitments and we are now able to utilize the equity line that we recently entered into with GHS.
Also on June 6, 2022, the Company entered into an Equity Financing Agreement (“Financing Agreement”) and Registration Rights Agreement (“Registration Agreement”) with GHS. Under the terms of the Financing Agreement, GHS agreed to provide the Company with up to $10,000,000 upon effectiveness of a registration statement filed with the U.S. Securities and Exchange Commission.
Following effectiveness of the registration statement, the Company shall have the discretion to deliver puts to GHS and GHS will be obligated to purchase shares of the Company’s common stock based on the investment amount specified in each put notice. The maximum amount that the Company shall be entitled to put to GHS in each put notice shall not exceed two hundred percent (200%) of the average daily trading dollar volume of the Company’s Common Stock during the ten (10) trading days preceding the put, in an amount equaling less than ten thousand dollars ($10,000) or greater than five hundred thousand dollars ($500,000). Pursuant to the Equity Financing Agreement, GHS and its affiliates will not be permitted to purchase and the Company may not put shares of the Company’s common stock to GHS that would result in GHS’s beneficial ownership equaling more than 4.99% of the Company’s outstanding Common Stock. The price of each put share shall be equal to eighty percent (80%) of the Market Price (as defined in the Financing Agreement). Following an up-list to the NASDAQ or an equivalent national exchange by the Company, the Purchase price shall mean ninety percent (90%) of the Market Price, subject to a floor of $.0001 per share. Puts may be delivered by the Company to GHS until the earlier of twenty-four (24) months after the effectiveness of the Registration Statement or the date on which GHS has purchased an aggregate of $10,000,000 worth of common stock under the terms of the Equity Financing Agreement.
Additionally, concurrently with the execution of definitive agreements, the Company has issued to GHS 29,069,768 commitment shares that were not issued prior by the Company, but have now been issued that the amendment to increase the Company’s authorized common stock has been filed.
The Registration Agreement provides that the Company shall (i) use its best efforts to file with the Commission the Registration Statement within 30 days of the date of the registration rights Agreement; and (ii) have the registration statement declared effective by the Commission within 30 days after the date the registration statement is filed with the Commission, but in no event more than 90 days after the Registration Statement is filed.
The Company has filed the registration statement as required by the Registration Agreement.
During the three months ended September 30, 2022, the Company utilized its equity line of credit and received $124,259 in proceeds from the issuance of 49,451,287 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
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.
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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, 2021 filed with the SEC on April 15, 2022.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include the assumptions used to determine the value of the derivative liabilities, the valuation allowance for the deferred tax asset, and the accruals for potential liabilities.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not 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.
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Recent Accounting Pronouncements
See Note 2 of the Condensed Consolidated Financial Statement herein for management’s discussion of recent accounting pronouncements.
Selected Financial Data
Not applicable.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
Not applicable.
Item 4. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this quarterly report, an evaluation was carried out by our management, with the participation of our principal executive officer and principal accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of 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.
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c) Changes in Internal Controls over Financial Reporting
During the fiscal quarter ended September 30, 2022, 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
Please see section titled “Liquidity and Capital Resources” above for unregistered sales of equity issuances.
In August 2022, the Company issued 29,069,768 shares of common stock to GHS under the Financing Agreement as commitment shares.
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 September 30, 2022.
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 | |
| 31.1* | Certification of the Chief Executive Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 32.1* | Certification of the Chief Executive Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 10.15 | Agreement between Kokku Games, Ltda and VNUE Inc. dated October 12, 2022 | |
| 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. | |
| Date: November 17, 2022 | By: | /s/ Zach Bair |
| Zach Bair | ||
Chief Executive Officer (Principal Executive Officer and Principal Accounting Officer) | ||
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Exhibit 10.15
AGREEMENT BETWEEN
Kokku Games Ltda. (“Kokku”), organized under the laws of Brazil and located at 2589, Eng. Domingos Ferreira Av. - 9th Floor - Boa Viagem. City of Recife. State of Pernambuco, Brazil. ZIP CODE: 51020-030. Company Registration: 14.886.508/0001-43 (“the “Developer”), and VNUE, Inc., a Nevada corporation, (“Client”), each a “Party” and collectively referred to as the “Parties.”
In consideration of the mutual promises and obligations set forth below, the adequacy and sufficiency of which is hereby acknowledged, Kokku and Client agree as follows (the “Agreement”):
CLAUSE ONE – SERVICES
1.
1.1. Kokku will provide the services set forth in this Agreement and other complements which reference this Agreement that are identified as Statements of Work (each a “SOW”) (the “Services”). All Services shall be performed in a timely business-like manner in accordance with industry standards and in accordance with this Agreement and as set forth in SOW(s) attached hereto and incorporated herein by this reference.
1.2. Kokku shall serve as a contractor of the Client and shall design, develop, and implement the Deliverables according to the functional specifications and related information provided by the Client and as more fully set forth in this Agreement and other briefing documentation provided by the Client, which will form part of a SOW. “Deliverable(s)” means any element of the Services, whether tangible or intangible, performed by Kokku as reflected in a SOW.
CLAUSE TWO - PAYMENTS AND NATURE OF RELATIONSHIP
2.1. In consideration of the Services Client will pay Kokku the amount as set forth in the SOW, attached hereto and incorporated herein by this reference.
2.2. Each Party is solely responsible for its own income and employment related taxes.
2.3. The relationship of the Parties under this Agreement is one of independent contractors, and no joint venture, partnership, agency, employer-employee, or similar relationship is created in or by this Agreement. Neither Party may assume or create obligations on the other Party’s behalf and neither Party may take any action that creates the appearance of such authority.
2.4. Kokku has the sole right to control and direct the means, details, manner, and method by which the Services will be performed, and the right to perform the Services at any time, place, or location. Kokku’s employees shall perform the Services, and Client is not required to hire, supervise, or pay any assistants to help Kokku perform those Services. Kokku has no claim against the Client under this Agreement or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind. The fees set forth in this Agreement are Kokku’s only compensation under this Agreement. Any ordinary and necessary expenses incurred by Kokku or its staff in performing under this Agreement are Kokku’s sole responsibility.
2.5. The Parties agree that the Services stated in this Agreement may be delivered only by Kokku itself and no other party unless agreed by Client. Kokku shall be solely liable for its performance in accordance with the terms of this Agreement. In any event, where Kokku requires subcontractors to perform certain tasks for the Client project, it must be agreed between the parties and Kokku shall make the Client aware of such performance and Kokku must also make subcontractor be aware of the confidentiality provisions contained in Clause Seven, hereof and obtain a written acknowledgment from such subcontractor(s) that they will comply with the same.
CLAUSE THREE – OWNERSHIP
3.1. Client retains all right, title and interest in and to Client Materials. “Client Materials” means any data, software, documents, intellectual property rights, artwork, logos and any other material or information owned or developed by Client that is delivered or made available to Kokku under this Agreement. Kokku acknowledges that nothing in this Agreement shall be construed as granting Kokku any license, right, title or ownership interest in or to Client Materials except to the extent specifically set out in this Agreement.
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3.2. In addition, Client will receive transfer and own all right, title and interest in the Deliverables provided to the Client by Kokku once payments for the work are made to Kokku in full. Upon full payment stipulated for the work, all work, Services, materials and Deliverables are the property of the Client and all title and interest therein shall vest the Client and shall be deemed to be a “work for hire” (and made in the course of Services rendered hereunder) as that term is used in conjunction with copyright laws (and to the extent that title may not, by operation of law, vest in Client or be considered a “work for hire”, Kokku hereby irrevocably assigns to Client all right, title and interest in and to such items to Client), limited only to the extent such work does not include Kokku Materials. “Kokku Materials” means any data, software, documents, intellectual property rights, artwork, logos and any other material or information owned or developed by Kokku that is not a part of the Services or Deliverables. To the extent that any work, Services, materials or Deliverable includes, in part or in whole, any Kokku Materials, Kokku grants Client a perpetual, royalty free, worldwide license to use those materials in a manner consistent with the terms and purposes set out in this Agreement provided that all fees under this Agreement are paid in full.
3.3. Kokku retains all right title and interest in and to Kokku Materials including, but not limited, to the related documentation and the Client acknowledges that nothing in this Agreement shall be construed as granting Client any license, right, title or ownership interest in or to Kokku Materials, except as specifically set out in this Agreement.
CLAUSE FOUR – REPRESENTATIONS AND WARRANTIES
4.1. Kokku makes the following representations and warranties to the Client:
4.1.1. In providing Services to the Client, Kokku will not knowingly infringe upon or misappropriate any third-party trade secrets, copyrights, trademarks, or rights of publicity or privacy;
4.1.2. Kokku has all necessary rights to grant and assign to the Client the various rights set forth in this Agreement and Kokku has not previously granted and will not grant any rights to any third party which are inconsistent with the rights granted to the Client herein;
4.1.3. Kokku will comply with all applicable laws, regulations, ordinances and statutes, including, but not limited to, the import/export laws and regulations of any applicable governmental and regulatory agencies and all applicable international treaties and laws;
4.1.4. Kokku has full corporate power to enter into this Agreement, to carry out its obligations hereunder and to grant the rights herein granted to Client;
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4.1.5. Any Deliverables provided to the Client by Kokku under this Agreement will not contain any known viruses, and will function substantially in accordance with its documentation in all material respects and does not and will not contain any undisclosed software, copyrighted works or other material owned by any third party, including, without limitation, any “open source” software, “shareware,” “freeware” or similar software.
4.2. The Client makes the following representations and warranties to Kokku:
4.2.1. The Client, both in whole and in part, do not and will not infringe upon or misappropriate any third-party trade secrets, copyrights, trademarks, or rights of publicity;
4.2.2. The Client will comply with all applicable laws, regulations, ordinances and statutes, including, but not limited to, the import/export laws and regulations of any applicable governmental and regulatory agencies and all applicable international treaties and laws;
4.2.3. Client has full power to enter into this Agreement and to carry out its obligations hereunder and to grant the rights herein granted to Kokku.
4.3. Kokku shall provide all the project Deliverables in agreed schedule. The Deliverables scope, form, schedule and delivery method are to be decided and agreed between the Parties as work scope described in briefing documents provided by the Client such as pdf files or notes, or more and reflected in a SOW.
CLAUSE FIVE - INDEMNIFICATION
5.1 Kokku agrees to indemnify, hold harmless and defend Client from all claims, defense costs (including reasonable attorneys’ fees), settlements, judgments and other expenses arising out of or because the following:
(i) alleged facts or circumstances that, if true, would constitute a breach of any express warranties with respect to the Services provided under this Agreement;
(ii) alleged infringement or violation of any trademark, copyright, trade secret, or other proprietary right with respect to the Services;
(iii) unfair trade practice, trade libel or misrepresentation based on any promotional material, documentation or other materials provided by Kokku with respect to the Services.
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Notwithstanding the above, Kokku shall have no liability to the Client for any claim to the extent that such claim is based upon any element of the Client or to the extent that it is a claim for which Client has agreed to indemnify Kokku.
5.2 The Client agrees to indemnify, hold harmless and defend Kokku from all claims, defense costs (including reasonable attorneys’ fees), judgments, settlements and other expenses arising out of the following:
(i) claims of unfair trade practice, trade libel or misrepresentation arising out of or because the Client (other than those claims for which Kokku has agreed to indemnify the Client);
(ii) alleged infringement or violation of any trademark, copyright, trade secret, patent or other proprietary right with respect to Client;
(iii) alleged facts or circumstances that, if true, would constitute a breach of Client’s warranties set forth.
5.3 If any action shall be brought against one of the Parties hereto in respect to which indemnity may be sought against the other Party (the “Indemnifying Party”) pursuant to this Clause 5, the Indemnifying Party’s obligation to provide such indemnification will be conditioned on prompt notice of such claim (including the nature of the claim and the amount of damages and nature of other relief sought) being provided to the Indemnifying Party by the Party against which such action is brought (the “Indemnified Party”). The Indemnified Party shall cooperate with the Indemnifying Party in all reasonable respects in connection with the defense of any such action at the expense of the Indemnifying Party. The Indemnifying Party may, upon written notice to the Indemnified Party, undertake to conduct all proceedings or negotiations relating to the action, assume the defense thereof, including settlement negotiations relating to the action, and be responsible for the costs of such defense, negotiations and proceedings. The Indemnifying Party will have sole control of the defense and settlement of any claims for which it provides indemnification hereunder, provided that the Indemnifying Party will not enter into any settlement of such claim without the prior approval of the Indemnified Party, which approval will not be unreasonably withheld. The Indemnified Party shall have the right to retain separate counsel and participate in the defense of the action or claim at its own expense.
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CLAUSE SIX – LIMITATION OF LIABILITY
6.1 Neither Party will be liable to the other Party for indirect, special, incidental, consequential or punitive damages or the loss of anticipated profits arising out of or relating to any breach of this agreement by such Party, even if such Party is notified of the possibility of such damages and regardless of whether any remedy set forth herein fails of its essential purpose.
CLAUSE SEVEN – CONFIDENTIALITY
7.1 Kokku and the Client acknowledge that, during performing their respective obligations hereunder, each may obtain information relating to the other and the other’s products that are of a confidential and proprietary nature to such other Party (“Confidential Information”). Such Confidential Information includes but is not limited to any information, technical data or know-how, including, without limitation, that which relates to computer software programs or documentation, specifications, source code, object code, research, inventions, processes, designs, drawings, engineering, products, services, customers, markets or finances of the disclosing Party which (a) has been marked as confidential or proprietary, (b) is identified as confidential at the time of disclosure either orally or in writing, or (c) which, due to its character and nature, a reasonable person under like circumstances would treat as confidential.
7.2 Each Party agrees that it will (a) use the other Party’s Confidential Information only in connection with fulfilling its obligations and exercising its rights and licenses under this Agreement; (b) hold the other Party’s Confidential Information in strict confidence and exercise due care with respect to its handling and protection, consistent with its own policies concerning protection of its confidential information of a similar nature, (c) not directly or indirectly reverse engineer, disassemble, or decompile the other Party’s Confidential Information consisting of binary code; (d) not disclose, divulge, or publish the other Party’s Confidential Information except to such of its responsible employees, and consultants (collectively, “Personnel”) who have a bona fide need to know to the extent necessary to fulfill such Party’s obligations under this Agreement; and (e) instruct all such Personnel not to disclose the other Party’s Confidential Information to third parties. Each Party shall require all Personnel who shall encounter the Confidential Information of the other Party to execute a confidentiality agreement at least as protective of the rights in such Confidential Information as the terms and conditions of this Agreement, prior to such Personnel being given access to any Confidential Information. Each Party shall be responsible for breaches of this Agreement by its Personnel.
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7.3 The obligations set forth above will not apply to either Party’s Confidential Information which (i) is or becomes public knowledge without the fault or action of the recipient Party, or which (ii) the recipient Party can document was independently developed by it without use of Confidential Information of the other Party; or which (iii) the recipient Party can document was already known to it, on a non-confidential basis, prior to the receipt of the other Party’s Confidential Information from a source (a) that was not bound by a confidentiality agreement with the recipient Party or (b) is not otherwise prohibited from transmitting the information to the disclosing Party by a contractual, legal, fiduciary or other obligation.
7.4 If either Party is required to disclose any Confidential Information pursuant to an order under law, it shall not be a breach of this Section to disclose such information provided that it shall use its reasonable efforts to give the Party owning the Confidential Information sufficient notice of such required disclosure to allow the Party owning the Confidential Information reasonable opportunity to object to and take necessary legal action to prevent such disclosure. Money damages may not be a sufficient remedy of this section and, in addition to any other remedies, a Party may seek (and may be entitled to) as a result of such breach, injunctive or other equitable relief as a remedy.
CLAUSE EIGHT – ACCEPTANCE
8.
8.1 Upon completing the full scope of works or separate sprints, Kokku presents to the Client a written request to accept or reject the software components and the Deliverables (each a “Deed of Acceptance”). Within 5 (five) working days of receipt of the software Deliverables, subject to this Agreement, the Client shall sign and return to Kokku the Deed of Acceptance or send a motivated refusal to accept.
8.2 In case the Client sends a motivated refusal, the parties shall draw up an act listing all corrections required, deadlines for completion, signed by the representatives of the Client and Kokku.
8.3 In case Kokku has not received either a signed Deed of Acceptance or a motivated refusal within 14 (fourteen) working days on the dispatch of the software Deliverables, the Deliverables are deemed to be accepted by the Client in full.
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CLAUSE NINE – TERM AND TERMINATION
9.1. This Agreement shall remain in force until the obligations of each Party under this Agreement are fulfilled, and each Party has notified the other Party thereof in writing.
9.2 In the event of a material breach by either Party of a material provision hereof, which breach is not cured within 10 (ten) days after written notice thereof by the other Party, then the non-breaching Party may, after written notice of failure to cure to the breaching Party, terminate this Agreement. In addition to or instead of its rights to terminate this Agreement upon a material breach by the other Party, each Party will have the right to pursue any remedies it may have at law or in equity.
9.3 The occurrence of any of the following events shall be deemed a material breach of this Agreement:
9.3.1. Kokku fails to meet any Milestone (as defined in a SOW);
9.3.2. Either Party breaches any of the Representations and Warranties set forth in Clause 4 of this Agreement;
9.3.3. Client breaches its payment obligations under Clause 2;
9.3.4. Either Party breaches the Confidentiality provisions set forth in Clause 7.
CLAUSE TEN – APPLICABLE LAW AND DISPUTE RESOLUTION
10.
10.1. The Parties shall primarily attempt to resolve any dispute, controversy or claim under or in relation to this Agreement (each a “Dispute”) through friendly negotiations. In case the Parties fail to settle the Dispute within 30 (thirty) days from the commencement of such negotiations, either Party shall be entitled to initiate proceedings as set forth below for final resolution of the Dispute.
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10.2 Subject to Clause 10.1, the Parties agree to settle the Dispute by binding, confidential arbitration ruled by a sole arbitrator to be administered by the Judicial Arbitration and Mediation Services’ {“JAMS”) Comprehensive Commercial Arbitration Rules in effect at the time the request for arbitration is made, when the Arbitration Claimant is Client. If the Arbitration Claimant is Kokku, the Parties agree to settle the Dispute by binding, confidential arbitration to be administered by CAMARB – Business Mediation and Arbitration Chamber – Brazil, in compliance with the provisions of its Arbitration Rules in effect at the time the request for arbitration is made, ruled by a sole arbitrator,
10.2.1 The Parties agree that any hearing, proceeding, or conference conducted as part of the arbitration may be held virtually. Each Party shall pay its own costs and expenses for the arbitration, with the cost of the Arbitrator to be divided equally between the Parties. Any award or decision in arbitration shall be final and binding upon the Parties and shall be enforceable by judgment of any court of competent jurisdiction.
10.3 If the Dispute involves an alleged breach of this Agreement by Client, then Kokku may commence an arbitration in Recife, Pernambuco, Brazil, the resolution of the Dispute shall be governed by the laws of Brazil and the language will be Portuguese. If the Dispute involves an alleged breach of this Agreement by Kokku, then Client may commence arbitration in New York, New York and the resolution of the Dispute shall be governed by the laws of the State of New York and the language will be English.
CLAUSE ELEVEN – GENERAL TERMS
11.1 This Agreement may not be assigned in whole or in part by either Party without consent of the other, which will not be unreasonably withheld. Notwithstanding the foregoing either Party may assign such Party’s rights and duties under this Agreement to an Affiliate or to any third party which succeeds by operation of law to, purchases or otherwise acquires substantially all the assets of such Party or Affiliate, provided such party assumes all rights and obligations of the assigning Party under this Agreement.
11.2 This Agreement has been fully negotiated by the Parties and will be interpreted according to the plain meaning of its terms without any presumption that it should be construed either for or against either Party.
11.3 All notices delivered in connection this Agreement must be given in writing. Notices with a claimed breach or termination of the Agreement will be deemed given as of
| (i) | the day they are delivered on paper by a nationally recognized express delivery service (such as Federal Express or DHL), addressed as set forth below; or |
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| (ii) | the day they are sent by fax to the fax number set forth below, but only if the receiving fax device immediately generates a message, printed by the sending fax device, that confirms transmission and the correct recipient fax number. Other than for a notice of breach or termination, notice sent by email is sufficient. |
11.4 No waiver of any provision of this Agreement will be effective unless it is in a signed writing, and no such waiver will constitute a waiver of any other provision(s) or of the same provision on another occasion.
11.5 Neither Party will be deemed in default of this Agreement to the extent that performance of its obligations or attempts to cure any breach are delayed or prevented by reason of any act of God, fire, natural disaster, accident, act of government, shortages of material or supplies or any other cause reasonably beyond the control of such Party (“Force Majeure”), provided that such Party gives the other Party written notice thereof promptly and, in any event, within 15 (fifteen) days of discovery thereof, and uses its diligent, good faith efforts to cure the breach. In the event of such a Force Majeure, the time for performance or cure will be extended for a period equal to the duration of the Force Majeure but not more than 60 (sixty) days.
11.6 If an arbitrator or court of competent jurisdiction holds any term, covenant or restriction of this Agreement to be illegal, invalid or unenforceable, in whole or in part, the remaining terms, covenants and provisions will remain in full force and effect and will in no way be affected, impaired or invalidated. If any provision in this Agreement is determined to be unenforceable in equity because of its scope, duration, geographical area or other factor, then the court making that determination will have the power to reduce or limit such scope, duration, area or other factor, and such provision will be then enforceable in equity in its reduced or limited form.
11.7 This Agreement is not effective until signed by both Parties. This Agreement, including any “SOW” attached hereto which are incorporated by this reference, constitutes the entire agreement between the Parties with respect to the subject matter hereof and merges all prior and contemporaneous communications and proposals, whether electronic, oral or written, between the parties.
11.8 This Agreement may not be modified except by a written Amendment dated after the date of this Agreement and signed by appropriately authorized representative of both Parties.
11.9 This Agreement may be signed in counterparts which will be taken together to comprise a single agreement. Digital, scanned or facsimile transmitted signatures will be treated as valid originals for all purposes.
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CLAUSE TWELVE – NON-SOLICITATION
12.1 Parties agree that within the term of this Agreement and for a period of 12 months following its termination or the commercial release of the last Product, a Party will not directly or indirectly solicit or otherwise take away the other Party’s employees, full-time consultants or full-time individual contractors of whom a Party became aware as a result of the engagement under this Agreement. For the avoidance of doubt, a general advertisement by a Party for employment that is not targeted at any specific employee/contractor shall not constitute a breach of the obligations of such Party. In such a case, if an employee/contractor applies to a Party, the other Party shall be informed at the earliest convenience: as soon as reasonably practicable and legally permissible.
This Agreement has been executed in 02 (two) identical copies of which the parties have retained one each.
Agreed to and accepted by:
KOKKU GAMES LTDA |
CLIENT | |||
Place and date: |
Recife, Oct 12th, 2022 |
Place and date: |
New York, Oct 12th, 2022 | |
Signature: |
/s/ Thiago de Freitas | Signature: |
/s/ Zach Bair | |
Printed name: |
Thiago de Freitas (CEO) |
Printed name: |
Zach Bair (CEO) | |
| (authorized representative of Developer) | (authorized representative of the Client) | |||
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EXHIBIT 31.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER PURSUANT TO 18
U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 AND
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14 UNDER THE SECURITIES ACT OF 1934
I, Zach Bair certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of VNUE, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
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b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Registrant | VNUE, Inc. | |
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| Date: November 17, 2022 | By: | /s/ Zach Bair |
| Zach Bair | ||
| Principal Executive Officer and Principal Accounting Officer | ||
EXHIBIT 32.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of VNUE, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zach Bair, Chief Executive Officer and Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Registrant | VNUE, Inc. | |
| Date: November 17, 2022 | By: | /s/ Zach Bair |
| Zach Bair | ||
| Principal Executive Officer and Principal Accounting Officer | ||