NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
1: ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
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 Mark Lucky as its Chief Executive Officer in February 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 Nustate 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.
|
Going
Concern
The accompanying financial statements have been prepared on a going concern basis. For the year ended June
30, 2018 we had a net loss of $1,390,340, had net cash used in operating activities of $59,401, and had negative working capital
of $4,514,240. 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.
Management
is in the process of acquiring an operating entity actively engaged in a business that generates sustained revenues. We are also
considering several additional potential acquisitions and are investigating various candidates to determine whether they would
have the potential to add value to us for the benefit of our stockholders.
We
intend to restrict our consideration of potential business to communications, services, or technology. Because we have limited
resources, the scope and number of suitable candidates to merge with is relatively limited. Because we may participate in a business
opportunity with a newly formed firm, a firm that is in the development stage, or a firm that is entering a new phase of growth,
we may incur further risk due to the inability of the target’s management to have proven its abilities or effectiveness,
or the lack of an established market for the target’s products or services, or the inability to reach profitability in the
next few years.
Any
business combination or transaction may result in a significant issuance of shares and substantial dilution to our present stockholders.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
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 assumptions used
in Black-Scholes-Merton stock based compensation valuation methods, such as expected volatility, risk-free interest rate, and
expected dividend rate and in the valuation allowance of deferred tax assets.
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 years ended June 30, 2018 and 2017.
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 years ended June 30, 2018 and 2017, the Company had not reached a bank balance exceeding the
FDIC insurance limit.
Derivative
Liabilities
The
Company assessed the classification of its derivative financial instruments as of June 30, 2018 and 2017, 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.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
During
the year ended June 30, 2017, the Company had notes payable outstanding in which the conversion rate was variable and undeterminable.
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. As of June 30, 2018 the Company has still determined that there was no active market for the
Company’s common stock.
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, accounts payable and accrued expenses, accrued compensation, notes payable and convertible promissory
notes payable, approximate their fair value due to the short maturity of these items or the use of market interest rates.
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.
The
Company determines whether the instruments issued in the transactions are considered indexed to the Company’s own stock.
During fiscal years 2014 through 2017 the Company’s issued convertible securities with variable conversion provisions that
resulted in derivative liabilities. See discussion above under derivative liabilities that resulted in a change in derivative
liability accounting.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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.
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 June 30, 2018, the Company had not filed tax returns for the tax years
ending June 30, 2008 through 2017 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, if 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”.
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.
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 business segment which technologies are focused on cybersecurity.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, “
Leases”
. The new standard establishes a right-of-use (ROU)
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer
than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense
recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. A modified retrospective transition approach is required for capital leases and operating
leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements,
with certain practical expedients available. While the Company is still evaluating the impact of its pending adoption of the new
standard on its consolidated financial statements, the Company expects that upon adoption in the fiscal year ending April 30,
2020, it will recognize ROU assets and lease liabilities and the amounts could be material.
VISIUM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2018 AND 2017
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, continued
In
March 2016, the FASB issued ASU No. 2016-09, “
Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting”,
a new accounting standard update intended to simplify several aspects of the accounting
for share-based payment transactions including: income tax consequences, classification of awards as either equity or liabilities
and classification on the statement of cash flows. Specifically, the update requires that excess tax benefits and tax deficiencies
(the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes)
be recognized as income tax expense or benefit in the consolidated statements of operations, introducing a new element of volatility
to the provision for income taxes. This update is effective for fiscal years beginning after December 15, 2016. Early adoption
is permitted. The Company adopted the ASU on May 1, 2017. Effective with the adoption of the ASU all share-based awards continue
to be accounted for as equity awards, excess tax benefits recognized on stock-based compensation expense are reflected in the
consolidated statements of operations as a component of the provision for income taxes on a prospective basis, excess tax benefits
recognized on stock-based compensation expense are classified as an operating activity in the consolidated statements of cash
flows on a prospective basis and the Company has elected to continue to estimate expected forfeitures over the course of a vesting
period. The adoption of the ASU had no material impact on the retained earnings, other components of equity or net assets as of
the beginning of the period of adoption.
In
August 2016, the FASB issued ASU Update No. 2016-15, “Statement of Cash Flows- Classification of Certain Cash Receipts and
Cash Payments,” which is intended to reduce diversity in practice in how certain transactions are classified in the statements
of cash flows. This update will be effective for fiscal years beginning after December 15, 2017 (the Company’s fiscal year
ending April 30, 2019), and interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments
are adopted in the same period. The guidance requires application using a retrospective transition method. The Company plans to
adopt the ASU in its fiscal year ending April 30, 2019. The Company does not expect the impact of the adoption of this ASU to
have a material impact on the Company’s consolidated statements of cash flows.
In
May 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting
Bulletin No. 118, regarding the accounting implications of the recently issued Tax Cuts and Jobs Act (the “Act”).
This standard is effective immediately. The update clarifies that in a company’s financial statements that include the reporting
period in which the Act was enacted, the company must first reflect the income tax effects of the Act in which the accounting
under GAAP is complete. These amounts would not be provisional amounts. The company would also report provisional amounts for
those specific income tax effects for which the accounting under GAAP is incomplete, but a reasonable estimate can be determined.
The Company has recorded a provisional amount which it believes is a reasonable estimate of the effects of the Act on the Company’s
financial statements as of April 30, 2018. Technical corrections or other forthcoming guidance could change how the Company interprets
provisions of the Act, which may impact its effective tax rate and could affect its deferred tax assets, tax positions and/or
its tax liabilities.
In
June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce
cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service
providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation,
which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees
for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially
aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods
beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective
approach for each period presented. Management has early adopted this guidance and has determined that no changes were necessary
for the prior year presented in these financials because the only applicable restricted stock awards were granted in April 2018.
In
May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606),
as modified by ASU
2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, ASU 2016-08,
Revenue
from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),
ASU
2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,
and
ASU 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.
The
revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the
full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption
approach. This standard is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted.
The Company early adopted this standard effective July 1, 2017. Since the Company has not earned any revenue to date, there was
no impact to the financial statements upon adoption.
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 the dilutive Common Stock
share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist of shares issuable upon the exercise
of in-the-money stock options and warrants (calculated using the modified-treasury stock method) and conversion of other
securities such as convertible debt or convertible preferred stock. Potential common shares includable in the computation of fully-diluted
per-share results are not presented in the financial statements for the year ended June 30, 2018 and 2017 as their effect
would be anti-dilutive.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
3: DERIVATIVE LIABILITY
For
the year ended June 30, 2017, the Company recorded a gain on the change in fair value of derivative liabilities of $636,096. This
was due to management’s change in accounting estimate during the year ended June 30, 2017. The Company determined that all
of the underlying 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.
Changes
in the derivative liabilities during the years ended June 30, 2018 and 2017 are as follows:
Derivative liabilities at June 30, 2016
|
|
$
|
636,096
|
|
Derivative liability expense
|
|
|
-
|
|
Gain on change
in fair value of derivative liability, recognized as other income
|
|
|
(636,096
|
)
|
Derivative liabilities
at June 30, 2017 and 2018
|
|
$
|
-
|
|
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
4: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible
Notes Payable
At
June 30, 2018 and June 30, 2017 convertible debentures consisted of the following:
|
|
June
30,
|
|
|
|
2018
|
|
|
2017
|
|
Convertible notes payable
|
|
$
|
1,617,984
|
|
|
$
|
2,201,914
|
|
Discount on convertible notes
|
|
|
-
|
|
|
|
(27,083
|
)
|
Convertible
notes payable to ASC Recap
|
|
|
147,965
|
|
|
|
147,965
|
|
Total
|
|
$
|
1,765,949
|
|
|
$
|
2,322,796
|
|
The
Company had convertible promissory notes aggregating approximately $1.8 million and $2.3 million at June 30, 2018 and June 30,
2017, respectively. The related accrued interest amounted to approximately $1.44 million and $1.27 million at June 30, 2018 and
June 30, 2017, 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. At June 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.
During
the year ended June 30, 2018, the Company amended the conversion terms for twelve convertible noteholders. The amended notes totaled
$139,225 in principal and were amended such that the conversion price is fixed at $0.09 per share, from conversion terms that
were priced at a 50% discount of the average closing bid price per share of Common Stock during the ten consecutive trading days
immediately prior to any such conversion. For those notes that were converted immediately after the amendment, the Company
recorded a debt conversion expense of $96,272, in accordance with guidance in ASC-470 for induced debt conversions. The Company
recorded an expense of $96,272 as a loss on reconstruction of debt related to the amendments to these notes.
For
the year ended June 30, 2018, the following summarizes the conversion of debt for common shares:
Date
|
|
|
|
|
Shares
Issued
(Post-Split)
|
|
|
Amount
Converted
|
|
|
Conversion
Price Per Share
|
|
|
07/10/2017
|
|
|
GOLD
COAST CAPITAL LLC
|
|
|
60,000
|
|
|
$
|
9,000
|
|
|
$
|
0.15
|
|
|
07/10/2017
|
|
|
ENTERPRISE SOLUTIONS
LLC
|
|
|
29,767
|
|
|
|
8,930
|
|
|
$
|
0.30
|
|
|
07/31/2017
|
|
|
ENTERPRISE SOLUTIONS
LLC
|
|
|
33,333
|
|
|
|
5,000
|
|
|
$
|
0.15
|
|
|
08/08/2017
|
|
|
ENTERPRISE SOLUTIONS
LLC
|
|
|
33,334
|
|
|
|
10,000
|
|
|
$
|
0.30
|
|
|
08/28/2017
|
|
|
ENTERPRISE SOLUTIONS
LLC
|
|
|
33,334
|
|
|
|
5,000
|
|
|
$
|
0.15
|
|
|
09/06/2017
|
|
|
ENTERPRISE SOLUTIONS
LLC
|
|
|
14,000
|
|
|
|
2,100
|
|
|
$
|
0.15
|
|
|
10/09/2017
|
|
|
ROYAL PALM CONSULTING
SERVICES LLC
|
|
|
39,667
|
|
|
|
5,950
|
|
|
$
|
0.15
|
|
|
10/03/2017
|
|
|
ROYAL PALM CONSULTING
SERVICES LLC
|
|
|
39,667
|
|
|
|
5,950
|
|
|
$
|
0.15
|
|
|
06/08/2018
|
|
|
LANCE
QUARTIERI
|
|
|
994,444
|
|
|
|
89,500
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,277,546
|
|
|
$
|
141,430
|
|
|
$
|
0.11
|
|
Transactions
During
the year ended June 30, 2018 we issued convertible notes to three investors, totaling $37,500. The notes bear interest at 12%
and have a term of sixty days.
Notes
Payable
The
Company had promissory notes aggregating $270,241 at both June 30, 2018 and June 30, 2017, respectively. The related accrued interest
amounted to approximately $245,000 and $222,000 at June 30, 2018 and June 30, 2017, 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.
Transactions
The
Company generated proceeds of $249,500 from the issuance of convertible promissory notes with interest rates of 0% during fiscal
2017, and $30,000 from the issuance of a short term note payable, with an interest rate of 0% during fiscal 2017.
The
Company recognized interest expense of approximately $276,000 and $339,400 during fiscal 2018 and 2017, respectively.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
5: STOCKHOLDERS’ DEFICIT
Common
Stock
At
June 30, 2018, the Company had 10,000,000,000 authorized common shares. At June 30, 2018 the Company issued 23,212,549 common
shares of which 9,376,441 were outstanding, as a result of the unvested shares issued for the restricted stock awards granted
during the year. See Note 6.
The Company effected a reverse split of our
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 effective March 5, 2018. The reverse stock split adjusted the then issued and outstanding Common shares of the company
from 4,457,470,456 Common Shares to a total of 1,485,824 Common Shares. This action had no effect on the number of Authorized
common shares of the Company.
Issuances
of Common Stock During 2018
Convertible Notes Payable
During
the fiscal first quarter, the Company issued 203,767 shares of its common stock upon the conversion of $40,030 of principal
of its outstanding convertible notes, at an average price of $0.1965 per share.
During
the fiscal second quarter, the Company issued 79,333 shares of its common stock upon the conversion of $11,900 of principal
of its outstanding convertible notes, at an average price of $0.015 per share.
During
the fiscal fourth quarter, the Company issued 994,446 shares of its common stock upon the conversion of $89,500 of principal
of its outstanding convertible notes, at an average price of $0.09 per share.
Stock Based Compensation
During
May 2018 the Company issued 1,500,000 shares of its common stock to its CEO, Mark Lucky, as compensation. The shares were valued
at $0.06, the market price on the date of issuance for a total value of $90,000. The expense is included in general and administrative
expenses and was recognized on the date the stock was issued. See Note 8 – Related Party Transactions.
During
May 2018 the Company issued 1,000,000 shares of its common stock to Tom Grbelja, as compensation for his service on the Board
of Directors. The shares were valued at $0.06, the market price on the date of issuance for a total value of $60,000. The expense
is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related
Party Transactions.
During
May 2018 the Company issued 900,000 shares of its common stock to Paul Favata, as compensation for his service on the Board of
Directors. The shares were valued at $0.06, the market price on the date of issuance for a total value of $54,000. The expense
is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related
Party Transactions.
During
May 2018 the Company issued 1,450,000 shares of its common stock to two consultants, as compensation for consulting services.
The shares were valued at $0.06, the market price on the date of issuance for a total value of $87,000. The expense is included
in general and administrative expenses and was recognized on the date the stock was issued.
During
May 2018 the Company issued 1,131,350 shares of its common stock to three consultants, as compensation for consulting services.
The shares were valued at $0.12, the market price on the date of issuance for a total value of $135,762. The expense is included
in general and administrative expenses and was recognized on the date the stock was issued.
Sale
of Restricted Common Stock
During
May 2018 we sold 100,000 shares of common stock, valued at $10,000 to an accredited investor, and the issuance was exempt from
registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.
Grants of Restricted Common Stock
During
the quarter ended March 31, 2018 the Company issued a restricted share award of 166,667 shares of its $0.0001 par value common
stock to its new CEO, Mark Lucky, as compensation. The shares were valued at $50,000, or $0.30 per share on a post reverse split
basis. On a pre-reverse split basis, the shares were issued at par value as there was no active market in our common stock.
During
the quarter ended March 31, 2018 the Company issued a restricted share award of 166,667 shares of its $0.0001 par value common
stock to its new board member, Tom Grbelja, as compensation for services rendered. The shares were valued at $50,000, or $0.30
per share on a post reverse split basis. On a pre-reverse split basis, the shares were issued at par value as there was no active
market in our common stock
During
the quarter ended March 31, 2018 the Company issued a restricted share award of 83,334 shares of its $0.0001 par value common
stock to its new board member, Paul Favata, as compensation for services rendered. The shares were valued at $25,000, or $0.30
per share on a post reverse split basis. On a pre-reverse split basis, the shares were issued at par value as there was no active
market in our common stock
During
the quarter ended March 31, 2018 the Company issued 191,669 shares of its $0.0001 par value common stock to four consultants,
as compensation under four separate consulting agreements. The shares were valued at $57,500, or $0.30 per share on a post reverse
split basis. On a pre- reverse split basis, the shares were issued at par value as there was no active market in our common stock
During
the quarter ended March 31, 2018 the Company issued 95,238 shares of its $0.0001 par value common stock to satisfy a liability
owed to a Company controlled by our CEO. The shares were valued at $60,000, or $0.63 per share on a post reverse split basis,
the weighted average market price for the ten preceding days from the date that the shares were issued.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
5: STOCKHOLDERS’ DEFICIT, continued
Issuances
of Common Stock During 2017
During
fiscal 2017 we issued shares of our common stock as follows:
On
August 15, 2017, the Company issued 6,667 shares of its common stock to its former CEO, Kevin Yates, as compensation. The shares
were valued at $90.00 per share, the market price of the common stock on the date of issuance for a total value of $600,000. This
expense is included in general and administrative expenses and was recognized on the date the stock was issued.
On
August 15, 2017, the Company issued 1,667 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares
were valued at $90.00 per share, the market price of the common stock on the date of issuance for a total value of $150,000. This
expense is included in general and administrative expenses and was recognized on the date the stock was issued.
On
August 15, 2017, the Company issued 667 shares of its common stock to its former CEO, Kathleen Roberton, pursuant to a settlement
agreement, for unpaid wages. Per agreement, the shares were valued at $120.00 per share for a total value of $80,000.
On
December 12, 2017, the Company issued 1,667 shares of its common stock to its former CEO, Kevin Yates, as compensation. The shares
were valued at $6.00 per share, the market price of the common stock on the date of issuance for a total value of $10,000. This
expense is included in general and administrative expenses and was recognized on the date the stock was issued.
On
December 12, 2017, the Company issued 1,667 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares
were valued at $6.00 per share, the market price of the common stock on the date of issuance for a total value of $10,000. This
expense is included in general and administrative expenses and was recognized on the date the stock was issued.
On
December 12, 2017, the Company issued 3,333 shares of its common stock to a company controlled by its former CEO, Kevin Yates,
as compensation. The shares were valued at $6.00 per share, the market price of the common stock on the date of issuance for a
total value of $20,000. This expense is included in general and administrative expenses and was recognized on the date the stock
was issued.
On
January 11, 2018, the Company issued 8,333 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares
were valued at $6.00 per share, the market price of the common stock on the date of issuance for a total value of $50,000. This
expense is included in general and administrative expenses and was recognized on the date the stock was issued.
On
January 11, 2017, the Company issued 33,333 shares of its common stock to a company controlled by its former CEO, Kevin Yates,
as compensation. The shares were valued at $6.00 per share, the market price of the common stock on the date of issuance for a
total value of $200,000. This expense is included in general and administrative expenses and was recognized on the date the stock
was issued.
During
the fiscal first quarter, the Company issued 1,600 shares of its common stock upon the conversion of $18,597 of principal of its
outstanding convertible notes, at an average price of $11.62 per share.
During
the fiscal second quarter, the Company issued 3,831 shares of its common stock upon the conversion of $13,454 of principal of
its outstanding convertible notes, at an average price of $3.52 per share.
During
the fiscal third quarter, the Company issued 141,083 shares of its common stock upon the conversion of $86,740 of principal of
its outstanding convertible notes, at an average price of $0.61 per share.
During
the fiscal fourth quarter, the Company issued 293,421 shares of its common stock upon the conversion of $51,047 of principal of
its outstanding convertible notes, at an average price of $0.17 per share.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
5: STOCKHOLDERS’ DEFICIT, continued
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 CEO, is the holder of the one share
of Series AA Convertible Preferred Stock.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
Note
6
-
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 year ended
June
30, 2018
and 2017 is presented in the following table:
|
|
For
the Year ended
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
Date
|
|
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
|
Shares
|
|
|
Fair
Value
|
|
Unvested at beginning of period
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
14,650,000
|
|
|
$
|
0.06
|
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
813,892
|
|
|
$
|
0.06
|
|
|
|
—
|
|
|
|
—
|
|
Unvested at end of period
|
|
|
13,836,108
|
|
|
$
|
0.06
|
|
|
|
—
|
|
|
|
—
|
|
Unrecognized
compensation expense related to outstanding restricted stock awards to employees and directors as of
June
30, 2018
was $830,166 and is expected to be recognized over a weighted average period of 2.83 years.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
7: INCOME TAXES
The
Company has not filed its corporate tax returns since fiscal 2007.
Due
to recurring losses, the Company’s tax provision for the years ended June 30, 2018 and 2017 was $0.
The
difference between the effective income tax rate and the applicable statutory federal income tax rate is summarized as follows:
|
|
2018
|
|
|
2017
|
|
Statutory federal rate
|
|
|
(28.1
|
)%
|
|
|
(35.0
|
)%
|
State income tax rate, net of federal benefit
|
|
|
(3.6
|
)%
|
|
|
(3.5
|
)%
|
Permanent differences, including stock based compensation
|
|
|
8.6
|
%
|
|
|
(5.6
|
)%
|
Change in valuation allowance
|
|
|
23.1
|
%
|
|
|
44.1
|
%
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
At
June 30, 2018 and 2017 the Company’s deferred tax assets were
as follows:
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
Tax benefit of net operating loss carry forward
|
|
$
|
6,244,000
|
|
|
$
|
10,704,000
|
|
Less: valuation allowance
|
|
|
(6,244,000
|
)
|
|
|
(10,704,000
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
As
of June 30, 2018, the Company had unused net operating loss carry forwards of approximately $31.1 million available to reduce
future federal taxable income. Net operating loss carryforwards expire through fiscal years ending 2037. Internal Revenue Code
Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control
(generally a greater than 50% change in ownership).
The
Company’s ability to offset future taxable income, if any, with tax net operating loss carryforwards may be limited due
to the non-filing of tax returns and the impact of the statute of limitations on the Company’s ability to claim such benefits.
Furthermore, changes in ownership may result in limitations under Internal Revenue Code Section 382. Due to these limitations,
and other considerations, management has established full valuation allowances on deferred tax assets relating to net operating
loss carryforward, as the realization of any future benefits from these assets is uncertain.
The Company’s valuation allowance
at June 30, 2018 and 2017 was $6,244,000 and $10,704,000, respectively. The change in the valuation allowance during the
year ended June 30, 2018 was a decrease of approximately $4.5 million. The change in the valuation allowance during
the year ended June 30, 2017 was an increase of $340,000. Effective December 22, 2017 a new tax bill was signed into law that
reduced the federal income tax rate for corporations from 35% to 21.7% for the year ended June 30, 2018. Going forward the blended
rate will be 25.4% for future years. The change in blended tax rate reduced the 2018 net operating loss carry forward deferred
tax assets by approximately $4.5 million.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018 AND 2017
NOTE
8: RELATED PARTY TRANSACTIONS
During
fiscal 2018 and 2017, the Company incurred expenses of $8,843 and $97,841, respectively, to a related party by means of common
ownership and management with the Company as compensation to our former Chairman of the Board and Chief Executive Officer. The
expenses are recorded as consulting expense and appears in general and administrative expense on our Statement of Operations.
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 Executive Officer and from certain Directors, for
working capital. The advances were payable upon demand and were interest free. During year ended June 30, 2018 Mr. Lucky advanced
$26,000, and Mr. Grbelja advanced $20,000 to the Company. $21,000 of these advances remain outstanding as of June 30, 2018.
In
March 2018 the Company entered into a settlement agreement with its former Chief Executive Officer, Kevin Yates. In exchange for
a full settlement and release of all claims, including accrued salary of $363,000 and a note payable plus accrued interest of
$526,632 the Company agreed to pay Mr. Yates a sum of $50,000 no later than December 31, 2018.
NOTE 9: COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases a virtual office
space under a non-cancelable operating lease, which expires August 31, 2019. Future minimum annual payments under non-cancelable
operating leases at June 30, 2018 are as follows (in thousands):
Year
ending June 30,
|
|
Amount
|
|
2019
|
|
$
|
5,688
|
|
2020
|
|
|
948
|
|
2021
|
|
|
-
|
|
2022
|
|
|
-
|
|
2023
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total
future minimum lease payments
|
|
$
|
6,636
|
|
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 June 30, 2018, and based on the assessment there are no probable loss contingencies
requiring accrual or disclosures within its financial statements.
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.
NOTE
10: SUBSEQUENT EVENTS
License
Agreement with George Mason Research Foundation, Inc.
On
July 24, 2018, the Company entered into a Patent License Agreement (the “Agreement”) with George Mason Research Foundation,
Inc. (“GMRF”), a non-profit organization formed for the benefit of George Mason University. The Agreement grants to
the Company a royalty-bearing license under six U.S. Patents during the term of the Agreement. The term of the Agreement is from
the Effective Date until the expiration of all issued patents licensed under the Agreement.
Under
the Agreement, the Company is required to make a first commercial sale of a “LICENSED PRODUCT” and/or a first commercial
performance of a “LICENSED PROCESS,” as defined in the Agreement, on or before July 30, 2019. The 2019 minimum revenue
target for the sale of products and services incorporating the GMRF technology is $100,000. This minimum revenue amount will increase
in subsequent years.
Within
30 days of the Effective date of the Agreement, the Company is required to pay GMRF a non-refundable license issue fee of $20,000.
Pursuant
to the Agreement, the Company is required to pay to GMRF a running royalty of 5% of “NET SALES,” as defined in the
Agreement.
Definitive
Agreement To Acquire Threat Surface Solutions Group, LLC
In
August 2018, we entered into a definitive agreement to acquire Threat Surface Solutions Group, LLC, a company with expertise in
Cybersecurity, Testing, Training, and Network Risk Assessment standards and processes. The closing of this acquisition is expected
to occur no later than September 1, 2018 and is subject to customary closing conditions.
Sale
of Unregistered Securities
In
July 2018 the Company sold 1,228,000 shares of its par value common stock to seven accredited investors at a price of $0.10/share.
The Company received $122,800.
In
July 2018 406,946 restricted shares which were issued to management and consultants were vested.
In August 2018, the Company issued 642,227
shares of its common stock upon the conversion of $57,800 of principal and interest of its outstanding convertible
notes to two noteholders, at an average price of $0.091 per share.
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.
In July 2018 the Company formed a wholly
owned subsidiary, Visium Analytics, LLC, a Virigina limited liability company. To date this subsidiary has not engaged in any
business activities.