SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 20182020
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to
___________.___________
Commission file number 000-25753
VISIUM TECHNOLOGIES, INC.
(Exact
nameName of
registrantRegistrant as specified in its
charter)Charter)| Florida | | 87-0449667 |
(State of Incorporation)7371 | | 87-0449667 |
(IRSState or other jurisdiction of incorporation or organization) | | (Primary Standard Industrial Classification Number) | | (I.R.S. Employer Identification No.)Number) |
11325 Random Hills Road, SUITE
4094 Majestic Lane, Suite 360
FAIRFAX,
(Address of
principal executive offices) (ZipPrincipal Executive Office)(Zip Code)
(703) 273-0383
(Registrant’s telephone number, including area
code: (703) 225-3443code)
Securities registered pursuant to Section 12(b) of the Act:
None| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, $0.0001 Par Value | | VISM | | OTC PINK |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
[X] No [ ]
No [X]Indicate by check mark whether the
registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant
wasas required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the
registrantRegistrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting
company, or an emerging growth company. See
definitionthe definitions of “large accelerated filer,” “accelerated
filer”filer,” “smaller reporting company,” and
“smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):| Large accelerated filer [ ] | | Accelerated filer [ ] |
| | |
| Non-accelerated filer [ ] | | Smaller reporting company [X] |
(Do not check if a smaller reporting company) | | Emerging growth company [ ] |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the common equity voting shares of the registrant held by non-affiliates on December 31,
20172019 was
$223,548,$216,315, at a share price of
$0.303$0.0019 on that date. For purposes of this calculation, an aggregate of
737,782113,850,143 shares of Common Stock were held by non-affiliates of the registrant on December 31,
20172019 and have been included in the number of shares of Common Stock held by affiliates.
The number of the registrant’s shares of Common Stock outstanding as of
August 20, 2018: 11,653,614October 9, 2020 is 2,127,470,956.
In this Annual Report on Form 10-K, the terms the “Company,” “Visium,” “we,” “us” or “our” refers to Visium Technologies, Inc., unless the context indicates otherwise.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS ANNUAL REPORT CONTAIN OR MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED UTILIZING NUMEROUS ASSUMPTIONS AND OTHER FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, OUR ABILITY TO IMPLEMENT OUR BUSINESS MODEL, RAISE SUFFICIENT CAPITAL TO FUND OUR OPERATING LOSSES AND PAY OUR ONGOING OBLIGATIONS, ECONOMIC AND MARKET CONDITIONS AND FLUCTUATIONS, GOVERNMENT AND INDUSTRY REGULATION, COMPETITION, AND OTHER FACTORS. MOST OF THESE FACTORS ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. YOU SHOULD CONSIDER THE AREAS OF RISK DESCRIBED IN CONNECTION WITH ANY FORWARD-LOOKING STATEMENTS THAT MAY BE MADE HEREIN. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS AND READERS SHOULD CAREFULLY REVIEW THIS ANNUAL REPORT IN ITS ENTIRETY, INCLUDING THE RISKS DESCRIBED IN PART I. DESCRIPTION OF BUSINESS - RISK FACTORS. EXCEPT FOR OUR ONGOING OBLIGATIONS TO DISCLOSE MATERIAL INFORMATION UNDER THE FEDERAL SECURITIES LAWS, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO ANY FORWARD-LOOKING STATEMENTS, TO REPORT EVENTS OR TO REPORT THE OCCURRENCE OF UNANTICIPATED EVENTS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND YOU SHOULD NOT RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE RISKS AND UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS.
VISIUM TECHNOLOGIES, INC.
2018 FORWARD LOOKING STATEMENTS
We make forward-looking statements in this Annual Report and the documents incorporated by reference herein within the meaning of the Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for futureevents, including without limitation our earnings, revenues, expenses or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions. These forward-looking statements are based on information available to us as of the date of this Annual Report and on our current expectations, forecasts and assumptions, and involve substantial risks and uncertainties. Actual results may vary materially from those expressed or implied by the forward-looking statements herein due to a variety of factors We do not undertake any obligation to update forward-looking statements as a result of as a result of new information, future events or developments or otherwise.
2020 ANNUAL REPORT ON FORM 10-K
PART I
Visium Technologies, Inc. initially was incorporated in the State of Nevada as Jaguar Investments, Inc. during October 1987. During March 2003, a wholly owned subsidiary of the Company merged with Freight Rate, Inc., a development stage company in the logistics software business. During May 2003, the Company changed its name to Power2Ship, Inc. During October 2006, the Company merged with a newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc., a Nevada corporation, with the Company surviving but its name changed to Fittipaldi Logistics, Inc. effective November 2006. During December 2007, the Company merged with a newly formed, wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada corporation, with the Company surviving but renamed NuState Energy Holdings, Inc. effective December 2007. In March 2018, the Company changed its name to Visium Technologies, Inc.
Visium is a
Florida based company focused on building a global cybersecurity business, by advancingprovider of cyber security visualization, analytics, and automation. Visium operates in the traditional cyber security space, as well as in the cloud-based technology and
Internet of Things spaces. Visium provides cybersecurity
technology solutions, tools, and services to support
commercial enterprises
in protectingand government’s ability to protect their
most valuable assets - theirdata. Visium’s CyGraph technology provides visualization, advanced cyber monitoring intelligence, data
on their networks, in the cloud, and IoT.Visium is currently engaged in creating a world-class cybersecurity/digital risk management company, with a focus on network security, threat visualization, Internet of Things, (“IoT”), mobile security, pinpoint threat identification, big-datamodeling, analytics, and smart cities technologies. Our solutions address the growingautomation to help reduce risk, simplify cyber security, and compliance complexities and risks resulting from the increasing adoption of cloud computing and the proliferation of geographically dispersed IT assets. deliver better security outcomes.
In July 2018March 2019, Visium entered into a software license agreement with George Mason UniversityMITRE Corporation to commercializelicense a patented technology, known as CyGraph, a tool for cyber warfare analytics, visualization, and sell a network assessment and visualization toolknowledge management. CyGraph provides advanced analytics for cybersecurity situational awareness that is backed by eight issued patents. Thisscalable, flexible, and comprehensive.
During fiscal 2020 we have engaged in significant research and development efforts aimed at commercializing our licensed technology, allows customers to collect and analyze large amountsactively pursuing business development opportunites.
A novel strain of IT security data, discovercoronavirus, the COVID-19 virus, may adversely affect our business operations and prioritize vulnerabilities,financial condition.
In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and
take remedial actions.Underon March 13, 2020, President Donald J. Trump declared the Agreement with George Mason University, the Company is required to makevirus a first commercial sale of a “LICENSED PRODUCT” and/or a first commercial performance of a “LICENSED PROCESS,” as definednational emergency in the Agreement,United States. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or before July 30, 2019.scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. The 2019 minimum revenue target forpandemic may adversely affect our potential customers’ operations, our employees and our employee productivity. It may also impact the saleability of productsour subcontractors, partners, and services incorporating the GMRF technology is $100,000. This minimum revenue amount willsuppliers to operate and fulfill their contractual obligations, and result in an increase in subsequent years. Also, within 30 dayscosts, delays or disruptions in performance. These supply chain effects, and the direct effect of the Effective datevirus and the disruption on our employees and operations, may negatively impact both our ability to meet customer demand and our revenue and profit margins. Our employees are working remotely and using various technologies to perform their functions. We might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of the Agreement,COVID-19 virus are highly fluid and the Companyfuture course of each is requireduncertain. For these reasons and other reasons that may come to pay GMRFlight if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a non-refundable license issue fee of $20,000. Pursuant to the Agreement, the Companymaterial adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is required to pay to GMRF a running royalty of 5% of “NET SALES,” as defined in the Agreement.
In addition, we have entered into a definitive agreement to acquire Threat Surface Solutions Group, LLC, a company with expertise in Cybersecurity, Testing, Training,highly uncertain 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.
change.
At
August 20, 2018,October 9, 2020, we had
23 full time employees.
Our principal offices are located at
11325 Random Hills Road,4094 Majestic Lane, Suite 360, Fairfax, Virginia
22030.22033. Our telephone number is (703)
225-3443.273-0383.
Our common stock is quoted on the OTC Pink under the symbol “VISM”.
The common shares of our Company are considered speculative. You should carefully consider the following risks and uncertainties in addition to other information in this annual report in evaluating our Company and our business before purchasing our common shares. Our business, operating or financial condition could be harmed due to any of the following risks:
Management and our auditors have raised substantial doubts as to our ability to continue as a going concern.
Our financial statements have been prepared assuming we will continue as a going concern. Since inception we have experienced recurring net losses which losses caused an accumulated deficit of approximately
$44.7$48 million as of June 30,
2018.2020. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The IT security market is rapidly evolving within the increasingly challenging cyber threat landscape and the continuing use of hybrid on-premise and cloud-based environments. As a result of unanticipated market, industry or company developments our sales may not continue to grow at current rates or may decline, and our share price could decrease.
We operate in a rapidly evolving industry focused on securing organizations’ IT systems and sensitive data. Our solutions focus on safeguarding privileged accounts, credentials, and secrets. Privileged accounts are those accounts within an organization that give users, applications, and machine identities the highest levels of access, or “privileged” access, to IT systems and infrastructure, industrial control systems, applications and data both on-premises and in cloud environments. While breaches of such privileged accounts have continued to gain media attention in recent years, IT security spending within enterprises is often concentrated on endpoint and network security products designed to stop threats from penetrating corporate networks. Organizations may allocate all or most of their IT security budgets to these products and may not adopt our solutions in addition to such products. Organizations are moving portions of their IT systems to be managed by third parties, primarily infrastructure, platform and application service providers, and may rely on such providers’ internal security measures.
Further, security solutions such as ours, which are focused on disrupting cyber attacks by insiders and external perpetrators that have penetrated an organization’s on-premise or cloud environment, represent a security layer designed to respond to advanced threats and more rigorous compliance standards and audit requirements. However, advanced cyber attackers are skilled at adapting to new technologies and developing new methods of gaining access to organizations’ sensitive data. As our customers’ technologies and business plans evolve and become more complex, we expect them to face new and increasingly sophisticated methods of attack. We face significant challenges in ensuring that our solutions effectively identify and respond to such attacks without disrupting the performance of our customers’ IT systems. As a result, we must continually modify and improve our products, services, and licensing models in response to market and technology trends to ensure we are meeting market needs and continue providing valuable solutions that can be deployed in a variety of environments, including cloud and hybrid.
We cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop or acquire product enhancements or new products to meet such needs or opportunities in a timely manner or at all. Delays in developing, completing or delivering new or enhanced products could cause our offerings to be less competitive, impair customer acceptance of our solutions and result in delayed or reduced revenue for our solutions.
In addition, any changes in compliance standards or audit requirements that reduce the priority for the types of controls, security, monitoring and analysis that our solutions provide would adversely impact demand for our solutions. It is therefore difficult to predict how large the market will be for our solutions. If our solutions are not viewed by organizations as necessary, or if customers do not recognize the benefit of our solutions as a critical layer of an effective security strategy, then our revenues may not continue to grow at their current rate or may decline, which could cause our share price to decrease in value.
Our reputation and business could be harmed based on real or perceived shortcomings, defects or vulnerabilities in our solutions or the provision of our services, or due to the failure of our customers, channel partners, managed security service providers, or subcontractors to correctly implement, manage and maintain our solutions, resulting in loss of existing or new customers, lawsuits or financial losses.
Security products and solutions are complex in design and deployment and may contain errors that are not capable of being remediated or detected until after their deployment. Any errors, defects, or misconfigurations could cause our products or services to not meet specifications, be vulnerable to security attacks or fail to secure networks and could negatively impact customer operations and harm our business and reputation. In particular, we may suffer significant adverse publicity and reputational harm, including a downgrade in our industry leadership position by industry analysts, if our solutions (or the services we provide in relation to our solutions) are associated, or are believed to be associated with, or fail to reasonably protect against, a significant breach or a breach at a high profile customer, managed service provider network, or third party system utilized by us as part of our cloud-based security solution.
Further, the third party data hosting facilities used for the provision of our SaaS solutions may experience damages, interruptions or other unanticipated problems that could result in disruptions in the provision of these solutions. Any disruptions or other performance problems with our SaaS solutions could harm our reputation and business, damage our customers’ businesses, subject us to potential liability, cause customers to terminate or not renew their subscriptions to our SaaS solutions and make it more challenging for us to retain existing customers and acquire new customers.
False detection of threats (referred to as “false positives”), while typical in our industry, may reduce perception of the reliability of our products and may therefore adversely impact market acceptance of our products. If our solutions restrict legitimate privileged access by authorized personnel to IT systems and applications by falsely identifying those users as attackers or otherwise unauthorized, our customers’ businesses could be harmed.
Our solutions not only reinforce but also rely on the common security concept of placing multiple layers of security controls throughout an IT system. The failure of our customers, channel partners, managed service providers or subcontractors to correctly implement and effectively manage and maintain our solutions (and the environments in which they are utilized), or to consistently implement and utilize generally accepted and comprehensive, multi-layered security measures and processes in customer networks, may lessen the efficacy of our solutions. Additionally, our customers or our channel partners may independently develop plug-ins or change existing plug-ins or APIs that we provided to them for interfacing purposes in an incorrect or insecure manner. Such failures or actions may lead to security breaches and data loss, which could result in a perception that our solutions failed. Further, our failure to provide our customers and channel partners with adequate services or inaccurate product documentation related to the use, implementation and maintenance of our solutions, could lead to claims against us.
An actual or perceived cyber attack, other security breach or theft of our customers’ data, regardless of whether the breach or theft is attributable to the failure of our products, SaaS solutions or the services we provided in relation thereto, could adversely affect the market’s perception of the efficacy of our solutions and our industry standing, cause current or potential customers to look to our competitors for alternatives to our solutions and subject us to lawsuits, indemnity claims and financial losses, as well as the expenditure of significant financial resources to analyze, correct or eliminate any vulnerabilities. In addition, provisions in our license agreements that attempt to limit our liabilities towards our customers, channel partners and relevant third parties may not withstand legal challenges, and certain liabilities may not be limited or capped. Additionally, any insurance coverage we may have may not adequately cover all claims asserted against us or may cover only a portion of such claims. An actual or perceived cyber attack could also cause us to suffer reputational harm, lose existing customers and potential new customers, or deter new and existing customers from purchasing or implementing our products.
We face intense competition from a wide variety of IT security vendors operating in different market segments and across diverse IT environments, which may challenge our ability to maintain or improve our competitive position or to meet our planned growth rates.
The IT security market in which we operate is characterized by intense competition, constant innovation, rapid adoption of different technological solutions and services, and evolving security threats. We compete with a multitude of companies that offer a broad array of IT security products that employ different approaches and delivery models to address these evolving threats.
We may face competition due to changes in the manner that organizations utilize IT assets and the security solutions applied to them, such as the provision of privileged account security functionalities as part of public cloud providers’ infrastructure offerings, or cloud-based identity management solutions. Limited IT budgets may also result in competition with providers of other advanced threat protection solutions such as McAfee, LLC, Palo Alto Networks, Splunk Inc., and NortonLifeLock, Inc. (formerly known as Symantec Corporation acquired by Broadcom Inc.). We also may compete, to a certain extent, with vendors that offer products or services in adjacent or complementary markets to privileged access management, including identity management vendors and cloud platform providers such as Amazon Web Services, Google Cloud Platform, and Microsoft Azure. As the privileged access management market has matured significantly over the recent years, the entry barrier is now lower and it is easier for competitors to compete in the market. Some of our competitors are large companies and have wider technical and financial resources and broader customer bases used to bring competitive solutions to the market. These companies may already have existing relationships as an established vendor for other product offerings, and certain customers may prefer one single IT vendor for product security procurement rather than purchasing solely based on product performance. Such companies may use these advantages to offer products and services that are perceived to be as effective as ours at a lower price or for free as part of a larger product package or solely in consideration for maintenance and services fees, which could result in increased market pressure to offer our solutions and services at lower prices. They may also develop different products to compete with our current solutions and respond more quickly and effectively than we do to new or changing opportunities, technologies, standards or client requirements or enjoy stronger sales and service capabilities in certain regions. Additionally, niche vendors are developing and marketing lower cost solutions with limited privileged access management functionality that may impact our ability to maintain premium market pricing.
Our competitors may enjoy potential competitive advantages over us, such as:
●
greater name recognition, a longer operating history and a larger customer base, notwithstanding the increased visibility of our brand in recent years since our initial public offering;
●
larger sales and marketing budgets and resources;
●
broader distribution and established relationships with channel partners, advisory firms and customers;
●
increased effectiveness in protecting, detecting and responding to cyber attacks;
●
greater or localized resources for customer support and provision of services;
●
greater speed at which a solution can be deployed and implemented;
●
greater resources to make acquisitions;
●
larger intellectual property portfolios; and
●
greater financial, technical and other resources.
Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources and capabilities. Current or potential competitors have been acquired and consolidated or may be acquired by third parties with greater resources in the future. As a result of such acquisitions, our current or potential competitors may be able to adapt more quickly to new technologies and customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of other opportunities more readily or develop and expand their product and service offerings more quickly than we do. Larger competitors with more diverse product offerings may reduce the price of products that compete with ours in order to promote the sale of other products or may bundle them with other products, which would lead to increased pricing pressure on our products and could cause the average sales prices for our products to decline. Similarly, we may also face increased competition following an acquisition of new lines of business that compete with providers of such technologies or from security vendors or other companies in adjacent markets extending their solutions into privilege access management. Wemay be at a competitive disadvantage to our privately-held competitors, as they may not face the same accounting, auditing and legal standards we do as a public company. Such privately-held competitors may face less public scrutiny than we do and may be less risk-averse than we are, and therefore may have greater operational flexibility.
Furthermore, an increasing number of independent industry analysts and researchers, regularly evaluate, compare and publish reviews regarding the functionality of IT security products, including ours. These reviews may significantly influence the market perception of our products, and our reputation and brand could be harmed if they publish negative reviews of our products or increasingly positive reviews of our competitors’ products, or do not view us as a market leader.
In addition, other IT security technologies exist or could be developed in the future by current or future competitors, and our business could be materially and adversely affected if such technologies are widely adopted. We may not be able to successfully anticipate or adapt to changing technology or customer requirements on a timely basis, or at all. If we fail to keep up with technological changes or to convince our customers and potential customers of the value of our solutions even in light of new technologies, our business, results of operations and financial condition could be materially and adversely affected.
We currently have a working capital deficit and negative cash flow from operations and are uncertain if and when we will be able to pay our current liabilities.
Our working capital deficit was approximately
$4.5$3.4 million as of June 30,
2018.2020. This deficit consists of
$11,412$30,251 in current assets, offset by
$4,525,651$3,411,011 in current liabilities. In addition, we had negative cash flow from operations for the year ended June 30,
20182020 of approximately
$59,401.$107,000. We do not have any liquid or other assets that can be liquidated to pay our current liabilities while we continue to incur additional liabilities to our officer and certain service providers who are working to prepare the documents required to be filed with the Securities and Exchange Commission to enable our common shares to be registered for trading. Since we currently have limited operations, the only ways we have of paying our current liabilities are to issue our common or preferred shares to our creditors or to issue unsecured promissory notes which may include certain features such as convertibility into common or preferred shares or warrants to purchase additional common or preferred shares in the future.
We currently do not have sufficient capital to finance the anticipated recurring costs of being a
publicly-tradedpublicly traded company.
As of
August 20, 2018,October 9, 2020, we had
minimalapproximately $2,600 in cash on hand. We anticipate incurring incremental annual costs of approximately $180,000 related to
beingmaintaining a
publicly-tradedpublicly traded company. We will need to raise additional capital to support our public-company-related activities.
We had
$3,722,244$1,883,784 of convertible notes, notes payable, and accrued interest payable as of June 30,
2018,2020, of which
$1,853,784 of this
entire amount is past due, and we do not have the funds necessary to pay these obligations.
In addition to funding our operating expenses, we need capital to pay various debt obligations totaling approximately
$3.7$1.9 million as of June 30,
20182020 which are either currently past due or which are due in the current fiscal year. Currently, there is
$1,765,949$822,962 principal amount of the convertible notes payable which is past due,
$270,241$205,000 principal of the notes payable which is past due, and
$1,686,053$677,857 of accrued interest which is past due. The interest on the past due principal amounts will continue to accrue monthly at their stated rates. Holders of past due notes do not have a security interest in our assets. The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our operations.
In the event we consummate a transaction with a profitable company, we may not be able to utilize our net operating loss carryover which may have a negative impact on your investment.
If we enter into a combination with a business that has operating income, we cannot assure you that we will be able to utilize all or even a portion of our existing net operating loss carryover for federal or state tax purposes following such a business combination. If we are unable to make use of our existing net operating loss carryover, the tax advantages of such a combination may be limited, which could negatively impact the price of our stock and the value of your investment. These factors will substantially increase the uncertainty, and thus the risk, of investing in our shares.
Economic conditions may affect our ability to obtain financing and to complete a merger or acquisition.
Due to general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will need. In the presence of these economic conditions, we may have difficulty raising sufficient capital to support the investigation of potential business opportunities, and to consummate a merger or acquisition. These factors substantially increase the uncertainty, and thus the risk, of investing in our shares.
In December 2019, a novel coronavirus (“COVID-19”) emerged and has subsequently spread worldwide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state, and local governments mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus.
As the COVID-19 pandemic is complex and rapidly changing, the full extent and duration of the impact of COVID-19 on the Company’s operation and financial performance is currently unknown and depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets.
There are a number of factors related to our common stock which may have an adverse effect on our shareholders.
Shareholders’ interests in our Company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities. In the event that we are required to issue additional shares, enter into private placements to raise financing through the sale of equity securities or acquire business interests in the future from the issuance of shares of our common stock to acquire such interests, the interests of existing shareholders in our Company will be diluted and existing shareholders may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we do issue additional shares, it will cause a reduction in the proportionate ownership and voting power of all existing shareholders.
We have certain provisions in our Articles of Incorporation and Bylaws, and there are other provisions under Florida law, that may serve to make a takeover of our Company more difficult.
Provisions of our articles of incorporation and bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders. Provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer, or prevent a takeover attempt. In addition, certain provisions of Florida law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation’s disinterested stockholders.
Voting power of our shareholders is highly concentrated by insiders.
Our officers and directors control, either directly or indirectly, a substantial portion of our voting securities. As of June 30,
2018,2020, our executive officer and directors beneficially owns
4,577,739390,312,564 shares of Common Stock, or approximately
40%25% of our outstanding shares of Common Stock. In addition, our executive officer owns the only issued and outstanding share of Series AA Convertible Preferred Stock which entitles him to 51% of the Common votes on any matter requiring a shareholder vote. Therefore, our management may significantly affect the outcome of all corporate actions and decisions for an indefinite period of time including the election of directors, amendment of charter documents and approval of mergers and other significant corporate transactions.
Our common stock is quoted in the over the counter market on the OTC Pink.
Our common stock is quoted on the OTC Pink. OTC Pink offers a quotation service to companies that are unable to list their securities on an exchange or for companies, such as ours, whose securities are not eligible for quotation on the OTC Bulletin Board. The requirements for quotation on the OTC Pink are considerably lower and less regulated than those of the OTC Bulletin Board or an exchange. Because our common stock is quoted on the OTC Pink, it is possible that even fewer brokers or dealers would be interested in making a market in our common stock which further adversely impacts its liquidity.
The tradability of our common stock is limited under the penny stock regulations which may cause the holders of our common stock difficulty should they wish to sell their shares.
Because the quoted price of our common stock is less than $5.00 per share, our common stock is considered a “penny stock,” and trading in our common stock is subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a “penny stock,” including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities and this limited liquidity will make it more difficult for an investor to sell his shares of our common stock in the secondary market should the investor wish to liquidate the investment. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.
Item 1B. Unresolved Staff Comments.
Not applicable.
We rent our principal executive offices from an unrelated third party on a month-to-month basis for a monthly rental of $196.$496.
Item 3. Legal Proceedings.
We know
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. Plaintiff asserts that the Company failed to convert two convertible notes held by Plaintiff. The Company is vigorously contesting this claim.Since the onset of the COVID-19 pandemic, no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. substantive work has been conducted on this case. There are no other proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
Item 4. Mine Safety Disclosures.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Our common shares are quoted on the OTC Pink Quotation System under the symbol “VISM,” but trade infrequently.
The high and low bid prices of our common stock for the periods indicated below are as follows:
| Fiscal Year Ended June 30, 2018 | | High | | | Low | |
| | | | | | | |
| Quarter Ended September 30, 2017 | | $ | 0.909 | * | | $ | 0.303 | * |
| Quarter Ended December 31, 2017 | | $ | 0.606 | * | | $ | 0.303 | * |
| Quarter Ended March 31, 2018 | | $ | 0.909 | * | | $ | 0.303 | * |
| Quarter Ended June 30, 2018 | | $ | 0.303 | * | | $ | 0.060 | * |
| Fiscal Year Ended June 30, 2017 | | High | | | Low | |
| | | | | | | |
| Quarter Ended September 30, 2016 | | $ | 126.424 | * | | $ | 14.849 | * |
| Quarter Ended December 31, 2016 | | $ | 38.909 | * | | $ | 9.394 | * |
| Quarter Ended March 31, 2017 | | $ | 7.879 | * | | $ | 1.212 | * |
| Quarter Ended June 30, 2017 | | $ | 3.030 | * | | $ | 0.606 | * |
* close price adjusted for splits
| Fiscal Year Ended June 30, 2020 | | |
| | | |
| Quarter Ended September 30, 2019 | $0.1000 | $0.0050 |
| Quarter Ended December 31, 2019 | $0.0160 | $0.0015 |
| Quarter Ended March 31, 2020 | $0.0034 | $0.0007 |
| Quarter Ended June 30, 2020 | $0.0020 | $0.0002 |
| Fiscal Year Ended June 30, 2019 | | |
| | | |
| Quarter Ended September 30, 2018 | $1.44 | $0.16 |
| Quarter Ended December 31, 2018 | $0.47 | $0.06 |
| Quarter Ended March 31, 2019 | $0.30 | $0.01 |
| Quarter Ended June 30, 2019 | $0.23 | $0.04 |
As of
August 15, 2018,October 9, 2020, there were
867930 stockholders of record of our Common Stock.
We have not paid any cash dividends and do not anticipate or contemplate paying dividends in the foreseeable future.
Recent Sales of Unregistered
issuance of Securities
During the
fiscal first quarter,year ended June 30, 2020 the Company issued
203,766954,210,518 shares of its common stock
uponrelated to the conversion of
$40,030$333,219 of principal
and accrued interest of its
outstanding convertible notes
payable, at an average
contract conversion price of
$0.1965$0.0004 per share.
The fair value of the shares issued was $1,059,572, resulting in a loss on debt settlement of $593,907.
Stock Based Compensation and Stock Based Consulting Services Expense
During the
fiscal second quarter,year ended June 30, 2020 the Company issued
79,334199,850,000 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 994,444 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.
During May 2018 the Company issued 1,500,000 shares of its$0.0001 par value common stock to its CEO, Mark Lucky,five consultants, as compensation.compensation for services rendered. The shares were valued at $0.06,$198,735, or $0.006 per share.
During 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 2018year ended June 30, 2020 the Company issued 1,000,000348,000,000 shares of its $0.0001 par value common stock to Tom Grbelja,our Directors and Officer, as compensation for his service on the Board of Directors.services rendered. 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.
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.
Share Repurchases
None.
$148,000, or $0.00186 per share. Rule 10B-18 Transactions
During the year ended June 30, 2020, there were no repurchases of the Company’s common stock by the Company
Item 6. Selected Financial Data.
Not Applicable.
As a “smaller reporting company”, we are not required to provide information required by this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with our financial statements and accompanying notes included in this Annual Report on Form 10-K.
The Company was incorporated in Nevada as Jaguar Investments, Inc. during October 1987. During March 2003, a wholly owned subsidiary of the Company merged with Freight Rate, Inc., a development stage company in the logistics software business. During May 2003, the Company changed its name to Power2Ship, Inc. During October 2006, the Company merged with a newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc., a Nevada corporation, with the Company surviving but its name changed to Fittipaldi Logistics, Inc. effective November 2006. During December 2007, the Company merged with a newly formed, wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada corporation, with the Company surviving but renamed NuState Energy Holdings, Inc. effective December 2007. In March
20182019, the Company changed its name to Visium Technologies, Inc.
On February 12, 2009, the Company filed Form 15 to terminate registration of its common stock under section 12(g) of the Securities Exchange Act of 1934 and subsequently has not submitted any filings to the Securities and Exchange Commission. During the period from February 2009 through April 2010, the Company had several changes to its officers and directors and moved its offices twice. The Company’s Chairman and President since April 2010, and its Chief Executive Officer from July 2010 to April 2017, and then reappointed as Chief Executive Officer on September 25, 2017 until
Since February 12, 2018
was Kevin Yates.The currentMark Lucky has served as Chairman and CEO since February 12, 2018 is Mark Lucky.CEO. He currently also serves as CFO. The Company’s headquarters is located at 11325 Random Hills Road,4094 Majestic Lane, Suite 360, Fairfax, VA 22124. Since February 2018, the Company’s current managementCompany has focused on creating a world-class cybersecurity/digital risk management company, with a focus on network security, threat visualization, Internet of Things, (“IoT”), mobile security, pinpoint threat identification, and big-data analytics, and smart cities technologies.analytics. Our solutions address the growing security and compliance complexities and risks resulting from the increasing adoption of cloud computing and the proliferation of geographically dispersed IT assets.
In July 2018 VisiumMarch 2019, the Company entered into a license agreement with George Mason UniversityThe MITRE Corporation to commercialize and sell CyGraph, a network assessment and visualization toolcybersecurity application that is backed by eight issued patents. This technology allows customers to collecta tool for cyber warfare analytics, visualization, and analyze large amounts of IT security data, discover and prioritize vulnerabilities, and take remedial actions. In addition, we have 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.In addition, the Company is focused on increasing the Company’s shareholder value by improving the Company’s balance sheet by reducing liabilities and regaining use of certain of its intellectual property and software.
knowledge management.
Selling, General, and Administrative Expenses
For the year ended June 30,
2018,2020, selling, general and administrative expenses were
$1,043,230$917,993 as compared to
$2,056,854$2,721,467 for the year ended June 30,
2017,2019, a decrease of
$1,013,624$1,803,474 or approximately
49%67.1%. For the years ended June 30,
20182020 and
20172019 selling, general and administrative expenses consisted of the following:
| | | 2018 | | | 2017 | | | Increase/ (Decrease) | | | % Change | |
| Accounting expense | | $ | 13,854 | | | $ | 75,400 | | | $ | (61,546 | ) | | | (81.63 | )% |
| Consulting fees | | | 100,000 | | | | 105,650 | | | | (5,650 | ) | | | (5.35 | )% |
| Salaries | | | 240,000 | | | | 720,000 | | | | (480,000 | ) | | | (66.67 | )% |
| Stock-based consulting expense | | | 299,595 | | | | - | | | | 299,595 | | | | 100 | % |
| Stock-based Compensation | | | 358,500 | | | | 1,080,000 | | | | (721,500 | ) | | | (66.81 | )% |
| Legal fees | | | 9,240 | | | | 64,000 | | | | (54,760 | ) | | | (85.56 | )% |
| Travel | | | - | | | | 732 | | | | (732 | ) | | | (100.00 | )% |
| Other | | | 22,040 | | | | 11,072 | | | | 10,968 | | | | 99.06 | % |
| | | $ | 1,043,230 | | | $ | 2,056,854 | | | $ | (1,013,624 | ) | | | (49.28 | )% |
| | | 2020 | | | 2019 | | | Increase/ (Decrease) | | | % Change | |
| Accounting expense | | $ | 5,581 | | | $ | 11,000 | | | $ | (5,419 | ) | | | (49.3 | )% |
| Consulting fees | | | 103,800 | | | | 125,500 | | | | (21,700 | ) | | | (17.3 | )% |
| Salaries | | | 336,000 | | | | 320,000 | | | | 16,000 | | | | 5.0 | % |
| Legal and professional fees | | | 59,550 | | | | 82,630 | | | | (23,080 | ) | | | (27.9 | )% |
| Travel expense | | | 9,786 | | | | 3,342 | | | | 6,444 | | | | 192.8 | % |
| Occupancy expense | | | 4,719 | | | | 9,319 | | | | (4,600 | ) | | | (49.4 | )% |
| Telephone expense | | | 3,600 | | | | 3,600 | | | | - | | | | 0.0 | % |
| Marketing expense | | | 8,199 | | | | - | | | | 8,199 | | | | N/A | |
| Website expense | | | 2,951 | | | | 2,555 | | | | 396 | | | | 15.5 | % |
| Investor relations expense | | | 20,000 | | | | 28,500 | | | | (8,500 | ) | | | (29.8 | )% |
| Stock based consulting expense | | | 198,735 | | | | 174,500 | | | | 24,235 | | | | 13.9 | % |
| Stock based compensation | | | 148,000 | | | | 1,901,500 | | | | (1,753,500 | ) | | | (92.2 | )% |
| Other | | | 17,072 | | | | 59,021 | | | | (41,949 | ) | | | (71.1 | )% |
| | | | | | | | | | | | | | | | | |
| | | $ | 917,993 | | | $ | 2,721,467 | | | $ | (1,803,474 | ) | | | (66.3 | )% |
The decrease in selling, general and administrative expenses during fiscal
2018,2020, when compared with the prior year, is primarily due to a decrease in stock-based compensation,
legal expenses, and salaries, offset
primarily by increases in
salary expense, and stock-based consulting
expenses.Gain on expense.
Amortization Expense
| | | |
| | | |
| | | | |
| Customer relationships | $- | $141,970 | (100 | )% |
The increase in amortization expense is due to the amortization of the customer relationships intangible asset resulting from the acquisition of Threat Surface Solutions Group, LLC in 2018.
Change in
Fair Value of Derivative Liability
| | | Years ended | |
| | | June 30, | |
| | | 2018 | | | 2017 | |
| Gain (loss) on change in fair value of derivative liabilities | | $ | - | | | $ | 636,096 | |
| | |
| | |
| | | |
| Gain (loss) on change in fair value of derivative liabilities | $385,367 | $(183,130 | ) |
Changes in fair value of derivative liabilities results from the changes in the fair value of the derivative liability due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The increase in fair value of derivative liabilities recognized during fiscal
20182020 is primarily due to a change in accounting estimate related to the accounting for derivative
liabilities.During fiscal 2017, the Company’s management hadliabilities as a changeresult of a decrease in accounting estimate related to the accounting for derivative liabilities. Due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, theprice.
Derivative Liability Expense
| | | Years Ended | | | | |
| | | June 30, | | | % | |
| | | 2020 | | | 2019 | | | Change | |
| Derivative liability expense | | $ | 61,396 | | | $ | 341,423 | | | | 82.0 | % |
The Company issued convertible notes
were determined to have no basis for applyingin January 2019 and October 2019 which provisions contained variable price conversion terms, resulting in a derivative liability
toexpense, measured as of the
conversionissuance date of
thesethe notes.
As a result, the Company recorded a change in accounting estimate which resulted in a gain on change in derivative liability of approximately $636,000. Interest Expense
| | | Years Ended | | | | |
| | | June 30, | | | % | |
| | | 2018 | | | 2017 | | | Change | |
| Interest Expense | | $ | 275,975 | | | $ | 339,351 | | | | (18.7 | )% |
| | | Years Ended | | | | |
| | | June 30, | | | % | |
| | | 2020 | | | 2019 | | | Change | |
| Interest Expense | | $ | 323,021 | | | $ | 276,087 | | | | 17.0 | % |
Interest expense represents the stated interest of notes and convertible notes payable as well as the amortization of debt discount. The decreaseincrease in interest expense during fiscal 20182020 is primarily due to lowerhigher amortization of debt discount of $81,667, along with$158,333.
Gain on Debt Write-Off
| | | Years Ended | |
| | | June 30, | |
| | | 2020 | | | 2019 | |
| Gain (loss) on debt write off/conversions | | $ | (593,907 | ) | | $ | 2,303,147 | |
During the twelve months ended June 30, 2020 the Company incurred losses on the convertible note conversions, which were valued at fair value on the date of the respective conversions, totaling $593,907.
In March 2019, the Company obtained a decreaselegal opinion to extinguish aged debt totaling $2,292,162 as detailed in the average interest ratefollowing table. Each of the individual debt instruments were determined to be beyond the statute of limitations and it was determined that the Company has a complete defense to liability related to this debt under the applicable statute of limitations.
| Accounts payable and accrued expenses | | $ | 312,001 | |
| Accrued interest expense | | | 1,184,214 | |
| Convertible notes payable | | | 671,706 | |
| Promissory notes payable | | | 65,241 | |
| | | $ | 2,292,162 | |
Loss on
interest-bearing liabilities.| Gain on Debt Settlement | | Years Ended | |
| | | June 30, | |
| | | 2018 | | | 2017 | |
| Gain on debt settlement | | $ | 25,137 | | | $ | - | |
| Debt Conversion Expense | | Years Ended | |
| | | June 30, | |
| | | | 2018 | | | | 2017 | |
Debt conversion expense | | $ | 96,272 | | | $ | - | |
impairment
| | | Years Ended | |
| | | June 30, | |
| | | 2020 | | | 2019 | |
| Loss on impairment | | $ | - | | | $ | 407,002 | |
In June 2019 Management determined that the intangible asset attributed to the purchase of Threat Surface Solutions Group, LLC had no future benefit to the Company. As a result, the net book value of the asset was written off in full, as follows:
| Net intangible asset as of date of impairment | | $ | 459,317 | |
| Reversal of contingent liability | | | (52,315 | ) |
| Loss on impairment | | $ | 407,002 | |
Liquidity and Capital Resources
| | | Balance at June 30, | |
| | | 2018 | | | 2017 | |
| Cash | | $ | 11,412 | | | $ | 2,313 | |
| Accounts payable and accrued expenses | | | 626,584 | | | | 565,468 | |
| Accrued compensation | | | 155,825 | | | | 280,125 | |
| Notes, convertible notes, and accrued interest | | | 3,722,242 | | | | 4,086,051 | |
| | | Balance at June 30, | |
| | | 2020 | | | 2019 | |
| Cash | | $ | 30,251 | | | $ | 18,668 | |
| Accounts payable and accrued expenses | | | (333,805 | ) | | | (213,805 | ) |
| Accrued compensation | | | (652,529 | ) | | | (316,529 | ) |
| Notes, convertible notes, and accrued interest | | | (1,883,784 | ) | | | (1,863,898 | ) |
At June 30,
20182020 and
2017,2019, 100% of our total assets consisted of cash.
We do not have any material commitments for capital expenditures.
The objective of liquidity management is to ensure that we have ready access to sufficient funds to meet commitments and effectively implement our growth strategy. Our primary sources are financing activities such as the issuance of notes payable and convertible notes payable. In the past, we have mostly relied on debt and equity financing to provide for our operating needs.
We were unable to generate sufficient funds from operations to fund our ongoing operating requirements through June 30,
2018.2020. As of
August 20, 2018,October 9, 2020, we had approximately
$60,000$2,600 on hand. We may need to raise funds to enhance our working capital and use them for strategic purposes. If such need arises, we intend to generate proceeds from either debt or equity financing.
We intend to finance our operations using equity financing. We do not anticipate incurring capital expenditures for the foreseeable future. We anticipate that we will need to raise approximately $180,000 per year in the near term to finance the recurring costs of being a
publicly-traded company, and from $2 to $5 million to implement a plan of operation. We anticipate we will need to raise up to $2 million to complete the acquisitions that we have identified. If these funds cannot be obtained, we may not be able to consummate an acquisition or merger, and our business may fail as a result.publicly traded company.
The accompanying financial statements have been prepared on a going concern basis. The Company has used net cash in its operating activities of
approximately $59,401$106,757 and
$278,993$566,745 during the years ended June 30,
20182020 and
2017,2019, respectively, and has a working capital deficit of approximately
$4.5$3.4 million and
$4.9$3.2 million at June 30,
20182020 and
2017,2019, respectively. 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, once a merger with an operating company is consummated. Management plans may continue to provide for its capital requirements by issuing additional equity securities and debt and the Company will continue to find possible acquisition targets. 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.
| | | Years Ended | |
| | | June 30, | |
| | | 2018 | | | 2017 | |
| Cash flows from operating activities: | | | | | | | | |
| Net income (loss) | | $ | (1,390,340 | ) | | $ | (1,760,109 | ) |
| Non-cash Adjustments: | | | | | | | | |
| Gain on extinguishment of debt | | | (25,137 | ) | | | | |
Debt conversion expense | | | 96,272 | | | | - | |
| Stock based compensation | | | 658,095 | | | | 1,080,000 | |
| Amortization of debt discount | | | 27,083 | | | | 81,667 | |
| (Gain) loss on change in derivative liability | | | - | | | | (636,096 | ) |
| Convertible note issued for consulting expense | | | - | | | | 480,000 | |
| Changes in assets and liabilities | | | | | | | | |
| Accrued interest | | | 239,670 | | | | 257,684 | |
| Accrued compensation | | | 240,000 | | | | 264,302 | |
| Accounts payable and accrued expenses | | | 94,956 | | | | (46,442 | ) |
| Net cash used in operations | | | (59,401 | ) | | | (278,993 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Advance from officers | | | 21,000 | | | | - | |
| Proceeds from sale of common stock | | | 10,000 | | | | - | |
| Proceeds from issuance of short term note payable | | | - | | | | 30,000 | |
| Proceeds from issuance of convertible notes payable | | | 37,500 | | | | 249,500 | |
| Net cash provided by financing activities | | | 68,500 | | | | 279,500 | |
| | | | | | | | | |
| Net increase in cash | | $ | 9,099 | | | $ | 507 | |
| | | Years Ended | |
| | | June 30, | |
| | | 2020 | | | 2019 | |
| Cash flows from operating activities: | | | | | | | | |
| Net loss | | $ | (1,542,450 | ) | | $ | (1,757,932 | ) |
| Non-cash Adjustments: | | | | | | | | |
| Gain (loss) on debt settlement and write off expense | | | 593,907 | | | | (2,303,147 | ) |
| Stock based compensation | | | 346,735 | | | | 2,076,000 | |
| Amortization of debt discount | | | 206,249 | | | | 283,637 | |
| Derivative liability expense | | | 61,396 | | | | 341,423 | |
| (Gain) loss on change in derivative liability | | | (385,367 | ) | | | 183,130 | |
| Impairment expense | | | - | | | | 407,002 | |
| Changes in assets and liabilities | | | | | | | | |
| Accrued interest | | | 145,941 | | | | 133,189 | |
| Accrued compensation | | | 336,000 | | | | 160,704 | |
| Accounts payable and accrued expenses | | | 130,832 | | | | (90,751 | ) |
| Net cash used in operations | | | (106,757 | ) | | | (566,745 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Advance from officers | | | 40,340 | | | | 41,000 | |
| Proceeds from sale of common stock | | | - | | | | 250,501 | |
| Proceeds from issuance of convertible notes payable, net of debt issuance costs | | | 78,000 | | | | 282,500 | |
| Net cash provided by financing activities | | | 118,340 | | | | 574,001 | |
| | | | | | | | | |
| Net increase in cash | | $ | 11,583 | | | $ | 7,256 | |
Year ended June 30,
20182020
Net cash used in operations in fiscal year 20182020 decreased by $219,592$459,987 or 79%81% from fiscal year 2017.2019. This cash was obtained through the sale of $37,500three convertible notes that netted the Company $78,000, and through advances of convertible promissory notes,cash made to the Company by its officers and directors of $40,340.
Year ended June 30, 2019
Net cash used in operations in fiscal year 2019 increased by $504,328 or 840% from fiscal year 2018. This cash was obtained through the sale of $10,0002,505,500 shares of the Company’s $0.0001 par value common stock, at a per share price of $0.10, or $250,501, the sale of convertible notes totaling $300,000, which netted the Company $282,500,and advances from directors of $21,000.Year ended June 30, 2017$41,000.
Net cash used in operations in fiscal year 2017 totaled $278,993. This cash was obtained through the sale of $249,500 of convertible promissory notes and the sale of $30,000 of short term notes payable.
Capital Raising Transactions
Issuance of Convertible Notes Payable
We generated
net proceeds of
$37,500$78,000 and
$279,500$282,500 during fiscal
20182020 and
2017,2019, respectively, from the issuance of convertible notes
payable and promissory notes.payable.
Convertible Notes Payable
The Company had convertible promissory notes aggregating approximately
$1.6 million$873,000 and
$2.21.075 million outstanding at June 30,
20182020 and
2017,2019, respectively. The accrued interest amounted to approximately
$1,493,000$503,000 and
$1,235,000$435,000 at June 30,
20182020 and
2017,2019, respectively.
There is no provision in the note agreements for adjustments to the interest rates on these notes in the event of default. The
Convertible Notes Payableconvertible notes payable bear interest at rates ranging between 10% and 18% per annum. Interest is generally payable monthly. The Convertible Notes Payable are generally convertible at rates ranging between
$1.875$0.0002 and
$0.75$22,500 per share, at the holders’ option. At June 30,
2018,2020, all convertible promissory notes have matured.
| | | Balance at | | | Balance at | |
| | | June 30, 2018 | | | June 30, 2017 | |
| Convertible Notes Payable | | $ | 1,617,984 | | | $ | 2,201,914 | |
| Discount on convertible notes | | | - | | | | (27,083 | ) |
| Notes Payable, net of discount | | $ | 1,617,984 | | | $ | 2,174,831 | |
Additionally, upon conversion, the holders of $192,000 of convertible promissory notes are also entitled to 12,800,000 warrants, exercisable at a rate of $37.50. The warrants expire 3 years from the date of issuance.
| | | Balance at | | | Balance at | |
| | | June 30, 2020 | | | June 30, 2019 | |
| Convertible Notes Payable | | $ | 852,962 | | | $ | 1,075,428 | |
| Discount on convertible notes | | | - | | | | (158,333 | ) |
| Notes Payable, net of discount | | $ | 852,962 | | | $ | 917,095 | |
Convertible notes payable to ASC Recap LLC
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 that was never consummated and therefore there was no performance by ASC to earn the notes. As a result, while the Company continues to carry the balance of these notes on its balance sheet, it does not believe the notes payable balances are owed. 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 50% of the lowest closing bid price of our common stock for the twenty days prior to conversion.
The Company had promissory notes aggregating approximately
$270,000$205,000 at June 30,
20182020 and
June 30, 2017.2019, respectively. The related accrued interest amounted to approximately
$245,237$175,000 and
$222,414$159,000 at June 30,
20182020 and
2017,2019, respectively.
There is no provision in the note agreements for adjustments to the interest rates on these notes in the event of default. The notes payable bear interest at rates
ranging between 8% andof 16% per annum. Interest is generally payable monthly. All promissory notes have matured as of June 30,
2018.2020.
Common Stock Warrants
WarrantsIn January 2020 we issued 500,000 warrants with a three-year life and a conversion price of $0.15 per share. These warrants have price protection provisions that allow for the reduction in the current exercise price upon the occurrence of certain events, including the CompanyAs’s issuance of common stock or securities convertible into or exercisable for common stock, such as options and warrants, at a price per share less than the exercise price then in effect. For instance, if the Company issues shares of its common stock or options exercisable for or securities convertible into common stock at an effective price per share of common stock less than the exercise price then in effect, the exercise price will be reduced to the effective price of the new issuance. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. Because it is indeterminate whether there is a sufficient number of authorized and unissued shares exists at the assessment date, the Company calculates a derivative liability associated with the warrants in accordance with FASB ASC Topic 815-40-25.
A summary of the status of the Company’s outstanding common stock warrants as of June 30,
2018, we had no outstanding warrants.2020 and changes during the period ending on that date is as follows:
| | | Number of | | | Weighted Average | |
| | | Warrants | | | Exercise Price | |
| Common Stock Warrants | | | | | | | | |
| Balance at June 30, 2019 | | | 500,000 | | | $ | 0.15 | |
| Granted | | | - | | |
| - | |
| Exercised | | | - | | | | - | |
| Forfeited | | | - | | | | - | |
| Balance at June 30, 2020 | | | 500,000 | | | $ | 0.15 | |
| | | | | | | | | |
| Warrants exercisable at end of period | | | 500,000 | | | $ | 0.15 | |
| | | | | | | | | |
| Weighted average fair value of warrants granted during the period | | | | | | $ | - | |
The
CorporationCompany recognizes all derivative financial instruments on its balance sheet at fair value.
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.Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.
Critical Accounting Policies
The Company’s critical accounting policies are as follows:
Convertible Instruments - The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with 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 in accordance with EITF 00-19. 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 that term is described).
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 the provisions of ASC 470 20 “Debt with Conversion 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 when necessary 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.
The Company believes the certain conversion features embedded in convertible notes payable are not clearly and closely related to the economic characteristics of the Company’s stock price. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation is most appropriate for the instrument (e.g., Black Scholes)Cox, Ross & Rubinstein Binomial Tree valuation model), the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is included in Item 15 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, who at June 30,
20182020 was also our principal executive and financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Chief Executive Officer concluded that, as of June 30,
2018,2020, our disclosure controls and procedures were not effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our Chief Executive Officer to allow timely decisions regarding required disclosure.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of June 30,
2018.2020. In making this assessment, our management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.
During our assessment of the design and the effectiveness of internal control over financial reporting as of June 30,
2018,2020, management identified the following material weaknesses:
| | ● | While we have processes in place, there are no formal written policies and procedures related to certain financial reporting processes; |
| | | |
| | ● | There is no formal documentation in which management specified financial reporting objectives to enable the identification of risks, including fraud risks; |
| | | |
| | ● | Our Board of Directors consistedconsists of threefour members, however we lack the resources and personnel to implement proper segregation of duties or other risk mitigation systems. |
A material weakness is “a significant deficiency, or a combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by us in a timely manner.” A significant deficiency is a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.
We intend to gradually improve our internal control over financial reporting to the extent that we can allocate resources to such improvements. We intend to prioritize the design of our internal control over financial reporting starting with our control environment and risk assessments and ending with control activities, information and communication activities, and monitoring activities. Although we believe the time to adapt in the next year will help position us to provide improved internal control functions into the future, in the interim, these changes caused control deficiencies, which in the aggregate resulted in a material weakness. Due to the existence of these material weaknesses, our management, including our Chief Executive Officer, concluded that our internal control over financial reporting was not effective as of June 30,
2018.2020.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit smaller reporting companies to provide only the management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2018,2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names, ages and principal position of our executive officers and directors as of June 30,
2018:2020:| Name | | Age | | Position |
| Mark Lucky | | 5961 | | Chairman of the Board, Chief Executive Office, Chief Financial Officer |
| Thomas Grbelja (1)(2) | | 5961 | | Director |
| Emmanuel Esaka, MD | | 47 | | Director |
| Paul Favata (1)(2) | | 5355 | | Director |
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Mr. Mark Luckyhas served as the Company’s Chief Executive Officer, Treasurer, Secretary, and Chairman of the Company’s Board of Directors since February
2018.2019. Mr. Lucky has been a certified public accountant and has more than 15 years of experience serving as a public company chief financial officer. His professional experience includes working with start-ups, development-stage and mature companies in a wide variety of industries. From May 2014 until February
20182019 Mr. Lucky has worked as a consultant to various public and private companies, including Visium Technologies, Inc., Intelligent Living America, Inc. (OTCBB: ILIV), and Ronn Motor Group, Inc. Prior to that, Mr. Lucky served as the CFO for IceWeb Inc. (OTCBB: IWEB) from March 2007 to May 2014. From 2004 to 2005 he served as Vice President of Finance and Administration at Galt Associates, Inc., a Sterling, Virginia informatics/ technology and medical research services company and from 2001 to 2004 he was Vice President of Finance and Administration of MindShare Design, Inc., a San Francisco, California based internet technology company. During his career Mr. Lucky has also been employed by Axys Pharmaceuticals, Inc (NASDAQ: AXPH) a San Francisco, California-based early stage drug discovery biotech company, PriceWaterhouseCoopers, LLC, COMPASS Management and Leasing, Inc., Mindscape, Inc., The Walt Disney Company and KPMG. Mr. Lucky formerly served as a member of the board of directors of Intelligent Living America, Inc., VOIS Inc. and HASCO Medical, Inc. Mr. Lucky received a B.A. degree in Economics from the University of California, Los Angeles.
We believe that Mr. Lucky’s extensive senior management and operational experience brings valuable knowledge to our board of directors and that these experiences, qualifications, and attributes have led to our conclusion that Mr. Lucky should be serving as a member of our board of directors.
Mr. Thomas Grbelja previously served as a director of Realbiz Media Group, Inc. (OTCBB: RBIZ), and served as their Chief Financial Officer from June 19, 2015 to January 2, 2017. Mr. Grbelja has spent over 30 years as a Certified Public Accountant providing a wide variety of professional accounting, tax and financial consulting services to professional service, manufacturing, and construction industry participants. Since 1990 he has served as the President and a Founding Member of Burke Grbelja & Symeonides, LLC, Certified Public Accountants, an accounting firm based in Rochelle Park, New Jersey. In addition, between 1983 and 1990, Mr. Grbelja worked as an accountant at Coopers & Lybrand, where he was responsible for the overall audit engagement, including filings with the SEC, for certain large, publicly traded companies. He received his undergraduate degree in accounting at Fairleigh Dickinson University and is a Certified Public Accountant.
Based on his business experience the Company believes that Mr. Grbelja is well-qualified to serve on the Company’s Board of Directors.
Mr. Paul Favata is a 29-year Wall Street veteran who began his career on the American Stock Exchange (AMEX), working for two smaller member firms, before moving to the New York Stock Exchange (NYSE). After five years with one of the largest specialist firms on the floor, Mr. Favata left the exchange in 1992 to work on the sell-side. Mr. Favata spent the bulk of the 1990’s with a small boutique firm working in both the retail and institutional sales areas. Mr. Favata held the position of Senior Vice President of Finance at a small,
privately-heldprivately held consulting firm that advised clients on acquisitions and long-term financing strategies. Since 2008, Mr. Favata has held various C-level executive positions
including;including as Chief Financial Officer of a $60 million annual revenue telecom provider having management oversight and responsibility for all financial functions while overseeing all revenues, costs, capital expenditures, investments, and debt. Most recently, President of a publicly traded company specializing in the acquisition and integration of IT and Cloud Technology service providers and Internet and web technologies. Mr. Favata resides, with his family, in Saint Petersburg, Florida.
We believe that Mr. Favata’s extensive senior management and operational experience brings valuable knowledge to our board of directors and that these experiences, qualifications, and attributes have led to our conclusion that Mr. Favata should be serving as a member of our board of directors.
Dr. Emmanuel Esaka. Dr. Esaka brings decades of experience as a successful surgeon. He has earned an MBA from Auburn University, and graduated Cum Laude with Highest Honors from Università Degli Studi di Bologna, Italy School of Medicine and Surgery. He is the Founder, Owner, and CEO of Advanced Care Obstetrics and Gynecology PA in Wilmington, Delaware, Co-Founder and Managing Director of 3N Pharma USA, Inc., Founder and CEO of Cameroon American Health System, Inc., and Co-Founder of Caritas Home Health Services, Inc. Dr. Osaka also served as attending obstetrics and gynecology at Irwin Army Community Hospital, and serves as a Director of Meiger Health, Inc.
We believe that Dr. Esaka’s extensive experience and business background adds valuable knowledge to our board of directors and that these experiences, qualifications, and attributes have led to our conclusion that Dr. Esaka should be serving as a member of our board of directors.
There are no family relationships among our directors or executive officers.
Committees of the Board of Directors
Our Board of Directors has established an Audit Committee, and a Compensation Committee, and meet as a whole to fulfill the functions of the Nominating Committee.
Audit Committee. Mr. Favata and Mr. Grbelja are members of the Audit Committee. The Audit Committee of our Board of Directors was formed to assist the Board of Directors in fulfilling its oversight responsibilities for the integrity of our consolidated financial statements, compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence, and the performance of our internal audit function and independent auditors. The Audit Committee will also prepare the report that SEC rules require be included in our annual proxy statement. The Audit Committee has adopted a charter which sets forth the parameters of its authority The Audit Committee Charter provides that the Audit Committee is empowered to:
| | ● | Appoint, compensate, and oversee the work of the independent registered public accounting firm employed by our company to conduct the annual audit. This firm will report directly to the audit committee; |
| | | |
| | ● | Resolve any disagreements between management and the auditor regarding financial reporting; |
| | | |
| | ● | Pre-approve all auditing and permitted non-audit services performed by our external audit firm; |
| | | |
| | ● | Retain independent counsel, accountants, or others to advise the committee or assist in the conduct of an investigation; |
| | | |
| | ● | Seek any information it requires from employees - all of whom are directed to cooperate with the committee’s requests - or external parties; |
| | | |
| | ● | Meet with our officers, external auditors, or outside counsel, as necessary; and |
| | | |
| | ● | The committee may delegate authority to subcommittees, including the authority to pre-approve all auditing and permitted non-audit services, provided that such decisions are presented to the full committee at its next scheduled meeting. |
Each Audit Committee member is required to:
| | ● | satisfy the independence requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934, and all rules and regulations promulgated by the SEC as well as the rules imposed by the stock exchange or other marketplace on which our securities may be listed from time to time, and |
| | | |
| | ● | meet the definitions of “non-employee director” for purposes of SEC Rule 16b-3 and “outside director” for purposes of Section 162(m) of the Internal Revenue Code. |
Each committee member is required to be financially literate and at least one member is to be designated as the “financial expert,” as defined by applicable legislation and regulation. No committee member is permitted to simultaneously serve on the audit committees of more than two other public companies. As we expand our Board of Directors with additional independent directors the number of directors serving on the Audit Committee will also increase.
A copy of the Audit Committee Charter is available on our website at www.visiumtechnologies.com under “Investor Relations”.
Compensation Committee. Mr. Favata and Mr. Grbelja are members of the Compensation Committee. The Compensation Committee was appointed by the Board to discharge the Board’s responsibilities relating to:
| | ● | compensation of our executives, |
| | | |
| | ● | equity-based compensation plans, including, without limitation, stock option and restricted stock plans, in which officers or employees may participate and |
| | | |
| | ● | arrangements with executive officers relating to their employment relationships with our company, including employment agreements, severance agreements, supplemental pension, or savings arrangements, change in control agreements and restrictive covenants. |
The Compensation Committee has adopted a charter. The Compensation Committee charter provides that the Compensation Committee has overall responsibility for approving and evaluating executive officer compensation plans, policies, and programs of our company, as well as all equity-based compensation plans and policies. In addition, the Compensation Committee oversees, reviews, and approves all of our ERISA and other employee benefit plans which we may establish from time to time. The Compensation Committee is also responsible for producing an annual report on executive compensation for inclusion in our proxy statement and assisting in the preparation of certain information to be included in other periodic reports filed with the SEC.
Each Compensation Committee member is required to:
| | ● | satisfy the independence requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934, and all rules and regulations promulgated by the SEC as well as the rules imposed by the stock exchange or other marketplace on which our securities may be listed from time to time, and |
| | | |
| | ● | meet the definitions of “non-employee director” for purposes of SEC Rule 16b-3 and “outside director” for purposes of Section 162(m) of the Internal Revenue Code. |
Pursuant to our Compensation Committee Charter, the Compensation Committee is charged with evaluating and recommending for approval by the Board of Directors the compensation of our executive officers. In addition, the Compensation Committee also evaluates and makes recommendations to the entire Board of Directors regarding grants of options which may be made as director compensation. The Compensation Committee does not delegate these authorities to any other persons, nor does it use the services of any compensation consultants.
Section 16(a) Beneficial Ownership Reporting
Compliance
with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC.Securities and Exchange Commission. Such executive officers, directors and ten percent stockholderspersons are also required by the SEC rulesregulations to furnish to us with copies of all Section 16(a) reports that they file. Based
To our knowledge, based solely on our review of the copies of such
forms received byreports furnished to us
orand written representations
from certain reporting persons that
theyno other reports were
not required to
file a Form 5,be filed during fiscal 2020, we believe that
during thefor fiscal
year ended June 30, 2018, our executive officers, directors2020, all required reports were filed on a timely basis under Section 16(a), except for Dr Esaka, who had not yet filed his initial Form 3 or subsequent Form 4 and
ten percent stockholders complied with all Section 16(a) filing requirements applicable to such persons.Form 5.
We have adopted a Code of Ethics and Business Conduct to provide guiding principles to our principal executive officer, principal financial officer, and principal accounting officer or controller of our company in the performance of their duties. Our Code of Ethics and Business Conduct also strongly recommends that all directors and employees of our company comply with the code in the performance of their duties. Our Code of Ethics and Business Conduct provides that the basic principle that governs all of our officers, directors and employees is that our business should be carried on with loyalty to the interest of our stockholders, customers, suppliers, fellow employees, strategic partners and other business associates. We believe that the philosophy and operating style of our management are essential to the establishment of a proper corporate environment for the conduct of our business.
Generally, our Code of Ethics and Business Conduct provides guidelines regarding:
| | ● | conflicts of interest, |
| | | |
| | ● | financial reporting responsibilities, |
| | | |
| | ● | insider trading, |
| | | |
| | ● | inappropriate and irregular conduct, |
| | | |
| | ● | political contributions, and |
| | | |
| | ● | compliance with laws. |
A copy of our Code of Ethics has been filed with the Securities and Exchange Commission as an exhibit to this annual report. We will provide a copy, without charge, to any person desiring a copy of the Code of Ethics, by written request to us at our principal offices.
Item 11. Executive Compensation.
The following table sets forth, for the last two completed fiscal years, all compensation paid, distributed or accrued for services rendered to us by (i) all individuals serving as our principal executive officer or acting in a similar capacity during the last completed fiscal year, regardless of compensation level; (ii) our two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at the end of the last completed fiscal year and whose total compensation exceeded $100,000; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to (ii) above but for the fact that the individual was not serving as our executive officer at the end of the last completed fiscal year:
Summary Compensation Table
Name and
Principal Position | | Year | | | Salary
($)(2)(3) | | | Bonus
($) | | | Stock
Awards | | | Option
Awards
($) | | | Non-Equity
Incentive Plan
Compensation
($) | | | Non-Qualified
Deferred
Compensation
Earnings | | | All Other
Compensation
($)(1) | | | Total ($) | |
| Kevin Yates, | | | 2018 | | | | 150,000 | | | | - | | | | | | | | | | | | | | | | | | | | 8,843 | | | | 158,843 | |
| Former Chief Executive Officer | | | 2017 | | | | 240,000 | | | | - | | | | 860,000 | | | | - | | | | - | | | | - | | | | 555,500 | | | | 1,655,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark Lucky | | | 2018 | | | | 90,000 | | | | - | | | | 110,000 | | | | - | | | | - | | | | - | | | | - | | | | 200,000 | |
| Chief Executive Officer and Chief Financial Officer | | | 2017 | | | | 27,500 | | | | - | | | | 220,000 | | | | - | | | | - | | | | - | | | | - | | | | 247,500 | |
| Name and Principal Position | | Year | | Salary ($)(1) | | | Bonus ($) | | | Stock Awards | | | Option Awards ($) | | | Non-Equity Incentive Plan Compensation ($) | | | Non-Qualified Deferred Compensation Earnings | | | All Other Compensation ($) | | | Total ($) | |
Mark Lucky (1) | | 2020 | | | 336,000 | | | | - | | | | 87,000 | | | | | | | | | | | | | | | | | | | | 423,000 | |
| Chief Executive Officer and Chief Financial Officer | | 2019 | | | 320,000 | | | | - | | | | 565,000 | | | | | | | | | | | | | | | | | | | | 885,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Henry Holcombe | | 2020 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Former Chief Executive Officer | | 2019 | | | | | | | | | | | 205,000 | | | | | | | | | | | | | | | | | | | | 205,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (1) | Other compensation for Mr. Yates during fiscal 2018 and 2017 represented funds paid to C3i Services, LLC, a related party by means of common ownership and management of the Company. The related parties provided assistance to Mr. Yates in his duties. In addition, Mr. Yates was issued a convertible note in the amount of $480,000 during fiscal 2017 in conjunction with his severance pay related to his resignation as Chief Executive Officer. This note was subsequently forgiven by Mr. Yates when he departed the Company. |
| | |
| (2) | Amounts represent accrued compensation for Mr. Yates. Actual amounts paid totaled $9,000 for the year ended June 30, 2018. |
| | |
| (3) | Amounts represent accrued compensation for Mr. Lucky. Actual amounts paid totaled $30,000to Mr. Lucky were $0 and $0 for the year ended June 30, 2018.2020 and 2019, respectively. |
| | |
Currently no employees are party to any employment agreement with the Company. We anticipate that as we complete certain acquisition transactions, the Company will enter into employment agreements with key executives.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our Board in the future.
Outstanding Equity Awards at Fiscal Year-End
There are no outstanding equity awards held as of June 30,
20182020 by our Executive Officers and Directors.
Our Board of Directors is comprised of Mr. Paul Favata, Mr. Tom Grbelja,
Dr. Emmanuel Esaka, and Mr. Mark Lucky, who is also an executive officer of our company. In February and April
20182019 Messrs. Favata and Grbelja each received restricted stock grants as compensation for their Board services.
In October 2019 Dr. Esaka received a restricted stock grant as compensation for his Board services. The restricted stock grants vest over thirty-six months. In March 2020, the remaining unvested restricted shares issued to the directors were vested and the corresponding expense was recognized as stock-based compensation and included in general and administrative expense in the statement of operations for the year ended June 30, 2020. The following table sets forth the restricted stock grants issued to Messrs. Favata,
Grbelja, and
GrbeljaDr. Esaka as compensation for their Board service:
| | | FY2018 | | | FY2017 | |
| | | Common Shares | | | | | | Common Shares | | | | |
| Name | | | Granted/Vested | | | | Expense | | | | Granted/Vested | | | | Expense | |
| Tom Grbelja | | | 1,250,000 | | | $ | 115,000 | | | | - | | | | - | |
| Paul Favata | | | 1,058,333 | | | | 83,500 | | | | - | | | | | |
| | | | 2,308,333 | | | $ | 198,500 | | | $ | - | | | $ | - | |
| | | FY2020 | | | FY2019 | |
| | | Common Shares | | | | | | Common Shares | | | | |
| Name | | Granted/Vested | | | Expense | | | Granted/Vested | | | Expense | |
| Tom Grbelja | | | 58,000,000 | | | $ | 43,000 | | | | 4,416,666 | | | $ | 220,000 | |
| Paul Favata | | | 20,000,000 | | | | 6,000 | | | | 4,275,000 | | | | 211,500 | |
| Emmanuel Esaka | | | 40,000,000 | | | | 12,000 | | | | 1,500,000 | | |
| 675,000 | |
| | | | 118,000,000 | | | $ | 61,000 | | | | 10,191,666 | | | $ | 1,106,500 | |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
At
August 20, 2018,October 9, 2020, we had
11,653,6142,127,470,956 shares of our Common Stock outstanding. The following table sets forth information regarding the beneficial ownership of our Common Stock as of
August 20, 2018October 9, 2020 by:
| ● | each person known by us to be the beneficial owner of more than 5% of our Common Stock; |
| ● | our director; |
| ● | each of our executive officers named in the compensation tables in Item 11; and |
| ● | all of our executive officers and director as a group. |
Amount and Nature of Beneficial Ownership |
| | | COMMON STOCK | | | Series AA Preferred Stock Ownership | | | | |
| | | AMOUNT OF | | | | | | AMOUNT OF | | | | | | % OF | |
| | | BENEFICIAL | | | % OF | | | BENEFICIAL | | | % OF | | | VOTING | |
| NAME | | OWNERSHIP | | | CLASS | | | OWNERSHIP | | | CLASS | | | CONTROL (1) | |
| Mark Lucky | | 2,273,572 | | | 19.5 | % | | 1 | | | 100.0 | % | | 63.9 | % |
| Tom Grbelja | | | 1,291,668 | | | | 11.1 | % | | | | | | | | | | | 7.3 | % |
| Paul Favata | | | 1,095,833 | | | | 9.4 | % | | | | | | | | | | | 6.2 | % |
| Officers and directors as a group | | | 4,661,073 | | | | 40.0 | % | | | 1 | | | | 100.0 | % | | | 77.5 | % |
| | | | | | | | | | | | | | | | | | | | | |
| John Guevara | | | 1,206,668 | | | | 10.4 | % | | | | | | | | | | | 6.9 | % |
| Jack White & Associates | | | 873,334 | | | | 7.5 | % | | | | | | | | | | | 5.0 | % |
| Total | | | 6,741,076 | | | | 57.8 | % | | | 1 | | | | 0.0 | % | | | 89.3 | % |
| Amount and Nature of Beneficial Ownership |
| | | COMMON STOCK | | | Series AA Preferred Stock Ownership | | | | |
| | | AMOUNT OF | | | | | | AMOUNT OF | | | | | | % OF VOTING | |
| | | BENEFICIAL | | | % OF | | | BENEFICIAL | | | % OF | | | CONTROL | |
| NAME | | OWNERSHIP | | | CLASS | | | OWNERSHIP | | | CLASS | | | (1) | |
| Mark Lucky | | | 306,812,564 | | | | 14.42 | % | | | 1 | | | | 100 | % | | | 58.07 | % |
| Tom Grbelja | | | 103,666,667 | | | | 4.87 | % | | | | | | | | | | | 2.39 | % |
| Emmanuel Esaka | | | 44,500,000 | | | | 2.09 | % | | | | | | | | | | | 1.02 | % |
| Paul Favata | | | 25,333,333 | | | | 1.19 | % | | | | | | | | | | | 0.58 | % |
| Officers and directors as a group | | | 480,312,564 | | | | 22.58 | % | | | 1 | | | | 100 | % | | | 62.07 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Total | | | 480,312,564 | | | | 22.58 | % | | | 1 | | | | 100 | % | | | 62.07 | % |
| (1) | Percent of Voting Control is based upon the number of issued and outstanding shares of our common stock and our Series AA Preferred Stock August 20, 2018.as of October 9, 2020. On that date, we had 11,653,6142,127,470,956 outstanding shares of common stock with one vote per share, and 1 share of Series AA Preferred Stock outstanding with voting rights equal to 51% of the outstanding common shares. |
The following table sets forth securities authorized for issuance under any equity compensation plans approved by our stockholders as well as any equity compensation plans not approved by our stockholder as of June 30,
2018.2020.| Plan category | | | Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights (a) | | | | Weighted-average
exercise price of
outstanding options,
warrants and rights (b) | | | | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding (excluding securities
reflected in column (a)) (c) | |
| Equity compensation plans approved by security holders | | | | | | | | | | | | |
| 2012 Employee Stock Compensation Plan | | | - | | | | - | | | | - | |
| Equity compensation plans not approved by security holders | | | - | | | | - | | | | - | |
| Total | | | - | | | | - | | | | - | |
Item 13. Certain Relationship and Related Party Transactions, and Director Independence.
Other than compensation arrangements, we describe below, transactions during our last fiscal year, to which we were a party, in which:
| | ● | The amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years; and |
| | | |
| | ● | Any of our directors, executive officers, or holders of more than 5% of our common stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. |
Issuances of Common Stock During 2020
During fiscal
20182020 we issued shares of our common stock as follows:
Convertible Notes Payable
During the
fiscal first quarter,year ended June 30, 2020 the Company issued
203,766954,210,518 shares of its common stock
uponrelated to the conversion of
$40,030$333,219 of principal
and accrued interest of its
outstanding convertible notes
payable, at an average
contract conversion price of
$0.1965$0.0003 per share.
The fair value of the shares issued was $1,059,572, resulting in a loss on debt settlement of $593,907.
Sale of Restricted Common Stock
None.
Stock Based Compensation
During the
fiscal second quarter,year ended June 30, 2020 the Company issued
79,334348,000,000 shares of its
$0.0001 par value 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 994,444 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.
During May 2018 the Company issued 1,500,000 shares of its common stockas compensation to its CEO, Mark Lucky, as compensation.directors and officers. The shares were valued at $0.06, the market price$148,000, or $0.00043 per share, based on the dateshare price at the time of issuance for a total value of $90,000. The expense is included in general and administrative expenses and was recognized on the datetransactions.
During the
stock was issued. See Note 8 – Related Party Transactions.During May 2018year ended June 30, 2020 the Company issued 1,000,000and vested 199,850,000 shares of its $0.0001 par value common stock to Tom Grbelja,four consultants, as compensation for his service on the Board of Directors.under four separate consulting agreements. The shares were valued at $0.06, the market price$198,735, or $0.001 per share, based on the dateshare price at the time 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.
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.
transactions.
Issuances of Common Stock During
20172019
During fiscal
20172019 we issued shares of our common stock as follows:
On August 15, 2017,
Convertible Notes Payable
During the year ended June 30, 2019 the Company issued 6,6671,985,327 shares of its common stock related to the conversion of $201,054 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.101 per share.
Sale of Restricted Common Stock
During the year ended June 30, 2019 the Company issued 2,505,000 shares of its common stock related to the sale of its common stock resulting in proceeds of $250,501, at an average price of $0.10 per share.
Acquisition of Threat Surface Solutions Group, LLC
During the year ended June 30, 2019 the Company issued 1,538,387 shares of its common stock related to its former CEO, Kevin Yates,acquisition of Threat Surface Solutions Group, LLC, valued at $500,000, or an average price of $0.325 per share.
Stock Based Compensation
During the year ended June 30, 2019 the Company issued 23,427,759 shares of its $0.0001 par value common stock as compensation.compensation to its directors and officers related to the vesting of restricted stock grants. The shares were valued at $90.00$1,901,500, or $0.081 per share, based on the marketshare price at the time of the common stock ontransactions.
During 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,year ended June 30, 2019 the Company issued 1,667and vested 3,233,341 shares of its $0.0001 par value common stock to its former CFO, Mark Lucky,four consultants, as compensation.compensation under four separate consulting agreements. The shares were valued at $90.00$174,500, or $0.054 per share, based on the marketshare price at the time 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.
transactions.
Although our common stock is not listed on any national securities exchange, for purposes of independence we use the definition of independence applied by The Nasdaq Stock Market. The Board has determined that each of Paul Favata, and Tom Grbelja, and Dr. Emmanuel Esaka are “independent” in accordance with such definition.
Item 14. Principal Accountant Fees and Services
On May 9, 2017 (the “Engagement Date”), the Company formally engaged Assurance Dimensions, Inc. as our independent registered public accounting firm. The engagement was due to the merger of our existing certifying account, D’Arelli Pruzansky, P.A. and Assurance Dimensions, Inc. The decision to engage Assurance Dimensions, Inc. as our independent registered public accounting firm was approved by our Board of Directors on May 9, 2017.
The former certifying accountant, D’Arelli Pruzansky, P.A., has provided the Company with a letter addressed to the United States Securities and Exchange Commission stating it agrees with the statements of the Form 8-K which was filed on May 11, 2018. A copy of the letter is filed concurrently herewith as Exhibit 16.1.
During the two most recent fiscal years and through the Engagement Date, neither the Company, nor
anany one on its behalf, consulted with Assurance Dimensions, Inc. in regard to the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or any other matters or reportable events as defined in Item 304(a)(2)(i) and (ii) of Regulation S-K.
The following table summarizes the fees of Assurance Dimensions, Inc., our independent registered public accounting firm billed for each of the last two fiscal years for audit services and other services:
| Fee Category | | 2018 | | | 2017 | |
| Audit Fees Paid to D’Arelli Pruzansky, P.A. (1) | | $ | - | | | $ | 10,000 | |
| Audit Related Fees Paid to Assurance Dimensions, Inc. (1) | | | 22,500 | | | | 20,000 | |
| | | | | | | | | |
| Tax Fees (2) | | | - | | | | - | |
| All Other Fees | | | - | | | | - | |
| | | | | | | | | |
| Total Fees | | $ | 22,500 | | | $ | 30,000 | |
| Fee Category | | 2020 | | | 2019 | |
| Audit Related Fees Paid to Assurance Dimensions, Inc. (1) | | $ | 35,500 | | | $ | 30,000 | |
| Tax Fees (2) | | | - | | | | - | |
| All Other Fees | | | - | | | | - | |
| | | | | | | | | |
| Total Fees | | $ | 35,500 | | | $ | 30,000 | |
(1) Consists of fees for professional services rendered in connection with the financial statements included in our Annual Report on Form 10-K and quarterly reports on Form 10-Q.
(2) Consists of fees relating to any tax compliance and tax planning.
PART IV
Item 15. Exhibits and Financial Statement Schedules
a. Index to Financial Statements and Financial Statement Schedules
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, or are inapplicable, and therefore have been omitted.
| Exhibit No. | | Description of Exhibit |
| | | |
| 2.1 | | |
| | | |
| 2.2 | | |
| | |
| 2.3 | | |
| | |
| 2.4 | | |
| | | |
| 3.1 | | |
| | | |
| 3.2 | | |
| | | |
| 3.3 | | |
| | | |
| 3.4 | | |
| | | |
| 3.5 | | |
| | | |
| 3.6 | | |
| | | |
| 3.7 | | |
| | | |
| 3.8 | | |
| | | |
| 3.9 | | |
| | | |
| 3.10 | | |
| | | |
| 3.11 | | |
| | | |
| 3.12 | | |
| | | |
| 3.13 | | |
| | | |
| 3.14 | | |
| | | |
| 3.15 | | |
| | | |
| 3.16 | | |
| | | |
| 3.17 | | |
| | | |
| 3.18 | | |
| | | |
| 4.1 | | |
| | | |
| 4.2 | | |
| | | |
| 4.3 | | |
| 4.4 | | |
| | | |
| 4.5 | | |
| | | |
| 4.6 | | |
| | | |
| 4.7 | | |
| | | |
| 4.8 | | |
| | | |
| 4.9 | | |
| | | |
| 4.10 | | |
| | | |
| 4.11 | | |
| | | |
| 4.12 | | |
| | | |
| 4.13 | | |
| | | |
| 4.14 | | |
| | | |
| 4.15 | | |
| | | |
| 4.16 | | |
| | | |
| 4.17 | | |
| | | |
| 4.18 | | |
| | | |
| 4.19 | | |
| | | |
| 4.20 | | |
| | | |
| 4.21 | | |
| | | |
| 4.22 | | |
| | | |
| 4.23 | | |
| | | |
| 4.24 | | |
| | | |
| 4.25 | | |
| | | |
| 4.26 | | |
| | | |
| 4.27 | | |
| | | |
| 4.28 | | |
| | | |
| 4.29 | | |
| | | |
| 4.30 | | |
| | | |
| 4.31 | | |
| | | |
| 4.32 | | |
| | | |
| 4.33 | | |
| | | |
| 4.34 | | |
| | | |
| 4.35 | | |
| | | |
| 4.36 | | |
| | | |
| 4.37 | | |
| 4.38 | | |
| | | |
| 4.39 | | |
| | | |
| 4.40 | | |
| | | |
| 4.41 | | |
| | | |
| 4.42 | | |
| | | |
| 4.43 | | |
| | | |
| 4.44 | | |
| | | |
| 4.45 | | |
| | | |
| 4.46 | | |
| | |
| 4.47 | | |
| | |
| 4.48 | | |
| | |
| 4.49 | | |
| | |
| 4.50 | | |
| | | |
| 10.1 | | |
| | | |
| 10.2 | | |
| | | |
| 10.3 | | |
| | | |
| 10.4 | | |
| | | |
| 10.5 | | |
| | | |
| 10.6 | | |
| | | |
| 10.7 | | |
| | | |
| 10.8 | | |
| | | |
| 10.9 | | |
| | | |
| 10.10 | | |
| | | |
| 10.11 | | |
| | | |
| 10.12 | | |
| | | |
| 10.13 | | |
| | | |
| 10.14 | | |
| | | |
| 10.15 | | |
| | | |
| 10.16 | | |
| | | |
| 10.17 | | |
| | | |
| 10.18 | | |
| | | |
| 10.19 | | |
| | | |
| 10.20 | | |
| | | |
| 10.21 | | |
| | | |
| 10.22 | | |
| | | |
| 10.23 | | |
| | | |
| 10.24 | | |
| | |
| 10.25 | | |
| | |
| 10.26 | | |
| | |
| 10.27 | | Amendment to License Agreement between MITRE Corporation and Visium Analytics, LLC (39) |
| | | |
| 14.1 | | |
| | | |
| 21.1 | | Subsidiaries of Registrant (20)* |
| | | |
| 31.1 | | Section 302 Certificate of Chief Executive Officer.* |
| | | |
| 31.2 | | Section 302 Certificate of Principal Financial Officer.* |
| | |
| 32.1 | | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| | |
| 32.2 | | Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| | | |
| 101. | | The following materials from the Company’s Annual Report on Form 10-K for the year ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) related notes to these financial statements.** |
| * | Filed herewith. |
| | |
| ** | Furnished herewith. |
| | |
| (1) | Incorporated by reference to Current Report on Form 8-K filed on March 26, 2003. |
| | |
| (2) | Incorporated by reference to registration statement on Form 10-SB, as amended. |
| | |
| (3) | Incorporated by reference to definitive Schedule 14C Information Statement filed on February 2, 2001. |
| | |
| (4) | Incorporated by reference to definitive Schedule 14C Information Statement filed on April 22, 2003. |
| | |
| (5) | Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended December 31, 2002. |
| | |
| (6) | Incorporated by reference to Current Report on Form 8-K filed on July 8, 2004. |
| | |
| (7) | Incorporated by reference to Current Report on Form 8-K filed on January 3, 2002. |
| | |
| (8) | Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended March 31, 2003. |
| | |
| (9) | Incorporated by reference to Preliminary Information Statement on Schedule 14C filed on July 8, 2004. |
| | |
| (10) | Incorporated by reference to registration statement on Form SB-2, SEC File No. 333-118792, filed on September 3, 2004. |
| | |
| (11) | Incorporated by reference to Amendment No. 1 to registration statement the Form SB-2, SEC File No. 333-118792, filed on October 20, 2004. |
| | |
| (12) | Incorporated by reference to Amendment No. 3 to the registration statement on Form SB-2, SEC File No. 333-118792, filed on December 15, 2004. |
| | |
| (13) | Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended December 31, 2004 filed on February 14, 2005. |
| | |
| (14) | Incorporated by reference to Current Report on Form 8-K/A filed on February 25, 2005. |
| | |
| (15) | Incorporated by reference to Current Report on Form 8-K filed on March 25, 2005. |
| | |
| (16) | Incorporated by reference to Current Report on Form 8-K filed on March 28, 2005. |
| | |
| (17) | Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended March 31, 2005. |
| | |
| (18) | Incorporated by reference to Current Report on Form 8-K filed on June 3, 2005. |
| | |
| (19) | Incorporated by reference to Current Report on Form 8-K filed on July 28, 2005. |
| | |
| (20) | Incorporated by reference to registration statement on Form SB-2, SEC File No. 333-131832 filed on February 14, 2006.Reserved |
| | |
| (21) | Incorporated by reference to Current Report on Form 8-K filed on February 17, 2006. |
| | |
| (22) | Incorporated by reference to Amendment No. 1 to registration statement the Form SB-2, SEC File No. 333-131832 filed on May 5, 2006. |
| | |
| (23) | Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended June 30, 2006 filed on October 13, 2006. |
| | |
| (24) | Incorporated by reference to Current Report on Form 8-K filed on October 17, 2006. |
| | |
| (25) | Incorporated by reference to Current Report on Form 8-K filed on October 24, 2006. |
| | |
| (26) | Incorporated by reference to Current Report on Form 8-K filed on January 26, 2007. |
| |
| (27) | Incorporated by reference to Current Report on Form 8-K filed on April 30, 2007. |
| | |
| (28) | Incorporated by reference to Current Report on Form 8-K filed on July 25, 2007. |
| | |
| (29) | Incorporated by reference to Annual Report on Form 10-KSB filed on October 15, 2007. |
| | |
| (30) | Incorporated by reference to Current Report on Form 8-K filed on November 15, 2007. |
| | |
| (31) | Incorporated by reference to Current Report on Form 8-K filed on December 31, 2007. |
| | |
| (32) | Incorporated by reference to Current Report on Form 8-K filed on March 25, 2008. |
| | |
| (33) | Incorporated by reference to Current Report on Form 8-K filed on June 13, 2008. |
| | |
| (34) | Incorporated by reference to Current Report on Form 8-K filed on October 16, 2008. |
| | |
| (35) | Incorporated by reference to Registration Statement on Form 10-12G/A filed on June 14, 2013. |
| |
| (36) | Incorporated by reference to Current Report on Form 8-K filed on July 27, 2019. |
| |
| (37) | Incorporated by reference to Current Report on Form 8-K filed on January 10, 2019. |
| |
| (38) | Incorporated by reference to Current Report on Form 8-K filed on January 16, 2019. |
| |
| (39) | Incorporated by reference to Current Report on Form 8-K filed on May 13, 2020 |
| |
| |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VISIUM TECHNOLOGIES, INC.
| By: | /S/s/ Mark Lucky | |
| | Mark Lucky | |
| | Chief Executive Officer | |
Date:
August 20, 2018October 9, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURE | | TITLE | | DATE |
| | | | | | |
| By: | /S/s/ Mark Lucky | | Chief Executive Officer and Chief Financial Officer | | August 20, 2018October 9, 2020 |
| | | | (principal accounting officer) | | |
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Visium Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying
consolidated balance sheets of Visium Technologies,
IncInc. (the Company) as of June 30,
20182020 and
2017,2019, and the related
consolidated statements of income, stockholders’ deficit and cash flows for each of the years in the two-year period ended June 30,
2018,2020, and the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30,
20182020 and
2017,2019, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30,
2018,2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph- Going Concern
20182020 the Company had a net loss of $1,390,340,$1,542,450, had net cash used in operating activities of $59,401,$106,757, and had negative working capital of $4,514,240.$3,380,760. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ Assurance Dimensions | |
| | |
| We have served as the Company’s auditor since 2017. | |
Coconut Creek,Margate, Florida | |
August 20, 2018October 9, 2020 | |
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
| | | June 30, | |
| | | 2018 | | | 2017 | |
| ASSETS | | | | | | |
| Current assets: | | | | | | | | |
| Cash | | $ | 11,412 | | | $ | 2,313 | |
| | | | | | | | | |
| Total current assets | | | 11,412 | | | | 2,313 | |
| | | | | | | | | |
| Total assets | | $ | 11,412 | | | $ | 2,313 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 626,583 | | | $ | 565,468 | |
| Accrued compensation | | | 155,825 | | | | 65,825 | |
| Accrued interest | | | 1,686,054 | | | | 1,493,014 | |
| Convertible notes payable to ASC Recap LLC | | | 147,965 | | | | 147,965 | |
| Convertible notes payable, net of discount of $0 and $27,083, respectively | | | 1,617,984 | | | | 2,174,831 | |
| Notes payable | | | 270,241 | | | | 270,241 | |
| Due to officers | | | 21,000 | | | | 214,300 | |
| Total current liabilities | | | 4,525,652 | | | | 4,931,643 | |
| | | | | | | | | |
| Commitments and contingencies (Note 9) | | | | | | | | |
| | | | | | | | | |
| Stockholders’ deficit: | | | | | | | | |
| Preferred stock | | | | | | | | |
| Series A Convertible Stock ($0.001 par value; 20,000,000 shares authorized, 13,992,340 shares issued and outstanding as of June 30, 2018 and 2017, respectively) | | | 13,992 | | | | 13,992 | |
| Series B Convertible Stock ($0.001 par value 30,000,000 shares authorized, 1,327,640 shares issued and outstanding as of June 30, 2018 at Juned 30, 2017, respectively) | | | 1,328 | | | | 1,328 | |
| Series AA Convertible Stock ($0.001 par value; 1 share authorized, 1 share issued and outstanding as of June 30, 2018 and no shares issued and outstanding at June 30, 2017, respectively) | | | 0 | | | | - | |
| Common stock, $0.0001 par value, 10,000,000,000 shares authorized: 23,212,549 shares issued and 9,376,441 outstanding at June 30, 2018, and 499,152 shares issued and outstanding at June 30, 2017, respectively (See Note 5) | | | 937 | | | | 50 | |
| Additional paid in capital | | | 40,160,699 | | | | 38,356,156 | |
| Accumulated deficit | | | (44,691,196 | ) | | | (43,300,856 | ) |
| Total stockholders’ deficit | | | (4,514,240 | ) | | | (4,929,330 | ) |
| | | | | | | | | |
| Total liabilities and stockholders’ deficit | | $ | 11,412 | | | $ | 2,313 | |
| | | June 30, | |
| | | 2020 | | | 2019 | |
| ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash | | $ | 30,251 | | | $ | 18,668 | |
| | | | | | | | | |
| Total current assets | | | 30,251 | | | | 18,668 | |
| | | | | | | | | |
| Total assets | | $ | 30,251 | | | $ | 18,668 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 333,805 | | | $ | 213,805 | |
| Accrued compensation | | | 652,529 | | | | 316,529 | |
| Accrued interest | | | 677,857 | | | | 593,838 | |
| Convertible notes payable to ASC Recap LLC | | | 147,965 | | | | 147,965 | |
| Convertible notes payable, net of discount of $0 and $158,333, respectively | | | 852,962 | | | | 917,095 | |
| Derivative liabilities | | | 438,553 | | | | 807,053 | |
| Notes payable | | | 205,000 | | | | 205,000 | |
| Due to officers | | | 102,340 | | | | 62,000 | |
| Total current liabilities | | | 3,411,011 | | | | 3,263,285 | |
| | | | | | | | | |
| Commitments and contingencies (Note 10) | | | | | | | | |
| | | | | | | | | |
| Stockholders’ deficit: | | | | | | | | |
| Preferred stock | | | | | | | | |
| Series A Convertible Stock ($0.001 par value; 20,000,000 shares authorized, 13,992,340 shares issued and outstanding as of June 30, 2020 and 2019, respectively) | | | 13,992 | | | | 13,992 | |
| Series B Convertible Stock ($0.001 par value 30,000,000 shares authorized, 1,327,640 shares issued and outstanding as of June 30, 2020 and 2019, respectively) | | | 1,328 | | | | 1,328 | |
| Series AA Convertible Stock ($0.001 par value; 1 share authorized, 1 share issued and outstanding as of June 30, 2020 and 2019) | | | 0 | | | | 0 | |
| Common stock, $0.0001 par value, 10,000,000,000 shares authorized: 1,544,793,446 shares issued and 1,544,126,787 outstanding at June 30, 2020, and 45,610,716 shares issued and 42,066,269 outstanding at June 30, 2019, respectively (See Note 6) | | | 154,413 | | | | 4,207 | |
| Additional paid in capital | | | 44,441,085 | | | | 43,184,984 | |
| Accumulated deficit | | | (47,991,578 | ) | | | (46,449,128 | ) |
| Total stockholders’ deficit | | | (3,380,760 | ) | | | (3,244,617 | ) |
| | | | | | | | | |
| Total liabilities and stockholders’ deficit | | $ | 30,251 | | | $ | 18,668 | |
See accompanying notes to
consolidated financial statements.
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | FOR THE YEAR ENDED | |
| | | June 30, 2018 | | | June 30, 2017 | |
| | | | | | | |
| Net revenues | | $ | - | | | $ | - | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative | | | 1,043,230 | | | | 2,056,854 | |
| Total operating expenses | | | 1,043,230 | | | | 2,056,854 | |
| | | | | | | | | |
| Loss from operations | | | (1,043,230 | ) | | | (2,056,854 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Gain on change in fair value of derivative liabilities | | | - | | | | 636,096 | |
| Interest expense | | | (275,975 | ) | | | (339,351 | ) |
| Debt conversion expense | | | (96,272 | ) | | | - | |
| Gain on debt settlement | | | 25,137 | | | | - | |
| Total other income (expense) | | | (347,110 | ) | | | 296,745 | |
| | | | | | | | | |
| Net income (loss) | | $ | (1,390,340 | ) | | $ | (1,760,109 | ) |
| | | | | | | | | |
| Weighted average common shares | | | | | | | | |
| Basic | | | 1,999,018 | | | | 118,087 | |
| Diluted | | | 1,999,018 | | | | 118,087 | |
| | | | | | | | | |
| Net loss Per Common Share –Basic and Diluted: | | $ | (0.70 | ) | | $ | (14.91 | ) |
| | | FOR THE YEAR ENDED | |
| | | June 30, 2020 | | | June 30, 2019 | |
| | | | | | | |
| Net revenues | | $ | - | | | $ | - | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative | | | 917,993 | | | | 2,721,467 | |
| Development expense | | | 35,500 | | | | | |
| Amortization expense | | | - | | | | 141,970 | |
| Total operating expenses | | | 953,493 | | | | 2,863,437 | |
| | | | | | | | | |
| Loss from operations | | | (953,493 | ) | | | (2,863,437 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Gain (loss) on change in fair value of derivative liabilities | | | 385,367 | | | | (183,130 | ) |
| Derivative liability expense | | | (61,396 | ) | | | (341,423 | ) |
| Interest expense | | | (323,021 | ) | | | (276,087 | ) |
| Gain (loss) on debt settlement/write-offs | | | (593,907 | ) | | | 2,303,147 | |
| Impairment expense | | | - | | | | (407,002 | ) |
| Other income | | | 4,000 | | | | 10,000 | |
| Total other income (expense) | | | (588,957 | ) | | | 1,105,505 | |
| | | | | | | | | |
| Net loss | | $ | (1,542,450 | ) | | $ | (1,757,932 | ) |
| | | | | | | | | |
| Weighted average common shares | | | | | | | | |
| Basic and diluted | | | 312,626,670 | | | | 22,992,865 | |
| | | | | | | | | |
| Net loss Per Common Share –Basic and Diluted: | | $ | (0.005 | ) | | $ | (0.076 | ) |
See accompanying notes to
consolidated financial statements.
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED JUNE 30,
20182020 AND
2017| | | Preferred
Stock - | | | Preferred
Stock - | | | Preferred
Stock - | | | Common | | | | | | | | | | |
| | | Series A | | | Series B | | | Series AA | | | Stock | | | | | | | | | | |
| | | $0.001
Par Value | | | $0.001
Par Value | | | $0.001
Par Value | | | $0.0001
Par Value | | | Additional
Paid-in | | | Accumulated | | | Total
Stockholders’ | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Deficit | |
| Balance at June 30, 2016 | | | 13,992,340 | | | | 13,992 | | | | 1,327,640 | | | $ | 1,328 | | | | - | | | $ | - | | | | 1,885 | | | $ | 0 | | | $ | 37,026,370 | | | $ | (41,540,747 | ) | | $ | (4,499,056 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares issued as compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 56,667 | | | | 6 | | | | 1,079,994 | | | | | | | $ | 1,080,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares issued for accrued compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 667 | | | | 0 | | | | 80,000 | | | | | | | $ | 80,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares issued for conversion of notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | 439,934 | | | | 44 | | | | 169,790 | | | | | | | $ | 169,834 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income for the year ended June 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1,760,108 | ) | | $ | (1,760,108 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2017 | | | 13,992,340 | | | $ | 13,992 | | | | 1,327,640 | | | $ | 1,328 | | | | - | | | $ | - | | | | 499,152 | | | $ | 50 | | | $ | 38,356,155 | | | $ | (43,300,855 | ) | | $ | (4,929,330 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares issued as compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,308,335 | | | | 431 | | | | 358,069 | | | | | | | $ | 358,500 | |
| Shares issued for consulting services | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,095,241 | | | | 310 | | | | 299,285 | | | | | | | $ | 299,595 | |
| Shares issued for accrued payables | | | | | | | | | | | | | | | | | | | | | | | | | | | 95,238 | | | | 10 | | | | 59,990 | | | | | | | $ | 60,000 | |
| Proceeds from sale of stock | | | | | | | | | | | | | | | | | | | 1 | | | | 0 | | | | 100,000 | | | | 10 | | | | 9,990 | | | | | | | $ | 10,000 | |
| Shares issued due to reverse split (rounding) | | | | | | | | | | | | | | | | | | | | | | | | | | | 930 | | | | 0 | | | | | | | | | | | $ | 0 | |
| Shares issued for conversion of notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,277,546 | | | | 128 | | | | 141,302 | | | | | | | $ | 141,430 | |
Debt conversion expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 96,273 | | | | | | | | 96,273 | |
| Forgiveness of debt due to former officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 839,634 | | | | | | | $ | 839,634 | |
| Net loss for the year ended June 30, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1,390,340 | ) | | $ | (1,390,340 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2018 | | | 13,992,340 | | | $ | 13,992 | | | | 1,327,640 | | | $ | 1,328 | | | | 1 | | | $ | 0 | | | | 9,376,441 | | | $ | 938 | | | $ | 40,160,699 | | | $ | (44,691,196 | ) | | $ | (4,514,240 | ) |
2019
| | | Preferred | | | Preferred | | | Preferred | | | | | | | | | | | | | |
| | | Stock - | | | Stock - | | | Stock - | | | Common | | | | | | | | | | |
| | | Series A | | | Series B | | | Series AA | | | Stock | | | | | | | | | | |
| | | $0.001 | | | $0.001 | | | $0.001 | | | $0.0001 | | | Additional | | | | | | Total | |
| | | Par Value | | | Par Value | | | Par Value | | | Par Value | | | Paid-in | | | Accumulated | | | Stockholders’ | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Deficit | |
| Balance at June 30, 2018 | | | 13,992,340 | | | $ | 13,992 | | | | 1,327,640 | | | $ | 1,328 | | | | 1 | | | $ | 0 | | | | 9,376,442 | | | $ | 937 | | | $ | 40,160,699 | | | $ | (44,691,196 | ) | | $ | (4,514,240 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares issued as compensation to directors and officers | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,427,772 | | | | 2,343 | | | | 1,899,157 | | | | | | | | 1,901,500 | |
| Shares issued for consulting services | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,233,341 | | | | 323 | | | | 174,177 | | | | | | | | 174,500 | |
| Proceeds from sale of common stock | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,505,000 | | | | 251 | | | | 250,250 | | | | | | | | 250,501 | |
| Shares issued for conversion of notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,985,327 | | | | 199 | | | | 200,855 | | | | | | | | 201,054 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Acquisition of TSSG | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,538,387 | | | | 154 | | | | 499,846 | | | | | | | | 500,000 | |
| Net loss for the year ended June 30, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1,757,932 | ) | | | (1,757,932 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2019 | | | 13,992,340 | | | $ | 13,992 | | | | 1,327,640 | | | $ | 1,328 | | | | 1 | | | $ | 0 | | | | 42,066,269 | | | $ | 4,207 | | | $ | 43,184,984 | | | $ | (46,449,128 | ) | | $ | (3,244,617 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares issued as compensation to directors and officers | | | | | | | | | | | | | | | | | | | | | | | | | | | 348,000,000 | | | | 34,800 | | | | 113,200 | | | | | | | | 148,000 | |
| Shares issued for consulting services | | | | | | | | | | | | | | | | | | | | | | | | | | | 199,850,000 | | | | 19,985 | | | | 178,750 | | | | | | | | 198,735 | |
| Shares issued for conversion of notes payable | | | | | | | | | | | | | | | | | | | | | | | | | | | 954,210,518 | | | | 95,421 | | | | 964,151 | | | | | | | | 1,059,572 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss for the year ended June 30, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1,542,450 | ) | | | (1,542,450 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2020 | | | 13,992,340 | | | $ | 13,992 | | | | 1,327,640 | | | $ | 1,328 | | | | 1 | | | $ | 0 | | | | 1,544,126,787 | | | $ | 154,413 | | | $ | 44,441,085 | | | $ | (47,991,578 | ) | | $ | (3,380,760 | ) |
See accompanying notes to
consolidated financial statements.
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | FOR THE YEAR | | | FOR THE YEAR | |
| | | ENDED | | | ENDED | |
| | | June 30, 2018 | | | June 30, 2017 | |
| | | | | | | |
| Cash flows from operating activities: | | | | | | | | |
| Net income (loss) | | $ | (1,390,340 | ) | | $ | (1,760,109 | ) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | |
| Amortization of debt discount | | | 27,083 | | | | 81,667 | |
| Stock based compensation | | | 658,095 | | | | 1,080,000 | |
| Gain on forgiveness of debt | | | (25,137 | ) | | | - | |
| Gain on change in fair value of derivative liabilities | | | - | | | | (636,096 | ) |
| Convertible note issued for severance agreement | | | - | | | | 480,000 | |
Debt conversion expense | | | 96,272 | | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | | 94,956 | | | | (46,442 | ) |
| Accrued compensation | | | 240,000 | | | | 264,302 | |
| Accrued interest | | | 239,670 | | | | 257,684 | |
| Net cash used in operating activities | | | (59,401 | ) | | | (278,993 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Advance from officers | | | 21.000 | | | | - | |
| Proceed from sale of common stock | | | 10,000 | | | | - | |
| Proceeds from short term note payable | | | - | | | | 30,000 | |
| Proceeds from convertible notes payable | | | 37,500 | | | | 249,500 | |
| Net cash provided by financing activities | | | 68,500 | | | | 279,500 | |
| | | | | | | | | |
| Net increase in cash | | | 9,099 | | | | 507 | |
| | | | | | | | | |
| Cash at beginning of year | | | 2,313 | | | | 1,806 | |
| | | | | | | | | |
| Cash at end of year | | $ | 11,412 | | | $ | 2,313 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for: | | | | | | | | |
| Interest | | $ | - | | | $ | - | |
| Income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| Issuance of common stock for conversion of debt | | $ | 141,430 | | | $ | 169,834 | |
| Issuance of common stock to satisfy accrued compensation | | $ | 242,500 | | | $ | 80,000 | |
| | | |
| | | |
| | | |
| | | |
| Cash flows from operating activities: | | |
| Net loss | $(1,542,450) | $(1,757,932) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | |
| Amortization expense related to intangible asset | - | 141,970 |
| Amortization of debt discounts | 206,249 | 141,667 |
| Stock based payments for consultants, directors, and officers | 346,735 | 2,076,000 |
| (Gain) loss on debt settlement/write-offs | 593,907 | (2,303,147) |
| (Gain) loss on change in fair value of derivative liabilities | (385,367) | 183,130 |
| Derivative liability expense | 61,396 | 341,423 |
| Impairment expense | - | 407,002 |
| Changes in operating assets and liabilities: | | |
| Accounts payable and accrued expenses | 130,832 | (90,751) |
| Accrued compensation | 336,000 | 160,704 |
| Accrued interest | 145,941 | 133,189 |
| Net cash used in operating activities | (106,757) | (566,745) |
| | | |
| Cash flows from financing activities: | | |
| Advance from officers | 40,340 | 41,000 |
| Proceed from sale of common stock | - | 250,501 |
| Proceeds from convertible notes payable | 78,000 | 282,500 |
| Net cash provided by financing activities | 118,340 | 574,001 |
| | | |
| Net increase in cash | 11,583 | 7,256 |
| | | |
| Cash at beginning of year | 18,668 | 11,412 |
| | | |
| Cash at end of year | $30,251 | $18,668 |
| | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| Cash paid for: | | |
| Interest | $- | $1,235 |
| Income taxes | - | $- |
| | | |
| Issuance of common stock for conversion of notes payable and accrued interest (fair value of the shares issued - $1,059,572 | $333,220 | $201,055 |
Change in fair value of derivative liability related to debt conversions
| $92,444 | - |
| Issuance of common stock for acquisition of Threat Surface Solutions Group | $- | 500,000 |
| Derivative liability attributable to debt discount on new notes payable | $48,000 | 282,500 |
See accompanying notes to
consolidated financial statements.
VISIUM TECHNOLOGIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
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. |
The accompanying
consolidated financial statements have been prepared on a going concern basis. For the year ended June 30,
20182020 we had a net loss of
$1,390,340,$1,542,450, had net cash used in operating activities of
$59,401,$106,757 and had negative working capital of
$4,514,240.$3,380,760. 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
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of
consolidated 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 basedCox, Ross & Rubinstein Binomial Tree stock-based compensation
and derivative liabilities 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
or investments 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,
20182020 and
2017.2019.
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,
20182020 and
2017,2019, the Company had not reached a bank balance exceeding the FDIC insurance limit.
The Company assessed the classification of its derivative financial instruments as of June 30,
20182020 and
2017,2019, 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
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
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 wasCompany recorded as a gain through the change in fair value of derivative liability on the statement of operations as of June 30, 2017. As2020 of June 30, 2018 the Company has still determined that there was no active market for the Company’s common stock.$438,553.
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.
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
20172020 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
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30,
20182020 AND
20172019
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). 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, 2019. Early adoption is permitted. The Company early adopted this standard effective July 1, 2019. Since the Company has not earned any revenue to date, there has been no impact to the financial statements upon adoption.
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,
2018,2020, the Company had not filed tax returns for the tax years ending June 30, 2008 through
20172020 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.
The Company accounts for stock-based compensation in accordance with ASU 2020-07, 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.
Under 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-pricingCox, Ross & Rubinstein Binomial Tree valuation 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.
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
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
2019
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Recent Accounting Pronouncements
In
March 2016,May 2019, 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. 2018-05,2020-05, 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,July 2017, the FASB issued
Accounting Standards Update (“ASU”) No. 2017-11. “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception (“ASU
2018-07, Compensation – Stock Compensation (Topic 718). This update2017-11”) ASU 2017-11 revises the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity, which is
intendedconsidered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to
reduce cost and complexity and to improve financial reportingdetermine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for
share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). Thethat scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities. 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 be2017-11 is effective for
financial statements issued by public companies for the annualfiscal years, and interim periods
within those fiscal years, beginning after December 15,
2018. Early2019, and early adoption is permitted, including adoption in an interim period. ASU 2017-11 provides that upon adoption, an entity may apply this standard retrospectively to outstanding financial instruments with a down round feature by means of a cumulative- effect adjustment to the opening balance of accumulated deficit in the fiscal year and interim period adoption. The Company has adopted ASU 2017-11 retrospectively as of January 1, 2020. The 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 hasdid not earnedhave any revenue to date, there was no impact to theon its financial statements upon adoption.
statements.
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-dilutedfully diluted per-share results are not presented in the financial statements for the year ended June 30,
20182020 and
20172019 as their effect would be anti-dilutive.
Potential common shares that would be as follows:| | | For the Years ended June 30, | |
| | | 2020 | | | 2019 | |
| Weighted average common shares outstanding | | | 312,626,670 | | | | 22,992,865 | |
| Effect of dilutive securities-when applicable: | | | | | | | | |
| Convertible promissory notes | | | 1,014,701,330 | | | | 14,604,829 | |
| Preferred Stock | | | 13,996,767 | | | | 13,996,767 | |
| Warrants | | | 500,000 | | | | 500,000 | |
| Fully diluted earnings per share—adjusted weighted-average shares and assumed conversions | | | 1,341,824,767 | | | | 52,094,461 | |
VISIUM TECHNOLOGIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
NOTE 3: DERIVATIVE LIABILITY
For
Derivative liability - warrants
The Company issued warrants in connection with convertible notes payable which were issued in January 2020. These warrants have price protection provisions that allow for the year endedreduction in the exercise price of the warrants in the event the Company subsequently issues stock or securities convertible into stock at a price lower than the $0.15 per share exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased or decreased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. Because it is indeterminate whether there is a sufficient number of authorized and unissued shares exists at the assessment date, the Company calculates a derivative liability associated with the warrants in accordance with FASB ASC Topic 815-40-25.
Accounting for Derivative Warrant Liability
The Company’s derivative warrant instruments have been measured at fair value at June 30, 2017,2020 using the Cox, Ross & Rubinstein Binomial Tree valuation model. The Company recorded a gain onrecognizes the changederivative liability related to those warrants that contain price protection features in its consolidated balance sheet as liabilities. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statements of operations. The initial recognition and subsequent changes in fair value of the derivative warrant liability have no effect on the Company’s cash flows.
Derivative liability – convertible notes
The Company has certain convertible notes with variable price conversion terms. Upon the issuance of these convertible notes and as a consequence of their conversion features, the convertible notes give rise to derivative liabilities. The Company’s derivative liabilities related to its convertible notes payable have been measured at fair value at June 30, 2020 and June 30, 2019 using the Cox, Ross & Rubinstein Binomial Tree valuation model.
The revaluation of $636,096. This was due to management’s changethe warrants and convertible debt at each reporting period, as well as the charges associated with issuing additional convertible notes, and warrants with price protection features, resulted in accounting estimate during the yearrecognition of a gain of $385,367 and a loss of $183,130 for the years ended June 30, 2017. 2020 and 2019, respectively in the Company’s consolidated statements of operations, under the caption “Gain (loss) in change of fair value of derivative liability”. The fair value of the warrants at June 30, 2020 and June 30, 2019 was $250 and $37,200, respectively. The fair value of the derivative liabilities related to the convertible debt at June 30, 2020 and June 30, 2019 is $438,303 and $807,053, respectively, which is reported on the consolidated balance sheet under the caption “Derivative liabilities”.
The Company
has determined
that allits derivative liability to be a Level 3 fair value measurement. The significant assumptions used in the Cox, Ross & Rubinstein Binomial Tree valuation 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.are as follows:
| | | Year Ended June 30, | |
| | | 2020 | | | 2019 | |
Effective exercise price | | $ | 0.00024 – $0.00039 | | | $ | 0.0355 - $ 0.0449 | |
| Effective market price | | $ | 0.0007 | | | $ | 0.0745 | |
| Expected volatility | | | 275.5% to 338.5 | % | | | 329.6% to 411.42 | % |
| Risk-free interest | | | 0.14 | % | | | 1.92% - 2.18 | % |
| Expected terms | | | 60 - 559 days | | | | 92 - 946 days | |
| Expected dividend rate | | | 0 | % | | | 0 | % |
Changes in the derivative liabilities during the
yearsyear ended June 30,
2018 and 2017 are as2020 was 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 | | $ | - | |
| Derivative liability at June 30, 2019 | | $ | 807,053 | |
| Derivative liability reduced as a result of note conversions | | | (92,529 | ) |
| Gain on change in fair value of derivative liabilities | | | (385,367 | ) |
| Increase due to issuance of convertible note | | | 109,396 | |
| Derivative liability at June 30, 2020 | | $ | 438,553 | |
VISIUM TECHNOLOGIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
NOTE 4: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible Notes Payable
At June 30,
20182020 and June 30,
20172019 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 | |
| | | June 30, | |
| | | 2020 | | | 2019 | |
| Convertible notes payable | | $ | 852,962 | | | $ | 1,075,428 | |
| Discount on convertible notes | | | - | | | | (158,333 | ) |
| Convertible notes, net | | | 852,962 | | | | 917,095 | |
| | | | | | | | | |
| Convertible notes payable to ASC Recap | | | 147,965 | | | | 147,965 | |
| Total | | $ | 1,000,927 | | | $ | 1,065,060 | |
The Company had convertible promissory notes aggregating approximately
$1.8$1.0 million and
$2.3$1.1 million at June 30,
20182020 and June 30,
2017,2019, respectively. The related accrued interest amounted to approximately
$1.44 million$503,068 and
$1.27 million$434,835 at June 30,
20182020 and June 30,
2017,2019, 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$0.00024 to $22,500
(as a result of two reverse stock splits) per share. At June 30,
2018, all $1.7 million2020, $841,000 of convertible promissory notes had matured, are in default and remain unpaid.
There is no provision in the note agreements for adjustments to the interest rates on these notes in the event of default.
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. Seeowed (see Note
10 – Subsequent Events in the footnotes to the financial statements.12). 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,
2018,2020, 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
| | | | | Amount of
| | | Amount of
| | | | | | Adjustment | | | | | | Conversion |
| | Shares | | | Converted | | | Converted
| | | Conversion | | | To | | | | | | Price |
| Name | Issued | | | Principal | | | Interest | | | Expense | | | Fair Value | | | Total | | | Per Share |
| Auctus Funds, LLC | 364,978,008 | | $ | 85,856 | | $ | 22,167 | | $ | 21,000 | | $ | 313,405 | | $ | 442,428 | | $ | $0.0012 |
| FirstFire Global Opportunities Fund LLC | 268,413,286 | | | 133,710 | | | 0 | | | 19,000 | | | 253,849 | | | 406,559 | | | $0.0015 |
| Power Up | 309,918,093 | | | 48,000 | | | 2,880 | | | 0 | | | 95,388 | | | 146,268 | | | $0.0005 |
| Mark Lucky | 10,901,131 | | | 32,900 | | | 7,707 | | | 0 | | | 23,710 | | | 64,317 | | | $0.0059 |
| TOTAL | 954,210,518 | | $ | 300,466 | | $ | 32,754 | | $ | 40,000 | | $ | 686,351 | | $ | 1,059,572 | | $ | $0.0011 |
The adjustment to Fair Value of $686,351 is comprised of the following:
| Loss on settlement of debt | $593,907 |
Change in fair value of derivative liability related to debt conversions | 92,444 |
| $686,351 |
Covenants and Other Matters
Certain of our convertible loan agreements contain customary covenants and events of default and termination, including cross-default provisions,whereby a default under one loan and security agreement triggers a default under those certain other convertible notes. The Auctus Funds note has a provision whereby a default annual interest rate of 24% applies after the one year endedanniversary of the note, and the FirstFire note has a provision whereby the default annual interest rate of 15% applies after the one year anniversary of the note, both of which occurred in January, 2020. The Auctus Funds note contains a 150% payoff provision if the note is in default, and is due and payable only when the Company receives a notice of default from the noteholder. As of June 30, 20182020 and subsequently, the Company has not received any notice of default.
Transactions
Convertible Notes Payable
In October 2019 we issued
a convertible
notesnote to
three investors,an investor, with a face value totaling
$37,500.$48,000 which generated net proceeds of $48,000. The notes
bearbore interest at
12%8% and have a term of
sixty days.one year. This note was fully converted and retired as of June 30, 2020.
In June 2020, in exchange for net proceeds of $30,000, we amended the outstanding convertible notes held by Auctus Funds, LLC and FirstFire Global Opportunities Fund, LLC, to increase the outstanding principal balance of each note in the amount of $15,000.
The Company had promissory notes aggregating
$270,241$205,000 at
both June 30,
20182020 and June 30,
2017, respectively.2019. The related accrued interest amounted to approximately
$245,000$175,000 and
$222,000$159,000 at June 30,
20182020 and June 30,
2017,2019, 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,
20182020 have matured, are in default, and remain unpaid.
Transactions
The Company generated proceeds of $249,500 from There is no provision in the issuance of convertible promissory notes withnote agreements for adjustments to the interest rates on these notes in the event 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.
default.
The Company recognized interest expense
on promissory notes payable of approximately
$276,000$16,000 and
$339,400$16,000 during
the fiscal
2018years 2020 and
2017,2019, respectively.
VISIUM TECHNOLOGIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
NOTE 5: ACCRUED INTEREST PAYABLE
Changes in accrued interest payable during the year ended June 30, 2020, is as follows:
| Accrued interest payable at June 30, 2019 | | $ | 593,838 | |
| Interest expense on notes payable for the year ended June, 2020 | | | 116,772 | |
| Conversion of accrued interest into common stock | | | (32,753 | ) |
| Accrued interest payable at June 30, 2020 | | $ | 677,857 | |
Interest expense for year ended June 30, 2020 was comprised of the following:
| Interest expense for the year ended June 30, 2020 | | $ | 116,772 | |
| Amortization of debt discount | | | 206,249 | |
| Total interest expense for the year ended June 30, 2020 | | $ | 323,021 | |
NOTE
5:6: STOCKHOLDERS’ DEFICIT
At June 30,
2018,2020, the Company had 10,000,000,000 authorized common shares. At June 30,
20182020, the Company
issued 23,212,549has 1,544,793,446 common shares
issued of which
9,376,4411,544,126,787 were outstanding,
as a resultwhich is net of
the666,659 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.
7.
Issuances of Common Stock During
20182020
Convertible Notes Payable
During the fiscal
first quarter,year ended June 30, 2020 the Company issued
203,767954,210,518 shares of its common stock
uponrelated to the conversion of
$40,030$333,220 of principal
and accrued interest of its
outstanding convertible notes
payable, at an average
contract conversion price of
$0.1965$0.00041 per share.
The fair value of these conversions was $1,059,572, resulting in a net loss of $593,907.
Stock Based Compensation
During the fiscal
second quarter,year ended June 30, 2020 the Company issued
79,333348,000,000 shares of its
$0.0001 par value common stock
uponas compensation to its directors and officers related to the
conversionvesting of
$11,900restricted stock grants. The shares were valued at $148,000, or $0.00043 per share, based on the share price at the time of
principal of its outstanding convertible notes, at an average price of $0.015 per share.the transactions.
During the fiscal fourth quarter, the Companyyear ended June 30, 2020 we 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 1,500,000 199,850,000 shares of its common stock to its CEO, Mark Lucky,consultants, as compensation. The shares were valued at $0.06,$0.001, the market price on the date of issuance for a total value of $90,000.$198,735. 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.
issued or vested.
Issuances of Common Stock During May 2018the Year ended June 30, 2019
Convertible Notes Payable
During the fiscal year ended June 30, 2019 the Company issued 1,000,0001,985,327 shares of its common stock related to the conversion of $201,054 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.101 per share.
Sale of Restricted Common Stock
During the fiscal year ended June 30, 2019 the Company issued 2,505,000 shares of its common stock related to the sale of its common stock resulting in proceeds of $250,501, at an average price of $0.10 per share.
Acquisition of Threat Surface Solutions Group, LLC
During the fiscal year ended June 30, 2019 the Company issued 1,538,387 shares of its common stock related to its acquisition of Threat Surface Solutions Group, LLC, valued at $500,000, or an average price of $0.325 per share.
Stock Based Compensation
During the fiscal year ended June 30, 2019 the Company issued 23,427,772 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 $1,901,500, or $0.081 per share, based on the share price at the time of the transactions.
During the fiscal year ended June 30, 2019 we issued 3,233,341 shares of its common stock to Tom Grbelja,consultants, as compensation for his service on the Board of Directors.compensation. The shares were valued at $0.06,$0.054, the market price on the date of issuance for a total value of $60,000.$174,500. 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$750 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
2018,2019, the Company authorized and issued one
(1) 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,Chief Executive Officer, is the holder of the one
(1) share of Series AA Convertible Preferred Stock.
VISIUM TECHNOLOGIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 20182020 AND 20172019
Note 6NOTE 7 - -STOCK-BASED COMPENSATION
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 endedJune 30, 20182020 and 20172019 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 | | | | — | | | | — | |
| | | For the Year ended | |
| | | June 30, 2020 | | | June 30, 2019 | |
| | | | | | Weighted | | | | | | Weighted | |
| | | | | | Average | | | | | | Average | |
| | | | | | Grant Date | | | | | | Grant Date | |
| | | Shares | | | Fair Value | | | Shares | | | Fair Value | |
| Unvested at beginning of period | | | 3,544,447 | | | $ | 0.06 | | | | 13,836,108 | | | $ | 0.06 | |
| Granted | | | - | | | $ | - | | | | 1,500,000 | | | $ | 0.37 | |
| Forfeited | | | (1,227,788 | ) | | | 0.06 | | | | (930,955 | ) | | | 0.36 | |
| Vested | | | (1,650,000 | ) | | $ | 0.06 | | | | (10,861,106 | ) | | $ | 0.08 | |
| Unvested at end of period | | | 666,659 | | | $ | 0.06 | | | | 3,544,447 | | | $ | 0.06 | |
Unrecognized compensation expense related to outstanding restricted stock awards to employees and directorsconsultants as ofJune 30, 20182020 was $830,166$40,000 and is expected to be recognized over a weighted average period of 2.830.83 years.VISIUM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2018 AND 2017
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,
20182020 and
20172019 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 | % |
| | | 2020 | | | 2019 | |
| Statutory federal rate | | | (21.7 | )% | | | (21.0 | )% |
| State income tax rate, net of federal benefit | | | (3.6 | )% | | | (3.6 | )% |
| Permanent differences, including stock-based compensation | | | 8.6 | % | | | 8.6 | % |
| Change in valuation allowance | | | 16.7 | % | | | 16.0 | % |
| Effective tax rate | | | 0.0 | % | | | 0.0 | % |
At June 30,
20182020 and
20172019 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 | | $ | - | | | $ | - | |
| | | June 30, 2020 | | | June 30, 2019 | |
| Tax benefit of net operating loss carry forward | | $ | 7,047,000
| | | $ | 6,961,000 | |
| Intangible | | | - | | | | 85,000 | |
| Total deferred tax assets | | | 7,047,000 | | | | 7,046,000 | |
| | | | | | | | | |
| Less: valuation allowance | | | (7,047,000 | ) | | | (7,046,000 | ) |
| Net deferred tax assets | | $ | - | | | $ | - | |
As of June 30,
2018,2020, the Company had unused net operating loss carry forwards of approximately
$31.1$33.6 million available to reduce future federal taxable income. Net operating loss carryforwards expire through fiscal years ending
2037.2038. 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).
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 8: INCOME TAXES, continued
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,
20182020 and
20172019 was
$6,244,000$7,047,000 and
$10,704,000,$7,046,000, respectively. The change in the valuation allowance during the year ended June 30,
20182020 was
a decreasean increase of approximately
$4.5 million.$105,000. The change in the valuation allowance during the year ended June 30,
20172019 was
an increasea decrease of
$340,000.$720,000. Effective December 22,
20172018 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,
2018.2019. Going forward the blended rate will be 25.4% for future years. The change in blended tax rate reduced the
20182019 net operating loss carry forward deferred tax assets by approximately
$4.5$3.3 million.
VISIUM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2018 AND 2017
NOTE
8:9: 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
6.7.
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,
20182020 Mr. Lucky advanced
$26,000, and Mr. Grbelja advanced $20,000$40,340 to the Company.
$21,000 of these$102,340 in advances remain outstanding as of June 30,
2018.In March 20182020. Mr. Lucky is owed $11,805 for out-of-pocket expenses as of June 30, 2020, which is included on the Company entered into a settlement agreement with its former Chief Executive Officer, Kevin Yates. In exchange for a full settlementbalance sheet in Accounts payable 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.
expenses.NOTE
9:10: COMMITMENTS AND CONTINGENCIES
The Company
leases a virtualoperates virtually, with no office space
under a non-cancelable operating lease, which expires August 31, 2019. Futurerented. The Company has no 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 | |
2020.
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 10: COMMITMENTS AND CONTINGENCIES, continued
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,
2018,2020, and based on the assessment there are no probable loss contingencies requiring accrual or disclosures within its financial statements.
License Contingent Consideration
Our license agreements with the sellers of Threat Surface Solutions Group, LLC includes a provision for a royalty payment based on ten percent (10%) of sales generated by Threat Surface Solutions Group beginning on the Agreement Date and ending on October 12, 2021, capped at a maximum royalty of $2,500,000. As of June 30, 2020, we have not generated any revenue related to these license agreements.
Our license agreements with George Mason University and The MITRE Corporation include provisions for a royalty payment on revenues collected of 5% and 6%, respectively. As of June 30, 2020, we have not generated any revenue related to these license agreements.
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. Plaintiff asserts that the Company failed to convert two convertible notes held by Plaintiff. The Company is vigorously contesting this claim. There are no other proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
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 11 – Fair Value Measurement
Fair value measurements
At June 30, 2020 and 2019, the fair value of derivative liabilities is estimated using the Cox, Ross & Rubinstein Binomial Tree valuation model using inputs that include the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate. The derivative liabilities are the only Level 3 fair value measures.
At June 30, 2020, the estimated fair values of the liabilities measured on a recurring basis are as follows:
| | | Fair Value Measurements at | |
| | | June 30, 2020: | |
| | | (Level 1) | | | (Level 2) | | | (Level 3) | |
| Derivative liability – Convertible notes | | | | | | | | | | | 438,303 | |
| Derivative liability – Warrants | | $ | - | | | $ | - | | | $ | 250 | |
| Total derivative liabilities | | $ | - | | | $ | - | | | $ | 438,553 | |
NOTE
10:12: 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 2018,2020, the Company issued 642,227155,557,900 shares of its common stock upon the conversion of $57,800principal of principal$27,007, and $1,431 of accrued interest ofon its outstanding convertible notes, to two noteholders,valued at an average price of $0.091$0.0002 per share.
In August 2020, the Company issued 110,432,492 shares of its common stock upon the conversion of principal of $15,769, and $1,182 of accrued interest on its outstanding convertible notes, valued at $0.00017 per share.
In September 2020, the Company issued 95,958,168 shares of its common stock upon the conversion of principal of $21,599, and $681 of accrued interest on its outstanding convertible notes, valued at $0.00024 per share.
In October 2020, the Company issued 101,195,600 shares of its common stock upon the conversion of principal of $19,181, and $309 of accrued interest on its outstanding convertible notes, valued at $0.0002 per share.
In July 2018and August 2020, 200,001 restricted shares which were previously issued to consultants have vested.
In July 2020, the Company was named asissued 30,000,000 shares to consultants for services rendered. The share shares were valued at the defendant in a legal proceeding brought by Tarpon Bay Partners LLC (the plaintiff) inmarket price on the Judicial District Courtdate of Danbury, Connecticut. The plaintiff asserts thatissuance, at $0.0005/share, or $15,000.
In July 2020, the Company
failedissued 90,000,000 shares to
convert two convertible notes held byofficers and directors as compensation. The share shares were valued at the
Plaintiff. The Company is vigorously contesting this claim.In July 2018market price on 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.
of issuance, at $0.0005/share, or $45,000.
