NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
1: ORGANIZATION, GOING CONCERN AND BASIS OF PRESENTATION
Visium
Technologies, Inc. (“Visium”) 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 October 2015 the Company redomiciled from Nevada and became a Florida corporation. In March 2018
the Company changed its name to Visium Technologies, Inc.
Visium
is a provider of cyber security automation, analytics and visualization. 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 and governments ability to protect their data. Visium’s CyGraph technology
provides visibility, advanced cyber monitoring intelligence, data modeling, analytics and automation to help reduce risk, simplify
cyber security and deliver better security outcomes.
In
March 2019, Visium entered into a software license agreement with MITRE Corporation to license a patented technology, known as
CyGraph, a tool for cyber warfare analytics, visualization and knowledge management. CyGraph provides advanced analytics for cybersecurity
situational awareness that is scalable, flexible and comprehensive.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis. For the six months ended December 31, 2019 we had
a net loss of $324,188, had net cash used in operating activities of $98,663, and had negative working capital of $3,142,928.
These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year
from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for
the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters
cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute
its business plan or generate positive operating results. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Basis
of Presentation
The
unaudited interim consolidated financial information furnished herein reflects all adjustments, consisting only of normal recurring
items, which in the opinion of management are necessary to fairly state Visium Technologies, Inc.’s (the “Company”
or “we”, “us” or “our”) financial position, results of operations and cash flows for the dates
and periods presented and to make such information not misleading. Certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”), nevertheless,
management of the Company believes that the disclosures herein are adequate to make the information presented not misleading.
These
unaudited consolidated financial statements should be read in conjunction with the Company’s audited financial statements
for the year ended June 30, 2019, contained in the Company’s Annual Report on Form 10-K filed with the SEC on September
27, 2019. The results of operations for the six months ended December 31, 2019, are not necessarily indicative of results to be
expected for any other interim period or the fiscal year ending June 30, 2020.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal
Year
The
fiscal year ends on June 30. References to fiscal year 2020, for example, refer to the fiscal year ending June 30, 2020.
Principles
of Consolidation
The
accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting
principles and include the accounts of the Company and its wholly-owned subsidiaries, Visium Analytics, LLC, and Threat Surface
Solutions Group, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Use
of Estimates
The
preparation of the 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 Cox, Ross & Rubinstein Binomial Tree stock-based compensation valuation methods, such as expected volatility, risk-free
interest rate, and expected dividend rate and in the valuation allowance of deferred tax assets, and derivative liabilities.
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 six months ended December 31, 2019 and
June 30, 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 six months ended December 31, 2019 and 2018, the Company had not reached a bank balance exceeding
the FDIC insurance limit.
Convertible
Instruments and Derivative Liabilities
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 assessed the potential classification of its derivative financial instruments as of December 31, 2019 and June 30, 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.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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.
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.
Business
combinations
Business
combinations are accounted for at fair value. Acquisition costs are expensed as incurred and recorded in selling, general and
administrative expenses. The accounting for business combinations requires estimates and judgment as to expectations for future
cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining
the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets
acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions,
as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.
If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements
could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense
of finite-lived intangible assets, or the recognition of additional consideration which would be expensed. The fair value of contingent
consideration is remeasured each period based on relevant information and changes to the fair value are included in the operating
results for the period.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
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, 2018. Early adoption is permitted. The Company early adopted this standard
effective July 1, 2018. Since the Company has not earned any revenue to date, there has been no impact to the financial statements
upon adoption.
Income
Taxes
The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset
or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above
should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest
and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all
highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The
Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of June 30, 2019, the Company had not filed tax returns for the tax years
ending June 30, 2008 through 2019 and such returns, when filed, potentially will be subject to audit by the taxing authorities
for a minimum of three years beyond the filing date under the three-year statute of limitations. The Company has not accrued any
potential tax penalties associated with not filing these tax returns. Due to recurring losses, management believes such potential
tax penalties, if any, would not be material in amount.
Share-Based
Payments
The
Company accounts for stock-based compensation in accordance with ASU 2019-07, 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 Cox, 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.
Segment
Reporting
The
Company operates in one business segment which technologies are focused on cybersecurity.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Recent
Accounting Pronouncements
In
May 2018, the FASB issued ASU No. 2019-05, 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 December 31, 2019. 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.
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 dilutive common
shares would be as follows:
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
Weighted average common shares outstanding
|
|
|
63,855,369
|
|
|
|
22,992,865
|
|
|
Effect of dilutive securities-when applicable:
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
|
91,175,099
|
|
|
|
14,604,829
|
|
|
Preferred Stock
|
|
|
13,996,767
|
|
|
|
13,996,767
|
|
|
Warrants
|
|
|
500,000
|
|
|
|
500,000
|
|
|
Adjusted weighted-average shares and assumed conversions
|
|
|
169,527,235
|
|
|
|
52,094,461
|
|
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
3: DERIVATIVE LIABILITIES
Derivative
liability - warrants
The
Company issued warrants in connection with convertible notes payable which were issued in January 2019. These warrants have price
protection provisions that allow for the reduction 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 December 31, 2019 using the Cox, Ross &
Rubinstein Binomial Tree valuation model. The Company recognizes the derivative 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 December 31, 2019 and December 31, 2018
using the Cox, Ross & Rubinstein Binomial Tree valuation model.
The
revaluation of the 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 the recognition of a gain of $485,568 and a loss of
$194,255 for the six months ended December 31, 2019 and 2018, 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
December 31, 2019 and June 30, 2019 was $950 and $37,200, respectively. The fair value of the derivative liability related to
the convertible debt at December 31, 2019 and June 30, 2019 is $337,402 and $769,853, respectively, which is reported on the consolidated
balance sheet under the caption “Derivative liability”.
The
Company has determined its derivative liability to be a Level 3 fair value measurement. The significant assumptions used in the
Cox, Ross & Rubinstein Binomial Tree valuation of the derivative are as follows:
|
|
|
Six
Months Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Effective
exercise price
|
|
$
|
0.0012
- $ 0.0039
|
|
|
$
|
0.494
- 0.616
|
|
|
Effective
market price
|
|
$
|
.0019
|
|
|
$
|
0.1014
|
|
|
Volatility
|
|
|
29.24%
- 379.7
|
%
|
|
|
204.78
|
%
|
|
Risk-free
interest
|
|
|
1.58%
- 1.59
|
%
|
|
|
2.56
|
%
|
|
Terms
|
|
|
30
- 741+ days
|
|
|
|
30
days
|
|
|
Expected
dividend rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Changes
in the derivative liabilities during the six months ended December 31, 2019 is follows:
|
Derivative liability at June 30, 2019
|
|
$
|
807,053
|
|
|
Derivative liability reduced as a result of note conversions
|
|
|
(92,529
|
)
|
|
Increase due to issuance of convertible note
|
|
|
109,396
|
|
|
Gain on change in fair value of derivative liability
|
|
|
(485,568
|
)
|
|
Derivative liability at December 31, 2019
|
|
$
|
338,352
|
|
NOTE
4: ACCRUED INTEREST PAYABLE
Changes
in accrued interest payable during the six months ended December 31, 2019 is as follows:
|
Accrued interest payable at June 30, 2019
|
|
$
|
593,838
|
|
|
Interest expense accrued for the six months ended December 31, 2019
|
|
|
58,539
|
|
|
Conversion of accrued interest into common stock
|
|
|
(18,980
|
)
|
|
Accrued interest payable at December 31, 2019
|
|
$
|
633,397
|
|
Interest
expense for the six months ended December 31, 2019 was comprised of the following:
|
Interest expense for the six months ended December 31, 2019
|
|
$
|
58,539
|
|
|
Amortization of debt discount
|
|
|
140,736
|
|
|
Total interest expense for the six months ended December 31, 2019
|
|
$
|
199,275
|
|
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible
Notes Payable
At
December 31, 2019 and June 30, 2019 convertible debentures consisted of the following:
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
Convertible notes payable
|
|
$
|
1,022,051
|
|
|
$
|
1,075,428
|
|
|
Discount on convertible notes
|
|
|
(47,818
|
)
|
|
|
(158,333
|
)
|
|
Convertible notes, net
|
|
|
974,233
|
|
|
|
917,095
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable to ASC Recap
|
|
|
147,965
|
|
|
|
147,965
|
|
|
Total
|
|
$
|
1,122,198
|
|
|
$
|
1,065,060
|
|
The
Company had convertible promissory notes aggregating approximately $1.1 million and $1.1 million at December 31, 2019 and June
30, 2019, respectively. The related accrued interest amounted to approximately $481,000 and $430,000 at December 30, 2019 and
June 30, 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 $0.0012 to $22,500 per share, as a result
of the two reverse stock splits. At December 31, 2019, $890,000 of convertible promissory notes had matured, are in default and
remain unpaid.
On
July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC (“ASC”) two convertible promissory notes with principal
amounts of $25,000 and $125,000, respectively. These two notes were issued as a fee for services under a 3(a)10 transaction. While
the Company continues to carry the balance of these notes on its balance sheet, management is disputing the notes and does not
believe that the balances of these notes are owed. See Note 9 – Commitments and Contingencies in the footnotes to the financial
statements. The July 22, 2013 note matured on March 31, 2014 and a balance of $22,965 remains unpaid. The May 6, 2014 note matured
on May 6, 2016 and remains unpaid. The notes are convertible into the common stock of the Company at any time at a conversion
price equal to (i) 50% of the lowest closing bid price of our common stock for the twenty days prior to conversion or (ii) fixed
price of $0.15 or $0.30 per share.
For
the six months ended December 31, 2019, the following summarizes the conversion of debt for common shares:
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
Adjustment
|
|
|
|
|
|
Conversion
|
|
|
|
|
Shares
|
|
|
Converted
|
|
|
|
|
|
Conversion
|
|
|
to
|
|
|
|
|
|
Price
|
|
|
Name
|
|
Issued
|
|
|
Principal
|
|
|
Interest
|
|
|
Expense
|
|
|
Fair
Value
|
|
|
Total
|
|
|
Per
Share
|
|
|
FirstFire Global Opportunities Fund
LLC
|
|
|
14,813,286
|
|
|
$
|
41,204
|
|
|
$
|
-
|
|
|
$
|
4,200
|
|
|
$
|
54,375
|
|
|
$
|
99,779
|
|
|
$
|
0.00307
|
|
|
Auctus Funds, LLC
|
|
|
27,102,790
|
|
|
|
27,273
|
|
|
|
11,274
|
|
|
|
6,750
|
|
|
|
95,484
|
|
|
|
140,781
|
|
|
$
|
0.00167
|
|
|
Mark Lucky
|
|
|
10,901,131
|
|
|
|
32,900
|
|
|
|
7,707
|
|
|
|
-
|
|
|
|
23,710
|
|
|
|
64,317
|
|
|
$
|
0.00372
|
|
|
Total
|
|
|
52,817,207
|
|
|
$
|
101,377
|
|
|
$
|
18,981
|
|
|
$
|
10,950
|
|
|
$
|
168,239
|
|
|
$
|
304,877
|
|
|
$
|
0.0027
|
|
Notes
Payable
The
Company had promissory notes aggregating $205,000 at December 31, 2019 and June 30, 2019, respectively. The related accrued interest
amounted to approximately $167,000 and $159,000 at December 31, 2019 and June 30, 2019, respectively. The notes payable bear interest
at rates ranging from 8% to 16% per annum which is payable monthly. All promissory notes outstanding as of December 31, 2019 have
matured, are in default, and remain unpaid.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
6: STOCKHOLDERS’ DEFICIT
Common
Stock
At
December 31, 2019, the Company had 10,000,000,000 authorized common shares.
Issuances
of Common Stock During the Six Months Ended December 31, 2019
Convertible
Notes Payable
During
the six months ended December 31, 2019 the Company issued 52,817,207 shares of its common stock related to the conversion of $304,877
of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.00249 per share.
Stock
Based Compensation
During
the six months ended December 31, 2019 the Company issued 966,667 shares of its $0.0001 par value common stock vested to two consultants,
as compensation under two separate consulting agreements. The shares were valued at $58,000, or $0.06 per share.
During
the six months ended December 31, 2019 the Company issued 10,000,000 shares of its $0.0001 par value common stock were issued
to three consultants, as compensation for services rendered. The shares were valued at $35,000, or $0.0035 per share.
During
the six months ended December 31, 2019 the Company issued 8,000,000 shares of its $0.0001 par value common stock were issued to
one of our Directors, as compensation for services rendered. The shares were valued at $28,000, or $0.0035 per share.
Issuances
of Common Stock During the Six Months Ended December 31, 2018
Convertible
Notes Payable
During
the six months ended December 31, 2018 the Company issued 1,985,327 shares of its common stock related to the conversion of $201,055
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 six months ended December 31, 2018 the Company issued 2,505,000 shares of its common stock related to the sale of its common
stock resulting in proceeds of $250,500, at an average price of $0.10 per share.
Acquisition
of Threat Surface Solutions Group, LLC
During
the six months ended December 31, 2018 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 six months ended December 31, 2018 the Company issued 3,079,153 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 $722,042, or $0.234
per share.
During
the six months ended December 31, 2018 the Company issued 966,669 shares of its $0.0001 par value common stock to four consultants,
as compensation under four separate consulting agreements. The shares were valued at $58,000, or $0.06 per share.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE 6: STOCKHOLDERS’
DEFICIT, continued
Preferred
Stock
Series
A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $0.001. All classes
rank(ed) prior to any class or series of the Company’s common stock as to the distribution of assets upon liquidation, dissolution
or winding up of the Company or as to the payment of dividends. All preferred stock shall have no voting rights except if the
subject of such vote would reduce the amount payable to the holders of preferred stock upon liquidation or dissolution of the
company and cancel and modify the conversion rights of the holders of preferred stock as defined in the certificate of designations
of the respective series of preferred stock.
Series
A Convertible Preferred Stock
The
Series A Preferred Stock has a stated value of $750.00 per share. Each one share of Series A Preferred Stock is convertible into
one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the
Conversion shall be set at $0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements.
Series
B Convertible Preferred Stock
Thirty
million (30,000,000) shares of preferred stock were designated as a new Series B Preferred stock in April 2016. This new Series
B Preferred Stock has a $0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock,
with a stated value of $375 per share.
Series
AA Convertible Preferred Stock
In
March 2018, the Company authorized and issued one share of Series AA convertible preferred stock which provides for the holder
to vote on all matters as a class with the holders of Common Stock and each share of Series AA Convertible Preferred Stock shall
be entitled to 51% of the common votes on any matters requiring a shareholder vote of the Company. Each one share of Series AA
Convertible Preferred Stock is convertible into one (1) share of Common Stock. Mark Lucky, our CFO, is the holder of the one share
of Series AA Convertible Preferred Stock.
Common
Stock Warrants
In
January 2019 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 Company’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.
A
summary of the status of the Company’s outstanding common stock warrants as of December 31, 2019 and changes during the
six months ending on that date is as follows:
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Common Stock Warrants
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
Granted due to repricing
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Balance at end of period
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable at end of period
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of warrants granted during the period
|
|
|
|
|
|
$
|
950
|
|
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE 6: STOCKHOLDERS’ DEFICIT, continued
The
following table summarizes information about common stock warrants outstanding at December 31, 2019:
|
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
Range
of
|
|
|
Number
|
|
|
Remaining
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
Exercise
|
|
|
Outstanding
at
|
|
|
Contractual
|
|
Exercise
|
|
|
Exercisable
at
|
|
|
Exercise
|
|
|
Price
|
|
|
December
31, 2019
|
|
|
Life
|
|
Price
|
|
|
December
31, 2019
|
|
|
Price
|
|
|
$
|
0.15
|
|
|
|
500,000
|
|
|
2.03
Years
|
|
$
|
0.15
|
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
500,000
|
|
|
2.03
Years
|
|
$
|
0.15
|
|
|
|
500,000
|
|
|
$
|
0.15
|
|
Note
7 - STOCK-BASED COMPENSATION
Restricted
Stock Awards
Restricted
stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder
leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on
and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the
right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its
grant. A summary of the Company’s restricted stock activity for the six months ended December 31, 2019 is presented in the following table:
|
|
|
For
the six months ended
|
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Grant
Date
|
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
|
Unvested
at beginning of period
|
|
|
3,544,447
|
|
|
$
|
0.06
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
(966,667
|
)
|
|
$
|
0.06
|
|
|
Unvested
at end of period
|
|
|
2,577,780
|
|
|
$
|
0.06
|
|
Unrecognized
compensation expense related to outstanding restricted stock awards to employees and directors as of December 31, 2019 was $154,666
and is expected to be recognized over a weighted average period of 1.33 years.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE
8: RELATED PARTY TRANSACTIONS
Equity
transactions with related parties are described in Note 6.
From
time to time we have borrowed operating funds from Mr. Mark Lucky, our Chief Executive Officer and from certain Directors, for
working capital. The advances were payable upon demand and were interest free. At December 31, 2019 there was $99,900 outstanding
of such advances made to the Company.
NOTE
9: COMMITMENTS AND CONTINGENCIES
Contingencies
The
Company accounts for contingent liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 450,
Contingencies. This guidance requires management to assess potential contingent liabilities that may exist as of the date
of the financial statements to determine the probability and amount of loss that may have occurred, which inherently involves
an exercise of judgment. If the assessment of a contingency indicates that it is probable that a material loss has been incurred
and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial
statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible,
or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible
losses, if determinable and material, would be disclosed. For loss contingencies considered remote, no accrual or disclosures
are generally made. Management has assessed potential contingent liabilities as of December 31, 2019, 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 December 31, 2019 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 5%, respectively. As of December 31, 2019 we have not generated any revenue related to these license agreements.
Legal
Claims
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
10 – Fair Value Measurement
Fair
value measurements
At
December 31, 2019 and 2018, 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.
VISIUM
TECHNOLOGIES, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
NOTE 10 – FAIR VALUE MEASUREMENT,
continued
At
December 31, 2019 the estimated fair values of the liabilities measured on a recurring basis are as follows:
|
|
|
Fair
Value Measurements at
|
|
|
|
|
December
31, 2019:
|
|
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
Derivative
liability – Convertible notes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
337,402
|
|
|
Derivative
liability – Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
950
|
|
|
Total
derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
338,352
|
|
NOTE
11: SUBSEQUENT EVENTS
During
January 2020 the Company issued 46,073,367 shares of its common stock related to the conversion of $20,547 of principal and accrued
interest of its convertible notes payable, at an average contract conversion price of $0.00066 per share.
In
January 2020 our consultants vested 161,111 shares of our $0.0001 par value common stock, at an average price per share of $0.06.
In
January 2020 the Company issued 1,000,000 shares of our $0.0001 par value common stock to two consultants for services rendered,
at an average price per share of $0.002095.
During February 2020 the Company issued 16,108,800 shares of its
common stock related to the conversion of $12,475 of principal and accrued interest of its convertible notes payable, at an average
contract conversion price of $0.00071 per share.