NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 1: ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING
CONCERN
Visium Technologies, Inc., or the Company, is 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, critical infrastructure security, and the
Internet of Things (“IOT”).
In April 2021 the Company created JAJ Advisory, LLC, a Viriginia
limited liability company. The LLC was established to account for
non-cybersecurity related business activities that the Company may
pursue.
Going Concern
The accompanying consolidated financial statements have been
prepared on a going concern basis. For the three months ended
September 30, 2021 we had a net loss of $1,815,818, had net cash
used in operating activities of $510,397 and had negative working
capital of $1,609,687. 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.
COVID-19 Update
In March 2020, the World Health Organization declared the COVID-19
outbreak to be a global pandemic. The pandemic has had significant
impacts around the globe and in many locations in which we operate.
While the impacts have not caused a material adverse financial
impact to our business to date, the future impacts remain
uncertain. The extent to which the COVID-19 pandemic may impact our
business going forward will depend on numerous evolving factors
that we cannot reliably predict. These factors may adversely impact
business spending on technology as well as customers’ ability
to pay for our products and services on an ongoing basis. The
effect, if any, of the COVID-19 pandemic would not be fully
reflected in our results of operations and overall financial
performance until future periods.
Throughout the pandemic we have continued to make investments to
support business growth and product development, including
investments in research and development as we continue to introduce
new applications to extend the functionality of our products, sales
and marketing to support customer growth, and other critical
functions to ensure the highest levels of customer service and
support as well as ensuring that we maintain the required
infrastructure to be a public company. We expect to continue to
make these investments. As of September 30, 2021, COVID-19 has not
had a material impact on our results of operations or financial
condition.
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, 2021, contained in the Company’s
Annual Report on Form 10-K filed with the SEC on October 13, 2021.
The results of operations for the three months ended September 30,
2021, are not necessarily indicative of results to be expected for
any other interim period or the fiscal year ending June 30,
2022.
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Fiscal Year
The fiscal year ends on June 30. References to fiscal year 2021,
for example, refer to the fiscal year ending June 30, 2021.
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. All significant intercompany
transactions and balances have been eliminated in
consolidation.
Use of Estimates
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 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
liability.
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 three months ended September 30,
2021 and year ended June 30, 2021.
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.
Derivative
Liabilities
The Company assessed the classification of its derivative financial
instruments as of September 30, 2021 and June 30, 2021 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 UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
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, the expected volatility, the
implied risk-free interest rate, as well as the expected dividend
rate, if any. The Company recorded a derivative liability as of
September 30, 2021 of $203,289.
Fair Value of Financial
Instruments
The Company accounts for assets and liabilities measured at fair
value on a recurring basis, in accordance with ASC Topic 820, Fair
Value Measurements and Disclosures, or ASC 820. ASC 820 establishes
a common definition for fair value to be applied to existing
generally accepted accounting principles that require the use of
fair value measurements, establishes a framework for measuring fair
value, and expands disclosure about such fair value
measurements.
ASC 820 defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Additionally, ASC 820 requires the use of valuation techniques that
maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:
|
Level 1:
|
Observable inputs such as quoted market prices in active markets
for identical assets or liabilities.
|
|
|
|
|
Level 2:
|
Observable market-based inputs or unobservable inputs that are
corroborated by market data.
|
|
|
|
|
Level 3:
|
Unobservable inputs for which there is little or no market data,
which require the use of the reporting entity’s own
assumptions.
|
Additional Disclosures Regarding Fair Value
Measurements
The carrying value of cash, accounts payable and accrued expenses,
accrued compensation, notes payable and convertible promissory
notes payable, approximate their fair value due to the short
maturity of these items or the use of market interest rates.
Convertible
Instruments
The Company accounts for convertible instruments (when it has
determined that the embedded conversion options should not be
bifurcated from their host instruments) in accordance with ASC
470-20, Debt with Conversion and Other Options. Accordingly, the
Company records, when necessary, discounts to convertible notes for
the intrinsic value of conversion options embedded in debt
instruments based upon the differences between the fair value of
the underlying common stock at the commitment date of the note
transaction and the effective conversion price embedded in the
note. Debt discounts under these arrangements are amortized over
the term of the related debt to their earliest date of redemption.
The Company also records deemed dividends for the intrinsic value
of conversion options embedded in preferred shares based upon the
differences between the fair value of the underlying common stock
at the commitment date of the note transaction and the effective
conversion price embedded in the note.
ASC 815-40, Contracts in Entity’s own Equity, generally
provides that, among other things, if an event is not within the
entity’s control, such contract could require net cash
settlement and shall be classified as an asset or a liability.
The Company determines whether the instruments issued in the
transactions are considered indexed to the Company’s own
stock. During fiscal years 2014 through 2021 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 UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Revenue
Recognition
All revenues are recorded in accordance with ASC 606, which is
recognized when: (i) a contract with a client has been identified,
(ii) the performance obligation(s) in the contract have been
identified, (iii) the transaction price has been determined, (iv)
the transaction price has been allocated to each performance
obligation in the contract, and (v) the Company has satisfied the
applicable performance obligation over time.
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 September
30, 2021, the Company had not filed tax returns for the tax years
ending June 30, 2008 through 2020 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 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 is 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
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Recent Accounting
Pronouncements
All new accounting pronouncements issued but not yet effective are
not expected to have a material impact on our results of
operations, cash flows or financial position. There have been no
new accounting pronouncements not yet effective that have
significance to our consolidated financial 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 that would be as follows:
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
Weighted average common shares outstanding
|
|
|
3,053,946,334
|
|
|
|
1,977,488,957
|
|
|
Effect of dilutive securities-when applicable:
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
|
9,061,929
|
|
|
|
142,079,692
|
|
|
Preferred stock
|
|
|
13,996,767
|
|
|
|
13,996,767
|
|
|
Common stock options
|
|
|
16,000,000
|
|
|
|
-
|
|
|
Warrants
|
|
|
3,912,663
|
|
|
|
12,165,260
|
|
|
Fully diluted earnings per share—adjusted weighted-average
shares and assumed conversions
|
|
|
3,096,917,693
|
|
|
|
2,145,730,676
|
|
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 3: PREPAID LICENSE FEE
In April 2021, the Company entered into two-year software license
agreement to enable product development. The license fee is prepaid
at a rate of $70,000 annually. The prepaid license fee is amortized
on a straight-line basis over the term of the license agreement,
and is included in Development expense in our Statement of
Operations.
NOTE 4: DERIVATIVE LIABILITY
Derivative liability - warrants
The Company issued warrants in connection with convertible notes
payable which were issued in January, February, and July 2021.
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 stated conversion for each warrant,
ranging from $0.0055 to $0.02 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 September 30, 2021 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 September 30, 2021 and June 30,
2021 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 loss of $18,908 and a
gain of $124,332 for the three months ended September 30, 2021 and
2020, respectively in the Company’s consolidated statements
of operations, under the caption “Gain in change of fair
value of derivative liability”. The fair value of the
warrants at September 30, 2021 and June 30, 2021 was $34,166 and
$69,334, respectively. The fair value of the derivative liability
related to the convertible debt at September 30, 2021 and June 30,
2021 is $169,123 and $115,047, 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:
|
|
|
Three Months Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Effective exercise price
|
|
$ 0.0055 – $0.02
|
|
|
$ 0.00361 – $0.02
|
|
|
Effective market price
|
|
$
|
0.0098
|
|
|
$
|
0.006
|
|
|
Expected volatility
|
|
191.4%to315.8
|
%
|
|
96.4%to304.0
|
%
|
|
Risk-free interest
|
|
0.05%-0.28
|
%
|
|
0.05%-0.25
|
%
|
|
Expected terms
|
|
60 – 1,073 days
|
|
|
60 - 711 days
|
|
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Changes in the derivative liabilities during the three months ended
September 30, 2021 is follows:
|
Derivative liability at June 30, 2021
|
|
$
|
184,381
|
|
|
Loss on change in fair value of derivative liability
|
|
|
18,908
|
|
|
Derivative liability at September 30, 2021
|
|
$
|
203,289
|
|
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 5: ACCRUED INTEREST PAYABLE
Changes in accrued interest payable during the three months ended
September 30, 2021 is as follows:
|
Accrued interest payable at June 30, 2021
|
|
$
|
366,149
|
|
|
Interest expense accrued for the three months ended September 30,
2021
|
|
|
75,542
|
|
|
Interest paid in cash
|
|
|
(9,200
|
)
|
|
Conversion of accrued interest into common stock
|
|
|
(56,001
|
)
|
|
Accrued interest payable at September 30, 2021
|
|
$
|
376,490
|
|
NOTE 6: CONVERTIBLE NOTES PAYABLE AND NOTES
PAYABLE
Convertible Notes
Payable
At September 30, 2021 and June 30, 2021 convertible debentures
consisted of the following:
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
Convertible notes payable
|
|
$
|
317,431
|
|
|
$
|
1,205,228
|
|
|
Discount on convertible notes
|
|
|
-
|
|
|
|
(396,033
|
)
|
|
Convertible notes, net
|
|
|
317,431
|
|
|
|
809,195
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable to ASC Recap
|
|
|
147,965
|
|
|
|
147,965
|
|
|
Total
|
|
$
|
465,396
|
|
|
$
|
957,160
|
|
The Company had convertible promissory notes aggregating
approximately $465,000 and $957,000 at September 30, 2021 and June
30, 2021, respectively. The related accrued interest amounted to
approximately $163,000 and $161,000 at September 30, 2021 and June
30, 2021, 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 $0.00483 to $22,500 per share, as a result of the two
reverse stock splits. At September 30, 2021, approximately $317,000
of convertible promissory notes had matured, are in default and
remain unpaid. There are no punitive default provisions included in
the terms of these convertible promissory notes.
On July 22, 2013 and May 6, 2014, the Company issued to ASC Recap
LLC (“ASC”) two convertible promissory notes with
principal amounts of $25,000 and $125,000, respectively. These two
notes were issued as a fee for services under a 3(a)10 transaction.
While the Company continues to carry the balance of these notes on
its balance sheet, management is disputing the notes and does not
believe that the balances of these notes are owed. See Note 10
– 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.
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 6: CONVERTIBLE NOTES PAYABLE AND NOTE
PAYABLE, continued
For the three months ended September 30, 2021, the following
summarizes the conversion of debt for common shares:
|
|
|
|
|
|
Amount of
|
|
|
Amount of
|
|
|
|
|
|
|
|
|
Conversion
|
|
|
|
|
Shares
|
|
|
Converted
|
|
|
Converted
|
|
|
Conversion
|
|
|
|
|
|
Price
|
|
|
Name
|
|
Issued
|
|
|
Principal
|
|
|
Interest
|
|
|
Expense
|
|
|
Total
|
|
|
Per Share
|
|
|
Labrys Funds
|
|
|
198,046,241
|
|
|
$
|
772,798
|
|
|
$
|
56,000
|
|
|
$
|
2,250
|
|
|
$
|
831,048
|
|
|
$
|
0.00417
|
|
|
TOTAL
|
|
|
198,046,241
|
|
|
$
|
772,798
|
|
|
$
|
56,000
|
|
|
$
|
2,250
|
|
|
$
|
831,048
|
|
|
$
|
0.00417
|
|
Notes
Payable
The Company had promissory notes aggregating $430,000 at September
30, 2021 and June 30, 2021, respectively. The related accrued
interest amounted to approximately $213,389 and $204,912 at
September 30, 2021 and June 30, 2021, 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
September 30, 2021 have matured, are in default, and remain
unpaid.
NOTE 7: STOCKHOLDERS’ DEFICIT
Common Stock
At September 30, 2021, the Company had 10,000,000,000 authorized
common shares.
Issuances of Common Stock During the Three Months Ended
September 30, 2021
Convertible Notes Payable
During the three months ended September 30, 2021 the Company issued
198,046,241 shares of its common stock related to the conversion of
$831,048 of principal and accrued interest for three of its
convertible notes payable, at an average contract conversion price
of $0.00417 per share. These convertible notes have terms that
include fixed conversion prices, and therefore the notes were
converted consistent with the contractual conversion prices of each
note.
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 7: STOCKHOLDERS’ DEFICIT, continued
Stock Based Compensation
During the three months ended September 30, 2021 the Company issued
30,000,000 shares of its $0.0001 par value common stock as
compensation to its directors and officers. The shares were valued
at $345,000, or $0.0115 per share, based on the share price at the
time of the transactions.
During the three months ended September 30, 2021 31,500,000 shares
of its $0.0001 par value common stock vested to six consultants, as
compensation under six separate consulting agreements. The shares
were valued at $326,748, or $0.0109 per share.
Warrant Exercises
During the three months ended September 30, 2021 the Company issued
6,587,229 shares of its $0.0001 par value common stock pursuant to
a two cashless exercises.
Sale of Common Stock
During the three months ended September 30, 2021 the Company
entered into two securities purchase agreement (with a single
institutional investor resulting in the raise of $1,500,000 in
gross proceeds to the Company, in exchange for 300,000,000 shares
of its $0.0001 par value common stock, or at $0.0005 per share.
Preferred Stock
Series A and B issued and outstanding shares of the Company’s
convertible preferred stock have a par value of $0.001. All classes
rank(ed) prior to any class or series of the Company’s common
stock as to the distribution of assets upon liquidation,
dissolution or winding up of the Company or as to the payment of
dividends. All preferred stock shall have no voting rights except
if the subject of such vote would reduce the amount payable to the
holders of preferred stock upon liquidation or dissolution of the
company and cancel and modify the conversion rights of the holders
of preferred stock as defined in the certificate of designations of
the respective series of preferred stock.
Series A Convertible Preferred Stock
The Series A Preferred Stock has a stated value of $750.00 per
share. Each one share of Series A Preferred Stock is convertible
into one (1) share of Common Stock. In the event the Common Stock
price per share is lower than $0.10 (ten cents) per share then the
Conversion shall be set at $0.035 per share. The Common Stock
shares are governed by Lock-Up/Leak-Out Agreements.
Series B Convertible Preferred Stock
Thirty million (30,000,000) shares of preferred stock were
designated as a new Series B Preferred stock in April 2016. This
new Series B Preferred Stock has a $0.001 par value, and each 300
shares is convertible into one share of the Company’s common
stock, with a stated value of $375 per share.
Series AA Convertible Preferred Stock
In March 2018, the Company authorized and issued one share of
Series AA convertible preferred stock which provides for the holder
to vote on all matters as a class with the holders of Common Stock
and each share of Series AA Convertible Preferred Stock shall be
entitled to 51% of the common votes on any matters requiring a
shareholder vote of the Company. Each one share of Series AA
Convertible Preferred Stock is convertible into one (1) share of
Common Stock. Mark Lucky, our CFO, is the holder of the one share
of Series AA Convertible Preferred Stock.
Common Stock Warrants
In January and February 2021, we issued 39,370,677 warrants with a
two year life, and fixed exercise prices ranging from $0.0055 to
$0.02 per share. An additional 9,239,130 warrant shares were issued
due to repricing certain warrants with a $0.02 exercise price to a
$0.0115 exercise price.
In July 2021 we issued 851,299 warrants with a two year life, and a
fixed exercise price of $0.0077.
In January 2019 we issued 500,000 warrants with a three year life
and a conversion price of $0.15 per share. These warrants had 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 September 30, 2021 and changes during the
fiscal year ending on that date is as follows:
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Common Stock Warrants
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
12,165,260
|
|
|
$
|
0.011
|
|
|
Granted
|
|
|
851,299
|
|
|
$
|
0.0077
|
|
|
Exercised
|
|
|
(6,565,229
|
)
|
|
|
0.0074
|
|
|
Forfeited
|
|
|
(2,538,667
|
)
|
|
|
0.0074
|
|
|
Balance at end of period
|
|
|
3,912,663
|
|
|
$
|
0.0113
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable at end of period
|
|
|
3,912,663
|
|
|
$
|
0.0113
|
|
The following table summarizes information about common stock
warrants outstanding at September 30, 2021:
|
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
Range of Exercise Price
|
|
|
Number
Outstanding at
September 30,
2021
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable at
September 30,
2021
|
|
|
Weighted
Average
Exercise
Price
|
|
|
$
|
0.0055
|
|
|
|
1,636,364
|
|
|
1.28 Years
|
|
$
|
0.0055
|
|
|
|
1,636,364
|
|
|
$
|
0.0055
|
|
|
|
0.0077
|
|
|
|
851,299
|
|
|
1.78 Years
|
|
|
0.0077
|
|
|
|
851,299
|
|
|
|
0.0077
|
|
|
|
0.0200
|
|
|
|
1,425,000
|
|
|
1.36 Years
|
|
|
0.0200
|
|
|
|
1,425,000
|
|
|
|
0.0200
|
|
|
|
|
|
|
|
3,912,663
|
|
|
1.28 Years
|
|
$
|
0.0113
|
|
|
|
3,912,663
|
|
|
$
|
0.0113
|
|
NOTE 8 - STOCK-BASED
COMPENSATION
The Company adopted an Incentive Stock Plan on April 18, 2021. This
plan is intended to provide incentives which will attract and
retain highly competent persons at all levels as employees of the
Company, as well as independent contractors providing consulting or
advisory services to the Company, by providing them opportunities
to acquire the Company’s common stock or to receive monetary
payments based on the value of such shares pursuant to Awards
issued. While the plan terminates 10 years after the adoption date,
issued options have their own schedule of termination. Options to
acquire shares of common stock may be granted at no less than fair
market value on the date of grant. Upon exercise, shares of new
common stock are issued by the Company.
Under the 2021 Stock Incentive Plan, the Company has issued options
to purchase 16 million shares at an average price of $0.015 with a
fair value of $0.00. For the three months ended September 30, 2021
and 2020, the Company did not issue any options to purchase shares,
respectively. Upon exercise, shares of new common stock are issued
by the Company.
For the three months ended September 30, 2021 and 2020, the Company
recognized an expense of approximately $40,524 and $0,
respectively, of non-cash compensation expense (included in General
and Administrative expense in the accompanying Consolidated
Statement of Operations) determined by application of a binomial
option pricing model with the following inputs: exercise price,
dividend yields, risk-free interest rate, and expected annual
volatility. As of September 30, 2021, the Company had approximately
$103,004 of unrecognized pre-tax non-cash compensation expense,
which the Company expects to recognize, based on a weighted-average
period of 0.83 years. The Company used straight-line amortization
of compensation expense over the one-year requisite service or
vesting period of the grant. The Company recognizes forfeitures as
they occur. There are options to purchase approximately 4,250,000
shares that have vested as of September 30, 2021.
The Company uses a binomial option pricing model to estimate the
fair value of its stock option awards and warrant issuances. The
calculation of the fair value of the awards using the binomial
option-pricing model is affected by the Company’s stock price
on the date of grant as well as assumptions regarding the
following:
|
|
|
Year ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Expected volatility
|
|
370%-497
|
%
|
|
-
|
%
|
|
Expected term
|
|
4 Years
|
|
|
|
-
|
|
|
Risk-free interest rate
|
|
0.76%-0.84
|
%
|
|
-
|
%
|
|
Forfeiture Rate
|
|
|
0.00
|
%
|
|
-
|
%
|
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
-
|
%
|
The expected volatility was determined with reference to the
historical volatility of the Company’s stock. The Company
uses historical data to estimate option exercise and employee
termination within the valuation model. The expected term of
options granted represents the period of time that options granted
are expected to be outstanding. The risk-free interest rate for
periods within the contractual life of the option is based on the
U.S. Treasury rate in effect at the time of grant.
A summary of the status of the Company’s outstanding stock
options as of June 30, 2021 and 2020 and changes during the periods
ending on that date is as follows:
|
|
|
|
|
|
Weighted Average
|
|
|
Aggregate
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
Intrinsic
|
|
|
Remaining
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Fair Value
|
|
|
Value
|
|
|
Term (Yrs)
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
June 30, 2021
|
|
16,000,000-
|
|
|
$
|
0.015
|
|
|
$
|
-
|
|
|
$
|
0
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Forfeiture and cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2021
|
|
|
16,000,000
|
|
|
$
|
0.015
|
|
|
$
|
-
|
|
|
$
|
0
|
|
|
|
4.65
|
|
The following table summarizes information about employee stock
options outstanding at June 30, 2021:
|
|
|
|
Outstanding Options
|
|
|
Vested Options
|
|
|
|
|
|
Number
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Number
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
Outstanding at
|
|
|
Averaged
|
|
|
Averaged
|
|
|
Exercisable at
|
|
|
Averaged
|
|
|
Averaged
|
|
|
|
|
|
June 30,
|
|
|
Remaining
|
|
|
Exercise
|
|
|
June 30,
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Range of Exercise Price
|
|
|
2020
|
|
|
Life
|
|
|
Price
|
|
|
2020
|
|
|
Price
|
|
|
Life
|
|
|
$
|
0.01
|
|
|
|
8,000,000
|
|
|
|
4.71
|
|
|
$
|
0.01
|
|
|
|
1,583,333
|
|
|
$
|
0.01
|
|
|
|
4.71
|
|
|
$
|
0.02
|
|
|
|
8,000,000
|
|
|
|
4.59
|
|
|
$
|
0.02
|
|
|
|
2,666,667
|
|
|
$
|
0.02
|
|
|
|
4.59
|
|
|
Outstanding options
|
|
|
|
16,000,000
|
|
|
|
4.65
|
|
|
$
|
0.015
|
|
|
|
4,250,000
|
|
|
$
|
0.015
|
|
|
|
4.65
|
|
As of September 30, 2021, the Company had approximately $103,004 of
unrecognized pre-tax non-cash compensation expense, which the
Company expects to recognize, based on a weighted-average period of
0.71 years.
Restricted Stock Awards
Restricted stock awards are awards of common stock that are subject
to restrictions on transfer and to a risk of forfeiture if the
holder leaves the Company before the restrictions lapse. The holder
of a restricted stock award is generally entitled at all times on
and after the date of issuance of the restricted shares to exercise
the rights of a shareholder of the Company, including the right to
vote the shares. The value of stock awards that vest over time was
established by the market price on the date of its grant. A summary
of the Company’s restricted stock activity for the three
months ended September 30, 2021 and June 30, 2021 is presented in
the following table:
|
|
|
For the Three months ended
|
|
|
|
|
September 30,
2021
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested at beginning of period
|
|
|
132,000,000
|
|
|
$
|
0.0115
|
|
|
Granted
|
|
|
44,000,000
|
|
|
$
|
0.0079
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
(56,500,000
|
)
|
|
$
|
0.0110
|
|
|
Unvested at end of period
|
|
|
119,500,000
|
|
|
$
|
0.0100
|
|
Unrecognized compensation expense related to outstanding restricted
stock awards to employees and directors as of September 30, 2021
was $1,242,550 and is expected to be recognized over a weighted
average period of 0.55 years. The recognition of expense related to
vested shares is accounted for as stock-based consulting expense
and stock-based compensation expense.
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 9: RELATED PARTY TRANSACTIONS
Equity transactions with related parties are described in Note
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. At September 30, 2021 there was $0 outstanding of
such advances made to the Company.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company operates virtually, with no office space rented. The
Company has no future minimum annual payments under non-cancelable
operating leases at September 30, 2021.
Contingencies
The Company accounts for contingent liabilities in accordance with
Accounting Standards Codification (“ASC”) Topic 450,
Contingencies. This guidance requires management to assess
potential contingent liabilities that may exist as of the date of
the financial statements to determine the probability and amount of
loss that may have occurred, which inherently involves an exercise
of judgment. If the assessment of a contingency indicates that it
is probable that a material loss has been incurred and the amount
of the liability can be estimated, then the estimated liability
would be accrued in the Company’s financial statements. If
the assessment indicates that a potential material loss contingency
is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability,
and an estimate of the range of possible losses, if determinable
and material, would be disclosed. For loss contingencies considered
remote, no accrual or disclosures are generally made. Management
has assessed potential contingent liabilities as of September 30,
2021, 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 September 30,
2021, we have not generated any revenue related to these license
agreements. These license agreements will not be renewed or
extended.
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 September 30, 2021, 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.
In January 2021 the Company won a dismissal of an involuntary
bankruptcy petition that was filed against the Company in the
Southern District Court of Florida on December 30, 2020, which had
been brought by three parties, (i) Tarpon Bay Partners LLC, (ii)
J.P. Carey Enterprises Inc., and (iii) Anvil Financial Mgmt LLC
(collectively the “Petitioning Creditors”).
The Court ruled in the Company’s favor, dismissing the
involuntary bankruptcy petition and allowing the Company to file a
motion with the Court seeking compensatory and punitive damages. In
addition, Visium plans to file an affidavit of fees and costs
incurred in connection with Visium’s defense of the
Involuntary Petition.
In March 2021 the Company filed a Complaint for Damages and Other
Relief against Tarpon Bay Partners, LLC, a Florida limited
liability company; J.P. Carey Enterprises, Inc., a Florida profit
corporation; Anvil Financial Management, LLC, a Florida limited
liability company; Stephen Hicks, an individual; Joseph C Canouse,
an individual; Jeffrey M. Canouse, an individual; Paul A. Rachmuth,
an individual; and Litt Law Group, LLC, a New York Limited
Liability Company (collectively the “Defendants”)
related to the involuntary bankruptcy petition. The Company is
seeking damages from the Defendants for reasonable attorneys’
fees and costs, as well as compensatory, consequential special and
punitive damages.
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.
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2021
NOTE 10 – Fair Value Measurement
Fair value measurements
At September 30, 2021 and June 30, 2021, 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 September 30, 2021 the estimated fair values of the liabilities
measured on a recurring basis are as follows:
|
|
|
Fair Value Measurements at
|
|
|
|
|
September 30, 2021:
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Derivative liability – Convertible notes
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
169,123
|
|
|
Derivative liability – Warrants
|
|
|
-
|
|
|
|
|
-
|
|
|
|
34,166
|
|
|
Total derivative liability
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
$
|
203,289
|
|
NOTE 11: SUBSEQUENT EVENTS
In October 2021 our consultants vested 10,166,666 shares of our
$0.0001 par value common stock, valued at $116,917, or at an
average price per share of $0.0115.
In October 2021 our directors and officers vested 18,000,000 shares
of our $0.0001 par value common stock, valued at $169,400, or at an
average price per share of $0.0094.
In October 2021 the Company issued 8,000,000 shares of our $0.0001
par value common stock to two employees as compensation, valued at
$54,400, or at an average price per share of $0.0068.