NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
1: ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND BASIS OF PRESENTATION
Visium
Technologies, Inc.
,
or the Company, is currently a Florida corporation that was originally incorporated in Nevada in October
1987. It was formerly known as Jaguar Investments, Inc. between October 1987 and May 2003, Power2Ship, Inc. between May 2003 and
November 2006, Fittipaldi Logistics, Inc. between November 2006 and December 2007, and as Nustate Energy Holdings, Inc. between
December 2007 and March 5, 2018 when it changed its name to Visium Technologies, Inc.
The
Company is focused on digital risk management, cybersecurity, and technology services for network physical security, the Cloud,
mobility solutions, and the Internet of Things (“IOT”).
The
Company named Henry J. Holcombe as its Chief Executive Officer in August 2018 to provide strategic expertise in pursuing its business
plans.
On
March 5, 2018 a majority of the common shareholders approved certain corporate actions, and the Company filed an amendment to
its Articles of Incorporation with the State Department of Corporations in the State of Florida to effect the following changes,
effective March 1, 2018:
(i)
|
reverse
the Common stock by a ratio of three thousand for one (3,000:1). The board of directors was authorized to implement the reverse
stock split.
|
|
|
(ii)
|
change
the name of the Company to Visium Technologies, Inc. from Visium Energy Holdings, Inc.
|
|
|
(iii)
|
amend
our Amended and Restated Articles of Incorporation to designate Series AA Convertible Preferred Stock which provides that
the Holder shall vote on all matters as a class with the holders of the Company’s Common Stock and shall be entitled
to 51% of the common votes on any matters requiring a shareholder vote of the Company.
|
On
September 4, 2018, the Company executed a definitive agreement to acquire Threat Surface Solutions Group, LLC, a cybersecurity
company focused on network risk assessment, penetration testing, mobility security, and Internet of Things (“IoT”)
security. On October 12, 2018, the Company completed the acquisition. See Note 10 – Subsequent Events.
Going Concern
The accompanying financial statements have
been prepared on a going concern basis. For the three months ended September 30, 2018 we had a net loss of $1,059,423, had net
cash used in operating activities of $137,732, and had negative working capital of $5,074,307. These matters raise substantial
doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing.
The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to
meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future
acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital
requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at
this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or
generate positive operating results. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Basis
of Presentation
The
unaudited interim financial information furnished herein reflects all adjustments, consisting only of normal recurring items,
which in the opinion of management are necessary to fairly state Visium Technologies, Inc.’s (the “Company”
or “we”, “us” or “our”) financial position, results of operations and cash flows for the dates
and periods presented and to make such information not misleading. Certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”), nevertheless,
management of the Company believes that the disclosures herein are adequate to make the information presented not misleading.
These
unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year
ended June 30, 2018, contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 20, 2018. The results
of operations for the three months ended September 30, 2018, are not necessarily indicative of results to be expected for any
other interim period or the fiscal year ending June 30, 2019.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
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 reporting amounts of revenues and expenses
during the reported period. Actual results will differ from those estimates. Included in these estimates are the valuation of
derivative liabilities, stock-based compensation, and deferred tax asset valuation allowance.
Cash
and Cash Equivalents
The
Company considers all highly liquid, temporary, cash equivalents with an original maturity of three months or less when purchased,
to be cash equivalents. The Company had no cash equivalents during the three months ended September 30, 2018 and June 30, 2018.
Concentration
of Credit Risks
The
Company is subject to a concentration of credit risk from cash.
The
Company’s cash account is held at a financial institution and is insured by the Federal Deposit Insurance Corporation, or
FDIC, up to $250,000. During the three months ended September 30, 2018 and 2017, the Company had not reached a bank balance exceeding
the FDIC insurance limit.
Derivative
Liabilities
The
Company assessed the potential classification of its derivative financial instruments as of September 30, 2018 and June 30, 2018,
which consist of convertible instruments and rights to shares of the Company’s common stock and determined that such derivatives
meet the criteria for liability classification under ASC 815.
ASC
815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments
and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a)
the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception
to this rule when the host instrument is deemed to be conventional, as described.
During
the year ended June 30, 2017, the Company determined that there was no active market for the Company’s common stock,
and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes.
The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance
sheet thereafter and in determining which valuation method is most appropriate for the instrument (e.g., Black-Scholes-Merton),
the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any. The derivate liability
that had previously been recognized was recorded as a gain through the change in fair value of derivative liability on the statement
of operations as of June 30, 2017. During the three months ended September 30, 2018 the Company determined that there was
an active market for the Company’s common stock, and there is, therefore, a derivative liability associated with certain
of its convertible notes. The Company recorded a derivative liability as of September 30, 2018.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Fair
Value of Financial Instruments
The
Company accounts, for assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair
Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing
generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring
fair value, and expands disclosure about such fair value measurements.
ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize
the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level
1:
|
Observable
inputs such as quoted market prices in active markets for identical assets or liabilities.
|
|
|
Level
2:
|
Observable
market-based inputs or unobservable inputs that are corroborated by market data.
|
|
|
Level
3:
|
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
Additional
Disclosures Regarding Fair Value Measurements
The
carrying value of cash and cash equivalents, accounts payable and accrued expenses, accrued compensation, note and convertible
promissory notes payable approximate their fair value due to the short maturity of these items.
Convertible
Instruments
The
Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated
from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options. Accordingly, the Company records,
when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based
upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and
the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the
related debt to their earliest date of redemption. The Company also records deemed dividends for the intrinsic value of conversion
options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note.
ASC
815-40, Contracts in Entity’s own Equity, generally provides that, among other things, if an event is not within the entity’s
control, such contract could require net cash settlement and shall be classified as an asset or a liability.
Income
Taxes
The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset
or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above
should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest
and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all
highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income
Taxes, continued
The
Company has adopted ASC 740-10-25,
“
Definition of Settlement”
,
which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of September 30, 2018, the Company had not filed tax returns for the tax
years ending June 30, 2008 through 2018 and such returns, when filed, potentially will be subject to audit by the taxing authorities
for a minimum of three years beyond the filing date under the three-year statute of limitations. The Company has not accrued any
potential tax penalties associated with not filing these tax returns. Due to recurring losses, management believes such potential
tax penalties, in any, would not be material in amount.
Share-Based
Payments
The
Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC 718. Under
the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the
fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the
vesting period.
In
July 2018, the FASB issued ASU 2018-07,
Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting
, an accounting standard update to improve non-employee share-based payment accounting. The accounting standard
update more closely aligns the accounting for employee and non-employee share based payments. The accounting standards update
is effective as of the beginning of 2019 with early adoption permitted. We have elected to adopt this standard as of July 1, 2018,
the beginning of our 2019 fiscal year.
The
Company has elected to use the Black-Scholes-Merton, or BSM, option-pricing model to estimate the fair value of its options, which
incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to
calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards
ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant
and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Segment
Reporting
The
Company operates in one segment, which is to search for possible acquisition targets and merge with an operating company. The
Company’s chief operating decision-maker evaluates the performance of the Company based upon expenses by functional areas
as disclosed in the Company’s statements of operations.
Recent
Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU
2016-02”). The ASU replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard
is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases
with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. In January
2018, the FASB issued ASU 2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842, which provides
an optional transition practical expedient that allows companies to not evaluate (under Topic 842) existing or expired land easements
that were not previously accounted for as leases (under Topic 840). Topic 842 is effective for interim and annual reporting periods
beginning after December 15, 2018, and early adoption is permitted. Topic 842 requires a modified retrospective approach, which
includes several optional practical expedients. The Company is currently evaluating the impact of ASU 2018-02 on the Company’s
consolidated financial statements.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) (“ASU 2018-02”).
The objective of the ASU is to allow a reclassification from accumulated comprehensive income (loss) to retained earnings for
stranded tax effects resulting from the Tax Cuts and Jobs Act (“TCJA”) and will improve the usefulness of information
reported to financial statement users. ASU 2018-02 is effective for interim and annual reporting periods beginning after December
15, 2018, and early adoption is permitted.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Basic
and Diluted Earnings Per Share
Basic
earnings per share are calculated by dividing income available to stockholders by the weighted-average number of shares of Common
Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common
Stock and dilutive Common Stock share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist
of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method), and
shares underlying convertible promissory notes and convertible preferred stock. Potential common shares includable in the computation
of fully-diluted per-share results are not presented in the financial statements as their affect would be anti-dilutive.
The
weighted-average potentially dilutive common share equivalents outstanding for the three months ended September 30, 2018 and 2017
are as follows:
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
Series
A Preferred Stock
|
|
|
113
|
|
|
|
113
|
|
Series
AA Convertible Preferred Stock
|
|
|
1
|
|
|
|
-
|
|
Series
B Preferred Stock
|
|
|
4
|
|
|
|
4
|
|
Convertible
notes payable
|
|
|
3,365,399
|
|
|
|
2,315,571
|
|
Total
|
|
|
3,365,517
|
|
|
|
2,315,688
|
|
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
3: DERIVATIVE LIABILITY
The Company accounts for the embedded conversion
features included in its convertible instruments as derivative liabilities. The aggregate fair value of derivative liabilities
at September 30, 2018 and June 30, 2018 amounted to $567,232 and $0, respectively. For the three months ended September
30, 2018 and 2017, the Company recorded a loss related to the change in fair value of the derivative liability amounting to $567,232
and $0, respectively. Management had a change in accounting estimate during the year ended June 30, 2017. The Company
determined that all of the underlying convertible notes were past due and in default, and that there was no active market for
the Company’s common stock. Because of this lack of liquidity and market value, there was no derivative liability associated
with these convertible notes as of June 30, 2017. During the three months ended September 30, 2018 the Company determined
that there was an active market for the Company’s common stock, and there is, therefore, a derivative liability associated
with certain of its convertible notes. The Company recorded a derivative liability as of September 30, 2018. At each measurement
date, the fair value of the embedded conversion features was based on the Black-Scholes-Merton method using the following assumptions:
|
|
Three Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Effective exercise price
|
|
$
|
0.124 - 0.137
|
|
|
|
-
|
|
Effective market price
|
|
$
|
0.47
|
|
|
|
-
|
|
Volatility
|
|
|
784.39
|
%
|
|
|
-
|
|
Risk-free interest
|
|
|
2.89
|
%
|
|
|
-
|
|
Terms
|
|
|
30 days
|
|
|
|
-
|
|
Expected dividend rate
|
|
|
0.00
|
%
|
|
|
-
|
|
Changes
in the derivative liabilities during the three months ended September 30, 2018 is follows:
Derivative liability at June 30, 2018
|
|
$
|
-
|
|
Loss on change in fair value of derivative liability
|
|
|
567,232
|
|
Derivative liability at September 30, 2018
|
|
$
|
567,232
|
|
NOTE
4: ACCRUED INTEREST PAYABLE
Changes
in accrued interest payable during the three months ended September 30, is as follows:
Accrued
interest payable at June 30, 2018
|
|
$
|
1,686,054
|
|
Interest expense
for the three months ended September 30, 2018
|
|
|
55,164
|
|
Conversion
of accrued interest into common stock
|
|
|
(26,706
|
)
|
Accrued
interest payable at September 30, 2018
|
|
$
|
1,714,512
|
|
NOTE
5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible
Notes Payable
At
September 30, 2018 and June 30, 2018 convertible debentures consisted of the following:
|
|
September,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
Convertible
notes payable
|
|
$
|
1,547,384
|
|
|
$
|
1,617,984
|
|
Convertible
notes payable to ASC Recap
|
|
|
147,965
|
|
|
|
147,965
|
|
Total
|
|
$
|
1,695,349
|
|
|
$
|
1,765,949
|
|
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE, continued
The
Company had convertible promissory notes aggregating approximately $1.7 million and $1.8 million at September 30, 2018 and June
30, 2018, respectively. The related accrued interest amounted to approximately $1.46 million and $1.44 million at September 30,
2018 and June 30, 2018, respectively. The convertible notes payable bear interest at rates ranging from 0% to 18% per annum. The
convertible notes are generally convertible, at the holders’ option, at rates ranging from $0.09 to $22,500 per share, as
a result of the two reverse stock splits. At September 30, 2018, all $1.7 million of convertible promissory notes had matured,
are in default and remain unpaid.
On
July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC (“ASC”) two convertible promissory notes with principal
amounts of $25,000 and $125,000, respectively. These two notes were issued as a fee for services under a 3(a)10 transaction. While
the Company continues to carry the balance of these notes on its balance sheet, management is disputing the notes and does not
believe that the balances of these notes are owed. See Note 10 – Subsequent Events in the footnotes to the financial statements.
The July 22, 2013 note matured on March 31, 2014 and a balance of $22,965 remains unpaid. The May 6, 2014 note matured on May
6, 2016 and remains unpaid. The notes are convertible into the common stock of the Company at any time at a conversion price equal
to (i) 50% of the lowest closing bid price of our common stock for the twenty days prior to conversion or (ii) fixed price of
$0.15 or $0.30 per share.
For
the three months ended September 30, 2018, the following summarizes the conversion of debt for common shares:
|
|
|
|
|
|
|
|
|
|
Conversion
|
|
|
|
|
|
|
|
|
Amount
Converted
|
|
|
Price
|
|
Date
|
|
Name
|
|
Shares Issued
|
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
Per
Share
|
|
7/31/2018
|
|
DWIGHT
POWER
|
|
|
111,111
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
10,000
|
|
|
$
|
0.09
|
|
8/2/2018
|
|
ROYAL
PALM CONSULTING SERVICES LLC
|
|
|
431,116
|
|
|
|
18,100
|
|
|
|
20,700
|
|
|
|
38,800
|
|
|
$
|
0.09
|
|
9/13/2018
|
|
LANCE
QUARTIERI
|
|
|
370,319
|
|
|
|
42,500
|
|
|
|
6,005
|
|
|
|
48,505
|
|
|
|
0.131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
912,546
|
|
|
$
|
70,600
|
|
|
$
|
26,705
|
|
|
$
|
97,305
|
|
|
$
|
0.107
|
|
Notes
Payable
The
Company had promissory notes aggregating $270,241 at September 30, 2018 and June 30, 2018, respectively. The related accrued interest
amounted to approximately $251,000 and $245,000 at September 30, 2018 and June 30, 2018, respectively. The notes payable bear
interest at rates ranging from 0% to 16% per annum and are payable monthly. All promissory notes outstanding as of June 30, 2018
have matured, are in default, and remain unpaid.
NOTE
6: STOCKHOLDERS’ DEFICIT
Common
Stock
At
September 30, 2018, the Company had 10,000,000,000 authorized common shares.
Issuances of Common Stock During the
Three Months Ended September 30, 2018
Convertible
Notes Payable
During
the three months ended September 30, 2018 the Company issued 912,5546 shares of its common stock related to the conversion of
$97,305 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.107
per share.
Sale
of Restricted Common Stock
During
the three months ended September 30, 2018 the Company issued 1,328,000 shares of its common stock related to the sale of its common
stock resulting in proceeds of $132,800, at an average price of $0.10 per share.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
6: STOCKHOLDERS’ DEFICIT, continued
Stock
Based Compensation
During the three
months ended September 30, 2018 the Company issued 1,306,947 shares of its $0.0001 par value common stock as compensation
to its directors and officers related to the vesting of restricted stock grants . The shares were valued at $239,250, or $0.183
per share.
During
the three months ended September 30, 2018 the Company issued 483,336 shares of its $0.0001 par value common stock to four consultants,
as compensation under four separate consulting agreements. The shares were valued at $29,000, or $0.06 per share.
Preferred
Stock
Series
A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $0.001. All classes
rank(ed) prior to any class or series of the Company’s common stock as to the distribution of assets upon liquidation, dissolution
or winding up of the Company or as to the payment of dividends. All preferred stock shall have no voting rights except if the
subject of such vote would reduce the amount payable to the holders of preferred stock upon liquidation or dissolution of the
company and cancel and modify the conversion rights of the holders of preferred stock as defined in the certificate of designations
of the respective series of preferred stock.
Series
A Convertible Preferred Stock
The
Series A Preferred Stock has a stated value of $750.00 per share. Each one share of Series A Preferred Stock is convertible into
one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the
Conversion shall be set at $0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements.
Series
B Convertible Preferred Stock
Thirty
million (30,000,000) shares of preferred stock were designated as a new Series B Preferred stock in April 2016. This new Series
B Preferred Stock has a $0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock,
with a stated value of $375 per share.
Series
AA Convertible Preferred Stock
In
March 2018, the Company authorized and issued one share of Series AA convertible preferred stock which provides for the holder
to vote on all matters as a class with the holders of Common Stock and each share of Series AA Convertible Preferred Stock shall
be entitled to 51% of the common votes on any matters requiring a shareholder vote of the Company. Each one share of Series AA
Convertible Preferred Stock is convertible into one (1) share of Common Stock. Mark Lucky, our CFO, is the holder of the one share
of Series AA Convertible Preferred Stock.
Series
A Convertible Preferred Stock
The
Series A Preferred Stock has a stated value of $750.00 per share. Each one share of Series A Preferred Stock is convertible into
one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the
Conversion shall be set at $0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements.
Series
B Convertible Preferred Stock
Prior
to cancellation, the Series B Preferred Stock had a stated value of $5.00 per share. Each share of Series B Preferred Stock was
convertible into 20 shares of the Company’s common stock. In addition, the holders of the preferred stock were entitled
to receive annual cumulative dividends of 10% payable in cash or shares of the Company’s common stock, at the Company’s
option. At March 31, 2018, the Company had not declared the payment of cumulative dividends aggregating approximately $673,200.
Thirty
million (30,000,000) shares of preferred stock were designated as a new Series B Preferred stock in April 2016. This new Series
B Preferred Stock has a $0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock,
with a stated value of $375 per share.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
Note
7
-
STOCK-BASED COMPENSATION
Restricted
Stock Awards
Restricted stock awards are awards of common
stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions
lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted
shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards
that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted
stock activity for the three months ended
September 30, 2018
and June 30, 2018
is presented in the following table:
|
|
For
the Year ended
|
|
|
|
September
30, 2018
|
|
|
June
30, 2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
Date
|
|
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
|
Shares
|
|
|
Fair
Value
|
|
Unvested
at beginning of period
|
|
|
13,836,108
|
|
|
$
|
0.06
|
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
500,000
|
|
|
$
|
0.36
|
|
|
|
14,650,000
|
|
|
|
.06
|
|
Vested
|
|
|
1,262,505
|
|
|
$
|
0.07
|
|
|
|
813,8892
|
|
|
|
.06
|
|
Unvested
at end of period
|
|
|
13,573,603
|
|
|
$
|
0.08
|
|
|
|
13,836,108
|
|
|
|
.06
|
|
Unrecognized
compensation expense related to outstanding restricted stock awards to employees and directors as of
September
30, 2018
was $1,006,083 and is expected to be recognized over a weighted average period of 2.83 years.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
8: RELATED PARTY TRANSACTIONS
Equity
transactions with related parties are described in Note 6.
From
time to time we have borrowed operating funds from Mr. Mark Lucky, our Chief Financial Officer and from certain Directors, for
working capital. The advances were payable upon demand and were interest free. At September 30, 2018 there was $20,000 outstanding
of such advances made to the Company.
NOTE
9: COMMITMENTS AND CONTINGENCIES
Contingencies
The Company accounts for contingent liabilities
in accordance with Accounting Standards Codification (“ASC”) Topic 450,
Contingencies
. This guidance requires
management to assess potential contingent liabilities that may exist as of the date of the financial statements to determine the
probability and amount of loss that may have occurred, which inherently involves an exercise of judgment. If the assessment of
a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a
potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the
nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
For loss contingencies considered remote, no accrual or disclosures are generally made. Management has assessed potential contingent
liabilities as of September 30, 2018, and based on the assessment there are no probable loss contingencies requiring accrual
or disclosures within its financial statements.
The
consideration payable to the sellers of Threat Surface Solutions Group, LLC includes up to $3.5 million as earnout consideration,
which in contingent on the Company achieving mutually agreed-to revenue milestones. See Note 10 – Subsequent Events.
Legal
Claims
The
Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business.
Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters
currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and
in the aggregate, is not expected to have a material impact on the Company’s cash flows, results of operations, or financial
position.
In July 2018 the
Company was named as the defendant in a legal proceeding brought by Tarpon Bay Partners LLC (the plaintiff) in the Judicial District
Court of Danbury, Connecticut. The plaintiff asserts that the Company failed to convert two convertible notes held
by the Plaintiff. The Company is vigorously contesting this claim.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER
30, 2018
NOTE
10: SUBSEQUENT EVENTS
On
October 12, 2018, the Company completed the transaction to acquire Threat Surface Solutions Group, LLC (“TSSG”), pursuant
to the Membership Interest Purchase Agreement (the “
Purchase Agreement
”). Pursuant to the Purchase Agreement,
each Seller assigned, transferred and sold to Purchaser, and Purchaser purchased from such Sellers, all of the issued and outstanding
voting membership interests of TSSG (collectively, the “
Transaction
”).
The
total consideration for the transaction is approximately $5 million, with up to $3.5 million of that amount payable as earnout
consideration based on mutually agreed-to revenue milestones. At the closing of the Transaction, Purchaser paid (i) 1,538,385
shares of its $0.0001 par value common stock, valued at $500,000, or $0.325 per share and (ii) a Seller’s note in the amount
of $1 million dollars. The note is interest-only, has a 5-year term and is subject to the earnout provisions in the Agreement.
Subject to funding, cash consideration of $1,000,000 will be payable post-Closing (the “
Closing Consideration
”).
On October 10, 2018, the Company appointed
Dr, Emmanuel Esaka to as a member of the Board of Directors of the Company.
In
October 2018 our officers, directors and consultants vested 441,669 shares of our $0.0001 par value common stock, at an average
price per share of $0.072.
In
October 2018 the Company issued 1,565,000 shares of our $0.0001 par value common stock in exchange for $156,500, or an average
price of $0.10/share.
In
October 2018 the Company issued 1,000,000 shares of our $0.0001 par value common stock to Dr. Emmanuel Esaka as compensation for
serving as a Director. The shares were valued at $390,000, or $0.39/share.