EX-99.2 4 vnueinc_ex99-2.htm EXHIBIT 99.2

 

EXHIBIT 99.2

 

Stage It Corp.

Balance Sheets

(Unaudited)

 

   September 30,   December 31, 
   2021   2020 
ASSETS          
Current assets:          
Cash and cash equivalents  $69,342   $281,003 
Prepaid expense   1,854    - 
Other assets   -    127,874 
Total current assets   71,196    408,877 
Fixed assets -net   60,303    62,912 
Total assets   131,499   $471,789 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $599,817   $427,087 
Accrued liabilities   2,313,671    1,785,861 
Accrued interest   840,197    650,654 
Accrued interest -related party   893,632    767,715 
Notes payable   879,922    179,000 
Convertible notes -related party   547,500    547,500 
Convertible notes   315,000    315,000 
Derivative liability   2,670,163    2,404,981 
Total current liabilities   9,059,902    7,077,798 
Total liabilities   9,059,902    7,077,798 
           
Commitments and contingencies        - 
           
Stockholders’ Equity:          
Preferred Stock, Series A, $0.0001 par value, 400,000 shares authorized, 40,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020   4    4 
Preferred Stock, Series A-1, $0.0001 par value, 3,000,000 shares authorized, 246,543 shares issued and outstanding as of September 30, 2021 and December 31, 2020   25    25 
Preferred Stock, Series A-2, $0.0001 par value, 2,000,000 shares authorized, 200,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020   20    20 
Preferred Stock, Series A-3, $0.0001 par value, 300,000 shares authorized, 196,522 shares issued and outstanding as of September 30, 2021 and December 31, 2020   20    20 
Common stock, $0.0001 par value, 20,000,000 shares authorized, 972,614 shares issued and outstanding as of September 30, 2021 and December 31, 2020   97    97 
Additional paid in capital   4,454,592    3,963,327 
Accumulated deficit   (13,383,161)   (10,569,502)
Total stockholders’ equity   (8,928,404)   (6,606,009)
Total liabilities and equity  $131,499   $471,789 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

1

 

 

Stage It Corp.

Statements of Operations

(Unaudited)

 

   Nine months   Nine months 
   ended   ended 
   September 30,   September 30, 
   2021   2020 
Revenue-net  $313,811   $895,145 
           
Operating expenses:          
General and administrative expenses   212,728    122,032 
Contractor expenses   259,686    242,963 
Payroll expense   1,320,436    658,317 
Stock-based compensation   491,265    - 
Legal and professional fees   114,150    36,365 
Total operating expenses   2,398,265    1,059,677 
Income(loss) from operations   (2,084,454)   (164,532)
Other income (expense)          
Change in derivative liability   (265,182)   (229,467)
Interest expense   (464,023)   (223,172)
Other income (expense), net   (729,205)   (452,639)
Net loss   (2,813,659)   (617,171)
           
Basic and diluted earnings (loss) per common share  $(2.89)  $(0.63)
           
Weighted-average number of common shares outstanding:          
Basic and diluted   972,614    972,614 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

2

 

 

Stage It Corp.

Statements of Cash Flows

(Unaudited)

 

   Nine months   Nine months 
   ended   ended 
   September 30,   September 30, 
   2021   2020 
Cash flows from operating activities          
Net loss  $(2,813,659)  $(617,171)
Depreciation   17,767    - 
Stock based compensation   491,265      
Change in balance sheet accounts          
Prepaid expenses   (1,854)   (2,480)
Other assets   127,874    (75,038)
Accounts payable   172,729    195,210 
Accrued liabilities   527,811    729,760 
Accrued interest   315,460    223,172 
Derivative liability   265,182    229,467 
Net cash provided by (used in) operating activities   (897,425)   682,920 
           
Cash flows from investing activities          
Purchase of fixed assets   (15,157)   (21,789)
Net cash used in investing activities   (15,157)   (21,789)
           
Cash flows from financing activities:          
Proceeds from notes payable   700,922    - 
Net cash provided by (used in) financing activities   700,922    - 
           
Net increase (decrease) in cash and cash equivalents   (211,660)   661,131 
Cash and cash equivalents at beginning of period   281,003    88,457 
Cash and cash equivalents at end of period  $69,342   $749,588 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $-   $- 
Cash paid for income taxes  $-   $- 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3

 

 

Stage It Corp.

Statements of Changes in Stockholders’ Equity

(Unaudited)

 

  

Preferred

Stock

Series A

  

Preferred

Stock

Series A-1

  

Preferred

Stock

Series A-2

  

Preferred

Stock

Series A-3

   Common Stock   Additional Paid in   Accumulated  

Total

Stockholders’

 
   Shares   Value   Shares   Value   Shares   Value   Shares   Value   Shares   Value   Capital   Deficit   Equity 
Balance, December 31, 2019   40,000   $4    246,543   $25    200,000   $20    196,522   $20    972,614   $97   $3,963,327   $(8,939,994)  $(4,976,501)
                                                                  
Net income (loss)                                                         $(617,171)  $(617,171)
                                                                  
Balance, September 30, 2020   40,000   $4    246,543   $25    200,000   $20    196,522   $20    972,614   $97   $3,963,327   $(9,557,166)  $(5,593,672)

 

  

Preferred

Stock

Series A

  

Preferred

Stock

Series A-1

  

Preferred

Stock

Series A-2

  

Preferred

Stock

Series A-3

   Common Stock   Additional Paid in   Accumulated   Stockholders’ 
   Shares   Value   Shares   Value   Shares   Value   Shares   Value   Shares   Value   Capital   Deficit   Equity 
Balance, December 31, 2020   40,000   $4    246,543   $24.65    200,000   $20    196,522   $20    972,614   $97   $3,963,327   $(10,569,503)  $(6,606,009)
                                                                  
Net income (loss)                                                          (2,813,659)   (2,813,659)
                                                                  
Stock based compensation                                                     491,265         491,265 
                                                                  
Balance, September 30, 2021   40,000   $4    246,543   $25    200,000   $20    196,522   $20    972,614   $97   $4,454,592   $(13,383,162)  $(8,928,404)

 

The accompanying notes are an integral part of the financial statements.

 

4

 

 

STAGE IT CORP.

UNAUDITED NOTES TO FINANCIAL STATEMENTS

FOR THE NINE MONTHE ENDED SEPTEMBER 30, 2021 AND 2020

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

History and Organization

 

Stage It Corp. (“Stage It”, or the “Company”) is a Delaware corporation formed in that operates an online venue for live an interactive performances through its technology platform that enables content creators to perform and create ticketed events, and provides fans with an opportunity to watch live shows, and ask artists questions and request songs.

 

Going Concern

 

The accompanying 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 financial statements, during the nine months ended September 30, 2021 the Company incurred a net loss of $2,813,659 and had a stockholders’ deficit of $13,383,161 as of September 30, 2021. In addition the Company had negative working capital of $8,988,706 These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As a result management has concluded that there substantial doubt about the Company’s ability to continue as a going concern.

 

On As of September 30, 2021, the Company had cash on hand of $69,342. Management estimates that the current funds on hand will be sufficient to continue operations through March 31, 2022. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the Company has been able to fund its operations from the proceeds of notes payable and convertible notes. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.

 

NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES

 

Basis of Presentation

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. For the periods ended September 30, 2021 and December 31, 2020 the financial statements include the accounts of the Company, Stage It. Corporation.

 

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 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.

 

5

 

 

Use of Estimates

 

The preparation of the 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 to value the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.

 

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”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto at December 31, 2020.

 

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.

 

The fair value of the derivative liabilities of $2,670,163 and $2,404,091 on September 30, 2021, and December 31, 2020, respectively, were valued using Level 3 inputs.

 

6

 

 

Property and Equipment

 

Property and equipment are stated at cost or fair value if acquired as part of a business combination. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. The threshold for depreciating office equipment is $200, and $1,000 for furniture and fixtures Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows:

 

Computers, software, and office equipment   3 years
Furniture and fixtures   7 years

 

As of September 30, 2021 and December 31, 2020 the Company’s property which consisted solely of computers amounted to $60,303 and $62,912, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020, amounted to $17,767 and $-0-, respectively.

 

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 statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

 

Income (Loss) per Common Share

 

Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options and, preferred stock and convertible notes. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on September 30, 2021 and December 31, 2020 respectively, because their impact was anti-dilutive.

 

Recently Issued Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

7

 

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

The Company entered into several convertible promissory notes in 2013, 2014 and 2015 with Evan Lowenstein the company founder and Director, Jaron Lowenstein the brother of Evan, Chuck Lowenstein the father of Evan. The Company also entered into several convertible promissory notes with Robert Jennings over the same period who is a Stage It Director. These notes were issued to fund the early growth of the Company. The notes were issued at 18% interest compound annually and can only convert to common stock upon the occurrence of a qualified funding, which has not occurred. As of September 30, 2021 and December 31, 2020 the balance of convertibles notes due to related parties was $547,500 and $547,500 respectively, and the accrued interest on September 30 2021 and December 31, 2020, was $893,632 and $767,515, respectively.

 

NOTE 4 – 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, 2021, and December 31, 2020.

 

  

September 30,

2021

  

December 31,

2020

 
Accounts payable  $599,817   $427,086 
Accrued liabilities (a)(b)   2,313,671    1,785,861 
Accrued interest   840,197    650,654 
Accrued interest- related parties   893,632    767,715 
Total accounts payable and accrued liabilities  $4,647,317   $2,404,981 

 

 

(a) Includes $887,120 in liabilities due to artists, $846,477 in unredeemed outstanding notes purchased by users, and $376,703 in payroll liabilities as of September 30, 2021
(b) Includes $946,537 in liabilities due to artists and $781,172 in unredeemed outstanding notes purchased by users as of December 31, 2020

 

NOTE 5 – NOTES PAYABLE

 

The following table sets forth the components of the Company’s notes payable on September 30, 2021, and December 31, 2020.

 

  

September 30,

2021

  

December 31,

2020

 
Notes payable (a)  $879,722   $179,000 
Convertible notes related party-past due (b)   547,500    547,500 
Convertible notes-past due (b)   315,000    315,000 
Total notes payable  $1,742,422   $1,041,500 

 

 

(a) Notes payable are comprised of a note for $179,000 at 15% interest in both period that is past due, a promissory note for $250,000 at 15% interest, advances of $35,000, and $415,922 in loans under the terms of revenue factoring agreement with three different lenders at an average rate of 15%
(b) The Company entered into several convertible promissory notes in 2013, 2014 and 2015 with several related parties (see Note 3) and third parties. These notes were issued to fund the early growth of the Company. The notes were issued at 18% interest compound annually and can only convert to common stock upon the occurrence of a qualified funding, which has not occurred

 

8

 

 

NOTE 6 – DERIVATIVE LIABILITY

 

The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 3 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. As of September 30, 2021 and December 31, 2020 the derivative liabilities were valued using probability weighted option pricing models with the following assumptions:

 

  

September 30,

2021

  

December 31,

2020

 
Exercise Price  $1.19   $1.19 
Stock Price  $1.59   $1.59 
Risk-free interest rate   .04%   .10%
Expected volatility   110.45%   94.55%
Expected life (in years)   1.00    1.00 
Expected dividend yield   0%   0%
Fair Value:  $2,670,162   $2,404,981 

 

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

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Common stock

 

The Company has authorized 20,000,000 shares of $0.001 par value common stock. As of September 30, 2021 and December 31, 2020 there were 972,614 shares of common stock issued and outstanding.

 

Preferred stock

 

As of September 30, 2021 and December 31, 2021, the Company had four classes of non-redeemable Preferred stock $0.0001 Preferred A, Preferred A-1, Preferred A-2, and Preferred A-3, all with a par value of $0.0001. The number of Preferred Shares authorized and issued and outstanding are as follows:

 

Preferred A 400,000 shares authorized, 40,000 shares issued and outstanding

 

Preferred A-1 3,000,000 shares authorized, 246,543 shares issued and outstanding

 

Preferred A-2 2,000,000 shares authorized, 200,000 shares issued and outstanding

 

Preferred A-3 300,000 shares authorized, 196,522 shares issued and outstanding

 

Each share of preferred stock is convertible to common stock on a 1 for 1 basis

 

9

 

 

NOTE 8 – COMMITMENT AND CONTINGENCIES

 

The Company had no commitments or contingencies as of September 30, 2021 and December 31, 2020, respectively

 

NOTE 9 – SUBSEQUENT EVENTS

 

On February 14, 2022, the Company entered into an agreement with VNUE, Inc. to sell 100% of the ownership of the Company in a $10,000,000 stock transaction comprised of approximately $1,500,000 in cash and up to $8,500,000 in restricted VNUE common stock, some of which is milestone based.

 

10