UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
fiscal year ended
June 30,
2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from ___________ to ___________
Commission
file number
000-25753
VISIUM TECHNOLOGIES, INC.
(Exact Name of Registrant as specified in its Charter)
|
Florida
|
|
7371
|
|
87-0449667
|
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Number)
|
|
(I.R.S. Employer
Identification Number)
|
4094 Majestic Lane, Suite 360
Fairfax, VA 22033
(Address of Principal Executive Office)(Zip Code)
(703) 273-0383
(Registrant’s telephone number, including area
code)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
|
Common Stock, $0.0001 Par Value
|
|
VISM
|
|
OTC
PINK
|
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.0001
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [X]
No [ ]
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for shorter
period that the registrant as required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate
by check mark whether the Registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes [X] No
[ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer [ ]
|
|
Accelerated
filer [ ]
|
|
Non-accelerated
filer [ ]
|
|
Smaller
reporting company [X]
|
|
|
|
Emerging
growth company [ ]
|
If an
emerging growth company, indicate by checkmark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
The
aggregate market value of the common equity voting shares of the
registrant held by non-affiliates on December 31, 2019 was
$216,315, at a share price of $0.0019 on that date. For purposes of
this calculation, an aggregate of 113,850,143 shares of Common
Stock were held by non-affiliates of the registrant on December 31,
2019 and have been included in the number of shares of Common Stock
held by affiliates.
The
number of the registrant’s shares of Common Stock outstanding
as of October 9, 2020 is 2,127,470,956.
In this
Annual Report on Form 10-K, the terms the “Company,”
“Visium,” “we,” “us” or
“our” refers to Visium Technologies, Inc., unless the
context indicates otherwise.
|
|
|
|
|
|
||
FORWARD LOOKING STATEMENTS
We
make forward-looking statements in this Annual Report and the
documents incorporated by reference herein within the meaning of
the Securities Litigation Reform Act of 1995. These forward-looking
statements relate to expectations or forecasts for futureevents,
including without limitation our earnings, revenues, expenses or
other future financial or business performance or strategies, or
the impact of legal or regulatory matters on our business, results
of operations or financial condition. These statements may be
preceded by, followed by or include the words “may,”
“might,” “will,” “will likely
result,” “should,” “estimate,”
“plan,” “project,” “forecast,”
“intend,” “expect,”
“anticipate,” “believe,”
“seek,” “continue,” “target” or
similar expressions. These forward-looking statements are based on
information available to us as of the date of this Annual Report
and on our current expectations, forecasts and assumptions, and
involve substantial risks and uncertainties. Actual results may
vary materially from those expressed or implied by the
forward-looking statements herein due to a variety of factors We do
not undertake any obligation to update forward-looking statements
as a result of as a result of new information, future events or
developments or otherwise.
|
|
2
|
|
|
|
||
2020 ANNUAL REPORT ON FORM 10-K
Table of Contents
|
PART I
|
4
|
|
|
|
|
Item 1. Business.
|
4
|
|
Item 1A. Risk Factors.
|
4
|
|
Item 1B. Unresolved Staff Comments.
|
7
|
|
Item 2. Properties.
|
7
|
|
Item 3. Legal Proceedings.
|
7
|
|
Item 4. Mine Safety Disclosures.
|
7
|
|
|
|
|
PART II
|
8
|
|
|
|
|
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
|
8
|
|
Item 6. Selected Financial Data.
|
9
|
|
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
|
9
|
|
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
|
14
|
|
Item 8. Financial Statements and Supplementary
Data.
|
14
|
|
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
|
14
|
|
Item 9A. Controls and Procedures.
|
14
|
|
Item 9B. Other Information.
|
15
|
|
|
|
|
PART III
|
16
|
|
|
|
|
Item 11. Executive Compensation.
|
19
|
|
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholders Matters.
|
20
|
|
Item 13. Certain Relationship and Related Party Transactions, and
Director Independence.
|
20
|
|
Item 14. Principal Accountant Fees and
Services.
|
22
|
|
|
|
|
PART IV
|
23
|
|
|
|
|
Item 15. Exhibits and Financial Statement
Schedules.
|
23
|
|
|
3
|
|
|
|
||
PART I
Overview
Visium
Technologies, Inc. initially was incorporated in the State of
Nevada as Jaguar Investments, Inc. during October 1987. During
March 2003, a wholly owned subsidiary of the Company merged with
Freight Rate, Inc., a development stage company in the logistics
software business. During May 2003, the Company changed its name to
Power2Ship, Inc. During October 2006, the Company merged with a
newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc.,
a Nevada corporation, with the Company surviving but its name
changed to Fittipaldi Logistics, Inc. effective November 2006.
During December 2007, the Company merged with a newly formed,
wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada
corporation, with the Company surviving but renamed NuState Energy
Holdings, Inc. effective December 2007. In March 2018, the Company
changed its name to Visium Technologies, Inc.
Visium
is a provider of cyber security visualization, analytics, and
automation. Visium operates in the traditional cyber security
space, as well as in the cloud-based technology and Internet of
Things spaces. Visium provides cybersecurity technology solutions,
tools, and services to support commercial enterprises and
government’s ability to protect their data. Visium’s
CyGraph technology provides visualization, 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.
During
fiscal 2020 we have engaged in significant research and development
efforts aimed at commercializing our licensed technology, and
actively pursuing business development
opportunites.
A
novel strain of coronavirus, the COVID-19 virus, may adversely
affect our business operations and financial
condition.
In December 2019, an outbreak of the COVID-19 virus was reported in
Wuhan, China. On March 11, 2020, the World Health Organization
declared the COVID-19 virus a global pandemic and on March 13,
2020, President Donald J. Trump declared the virus a national
emergency in the United States. This highly contagious disease has
spread to most of the countries in the world and throughout the
United States, creating a serious impact on customers, workforces
and suppliers, disrupting economies and financial markets, and
potentially leading to a world-wide economic downturn. It has
caused a disruption of the normal operations of many businesses,
including the temporary closure or scale-back of business
operations and/or the imposition of either quarantine or remote
work or meeting requirements for employees, either by government
order or on a voluntary basis. The pandemic may adversely affect
our potential customers’ operations, our employees and our
employee productivity. It may also impact the ability of our
subcontractors, partners, and suppliers to operate and fulfill
their contractual obligations, and result in an increase in costs,
delays or disruptions in performance. These supply chain effects,
and the direct effect of the virus and the disruption on our
employees and operations, may negatively impact both our ability to
meet customer demand and our revenue and profit margins. Our
employees are working remotely and using various technologies to
perform their functions. We might experience delays or changes in
customer demand, particularly if customer funding priorities
change. Further, in reaction to the spread of COVID-19 in the
United States, many businesses have instituted social distancing
policies, including the closure of offices and worksites and
deferring planned business activity. The disruption and volatility
in the global and domestic capital markets may increase the cost of
capital and limit our ability to access capital. Both the health
and economic aspects of the COVID-19 virus are highly fluid and the
future course of each is uncertain. For these reasons and other
reasons that may come to light if the coronavirus pandemic and
associated protective or preventative measures expand, we may
experience a material adverse effect on our business operations,
revenues and financial condition; however, its ultimate impact is
highly uncertain and subject to change.
Employees
At
October 9, 2020, we had 3 full time employees.
Our
principal offices are located at 4094 Majestic Lane, Suite 360,
Fairfax, Virginia 22033. Our telephone number is (703)
273-0383.
Our
common stock is quoted on the OTC Pink under the symbol
“VISM”.
Item 1A. Risk Factors
The
common shares of our Company are considered speculative. You should
carefully consider the following risks and uncertainties in
addition to other information in this annual report in evaluating
our Company and our business before purchasing our common shares.
Our business, operating or financial condition could be harmed due
to any of the following risks:
Management and our auditors have
raised substantial doubts as to our ability to continue as a going
concern
.
Our
financial statements have been prepared assuming we will continue
as a going concern. Since inception we have experienced recurring
net losses which losses caused an accumulated deficit of
approximately $48 million as of June 30, 2020. These factors, among
others, raise substantial doubt about our ability to continue as a
going concern. Our financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The IT security market is rapidly evolving within the increasingly
challenging cyber threat landscape and the continuing use
of hybrid on-premise and cloud-based environments. As a result
of unanticipated market, industry or company developments our
sales may not continue to grow at current rates or may
decline, and our share price could decrease.
We operate in a rapidly evolving industry focused on securing
organizations’ IT systems and sensitive data. Our solutions
focus on safeguarding privileged accounts, credentials, and
secrets. Privileged accounts are those accounts within an
organization that give users, applications, and machine identities
the highest levels of access, or “privileged” access,
to IT systems and infrastructure, industrial control systems,
applications and data both on-premises and in cloud environments.
While breaches of such privileged accounts have continued to gain
media attention in recent years, IT security spending within
enterprises is often concentrated on endpoint and network security
products designed to stop threats from penetrating corporate
networks. Organizations may allocate all or most of their IT
security budgets to these products and may not adopt our solutions
in addition to such products. Organizations are moving portions of
their IT systems to be managed by third parties, primarily
infrastructure, platform and application service providers, and may
rely on such providers’ internal security
measures.
Further, security solutions such as ours, which are focused on
disrupting cyber attacks by insiders and external perpetrators that
have penetrated an organization’s on-premise or cloud
environment, represent a security layer designed to respond to
advanced threats and more rigorous compliance standards and audit
requirements. However, advanced cyber attackers are skilled at
adapting to new technologies and developing new methods of gaining
access to organizations’ sensitive data. As our
customers’ technologies and business plans evolve and become
more complex, we expect them to face new and increasingly
sophisticated methods of attack. We face significant challenges in
ensuring that our solutions effectively identify and respond to
such attacks without disrupting the performance of our
customers’ IT systems. As a result, we must continually
modify and improve our products, services, and licensing models in
response to market and technology trends to ensure we are meeting
market needs and continue providing valuable solutions that can be
deployed in a variety of environments, including cloud and
hybrid.
We cannot guarantee that we will be able to anticipate future
market needs and opportunities or be able to develop or acquire
product enhancements or new products to meet such needs or
opportunities in a timely manner or at all. Delays in developing,
completing or delivering new or enhanced products could cause our
offerings to be less competitive, impair customer acceptance of our
solutions and result in delayed or reduced revenue for our
solutions.
In addition, any changes in compliance standards or audit
requirements that reduce the priority for the types of controls,
security, monitoring and analysis that our solutions provide would
adversely impact demand for our solutions. It is therefore
difficult to predict how large the market will be for our
solutions. If our solutions are not viewed by organizations as
necessary, or if customers do not recognize the benefit of our
solutions as a critical layer of an effective security strategy,
then our revenues may not continue to grow at their current rate or
may decline, which could cause our share price to decrease in
value.
Our reputation and business could be harmed based on real or
perceived shortcomings, defects or vulnerabilities in our solutions
or the provision of our services, or due to the failure of our
customers, channel partners, managed security service providers,
or subcontractors to correctly implement, manage and maintain
our solutions, resulting in loss of existing or new customers,
lawsuits or financial losses.
Security products and solutions are complex in design and
deployment and may contain errors that are not capable of being
remediated or detected until after their deployment. Any errors,
defects, or misconfigurations could cause our products or services
to not meet specifications, be vulnerable to security attacks or
fail to secure networks and could negatively impact customer
operations and harm our business and reputation. In particular, we
may suffer significant adverse publicity and reputational harm,
including a downgrade in our industry leadership position by
industry analysts, if our solutions (or the services we provide in
relation to our solutions) are associated, or are believed to be
associated with, or fail to reasonably protect against, a
significant breach or a breach at a high profile customer, managed
service provider network, or third party system utilized by us as
part of our cloud-based security solution.
Further, the third party data hosting facilities used for the
provision of our SaaS solutions may experience damages,
interruptions or other unanticipated problems that could result in
disruptions in the provision of these solutions. Any disruptions or
other performance problems with our SaaS solutions could harm our
reputation and business, damage our customers’ businesses,
subject us to potential liability, cause customers to terminate or
not renew their subscriptions to our SaaS solutions and make it
more challenging for us to retain existing customers and acquire
new customers.
False detection of threats (referred to as “false
positives”), while typical in our industry, may reduce
perception of the reliability of our products and may therefore
adversely impact market acceptance of our products. If our
solutions restrict legitimate privileged access by authorized
personnel to IT systems and applications by falsely identifying
those users as attackers or otherwise unauthorized, our
customers’ businesses could be harmed.
Our solutions not only reinforce but also rely on the common
security concept of placing multiple layers of security controls
throughout an IT system. The failure of our customers, channel
partners, managed service providers or subcontractors to correctly
implement and effectively manage and maintain our solutions (and
the environments in which they are utilized), or to consistently
implement and utilize generally accepted and comprehensive,
multi-layered security measures and processes in customer networks,
may lessen the efficacy of our solutions. Additionally, our
customers or our channel partners may independently develop
plug-ins or change existing plug-ins or APIs that we provided to
them for interfacing purposes in an incorrect or insecure manner.
Such failures or actions may lead to security breaches and data
loss, which could result in a perception that our solutions failed.
Further, our failure to provide our customers and channel partners
with adequate services or inaccurate product documentation related
to the use, implementation and maintenance of our solutions, could
lead to claims against us.
An actual or perceived cyber attack, other security breach or theft
of our customers’ data, regardless of whether the breach or
theft is attributable to the failure of our products, SaaS
solutions or the services we provided in relation thereto, could
adversely affect the market’s perception of the efficacy of
our solutions and our industry standing, cause current or potential
customers to look to our competitors for alternatives to our
solutions and subject us to lawsuits, indemnity claims and
financial losses, as well as the expenditure of significant
financial resources to analyze, correct or eliminate any
vulnerabilities. In addition, provisions in our license agreements
that attempt to limit our liabilities towards our customers,
channel partners and relevant third parties may not withstand legal
challenges, and certain liabilities may not be limited or capped.
Additionally, any insurance coverage we may have may not adequately
cover all claims asserted against us or may cover only a portion of
such claims. An actual or perceived cyber attack could also cause
us to suffer reputational harm, lose existing customers and
potential new customers, or deter new and existing customers from
purchasing or implementing our products.
We face intense competition from a wide variety of IT security
vendors operating in different market segments and across diverse
IT environments, which may challenge our ability to maintain
or improve our competitive position or to meet our planned growth
rates.
The IT security market in which we operate is characterized by
intense competition, constant innovation, rapid adoption of
different technological solutions and services, and evolving
security threats. We compete with a multitude of companies that
offer a broad array of IT security products that employ different
approaches and delivery models to address these evolving
threats.
We may face competition due to changes in the manner that
organizations utilize IT assets and the security solutions applied
to them, such as the provision of privileged account security
functionalities as part of public cloud providers’
infrastructure offerings, or cloud-based identity management
solutions. Limited IT budgets may also result in competition with
providers of other advanced threat protection solutions such as
McAfee, LLC, Palo Alto Networks, Splunk Inc., and NortonLifeLock,
Inc. (formerly known as Symantec Corporation acquired by Broadcom
Inc.). We also may compete, to a certain extent, with vendors that
offer products or services in adjacent or complementary markets to
privileged access management, including identity management vendors
and cloud platform providers such as Amazon Web Services, Google
Cloud Platform, and Microsoft Azure. As the privileged access
management market has matured significantly over the recent years,
the entry barrier is now lower and it is easier for competitors to
compete in the market. Some of our competitors are large companies
and have wider technical and financial resources and broader
customer bases used to bring competitive solutions to the market.
These companies may already have existing relationships as an
established vendor for other product offerings, and certain
customers may prefer one single IT vendor for product security
procurement rather than purchasing solely based on product
performance. Such companies may use these advantages to offer
products and services that are perceived to be as effective as ours
at a lower price or for free as part of a larger product package or
solely in consideration for maintenance and services fees, which
could result in increased market pressure to offer our solutions
and services at lower prices. They may also develop different
products to compete with our current solutions and respond more
quickly and effectively than we do to new or changing
opportunities, technologies, standards or client requirements or
enjoy stronger sales and service capabilities in certain regions.
Additionally, niche vendors are developing and marketing lower cost
solutions with limited privileged access management functionality
that may impact our ability to maintain premium market
pricing.
Our competitors may enjoy potential competitive advantages over us,
such as:
●
greater
name recognition, a longer operating history and a larger customer
base, notwithstanding the increased visibility of our brand in
recent years since our initial public offering;
●
larger
sales and marketing budgets and resources;
●
broader
distribution and established relationships with channel partners,
advisory firms and customers;
●
increased
effectiveness in protecting, detecting and responding to cyber
attacks;
●
greater
or localized resources for customer support and provision of
services;
●
greater
speed at which a solution can be deployed and
implemented;
●
greater
resources to make acquisitions;
●
larger
intellectual property portfolios; and
●
greater
financial, technical and other resources.
Our current and potential competitors may also establish
cooperative relationships among themselves or with third parties
that may further enhance their resources and capabilities. Current
or potential competitors have been acquired and consolidated or may
be acquired by third parties with greater resources in the future.
As a result of such acquisitions, our current or potential
competitors may be able to adapt more quickly to new technologies
and customer needs, devote greater resources to the promotion or
sale of their products and services, initiate or withstand
substantial price competition, take advantage of other
opportunities more readily or develop and expand their product and
service offerings more quickly than we do. Larger competitors with
more diverse product offerings may reduce the price of products
that compete with ours in order to promote the sale of other
products or may bundle them with other products, which would lead
to increased pricing pressure on our products and could cause the
average sales prices for our products to decline. Similarly, we may
also face increased competition following an acquisition of new
lines of business that compete with providers of such technologies
or from security vendors or other companies in adjacent markets
extending their solutions into privilege access management. Wemay
be at a competitive disadvantage to our privately-held competitors,
as they may not face the same accounting, auditing and legal
standards we do as a public company. Such privately-held
competitors may face less public scrutiny than we do and may be
less risk-averse than we are, and therefore may have greater
operational flexibility.
Furthermore, an increasing number of independent industry analysts
and researchers, regularly evaluate, compare and publish reviews
regarding the functionality of IT security products, including
ours. These reviews may significantly influence the market
perception of our products, and our reputation and brand could be
harmed if they publish negative reviews of our products or
increasingly positive reviews of our competitors’ products,
or do not view us as a market leader.
In addition, other IT security technologies exist or could be
developed in the future by current or future competitors, and our
business could be materially and adversely affected if such
technologies are widely adopted. We may not be able to successfully
anticipate or adapt to changing technology or customer requirements
on a timely basis, or at all. If we fail to keep up with
technological changes or to convince our customers and potential
customers of the value of our solutions even in light of new
technologies, our business, results of operations and financial
condition could be materially and adversely affected.
We currently have a working capital deficit and negative cash flow
from operations and are uncertain if and when we will be able to
pay our current liabilities.
Our
working capital deficit was approximately $3.4 million as of June
30, 2020. This deficit consists of $30,251 in current assets,
offset by $3,411,011 in current liabilities. In addition, we had
negative cash flow from operations for the year ended June 30, 2020
of approximately $107,000. We do not have any liquid or other
assets that can be liquidated to pay our current liabilities while
we continue to incur additional liabilities to our officer and
certain service providers who are working to prepare the documents
required to be filed with the Securities and Exchange Commission to
enable our common shares to be registered for trading. Since we
currently have limited operations, the only ways we have of paying
our current liabilities are to issue our common or preferred shares
to our creditors or to issue unsecured promissory notes which may
include certain features such as convertibility into common or
preferred shares or warrants to purchase additional common or
preferred shares in the future.
We currently do not have sufficient capital to finance the
anticipated recurring costs of being a publicly traded
company.
As of
October 9, 2020, we had approximately $2,600 in cash on hand. We anticipate
incurring incremental annual costs of approximately $180,000
related to maintaining a publicly traded company. We will need to
raise additional capital to support our public-company-related
activities.
|
|
4
|
|
|
|
||
We had $1,883,784 of convertible notes, notes payable, and accrued
interest payable as of June 30, 2020, of which $1,853,784 of this
amount is past due, and we do not have the funds necessary to pay
these obligations.
In
addition to funding our operating expenses, we need capital to pay
various debt obligations totaling approximately $1.9 million as of
June 30, 2020 which are either currently past due or which are due
in the current fiscal year. Currently, there is $822,962 principal
amount of the convertible notes payable which is past due, $205,000
principal of the notes payable which is past due, and $677,857 of
accrued interest which is past due. The interest on the past due
principal amounts will continue to accrue monthly at their stated
rates. Holders of past due notes do not have a security interest in
our assets. The existence of these obligations provides additional
challenges to us in our efforts to raise capital to fund our
operations.
In the event we consummate a transaction with a profitable company,
we may not be able to utilize our net operating loss carryover
which may have a negative impact on your investment.
If we
enter into a combination with a business that has operating income,
we cannot assure you that we will be able to utilize all or even a
portion of our existing net operating loss carryover for federal or
state tax purposes following such a business combination. If we are
unable to make use of our existing net operating loss carryover,
the tax advantages of such a combination may be limited, which
could negatively impact the price of our stock and the value of
your investment. These factors will substantially increase the
uncertainty, and thus the risk, of investing in our
shares.
Economic conditions may affect our ability to obtain financing and
to complete a merger or acquisition.
Due to
general economic conditions, rapid technological advances being
made in some industries, and shortages of available capital, our
management believes that there are numerous firms seeking even the
limited additional capital which we will need. In the presence of
these economic conditions, we may have difficulty raising
sufficient capital to support the investigation of potential
business opportunities, and to consummate a merger or acquisition.
These factors substantially increase the uncertainty, and thus the
risk, of investing in our shares.
In
December 2019, a novel coronavirus (“COVID-19”) emerged
and has subsequently spread worldwide. The World Health
Organization has declared COVID-19 a pandemic resulting in federal,
state, and local governments mandating various restrictions,
including travel restrictions, restrictions on public gatherings,
stay at home orders and advisories and quarantining of people who
may have been exposed to the virus.
As the
COVID-19 pandemic is complex and rapidly changing, the full extent
and duration of the impact of COVID-19 on the Company’s
operation and financial performance is currently unknown and
depends on future developments that are uncertain and
unpredictable, including the duration and spread of the pandemic,
its impact on capital and financial markets.
There are a number of factors related to our common stock which may
have an adverse effect on our shareholders.
Shareholders’
interests in our Company will be diluted and investors may suffer
dilution in their net book value per share if we issue additional
shares or raise funds through the sale of equity securities. In the
event that we are required to issue additional shares, enter into
private placements to raise financing through the sale of equity
securities or acquire business interests in the future from the
issuance of shares of our common stock to acquire such interests,
the interests of existing shareholders in our Company will be
diluted and existing shareholders may suffer dilution in their net
book value per share depending on the price at which such
securities are sold. If we do issue additional shares, it will
cause a reduction in the proportionate ownership and voting power
of all existing shareholders.
We have certain provisions in our Articles of Incorporation and
Bylaws, and there are other provisions under Florida law, that may
serve to make a takeover of our Company more
difficult.
Provisions
of our articles of incorporation and bylaws may delay or prevent a
takeover which may not be in the best interests of our
stockholders. Provisions of our articles of incorporation and
bylaws may be deemed to have anti-takeover effects, which include
when and by whom special meetings of our stockholders may be
called, and may delay, defer, or prevent a takeover attempt. In
addition, certain provisions of Florida law also may be deemed to
have certain anti-takeover effects which include that control of
shares acquired in excess of certain specified thresholds will not
possess any voting rights unless these voting rights are approved
by a majority of a corporation’s disinterested
stockholders.
|
|
5
|
|
|
|
||
Voting power of our shareholders is highly concentrated by
insiders.
Our
officers and directors control, either directly or indirectly, a
substantial portion of our voting securities. As of June 30, 2020,
our executive officer and directors beneficially owns 390,312,564
shares of Common Stock, or approximately 25% of our outstanding
shares of Common Stock. In addition, our executive officer owns the
only issued and outstanding share of Series AA Convertible
Preferred Stock which entitles him to 51% of the Common votes on
any matter requiring a shareholder vote. Therefore, our management
may significantly affect the outcome of all corporate actions and
decisions for an indefinite period of time including the election
of directors, amendment of charter documents and approval of
mergers and other significant corporate transactions.
Our common stock is quoted in the over the counter market on the
OTC Pink.
Our
common stock is quoted on the OTC Pink. OTC Pink offers a quotation
service to companies that are unable to list their securities on an
exchange or for companies, such as ours, whose securities are not
eligible for quotation on the OTC Bulletin Board. The requirements
for quotation on the OTC Pink are considerably lower and less
regulated than those of the OTC Bulletin Board or an exchange.
Because our common stock is quoted on the OTC Pink, it is possible
that even fewer brokers or dealers would be interested in making a
market in our common stock which further adversely impacts its
liquidity.
The tradability of our common stock is limited under the penny
stock regulations which may cause the holders of our common stock
difficulty should they wish to sell their shares.
Because
the quoted price of our common stock is less than $5.00 per share,
our common stock is considered a “penny stock,” and
trading in our common stock is subject to the requirements of Rule
15g-9 under the Exchange Act. Under this rule, broker/dealers who
recommend low-priced securities to persons other than established
customers and accredited investors must satisfy special sales
practice requirements. The broker/dealer must make an
individualized written suitability determination for the purchaser
and receive the purchaser’s written consent prior to the
transaction. SEC regulations also require additional disclosure in
connection with any trades involving a “penny stock,”
including the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and its
associated risks. These requirements severely limit the liquidity
of securities in the secondary market because few broker or dealers
are likely to undertake these compliance activities and this
limited liquidity will make it more difficult for an investor to
sell his shares of our common stock in the secondary market should
the investor wish to liquidate the investment. In addition to the
applicability of the penny stock rules, other risks associated with
trading in penny stocks could also be price fluctuations and the
lack of a liquid market.
|
|
6
|
|
|
|
||
Item 1B. Unresolved Staff Comments.
Not
applicable.
Item 2. Properties.
We rent
our principal executive offices from an unrelated third party on a
month-to-month basis for a monthly rental of $496.
Item 3. Legal Proceedings.
In July 2018, the Company was named as the defendant in a legal
proceeding brought by Tarpon Bay Partners LLC (the
“Plaintiff”) in the Judicial District Court of Danbury,
Connecticut. Plaintiff asserts that the Company failed to convert
two convertible notes held by Plaintiff. The Company is vigorously
contesting this claim.
Since
the onset of the COVID-19 pandemic, no substantive work has been
conducted on this case.
There are no other proceedings
in which any of our directors, officers, or affiliates, or any
registered or beneficial stockholder, is an adverse party or has a
material interest adverse to our interest.
Item 4. Mine Safety Disclosures.
Not
applicable.
|
|
7
|
|
|
|
||
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters, and Issuer Purchases of Equity
Securities.
Our
common shares are quoted on the OTC Pink Quotation System under the
symbol “VISM,” but trade infrequently.
The
high and low bid prices of our common stock for the periods
indicated below are as follows:
|
Fiscal Year Ended
June 30, 2020
|
High
|
Low
|
|
|
|
|
|
Quarter Ended
September 30, 2019
|
$
0.1000
|
$
0.0050
|
|
Quarter Ended
December 31, 2019
|
$
0.0160
|
$
0.0015
|
|
Quarter Ended March
31, 2020
|
$
0.0034
|
$
0.0007
|
|
Quarter Ended June
30, 2020
|
$
0.0020
|
$
0.0002
|
|
Fiscal Year Ended
June 30, 2019
|
High
|
Low
|
|
|
|
|
|
Quarter Ended
September 30, 2018
|
$
1.44
|
$
0.16
|
|
Quarter Ended
December 31, 2018
|
$
0.47
|
$
0.06
|
|
Quarter Ended March
31, 2019
|
$
0.30
|
$
0.01
|
|
Quarter Ended June
30, 2019
|
$
0.23
|
$
0.04
|
Stockholders
As of
October 9, 2020, there were 930 stockholders of record of our
Common Stock.
Dividend Policy
We have
not paid any cash dividends and do not anticipate or contemplate
paying dividends in the foreseeable future.
Recent Sales of Unregistered Securities
During
the year ended June 30, 2020 the Company issued 954,210,518 shares
of its common stock related to the conversion of $333,219 of
principal and accrued interest of its convertible notes payable, at
an average contract conversion price of $0.0004 per share.
The fair value of the shares issued was $1,059,572, resulting in a
loss on debt settlement of $593,907.
Stock Based Compensation and Stock Based Consulting Services
Expense
During
the year ended June 30, 2020 the Company issued 199,850,000 shares
of its $0.0001 par value common stock to five consultants, as
compensation for services rendered. The shares were valued at
$198,735, or $0.006 per share.
During
the year ended June 30, 2020 the Company issued 348,000,000 shares
of its $0.0001 par value common stock to our Directors and Officer,
as compensation for services rendered. The shares were valued at
$148,000, or $0.00186 per share.
|
|
8
|
|
|
|
||
Rule 10B-18 Transactions
During
the year ended June 30, 2020, there were no repurchases of the
Company’s common stock by the Company
Item 6. Selected Financial Data.
As a
“smaller reporting company”, we are not required to
provide information required by this item.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The
following information should be read in conjunction with our
financial statements and accompanying notes included in this Annual
Report on Form 10-K.
Overview
The
Company was incorporated in Nevada as Jaguar Investments, Inc.
during October 1987. During March 2003, a wholly owned subsidiary
of the Company merged with Freight Rate, Inc., a development stage
company in the logistics software business. During May 2003, the
Company changed its name to Power2Ship, Inc. During October 2006,
the Company merged with a newly formed, wholly owned subsidiary,
Fittipaldi Logistics, Inc., a Nevada corporation, with the Company
surviving but its name changed to Fittipaldi Logistics, Inc.
effective November 2006. During December 2007, the Company merged
with a newly formed, wholly owned subsidiary, NuState Energy
Holdings, Inc., a Nevada corporation, with the Company surviving
but renamed NuState Energy Holdings, Inc. effective December 2007.
In March 2019, the Company changed its name to Visium Technologies,
Inc.
Since
February 12, 2018 Mark Lucky has served as Chairman and CEO. He
currently also serves as CFO. The Company’s headquarters is
located at 4094 Majestic Lane, Suite 360, Fairfax, VA 22124. Since
February 2018, the Company has focused on creating a world-class
cybersecurity/digital risk management company, with a focus on
network security, threat visualization, pinpoint threat
identification, and big-data analytics. Our solutions address the
growing security and compliance complexities and risks resulting
from the increasing adoption of cloud computing and the
proliferation of geographically dispersed IT assets.
In
March 2019, the Company entered into a license agreement with The
MITRE Corporation to commercialize and sell CyGraph,
a cybersecurity application that
is
a tool for cyber
warfare analytics, visualization, and knowledge
management.
Results of Operations
Selling, General, and Administrative Expenses
For the
year ended June 30, 2020, selling, general and administrative
expenses were $917,993 as compared to $2,721,467 for the year ended
June 30, 2019, a decrease of $1,803,474 or approximately 67.1%. For
the years ended June 30, 2020 and 2019 selling, general and
administrative expenses consisted of the following:
|
|
|
2020
|
|
|
2019
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
||||
|
Accounting
expense
|
|
$
|
5,581
|
|
|
$
|
11,000
|
|
|
$
|
(5,419
|
)
|
|
|
(49.3
|
)%
|
|
Consulting
fees
|
|
|
103,800
|
|
|
|
125,500
|
|
|
|
(21,700
|
)
|
|
|
(17.3
|
)%
|
|
Salaries
|
|
|
336,000
|
|
|
|
320,000
|
|
|
|
16,000
|
|
|
|
5.0
|
%
|
|
Legal
and professional fees
|
|
|
59,550
|
|
|
|
82,630
|
|
|
|
(23,080
|
)
|
|
|
(27.9
|
)%
|
|
Travel
expense
|
|
|
9,786
|
|
|
|
3,342
|
|
|
|
6,444
|
|
|
|
192.8
|
%
|
|
Occupancy
expense
|
|
|
4,719
|
|
|
|
9,319
|
|
|
|
(4,600
|
)
|
|
|
(49.4
|
)%
|
|
Telephone
expense
|
|
|
3,600
|
|
|
|
3,600
|
|
|
|
-
|
|
|
|
0.0
|
%
|
|
Marketing
expense
|
|
|
8,199
|
|
|
|
-
|
|
|
|
8,199
|
|
|
|
N/A
|
|
|
Website
expense
|
|
|
2,951
|
|
|
|
2,555
|
|
|
|
396
|
|
|
|
15.5
|
%
|
|
Investor
relations expense
|
|
|
20,000
|
|
|
|
28,500
|
|
|
|
(8,500
|
)
|
|
|
(29.8
|
)%
|
|
Stock
based consulting expense
|
|
|
198,735
|
|
|
|
174,500
|
|
|
|
24,235
|
|
|
|
13.9
|
%
|
|
Stock
based compensation
|
|
|
148,000
|
|
|
|
1,901,500
|
|
|
|
(1,753,500
|
)
|
|
|
(92.2
|
)%
|
|
Other
|
|
|
17,072
|
|
|
|
59,021
|
|
|
|
(41,949
|
)
|
|
|
(71.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
917,993
|
|
|
$
|
2,721,467
|
|
|
$
|
(1,803,474
|
)
|
|
|
(66.3
|
)%
|
The
decrease in selling, general and administrative expenses during
fiscal 2020, when compared with the prior year, is primarily due to
a decrease in stock-based compensation, legal expenses, and
salaries, offset by increases in salary expense, and stock-based
consulting expense.
|
|
9
|
|
|
|
||
Amortization Expense
|
|
Years
Ended
|
|
||
|
|
June
30,
|
%
|
||
|
|
2020
|
2019
|
Change
|
|
|
Customer
relationships
|
$
-
|
$
141,970
|
(100
|
)
%
|
The
increase in amortization expense is due to the amortization of the
customer relationships intangible asset resulting from the
acquisition of Threat Surface Solutions Group, LLC in
2018.
Change in Fair Value of Derivative Liability
|
|
Years
ended
|
||
|
|
June
30,
|
||
|
|
2020
|
2019
|
|
|
Gain (loss) on
change in fair value of derivative liabilities
|
$
385,367
|
$
(183,130
|
)
|
Changes
in fair value of derivative liabilities results from the changes in
the fair value of the derivative liability due to the application
of ASC 815, resulting in either income or expense, depending on the
difference in fair value of the derivative liabilities between
their measurement dates. The increase in fair value of derivative
liabilities recognized during fiscal 2020 is primarily due to a
change in accounting estimate related to the accounting for
derivative liabilities as a result of a decrease in share
price.
Derivative Liability Expense
|
|
|
Years Ended
|
|
|
|
|
||||||
|
|
|
June 30,
|
|
|
%
|
|
||||||
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|||
|
Derivative
liability expense
|
|
$
|
61,396
|
|
|
$
|
341,423
|
|
|
|
82.0
|
%
|
The
Company issued convertible notes in January 2019 and October 2019
which provisions contained variable price conversion terms,
resulting in a derivative liability expense, measured as of the
issuance date of the notes.
Interest Expense
|
|
|
Years Ended
|
|
|
|
|
||||||
|
|
|
June 30,
|
|
|
%
|
|
||||||
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|||
|
Interest
Expense
|
|
$
|
323,021
|
|
|
$
|
276,087
|
|
|
|
17.0
|
%
|
Interest
expense represents the stated interest of notes and convertible
notes payable as well as the amortization of debt discount. The
increase in interest expense during fiscal 2020 is primarily due to
higher amortization of debt discount of $158,333.
Gain on Debt Write-Off
|
|
|
Years Ended
|
|
|||||
|
|
|
June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Gain
(loss) on debt write off/conversions
|
|
$
|
(593,907
|
)
|
|
$
|
2,303,147
|
|
During the twelve months ended June 30, 2020 the Company incurred
losses on the convertible note conversions, which were valued at
fair value on the date of the respective conversions, totaling
$593,907.
In March 2019, the Company obtained a legal opinion to extinguish
aged debt totaling $2,292,162 as detailed in the following table.
Each of the individual debt instruments were determined to be
beyond the statute of limitations and it was determined that the
Company has a complete defense to liability related to this debt
under the applicable statute of limitations.
|
Accounts
payable and accrued expenses
|
|
$
|
312,001
|
|
|
Accrued
interest expense
|
|
|
1,184,214
|
|
|
Convertible
notes payable
|
|
|
671,706
|
|
|
Promissory
notes payable
|
|
|
65,241
|
|
|
|
|
$
|
2,292,162
|
|
|
|
10
|
|
|
|
||
Loss on impairment
|
|
|
Years Ended
|
|
|||||
|
|
|
June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Loss on
impairment
|
|
$
|
-
|
|
|
$
|
407,002
|
|
In June
2019 Management determined that the intangible asset attributed to
the purchase of Threat Surface Solutions Group, LLC had no future
benefit to the Company. As a result, the net book value of the
asset was written off in full, as follows:
|
Net
intangible asset as of date of impairment
|
|
$
|
459,317
|
|
|
Reversal
of contingent liability
|
|
|
(52,315
|
)
|
|
Loss on
impairment
|
|
$
|
407,002
|
|
Liquidity and Capital Resources
|
|
|
Balance at June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Cash
|
|
$
|
30,251
|
|
|
$
|
18,668
|
|
|
Accounts
payable and accrued expenses
|
|
|
(333,805
|
)
|
|
|
(213,805
|
)
|
|
Accrued
compensation
|
|
|
(652,529
|
)
|
|
|
(316,529
|
)
|
|
Notes,
convertible notes, and accrued interest
|
|
|
(1,883,784
|
)
|
|
|
(1,863,898
|
)
|
At June
30, 2020 and 2019, 100% of our total assets consisted of
cash.
We do
not have any material commitments for capital
expenditures.
The
objective of liquidity management is to ensure that we have ready
access to sufficient funds to meet commitments and effectively
implement our growth strategy. Our primary sources are financing
activities such as the issuance of notes payable and convertible
notes payable. In the past, we have mostly relied on debt and
equity financing to provide for our operating needs.
We were
unable to generate sufficient funds from operations to fund our
ongoing operating requirements through June 30, 2020. As of October
9, 2020, we had approximately $2,600 on hand. We may need to raise
funds to enhance our working capital and use them for strategic
purposes. If such need arises, we intend to generate proceeds from
either debt or equity financing.
We
intend to finance our operations using equity financing. We do not
anticipate incurring capital expenditures for the foreseeable
future. We anticipate that we will need to raise approximately
$180,000 per year in the near term to finance the recurring costs
of being a publicly traded company.
|
|
11
|
|
|
|
||
Going Concern
The
accompanying financial statements have been prepared on a going
concern basis. The Company has used net cash in its operating
activities of $106,757 and $566,745 during the years ended June 30,
2020 and 2019, respectively, and has a working capital deficit of
approximately $3.4 million and $3.2 million at June 30, 2020 and
2019, respectively. The Company’s ability to continue as a
going concern is dependent upon its ability to obtain the necessary
financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due, to fund
possible future acquisitions, and to generate profitable operations
in the future, once a merger with an operating company is
consummated. Management plans may continue to provide for its
capital requirements by issuing additional equity securities and
debt and the Company will continue to find possible acquisition
targets. The outcome of these matters cannot be predicted at this
time and there are no assurances that, if achieved, the Company
will have sufficient funds to execute its business plan or generate
positive operating results.
|
|
|
Years Ended
|
|
|||||
|
|
|
June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,542,450
|
)
|
|
$
|
(1,757,932
|
)
|
|
Non-cash
Adjustments:
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on debt settlement and write off expense
|
|
|
593,907
|
|
|
|
(2,303,147
|
)
|
|
Stock
based compensation
|
|
|
346,735
|
|
|
|
2,076,000
|
|
|
Amortization of
debt discount
|
|
|
206,249
|
|
|
|
283,637
|
|
|
Derivative
liability expense
|
|
|
61,396
|
|
|
|
341,423
|
|
|
(Gain)
loss on change in derivative liability
|
|
|
(385,367
|
)
|
|
|
183,130
|
|
|
Impairment
expense
|
|
|
-
|
|
|
|
407,002
|
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accrued
interest
|
|
|
145,941
|
|
|
|
133,189
|
|
|
Accrued
compensation
|
|
|
336,000
|
|
|
|
160,704
|
|
|
Accounts payable
and accrued expenses
|
|
|
130,832
|
|
|
|
(90,751
|
)
|
|
Net
cash used in operations
|
|
|
(106,757
|
)
|
|
|
(566,745
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Advance
from officers
|
|
|
40,340
|
|
|
|
41,000
|
|
|
Proceeds
from sale of common stock
|
|
|
-
|
|
|
|
250,501
|
|
|
Proceeds
from issuance of convertible notes payable, net of debt issuance
costs
|
|
|
78,000
|
|
|
|
282,500
|
|
|
Net
cash provided by financing activities
|
|
|
118,340
|
|
|
|
574,001
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
$
|
11,583
|
|
|
$
|
7,256
|
|
|
|
12
|
|
|
|
||
Year ended June 30, 2020
Net
cash used in operations in fiscal year 2020 decreased by $459,987
or 81% from fiscal year 2019. This cash was obtained through the
sale of three convertible notes that netted the Company $78,000,
and through advances of cash made to the Company by its officers
and directors of $40,340.
Year ended June 30, 2019
Net
cash used in operations in fiscal year 2019 increased by $504,328
or 840% from fiscal year 2018.
This cash was obtained through the sale
of 2,505,500 shares of the Company’s $0.0001 par value common
stock, at a per share price of $0.10, or $250,501, the sale of
convertible notes totaling $300,000, which netted the Company
$282,500,
and advances from directors of
$41,000.
Capital Raising Transactions
Issuance of Convertible Notes Payable
We
generated net proceeds of $78,000 and $282,500 during fiscal 2020
and 2019, respectively, from the issuance of convertible notes
payable.
Convertible Notes Payable
The
Company had convertible promissory notes aggregating approximately
$873,000 and 1.075 million outstanding at June 30, 2020 and 2019,
respectively. The accrued interest amounted to approximately
$503,000 and $435,000 at June 30, 2020 and 2019, respectively.
There is no provision in the note agreements for adjustments to the
interest rates on these notes in the event of default. The
convertible notes payable bear interest at rates ranging between
10% and 18% per annum. Interest is generally payable monthly. The
Convertible Notes Payable are generally convertible at rates
ranging between $0.0002 and $22,500 per share, at the
holders’ option. At June 30, 2020, all convertible promissory
notes have matured.
|
|
|
Balance at
|
|
|
Balance at
|
|
||
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
||
|
Convertible
Notes Payable
|
|
$
|
852,962
|
|
|
$
|
1,075,428
|
|
|
Discount
on convertible notes
|
|
|
-
|
|
|
|
(158,333
|
)
|
|
Notes
Payable, net of discount
|
|
$
|
852,962
|
|
|
$
|
917,095
|
|
Convertible notes payable to ASC Recap LLC
On July
22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC
(“ASC”) two convertible promissory notes with principal
amounts of $25,000 and $125,000, respectively. These two notes were
issued as a fee for services under a 3(a)10 transaction that was
never consummated and therefore there was no performance by ASC to
earn the notes. As a result, while the Company continues to carry
the balance of these notes on its balance sheet, it does not
believe the notes payable balances are owed. The July 22, 2013 note
matured on March 31, 2014 and a balance of $22,965 remains unpaid.
The May 6, 2014 note matured on May 6, 2016 and remains unpaid. The
notes are convertible into the common stock of the Company at any
time at a conversion price equal to 50% of the lowest closing bid
price of our common stock for the twenty days prior to
conversion.
Notes Payable
The
Company had promissory notes aggregating approximately $205,000 at
June 30, 2020 and 2019, respectively. The related accrued interest
amounted to approximately $175,000 and $159,000 at June 30, 2020
and 2019, respectively. There is no provision in the note
agreements for adjustments to the interest rates on these notes in
the event of default. The notes payable bear interest at rates of
16% per annum. Interest is generally payable monthly. All
promissory notes have matured as of June 30, 2020.
Common Stock Warrants
In
January 2020 we issued 500,000 warrants with a three-year life and
a conversion price of $0.15 per share.
These warrants have price protection
provisions that allow for the reduction in the current exercise
price upon the occurrence of certain events, including the
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.
Because it is
indeterminate whether there is a sufficient number of authorized
and unissued shares exists at the assessment date, the Company
calculates a derivative liability associated with the warrants in
accordance with FASB ASC Topic 815-40-25.
A
summary of the status of the Company’s outstanding common
stock warrants as of June 30, 2020 and changes during the period
ending on that date is as follows:
|
|
|
Number of
|
|
|
Weighted Average
|
|
||
|
|
|
Warrants
|
|
|
Exercise Price
|
|
||
|
Common
Stock Warrants
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2019
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Balance
at June 30, 2020
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable at end of period
|
|
|
500,000
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value of warrants granted during the
period
|
|
|
|
|
|
$
|
-
|
|
Derivative Liability
The
Company recognizes all derivative financial instruments on its
balance sheet at fair value.
|
|
13
|
|
|
|
||
Off-Balance Sheet Arrangements
We have
no off-balance sheet arrangements.
Climate Change
Our
opinion is that neither climate change, nor governmental
regulations related to climate change, have had, or are expected to
have, any material effect on our operations.
Critical Accounting Policies
The
Company’s critical accounting policies are as
follows:
Convertible
Instruments - The Company evaluates and accounts for conversion
options embedded in its convertible instruments in accordance with
ASC 815.
ASC 815
generally provides three criteria that, if met, require companies
to bifurcate conversion options from their host instruments and
account for them as free standing derivative financial instruments
in accordance with EITF 00-19. These three criteria include
circumstances in which (a) the economic characteristics and risks
of the embedded derivative instrument are not clearly and closely
related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded
derivative instrument and the host contract is not re-measured at
fair value under otherwise applicable generally accepted accounting
principles with changes in fair value reported in earnings as they
occur and (c) a separate instrument with the same terms as the
embedded derivative instrument would be considered a derivative
instrument subject to the requirements of ASC 815. ASC 815 also
provides an exception to this rule when the host instrument is
deemed to be conventional (as that term is described).
The
Company accounts for convertible instruments (when it has
determined that the embedded conversion options should not be
bifurcated from their host instruments) in accordance with the
provisions of ASC 470 20 “Debt with Conversion Options”
Accordingly, the Company records, when necessary, discounts to
convertible notes for the intrinsic value of conversion options
embedded in debt instruments based upon the differences between the
fair value of the underlying common stock at the commitment date of
the note transaction and the effective conversion price embedded in
the note. Debt discounts under these arrangements are amortized
over the term of the related debt to their earliest date of
redemption. The Company also records when necessary deemed
dividends for the intrinsic value of conversion options embedded in
preferred shares based upon the differences between the fair value
of the underlying common stock at the commitment date of the note
transaction and the effective conversion price embedded in the
note.
The
Company believes the certain conversion features embedded in
convertible notes payable are not clearly and closely related to
the economic characteristics of the Company’s stock price.
Accordingly, the Company has recognized derivative liabilities in
connection with such instruments. The Company uses judgment in
determining the fair value of derivative liabilities at the date of
issuance at every balance sheet thereafter. The Company uses
judgment in determining which valuation is most appropriate for the
instrument (e.g., Cox, Ross & Rubinstein Binomial Tree
valuation model), the expected volatility, the implied risk-free
interest rate, as well as the expected dividend rate.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
Not
applicable.
Item 8. Financial Statements and Supplementary Data.
The
information required by this item is included in Item 15 of this
Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer,
who at June 30, 2020 was also our principal executive and financial
officer, has evaluated the effectiveness of our disclosure controls
and procedures as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. Based upon
that evaluation, our Chief Executive Officer concluded that, as of
June 30, 2020, our disclosure controls and procedures were not
effective in ensuring that material information required to be
disclosed in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, including
ensuring that such material information is accumulated and
communicated to our Chief Executive Officer to allow timely
decisions regarding required disclosure.
|
|
14
|
|
|
|
||
Management Report on Internal Control over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule
13a-15(f) under the Exchange Act. Our management assessed the
effectiveness of our internal control over financial reporting as
of June 30, 2020. In making this assessment, our management used
criteria issued by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control Over Financial Reporting
– Guidance for Smaller Public Companies.
During
our assessment of the design and the effectiveness of internal
control over financial reporting as of June 30, 2020, management
identified the following material weaknesses:
|
|
●
|
While
we have processes in place, there are no formal written policies
and procedures related to certain financial reporting
processes;
|
|
|
|
|
|
|
●
|
There
is no formal documentation in which management specified financial
reporting objectives to enable the identification of risks,
including fraud risks;
|
|
|
|
|
|
|
●
|
Our
Board of Directors consists of four members, however we lack the
resources and personnel to implement proper segregation of duties
or other risk mitigation systems.
|
A
material weakness is “a significant deficiency, or a
combination of significant deficiencies, that result in more than a
remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected by
us in a timely manner.” A significant deficiency is a
deficiency or a combination of deficiencies, in internal control
over financial reporting that is less severe than a material
weakness, yet important enough to merit attention by those
responsible for oversight of the registrant’s financial
reporting.
We
intend to gradually improve our internal control over financial
reporting to the extent that we can allocate resources to such
improvements. We intend to prioritize the design of our internal
control over financial reporting starting with our control
environment and risk assessments and ending with control
activities, information and communication activities, and
monitoring activities. Although we believe the time to adapt in the
next year will help position us to provide improved internal
control functions into the future, in the interim, these changes
caused control deficiencies, which in the aggregate resulted in a
material weakness. Due to the existence of these material
weaknesses, our management, including our Chief Executive Officer,
concluded that our internal control over financial reporting was
not effective as of June 30, 2020.
This
annual report does not include an attestation report of the
Company’s independent registered public accounting firm
regarding internal control over financial reporting.
Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm
pursuant to the rules of the SEC that permit smaller reporting
companies to provide only the management’s report in this
annual report.
Changes in Internal Control over Financial Reporting
There
was no change in our internal control over financial reporting
during the fiscal quarter ended June 30, 2020, that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Item 9B. Other Information
None.
|
|
15
|
|
|
|
||
PART III
Item 10. Directors, Executive Officers and Corporate
Governance.
The
following table sets forth the names, ages and principal position
of our executive officers and directors as of June 30,
2020:
|
Name
|
|
Age
|
|
Position
|
|
Mark
Lucky
|
|
61
|
|
Chairman
of the Board, Chief Executive Office, Chief Financial
Officer
|
|
Thomas
Grbelja (1)(2)
|
|
61
|
|
Director
|
|
Emmanuel
Esaka, MD
|
|
47
|
|
Director
|
|
Paul
Favata (1)(2)
|
|
55
|
|
Director
|
(1)
Member of the Compensation Committee
(2)
Member of the Audit Committee
Mr. Mark Lucky
has served as the Company’s Chief
Executive Officer, Treasurer, Secretary, and Chairman of the
Company’s Board of Directors since February 2019. Mr. Lucky
has been a certified public accountant and has more than 15 years
of experience serving as a public company chief financial officer.
His professional experience includes working with start-ups,
development-stage and mature companies in a wide variety of
industries. From May 2014 until February 2019 Mr. Lucky has worked
as a consultant to various public and private companies, including
Visium Technologies, Inc., Intelligent Living America, Inc. (OTCBB:
ILIV), and Ronn Motor Group, Inc. Prior to that, Mr. Lucky served
as the CFO for IceWeb Inc. (OTCBB: IWEB) from March 2007 to May
2014. From 2004 to 2005 he served as Vice President of Finance and
Administration at Galt Associates, Inc., a Sterling, Virginia
informatics/ technology and medical research services company and
from 2001 to 2004 he was Vice President of Finance and
Administration of MindShare Design, Inc., a San Francisco,
California based internet technology company. During his career Mr.
Lucky has also been employed by Axys Pharmaceuticals, Inc (NASDAQ:
AXPH) a San Francisco, California-based early stage drug discovery
biotech company, PriceWaterhouseCoopers, LLC, COMPASS Management
and Leasing, Inc., Mindscape, Inc., The Walt Disney Company and
KPMG. Mr. Lucky formerly served as a member of the board of
directors of Intelligent Living America, Inc., VOIS Inc. and HASCO
Medical, Inc. Mr. Lucky received a B.A. degree in Economics from
the University of California, Los Angeles.
We
believe that Mr. Lucky’s extensive senior management and
operational experience brings valuable knowledge to our board of
directors and that these experiences, qualifications, and
attributes have led to our conclusion that Mr. Lucky should be
serving as a member of our board of directors.
Mr. Thomas Grbelja
previously served as a director of
Realbiz Media Group, Inc. (OTCBB: RBIZ), and served as their Chief
Financial Officer from June 19, 2015 to January 2, 2017. Mr.
Grbelja has spent over 30 years as a Certified Public Accountant
providing a wide variety of professional accounting, tax and
financial consulting services to professional service,
manufacturing, and construction industry participants. Since 1990
he has served as the President and a Founding Member of Burke
Grbelja & Symeonides, LLC, Certified Public Accountants, an
accounting firm based in Rochelle Park, New Jersey. In addition,
between 1983 and 1990, Mr. Grbelja worked as an accountant at
Coopers & Lybrand, where he was responsible for the overall
audit engagement, including filings with the SEC, for certain
large, publicly traded companies. He received his undergraduate
degree in accounting at Fairleigh Dickinson University and is a
Certified Public Accountant.
Based
on his business experience the Company believes that Mr. Grbelja is
well-qualified to serve on the Company’s Board of
Directors.
Mr. Paul Favata
is a 29-year Wall Street veteran who began
his career on the American Stock Exchange (AMEX), working for two
smaller member firms, before moving to the New York Stock Exchange
(NYSE). After five years with one of the largest specialist firms
on the floor, Mr. Favata left the exchange in 1992 to work on the
sell-side. Mr. Favata spent the bulk of the 1990’s with a
small boutique firm working in both the retail and institutional
sales areas. Mr. Favata held the position of Senior Vice President
of Finance at a small, privately held consulting firm that advised
clients on acquisitions and long-term financing strategies. Since
2008, Mr. Favata has held various C-level executive positions
including as Chief Financial Officer of a $60 million annual
revenue telecom provider having management oversight and
responsibility for all financial functions while overseeing all
revenues, costs, capital expenditures, investments, and debt. Most
recently, President of a publicly traded company specializing in
the acquisition and integration of IT and Cloud Technology service
providers and Internet and web technologies. Mr. Favata resides,
with his family, in Saint Petersburg, Florida.
We
believe that Mr. Favata’s extensive senior management and
operational experience brings valuable knowledge to our board of
directors and that these experiences, qualifications, and
attributes have led to our conclusion that Mr. Favata should be
serving as a member of our board of directors.
Dr. Emmanuel Esaka.
Dr. Esaka brings decades of experience
as a successful surgeon. He has earned an MBA from Auburn
University, and graduated Cum Laude with Highest Honors from
Università Degli Studi di Bologna, Italy School of Medicine
and Surgery. He is the Founder, Owner, and CEO of Advanced Care
Obstetrics and Gynecology PA in Wilmington, Delaware, Co-Founder
and Managing Director of 3N Pharma USA, Inc., Founder and CEO of
Cameroon American Health System, Inc., and Co-Founder of Caritas
Home Health Services, Inc. Dr. Osaka also served as attending
obstetrics and gynecology at Irwin Army Community Hospital, and
serves as a Director of Meiger Health, Inc.
We
believe that Dr. Esaka’s extensive experience and business
background adds valuable knowledge to our board of directors and
that these experiences, qualifications, and attributes have led to
our conclusion that Dr. Esaka should be serving as a member of our
board of directors.
There
are no family relationships among our directors or executive
officers.
|
|
16
|
|
|
|
||
Committees of the Board of Directors
Our
Board of Directors has established an Audit Committee, and a
Compensation Committee, and meet as a whole to fulfill the
functions of the Nominating Committee.
Audit Committee
. Mr. Favata and Mr. Grbelja are members of
the Audit Committee. The Audit Committee of our Board of Directors
was formed to assist the Board of Directors in fulfilling its
oversight responsibilities for the integrity of our consolidated
financial statements, compliance with legal and regulatory
requirements, the independent registered public accounting
firm’s qualifications and independence, and the performance
of our internal audit function and independent auditors. The Audit
Committee will also prepare the report that SEC rules require be
included in our annual proxy statement. The Audit Committee has
adopted a charter which sets forth the parameters of its authority
The Audit Committee Charter provides that the Audit Committee is
empowered to:
|
|
●
|
Appoint,
compensate, and oversee the work of the independent registered
public accounting firm employed by our company to conduct the
annual audit. This firm will report directly to the audit
committee;
|
|
|
|
|
|
|
●
|
Resolve
any disagreements between management and the auditor regarding
financial reporting;
|
|
|
|
|
|
|
●
|
Pre-approve
all auditing and permitted non-audit services performed by our
external audit firm;
|
|
|
|
|
|
|
●
|
Retain
independent counsel, accountants, or others to advise the committee
or assist in the conduct of an investigation;
|
|
|
|
|
|
|
●
|
Seek
any information it requires from employees - all of whom are
directed to cooperate with the committee’s requests - or
external parties;
|
|
|
|
|
|
|
●
|
Meet
with our officers, external auditors, or outside counsel, as
necessary; and
|
|
|
|
|
|
|
●
|
The
committee may delegate authority to subcommittees, including the
authority to pre-approve all auditing and permitted non-audit
services, provided that such decisions are presented to the full
committee at its next scheduled meeting.
|
Each
Audit Committee member is required to:
|
|
●
|
satisfy
the independence requirements of Section 10A(m)(3) of the
Securities Exchange Act of 1934, and all rules and regulations
promulgated by the SEC as well as the rules imposed by the stock
exchange or other marketplace on which our securities may be listed
from time to time, and
|
|
|
|
|
|
|
●
|
meet
the definitions of “non-employee director” for purposes
of SEC Rule 16b-3 and “outside director” for purposes
of Section 162(m) of the Internal Revenue Code.
|
Each
committee member is required to be financially literate and at
least one member is to be designated as the “financial
expert,” as defined by applicable legislation and regulation.
No committee member is permitted to simultaneously serve on the
audit committees of more than two other public companies. As we
expand our Board of Directors with additional independent directors
the number of directors serving on the Audit Committee will also
increase.
A copy
of the Audit Committee Charter is available on our website at
www.visiumtechnologies.com under “Investor
Relations”.
Compensation Committee
. Mr. Favata and Mr. Grbelja are
members of the Compensation Committee. The Compensation Committee
was appointed by the Board to discharge the Board’s
responsibilities relating to:
|
|
●
|
compensation
of our executives,
|
|
|
|
|
|
|
●
|
equity-based
compensation plans, including, without limitation, stock option and
restricted stock plans, in which officers or employees may
participate and
|
|
|
|
|
|
|
●
|
arrangements
with executive officers relating to their employment relationships
with our company, including employment agreements, severance
agreements, supplemental pension, or savings arrangements, change
in control agreements and restrictive covenants.
|
The
Compensation Committee has adopted a charter. The Compensation
Committee charter provides that the Compensation Committee has
overall responsibility for approving and evaluating executive
officer compensation plans, policies, and programs of our company,
as well as all equity-based compensation plans and policies. In
addition, the Compensation Committee oversees, reviews, and
approves all of our ERISA and other employee benefit plans which we
may establish from time to time. The Compensation Committee is also
responsible for producing an annual report on executive
compensation for inclusion in our proxy statement and assisting in
the preparation of certain information to be included in other
periodic reports filed with the SEC.
|
|
17
|
|
|
|
||
Each
Compensation Committee member is required to:
|
|
●
|
satisfy
the independence requirements of Section 10A(m)(3) of the
Securities Exchange Act of 1934, and all rules and regulations
promulgated by the SEC as well as the rules imposed by the stock
exchange or other marketplace on which our securities may be listed
from time to time, and
|
|
|
|
|
|
|
●
|
meet
the definitions of “non-employee director” for purposes
of SEC Rule 16b-3 and “outside director” for purposes
of Section 162(m) of the Internal Revenue Code.
|
Pursuant to our
Compensation Committee Charter, the Compensation Committee is
charged with evaluating and recommending for approval by the Board
of Directors the compensation of our executive officers. In
addition, the Compensation Committee also evaluates and makes
recommendations to the entire Board of Directors regarding grants
of options which may be made as director compensation. The
Compensation Committee does not delegate these authorities to any
other persons, nor does it use the services of any compensation
consultants.
Compliance with Section 16(a) of the Exchange Act
Section
16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Such persons are required by SEC regulations to furnish
us with copies of all Section 16(a) reports they file.
To our knowledge, based solely on our review of the copies of such
reports furnished to us and written representations that no other
reports were required to be filed during fiscal 2020, we believe
that for fiscal 2020, all required reports were filed on a timely
basis under Section 16(a), except for Dr Esaka, who had not
yet filed his initial Form 3 or subsequent Form 4 and Form
5.
Code of Ethics
We have
adopted a Code of Ethics and Business Conduct to provide guiding
principles to our principal executive officer, principal financial
officer, and principal accounting officer or controller of our
company in the performance of their duties. Our Code of Ethics and
Business Conduct also strongly recommends that all directors and
employees of our company comply with the code in the performance of
their duties. Our Code of Ethics and Business Conduct provides that
the basic principle that governs all of our officers, directors and
employees is that our business should be carried on with loyalty to
the interest of our stockholders, customers, suppliers, fellow
employees, strategic partners and other business associates. We
believe that the philosophy and operating style of our management
are essential to the establishment of a proper corporate
environment for the conduct of our business.
Generally, our Code
of Ethics and Business Conduct provides guidelines
regarding:
|
|
●
|
conflicts
of interest,
|
|
|
|
|
|
|
●
|
financial
reporting responsibilities,
|
|
|
|
|
|
|
●
|
insider
trading,
|
|
|
|
|
|
|
●
|
inappropriate
and irregular conduct,
|
|
|
|
|
|
|
●
|
political
contributions, and
|
|
|
|
|
|
|
●
|
compliance
with laws.
|
|
|
18
|
|
|
|
||
Item 11. Executive Compensation.
The
following table sets forth, for the last two completed fiscal
years, all compensation paid, distributed or accrued for services
rendered to us by (i) all individuals serving as our principal
executive officer or acting in a similar capacity during the last
completed fiscal year, regardless of compensation level; (ii) our
two most highly compensated executive officers other than the
principal executive officer who were serving as executive officers
at the end of the last completed fiscal year and whose total
compensation exceeded $100,000; and (iii) up to two additional
individuals for whom disclosure would have been provided pursuant
to (ii) above but for the fact that the individual was not serving
as our executive officer at the end of the last completed fiscal
year:
Summary Compensation Table
|
Name and Principal Position
|
|
Year
|
|
Salary ($)(1)
|
|
|
Bonus ($)
|
|
|
Stock Awards
|
|
|
Option Awards ($)
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
Non-Qualified Deferred Compensation Earnings
|
|
|
All Other Compensation ($)
|
|
|
Total ($)
|
|
||||||||
|
Mark
Lucky
(1)
|
|
2020
|
|
|
336,000
|
|
|
|
-
|
|
|
|
87,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
423,000
|
|
|
Chief
Executive Officer and Chief Financial Officer
|
|
2019
|
|
|
320,000
|
|
|
|
-
|
|
|
|
565,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
885,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
Holcombe
|
|
2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Former
Chief Executive Officer
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts
represent accrued compensation for Mr. Lucky. Actual amounts paid
to Mr. Lucky were $0 and $0 for 2020 and 2019,
respectively.
|
|
|
|
|
Employment Agreements
Currently
no employees are party to any employment agreement with the
Company. We anticipate that as we complete certain acquisition
transactions, the Company will enter into employment agreements
with key executives.
Pension, Retirement or Similar Benefit Plans
There
are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers.
Our directors and executive officers may receive stock options at
the discretion of our Board in the future.
Outstanding Equity Awards at Fiscal Year-End
There
are no outstanding equity awards held as of June 30, 2020 by our
Executive Officers and Directors.
Director Compensation
Our
Board of Directors is comprised of Mr. Paul Favata, Mr. Tom
Grbelja, Dr. Emmanuel Esaka, and Mr. Mark Lucky, who is also an
executive officer of our company. In February and April 2019
Messrs. Favata and Grbelja each received restricted stock grants as
compensation for their Board services. In October 2019 Dr. Esaka
received a restricted stock grant as compensation for his Board
services. The restricted stock grants vest over thirty-six months.
In March 2020, the remaining unvested restricted shares issued to
the directors were vested and the corresponding expense was
recognized as stock-based compensation and included in general and
administrative expense in the statement of operations for the year
ended June 30, 2020. The following table sets forth the restricted
stock grants issued to Messrs. Favata, Grbelja, and Dr. Esaka as
compensation for their Board service:
|
|
|
FY2020
|
|
|
FY2019
|
|
||||||||||
|
|
|
Common Shares
|
|
|
|
|
|
Common Shares
|
|
|
|
|
||||
|
Name
|
|
Granted/Vested
|
|
|
Expense
|
|
|
Granted/Vested
|
|
|
Expense
|
|
||||
|
Tom
Grbelja
|
|
|
58,000,000
|
|
|
$
|
43,000
|
|
|
|
4,416,666
|
|
|
$
|
220,000
|
|
|
Paul
Favata
|
|
|
20,000,000
|
|
|
|
6,000
|
|
|
|
4,275,000
|
|
|
|
211,500
|
|
|
Emmanuel
Esaka
|
|
|
40,000,000
|
|
|
|
12,000
|
|
|
|
1,500,000
|
|
|
|
675,000
|
|
|
|
|
|
118,000,000
|
|
|
$
|
61,000
|
|
|
|
10,191,666
|
|
|
$
|
1,106,500
|
|
|
|
19
|
|
|
|
||
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholders Matters.
At
October 9, 2020, we had 2,127,470,956 shares of our Common Stock
outstanding. The following table sets forth information regarding
the beneficial ownership of our Common Stock as of October 9, 2020
by:
|
●
|
each
person known by us to be the beneficial owner of more than 5% of
our Common Stock;
|
|
●
|
our
director;
|
|
●
|
each of
our executive officers named in the compensation tables in Item 11;
and
|
|
●
|
all of
our executive officers and director as a group.
|
|
Amount and Nature of Beneficial Ownership
|
||||||||||||||||||||
|
|
|
COMMON STOCK
|
|
|
Series AA Preferred Stock Ownership
|
|
|
|
|
|||||||||||
|
|
|
AMOUNT OF
|
|
|
|
|
|
AMOUNT OF
|
|
|
|
|
|
% OF
VOTING
|
|
|||||
|
|
|
BENEFICIAL
|
|
|
% OF
|
|
|
BENEFICIAL
|
|
|
% OF
|
|
|
CONTROL
|
|
|||||
|
NAME
|
|
OWNERSHIP
|
|
|
CLASS
|
|
|
OWNERSHIP
|
|
|
CLASS
|
|
|
(1)
|
|
|||||
|
Mark
Lucky
|
|
|
306,812,564
|
|
|
|
14.42
|
%
|
|
|
1
|
|
|
|
100
|
%
|
|
|
58.07
|
%
|
|
Tom
Grbelja
|
|
|
103,666,667
|
|
|
|
4.87
|
%
|
|
|
|
|
|
|
|
|
|
|
2.39
|
%
|
|
Emmanuel
Esaka
|
|
|
44,500,000
|
|
|
|
2.09
|
%
|
|
|
|
|
|
|
|
|
|
|
1.02
|
%
|
|
Paul
Favata
|
|
|
25,333,333
|
|
|
|
1.19
|
%
|
|
|
|
|
|
|
|
|
|
|
0.58
|
%
|
|
Officers
and directors as a group
|
|
|
480,312,564
|
|
|
|
22.58
|
%
|
|
|
1
|
|
|
|
100
|
%
|
|
|
62.07
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
480,312,564
|
|
|
|
22.58
|
%
|
|
|
1
|
|
|
|
100
|
%
|
|
|
62.07
|
%
|
|
(1)
|
Percent of Voting Control is based upon the number of outstanding
shares of our common stock and our Series AA Preferred Stock as of
October 9, 2020. On that date, we had 2,127,470,956 outstanding
shares of common stock with one vote per share, and 1 share of
Series AA Preferred Stock outstanding with voting rights equal to
51% of the outstanding common shares.
|
The
following table sets forth securities authorized for issuance under
any equity compensation plans approved by our stockholders as well
as any equity compensation plans not approved by our stockholder as
of June 30, 2020.
|
Plan category
|
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights (a)
|
|
|
Weighted-average exercise price of outstanding options,warrants and
rights (b)
|
|
|
Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column
(a)) (c)
|
|
|||
|
Equity
compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
Employee Stock Compensation Plan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Item 13. Certain Relationship and Related Party Transactions, and
Director Independence.
Other
than compensation arrangements, we describe below, transactions
during our last fiscal year, to which we were a party, in
which:
|
|
●
|
The
amounts involved exceeded or will exceed the lesser of $120,000 or
1% of the average of our total assets at year-end for the last two
completed fiscal years; and
|
|
|
|
|
|
|
●
|
Any of
our directors, executive officers, or holders of more than 5% of
our common stock, or any member of the immediate family of the
foregoing persons, had or will have a direct or indirect material
interest.
|
|
|
20
|
|
|
|
||
Common Stock
Issuances of Common Stock During 2020
During
fiscal 2020 we issued shares of our common stock as
follows:
Convertible Notes Payable
During
the year ended June 30, 2020 the Company issued 954,210,518 shares
of its common stock related to the conversion of $333,219 of
principal and accrued interest of its convertible notes payable, at
an average contract conversion price of $0.0003 per share. The fair
value of the shares issued was $1,059,572, resulting in a loss on
debt settlement of $593,907.
Sale of Restricted Common Stock
None.
Stock Based Compensation
During
the year ended June 30, 2020 the Company issued 348,000,000 shares
of its $0.0001 par value common stock as compensation to its
directors and officers. The shares were valued at $148,000, or
$0.00043 per share, based on the share price at the time of the
transactions.
During
the year ended June 30, 2020 the Company issued and vested
199,850,000 shares of its $0.0001 par value common stock to four
consultants, as compensation under four separate consulting
agreements. The shares were valued at $198,735, or $0.001 per
share, based on the share price at the time of the
transactions.
Issuances of Common Stock During 2019
During
fiscal 2019 we issued shares of our common stock as
follows:
Convertible Notes Payable
During
the year ended June 30, 2019 the Company issued 1,985,327 shares of
its common stock related to the conversion of $201,054 of principal
and accrued interest of its convertible notes payable, at an
average contract conversion price of $0.101 per share.
Sale of Restricted Common Stock
During
the year ended June 30, 2019 the Company issued 2,505,000 shares of
its common stock related to the sale of its common stock resulting
in proceeds of $250,501, at an average price of $0.10 per
share.
Acquisition of Threat Surface Solutions Group, LLC
During
the year ended June 30, 2019 the Company issued 1,538,387 shares of
its common stock related to its acquisition of Threat Surface
Solutions Group, LLC, valued at $500,000, or an average price of
$0.325 per share.
Stock Based Compensation
During
the year ended June 30, 2019 the Company issued 23,427,759 shares
of its $0.0001 par value common stock as compensation to its
directors and officers related to the vesting of restricted stock
grants. The shares were valued at $1,901,500, or $0.081 per share,
based on the share price at the time of the
transactions.
During
the year ended June 30, 2019 the Company issued and vested
3,233,341 shares of its $0.0001 par value common stock to four
consultants, as compensation under four separate consulting
agreements. The shares were valued at $174,500, or $0.054 per
share, based on the share price at the time of the
transactions.
|
|
21
|
|
|
|
||
Director Independence
Although
our common stock is not listed on any national securities exchange,
for purposes of independence we use the definition of independence
applied by The Nasdaq Stock Market. The Board has determined that
each of Paul Favata, Tom Grbelja, and Dr. Emmanuel Esaka are
“independent” in accordance with such
definition.
Item 14. Principal Accountant Fees and Services
During
the two most recent fiscal years and through the Engagement Date,
neither the Company, nor any one on its behalf, consulted with
Assurance Dimensions, Inc. in regard to the application of
accounting principles to any specified transaction, either
completed or proposed, or the type of audit opinion that might be
rendered on the Company’s financial statements, or any other
matters or reportable events as defined in Item 304(a)(2)(i) and
(ii) of Regulation S-K.
The
following table summarizes the fees of Assurance Dimensions, Inc.,
our independent registered public accounting firm billed for each
of the last two fiscal years for audit services and other
services:
|
Fee Category
|
|
2020
|
|
|
2019
|
|
||
|
Audit
Related Fees Paid to Assurance Dimensions, Inc. (1)
|
|
$
|
35,500
|
|
|
$
|
30,000
|
|
|
Tax
Fees (2)
|
|
|
-
|
|
|
|
-
|
|
|
All
Other Fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Fees
|
|
$
|
35,500
|
|
|
$
|
30,000
|
|
(1)
Consists of fees for professional services rendered in connection
with the financial statements included in our Annual Report on Form
10-K and quarterly reports on Form 10-Q.
(2)
Consists of fees relating to any tax compliance and tax
planning.
|
|
22
|
|
|
|
||
PART IV
Item 15. Exhibits and Financial Statement Schedules
a.
Index to Financial Statements and Financial Statement
Schedules
|
|
Page
|
|
Report of Independent Registered Public Accounting
Firm
|
F-2
|
|
Consolidated Balance Sheets as of June 30, 2020 and
2019
|
F-3
|
|
Consolidated Statements of Operations for each of the two years in
the period ended June 30, 2020
|
F-4
|
|
Consolidated Statements of Changes in Stockholders’ Deficit
for each of the two years in the period ended June 30,
2020
|
F-5
|
|
Consolidated Statements of Cash Flows for each of the two years in
the period ended June 30, 2020
|
F-6
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-7 -
F-21
|
All
other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the
related instructions, or are inapplicable, and therefore have been
omitted.
b. Exhibits
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
2.2
|
|
|
|
|
|
|
|
2.3
|
|
|
|
|
|
|
|
2.4
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
3.3
|
|
|
|
|
|
|
|
3.4
|
|
|
|
|
|
|
|
3.5
|
|
|
|
|
|
|
|
3.6
|
|
|
|
|
|
|
|
3.7
|
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
|
|
3.10
|
|
|
|
|
|
|
|
3.11
|
|
|
|
|
|
|
|
3.12
|
|
|
|
|
|
|
|
3.13
|
|
|
|
|
|
|
|
3.14
|
|
|
|
|
|
|
|
3.15
|
|
|
|
|
|
|
|
3.16
|
|
|
|
|
|
|
|
3.17
|
|
|
|
|
|
|
|
3.18
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
4.3
|
|
|
|
23
|
|
|
|
||
|
4.4
|
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
|
|
4.9
|
|
|
|
|
|
|
|
4.10
|
|
|
|
|
|
|
|
4.11
|
|
|
|
|
|
|
|
4.12
|
|
|
|
|
|
|
|
4.13
|
|
|
|
|
|
|
|
4.14
|
|
|
|
|
|
|
|
4.15
|
|
|
|
|
|
|
|
4.16
|
|
|
|
|
|
|
|
4.17
|
|
|
|
|
|
|
|
4.18
|
|
|
|
|
|
|
|
4.19
|
|
|
|
|
|
|
|
4.20
|
|
|
|
|
|
|
|
4.21
|
|
|
|
|
|
|
|
4.22
|
|
|
|
|
|
|
|
4.23
|
|
|
|
|
|
|
|
4.24
|
|
|
|
|
|
|
|
4.25
|
|
|
|
|
|
|
|
4.26
|
|
|
|
|
|
|
|
4.27
|
|
|
|
|
|
|
|
4.28
|
|
|
|
|
|
|
|
4.29
|
|
|
|
|
|
|
|
4.30
|
|
|
|
|
|
|
|
4.31
|
|
|
|
|
|
|
|
4.32
|
|
|
|
|
|
|
|
4.33
|
|
|
|
|
|
|
|
4.34
|
|
|
|
|
|
|
|
4.35
|
|
|
|
|
|
|
|
4.36
|
|
|
|
|
|
|
|
4.37
|
|
|
|
24
|
|
|
|
||
|
4.38
|
|
|
|
|
|
|
|
4.39
|
|
|
|
|
|
|
|
4.40
|
|
|
|
|
|
|
|
4.41
|
|
|
|
|
|
|
|
4.42
|
|
|
|
|
|
|
|
4.43
|
|
|
|
|
|
|
|
4.44
|
|
|
|
|
|
|
|
4.45
|
|
|
|
|
|
|
|
4.46
|
|
|
|
|
|
|
|
4.47
|
|
|
|
|
|
|
|
4.48
|
|
|
|
|
|
|
|
4.49
|
|
|
|
|
|
|
|
4.50
|
|
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
10.2
|
|
|
|
|
|
|
|
10.3
|
|
|
|
|
|
|
|
10.4
|
|
|
|
|
|
|
|
10.5
|
|
|
|
|
|
|
|
10.6
|
|
|
|
|
|
|
|
10.7
|
|
|
|
|
|
|
|
10.8
|
|
|
|
|
|
|
|
10.9
|
|
|
|
|
|
|
|
10.10
|
|
|
|
|
|
|
|
10.11
|
|
|
|
|
|
|
|
10.12
|
|
|
|
|
|
|
|
10.13
|
|
|
|
|
|
|
|
10.14
|
|
|
|
|
|
|
|
10.15
|
|
|
|
|
|
|
|
10.16
|
|
|
|
|
|
|
|
10.17
|
|
|
|
|
|
|
|
10.18
|
|
|
|
|
|
|
|
10.19
|
|
|
|
|
|
|
|
10.20
|
|
|
|
|
|
|
|
10.21
|
|
|
|
|
|
|
|
10.22
|
|
|
|
|
|
|
|
10.23
|
|
|
|
|
|
|
|
10.24
|
|
|
|
|
|
|
|
10.25
|
|
|
|
|
|
|
|
10.26
|
|
|
|
|
|
|
|
10.27
|
|
Amendment
to License Agreement between MITRE Corporation and Visium
Analytics, LLC (39)
|
|
|
|
|
|
14.1
|
|
|
|
|
|
|
|
21.1
|
|
Subsidiaries of Registrant (20)*
|
|
|
|
|
|
31.1
|
|
Section 302 Certificate of Chief Executive Officer.*
|
|
|
|
|
|
31.2
|
|
Section 302 Certificate of Principal Financial
Officer.*
|
|
|
|
|
|
32.1
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
32.2
|
|
Certification of the Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
101.
|
|
The
following materials from the Company’s Annual Report on Form
10-K for the year ended June 30, 2013, formatted in XBRL
(eXtensible Business Reporting Language): (i) the Balance Sheets,
(ii) the Statements of Operations, (iii) the Statements of Cash
Flows, and (iv) related notes to these financial
statements.**
|
|
|
25
|
|
|
|
||
|
*
|
Filed
herewith.
|
|
|
|
|
**
|
Furnished
herewith.
|
|
|
|
|
(1)
|
Incorporated
by reference to Current Report on Form 8-K filed on March 26,
2003.
|
|
|
|
|
(2)
|
Incorporated
by reference to registration statement on Form 10-SB, as
amended.
|
|
|
|
|
(3)
|
Incorporated
by reference to definitive Schedule 14C Information Statement filed
on February 2, 2001.
|
|
|
|
|
(4)
|
Incorporated
by reference to definitive Schedule 14C Information Statement filed
on April 22, 2003.
|
|
|
|
|
(5)
|
Incorporated
by reference to Annual Report on Form 10-K for the fiscal year
ended December 31, 2002.
|
|
|
|
|
(6)
|
Incorporated
by reference to Current Report on Form 8-K filed on July 8,
2004.
|
|
|
|
|
(7)
|
Incorporated
by reference to Current Report on Form 8-K filed on January 3,
2002.
|
|
|
|
|
(8)
|
Incorporated
by reference to Quarterly Report on Form 10-QSB for the period
ended March 31, 2003.
|
|
|
|
|
(9)
|
Incorporated
by reference to Preliminary Information Statement on Schedule 14C
filed on July 8, 2004.
|
|
|
|
|
(10)
|
Incorporated
by reference to registration statement on Form SB-2, SEC File No.
333-118792, filed on September 3, 2004.
|
|
|
|
|
(11)
|
Incorporated
by reference to Amendment No. 1 to registration statement the Form
SB-2, SEC File No. 333-118792, filed on October 20,
2004.
|
|
|
|
|
(12)
|
Incorporated
by reference to Amendment No. 3 to the registration statement on
Form SB-2, SEC File No. 333-118792, filed on December 15,
2004.
|
|
|
|
|
(13)
|
Incorporated
by reference to Quarterly Report on Form 10-QSB for the period
ended December 31, 2004 filed on February 14, 2005.
|
|
|
|
|
(14)
|
Incorporated
by reference to Current Report on Form 8-K/A filed on February 25,
2005.
|
|
|
|
|
(15)
|
Incorporated
by reference to Current Report on Form 8-K filed on March 25,
2005.
|
|
|
|
|
(16)
|
Incorporated
by reference to Current Report on Form 8-K filed on March 28,
2005.
|
|
|
|
|
(17)
|
Incorporated
by reference to Quarterly Report on Form 10-QSB for the period
ended March 31, 2005.
|
|
|
|
|
(18)
|
Incorporated
by reference to Current Report on Form 8-K filed on June 3,
2005.
|
|
|
|
|
(19)
|
Incorporated
by reference to Current Report on Form 8-K filed on July 28,
2005.
|
|
|
|
|
(20)
|
Reserved
|
|
|
|
|
(21)
|
Incorporated
by reference to Current Report on Form 8-K filed on February 17,
2006.
|
|
|
|
|
(22)
|
Incorporated
by reference to Amendment No. 1 to registration statement the Form
SB-2, SEC File No. 333-131832 filed on May 5, 2006.
|
|
|
|
|
(23)
|
Incorporated
by reference to Annual Report on Form 10-K for the fiscal year
ended June 30, 2006 filed on October 13, 2006.
|
|
|
|
|
(24)
|
Incorporated
by reference to Current Report on Form 8-K filed on October 17,
2006.
|
|
|
|
|
(25)
|
Incorporated
by reference to Current Report on Form 8-K filed on October 24,
2006.
|
|
|
|
|
(26)
|
Incorporated
by reference to Current Report on Form 8-K filed on January 26,
2007.
|
|
|
|
|
(27)
|
Incorporated
by reference to Current Report on Form 8-K filed on April 30,
2007.
|
|
|
|
|
(28)
|
Incorporated
by reference to Current Report on Form 8-K filed on July 25,
2007.
|
|
|
|
|
(29)
|
Incorporated
by reference to Annual Report on Form 10-KSB filed on October 15,
2007.
|
|
|
|
|
(30)
|
Incorporated
by reference to Current Report on Form 8-K filed on November 15,
2007.
|
|
|
|
|
(31)
|
Incorporated
by reference to Current Report on Form 8-K filed on December 31,
2007.
|
|
|
|
|
(32)
|
Incorporated
by reference to Current Report on Form 8-K filed on March 25,
2008.
|
|
|
|
|
(33)
|
Incorporated
by reference to Current Report on Form 8-K filed on June 13,
2008.
|
|
|
|
|
(34)
|
Incorporated
by reference to Current Report on Form 8-K filed on October 16,
2008.
|
|
|
|
|
(35)
|
Incorporated
by reference to Registration Statement on Form 10-12G/A filed on
June 14, 2013.
|
|
|
|
|
(36)
|
Incorporated
by reference to Current Report on Form 8-K filed on July 27,
2019.
|
|
|
|
|
(37)
|
Incorporated
by reference to Current Report on Form 8-K filed on January 10,
2019.
|
|
|
|
|
(38)
|
Incorporated
by reference to Current Report on Form 8-K filed on January 16,
2019.
|
|
|
|
|
(39)
|
Incorporated
by reference to Current Report on Form 8-K filed on May 13,
2020
|
|
|
|
|
|
|
|
|
26
|
|
|
|
||
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
VISIUM TECHNOLOGIES, INC.
|
By:
|
/s/ Mark Lucky
|
|
|
|
Mark
Lucky
|
|
|
|
Chief
Executive Officer
|
|
Date:
October 9, 2020
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Mark Lucky
|
|
Chief
Executive Officer and Chief Financial Officer
|
|
October
9, 2020
|
|
|
|
|
(principal
accounting officer)
|
|
|
|
|
27
|
|
|
|
||
TABLE OF CONTENTS
|
Report of Independent Registered Public Accounting
Firm
|
F-2
|
|
|
|
|
Financial
Statements:
|
|
|
|
|
|
Consolidated Balance Sheets
|
F-3
|
|
|
|
|
Consolidated Statements of Operations
|
F-4
|
|
|
|
|
Consolidated Statements of Changes in Stockholders’
Deficit
|
F-5
|
|
|
|
|
Consolidated Statements of Cash Flows
|
F-6
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-7 -
F-17
|
|
|
F-1
|
|
|
|
||
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Visium Technologies, Inc.
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of Visium
Technologies, Inc. (the Company) as of June 30, 2020 and 2019, and
the related consolidated statements of income, stockholders’
deficit and cash flows for each of the years in the two-year period
ended June 30, 2020, and the related notes (collectively referred
to as the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 2020
and 2019, and the results of its operations and its cash flows for
each of the years in the two-year period ended June 30, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Explanatory Paragraph- Going Concern
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has
suffered recurring losses for the year ended June 30, 2020 the
Company had a net loss of $1,542,450, had net cash used in
operating activities of $106,757, and had negative working capital
of $3,380,760. These factors raise substantial doubt about its
ability to continue as a going concern. Management’s plans in
regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
|
/s/ Assurance Dimensions
|
|
|
|
|
|
We have
served as the Company’s auditor since 2017.
|
|
|
Margate,
Florida
|
|
|
October
9, 2020
|
|
|
|
F-2
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
30,251
|
|
|
$
|
18,668
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
30,251
|
|
|
|
18,668
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
30,251
|
|
|
$
|
18,668
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
333,805
|
|
|
$
|
213,805
|
|
|
Accrued
compensation
|
|
|
652,529
|
|
|
|
316,529
|
|
|
Accrued
interest
|
|
|
677,857
|
|
|
|
593,838
|
|
|
Convertible
notes payable to ASC Recap LLC
|
|
|
147,965
|
|
|
|
147,965
|
|
|
Convertible
notes payable, net of discount of $0 and $158,333,
respectively
|
|
|
852,962
|
|
|
|
917,095
|
|
|
Derivative
liabilities
|
|
|
438,553
|
|
|
|
807,053
|
|
|
Notes
payable
|
|
|
205,000
|
|
|
|
205,000
|
|
|
Due to
officers
|
|
|
102,340
|
|
|
|
62,000
|
|
|
Total
current liabilities
|
|
|
3,411,011
|
|
|
|
3,263,285
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficit:
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
|
|
|
|
|
|
|
Series
A Convertible Stock ($0.001 par value; 20,000,000 shares
authorized, 13,992,340 shares issued and outstanding as of June 30,
2020 and 2019, respectively)
|
|
|
13,992
|
|
|
|
13,992
|
|
|
Series
B Convertible Stock ($0.001 par value 30,000,000 shares authorized,
1,327,640 shares issued and outstanding as of June 30, 2020 and
2019, respectively)
|
|
|
1,328
|
|
|
|
1,328
|
|
|
Series
AA Convertible Stock ($0.001 par value; 1 share authorized, 1 share
issued and outstanding as of June 30, 2020 and 2019)
|
|
|
0
|
|
|
|
0
|
|
|
Common
stock, $0.0001 par value, 10,000,000,000 shares authorized:
1,544,793,446 shares issued and 1,544,126,787 outstanding at June
30, 2020, and 45,610,716 shares issued and 42,066,269 outstanding
at June 30, 2019, respectively (See Note 6)
|
|
|
154,413
|
|
|
|
4,207
|
|
|
Additional
paid in capital
|
|
|
44,441,085
|
|
|
|
43,184,984
|
|
|
Accumulated
deficit
|
|
|
(47,991,578
|
)
|
|
|
(46,449,128
|
)
|
|
Total
stockholders’ deficit
|
|
|
(3,380,760
|
)
|
|
|
(3,244,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
30,251
|
|
|
$
|
18,668
|
|
See
accompanying notes to consolidated financial
statements.
|
|
F-3
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
FOR THE YEAR ENDED
|
|
|||||
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
||
|
|
|
|
|
|
|
|
||
|
Net
revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
917,993
|
|
|
|
2,721,467
|
|
|
Development
expense
|
|
|
35,500
|
|
|
|
|
|
|
Amortization
expense
|
|
|
-
|
|
|
|
141,970
|
|
|
Total
operating expenses
|
|
|
953,493
|
|
|
|
2,863,437
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(953,493
|
)
|
|
|
(2,863,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on change in fair value of derivative
liabilities
|
|
|
385,367
|
|
|
|
(183,130
|
)
|
|
Derivative
liability expense
|
|
|
(61,396
|
)
|
|
|
(341,423
|
)
|
|
Interest
expense
|
|
|
(323,021
|
)
|
|
|
(276,087
|
)
|
|
Gain
(loss) on debt settlement/write-offs
|
|
|
(593,907
|
)
|
|
|
2,303,147
|
|
|
Impairment
expense
|
|
|
-
|
|
|
|
(407,002
|
)
|
|
Other
income
|
|
|
4,000
|
|
|
|
10,000
|
|
|
Total
other income (expense)
|
|
|
(588,957
|
)
|
|
|
1,105,505
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,542,450
|
)
|
|
$
|
(1,757,932
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
312,626,670
|
|
|
|
22,992,865
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss Per Common Share –Basic and Diluted:
|
|
$
|
(0.005
|
)
|
|
$
|
(0.076
|
)
|
See
accompanying notes to consolidated financial
statements.
|
|
F-4
|
|
|
|
||
VISIUM
TECHNOLOGIES, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE
YEARS ENDED JUNE 30, 2020 AND 2019
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
Stock -
|
|
|
Stock -
|
|
|
Stock -
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
Series A
|
|
|
Series B
|
|
|
Series AA
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
$0.001
|
|
|
$0.001
|
|
|
$0.001
|
|
|
$0.0001
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|||||||||||||||||||||||
|
|
|
Par Value
|
|
|
Par Value
|
|
|
Par Value
|
|
|
Par Value
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|||||||||||||||||||||||
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|||||||||||
|
Balance at June 30, 2018
|
|
|
13,992,340
|
|
|
$
|
13,992
|
|
|
|
1,327,640
|
|
|
$
|
1,328
|
|
|
|
1
|
|
|
$
|
0
|
|
|
|
9,376,442
|
|
|
$
|
937
|
|
|
$
|
40,160,699
|
|
|
$
|
(44,691,196
|
)
|
|
$
|
(4,514,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as compensation to directors and
officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,427,772
|
|
|
|
2,343
|
|
|
|
1,899,157
|
|
|
|
|
|
|
|
1,901,500
|
|
|
Shares issued for consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,233,341
|
|
|
|
323
|
|
|
|
174,177
|
|
|
|
|
|
|
|
174,500
|
|
|
Proceeds from sale of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,505,000
|
|
|
|
251
|
|
|
|
250,250
|
|
|
|
|
|
|
|
250,501
|
|
|
Shares issued for conversion of notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,985,327
|
|
|
|
199
|
|
|
|
200,855
|
|
|
|
|
|
|
|
201,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of TSSG
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,538,387
|
|
|
|
154
|
|
|
|
499,846
|
|
|
|
|
|
|
|
500,000
|
|
|
Net loss for the year ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,757,932
|
)
|
|
|
(1,757,932
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
13,992,340
|
|
|
$
|
13,992
|
|
|
|
1,327,640
|
|
|
$
|
1,328
|
|
|
|
1
|
|
|
$
|
0
|
|
|
|
42,066,269
|
|
|
$
|
4,207
|
|
|
$
|
43,184,984
|
|
|
$
|
(46,449,128
|
)
|
|
$
|
(3,244,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as compensation to directors and
officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348,000,000
|
|
|
|
34,800
|
|
|
|
113,200
|
|
|
|
|
|
|
|
148,000
|
|
|
Shares issued for consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,850,000
|
|
|
|
19,985
|
|
|
|
178,750
|
|
|
|
|
|
|
|
198,735
|
|
|
Shares issued for conversion of notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
954,210,518
|
|
|
|
95,421
|
|
|
|
964,151
|
|
|
|
|
|
|
|
1,059,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,542,450
|
)
|
|
|
(1,542,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
|
13,992,340
|
|
|
$
|
13,992
|
|
|
|
1,327,640
|
|
|
$
|
1,328
|
|
|
|
1
|
|
|
$
|
0
|
|
|
|
1,544,126,787
|
|
|
$
|
154,413
|
|
|
$
|
44,441,085
|
|
|
$
|
(47,991,578
|
)
|
|
$
|
(3,380,760
|
)
|
See
accompanying notes to consolidated financial
statements.
|
|
F-5
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
FOR
THE YEAR
|
FOR
THE YEAR
|
|
|
ENDED
|
ENDED
|
|
|
June
30, 2020
|
June
30, 2019
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net
loss
|
$
(1,542,450
)
|
$
(1,757,932
)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Amortization
expense related to intangible asset
|
-
|
141,970
|
|
Amortization of
debt discounts
|
206,249
|
141,667
|
|
Stock based
payments for consultants, directors, and officers
|
346,735
|
2,076,000
|
|
(Gain) loss on debt
settlement/write-offs
|
593,907
|
(2,303,147
)
|
|
(Gain) loss on
change in fair value of derivative liabilities
|
(385,367
)
|
183,130
|
|
Derivative
liability expense
|
61,396
|
341,423
|
|
Impairment
expense
|
-
|
407,002
|
|
Changes in
operating assets and liabilities:
|
|
|
|
Accounts payable
and accrued expenses
|
130,832
|
(90,751
)
|
|
Accrued
compensation
|
336,000
|
160,704
|
|
Accrued
interest
|
145,941
|
133,189
|
|
Net cash used in
operating activities
|
(106,757
)
|
(566,745
)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Advance from
officers
|
40,340
|
41,000
|
|
Proceed from sale
of common stock
|
-
|
250,501
|
|
Proceeds from
convertible notes payable
|
78,000
|
282,500
|
|
Net cash provided
by financing activities
|
118,340
|
574,001
|
|
|
|
|
|
Net increase in
cash
|
11,583
|
7,256
|
|
|
|
|
|
Cash at beginning
of year
|
18,668
|
11,412
|
|
|
|
|
|
Cash at end of
year
|
$
30,251
|
$
18,668
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash paid
for:
|
|
|
|
Interest
|
$
-
|
$
1,235
|
|
Income
taxes
|
-
|
$
-
|
|
|
|
|
|
Issuance of common
stock for conversion of notes payable and accrued interest (fair
value of the shares issued - $1,059,572
|
$
333,220
|
$
201,055
|
|
Change in fair
value of derivative liability related to debt
conversions
|
$
92,444
|
-
|
|
Issuance of common
stock for acquisition of Threat Surface Solutions
Group
|
$
-
|
500,000
|
|
Derivative
liability attributable to debt discount on new notes
payable
|
$
48,000
|
282,500
|
See
accompanying notes to consolidated financial
statements.
|
|
F-6
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
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, and the Internet of Things
(“IOT”).
The
Company named Mark Lucky as its Chief Executive Officer in February
2018 to provide strategic expertise in pursuing its business
plans.
Going Concern
The
accompanying consolidated financial statements have been prepared
on a going concern basis. For the year ended June 30, 2020 we had a
net loss of $1,542,450, had net cash used in operating activities
of $106,757 and had negative working capital of $3,380,760. These
matters raise substantial doubt about the Company’s ability
to continue as a going concern for a period of one year from the
date of this filing. The Company’s ability to continue as a
going concern is dependent upon its ability to obtain the necessary
financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due, to fund
possible future acquisitions, and to generate profitable operations
in the future. Management plans to provide for the Company’s
capital requirements by continuing to issue additional equity and
debt securities. The outcome of these matters cannot be predicted
at this time and there are no assurances that, if achieved, the
Company will have sufficient funds to execute its business plan or
generate positive operating results. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Management
is in the process of acquiring an operating entity actively engaged
in a business that generates sustained revenues. We are also
considering several additional potential acquisitions and are
investigating various candidates to determine whether they would
have the potential to add value to us for the benefit of our
stockholders.
We
intend to restrict our consideration of potential business to
communications, services, or technology. Because we have limited
resources, the scope and number of suitable candidates to merge
with is relatively limited. Because we may participate in a
business opportunity with a newly formed firm, a firm that is in
the development stage, or a firm that is entering a new phase of
growth, we may incur further risk due to the inability of the
target’s management to have proven its abilities or
effectiveness, or the lack of an established market for the
target’s products or services, or the inability to reach
profitability in the next few years.
Any
business combination or transaction may result in a significant
issuance of shares and substantial dilution to our present
stockholders.
|
|
F-7
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and derivative liabilities valuation methods, such as
expected volatility, risk-free interest rate, and expected dividend
rate and in the valuation allowance of deferred tax
assets.
Cash and Cash Equivalents
The
Company considers all highly liquid, temporary, cash equivalents or
investments with an original maturity of three months or less when
purchased, to be cash equivalents. The Company had no cash
equivalents during the years ended June 30, 2020 and
2019.
Concentration of Credit Risks
The
Company is subject to a concentration of credit risk from
cash.
The
Company’s cash account is held at a financial institution and
is insured by the Federal Deposit Insurance Corporation, or FDIC,
up to $250,000. During the years ended June 30, 2020 and 2019, the
Company had not reached a bank balance exceeding the FDIC insurance
limit.
Derivative Liabilities
The
Company assessed the classification of its derivative financial
instruments as of June 30, 2020 and 2019, which consist of
convertible instruments and rights to shares of the Company’s
common stock and determined that such derivatives meet the criteria
for liability classification under ASC 815.
ASC 815
generally provides three criteria that, if met, require companies
to bifurcate conversion options from their host instruments and
account for them as free standing derivative financial instruments.
These three criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid
instrument that embodies both the embedded derivative instrument
and the host contract is not re-measured at fair value under
otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur and (c) a
separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to
the requirements of ASC 815. ASC 815 also provides an exception to
this rule when the host instrument is deemed to be conventional, as
described.
|
|
F-8
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
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 June 30, 2020 of
$438,553.
Fair Value of Financial Instruments
The
Company accounts for assets and liabilities measured at fair value
on a recurring basis, in accordance with ASC Topic 820, Fair Value
Measurements and Disclosures, or ASC 820. ASC 820 establishes a
common definition for fair value to be applied to existing
generally accepted accounting principles that require the use of
fair value measurements, establishes a framework for measuring fair
value, and expands disclosure about such fair value
measurements.
ASC 820
defines fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally,
ASC 820 requires the use of valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable
inputs. These inputs are prioritized below:
|
Level
1:
|
Observable
inputs such as quoted market prices in active markets for identical
assets or liabilities.
|
|
|
|
|
Level
2:
|
Observable
market-based inputs or unobservable inputs that are corroborated by
market data.
|
|
|
|
|
Level
3:
|
Unobservable
inputs for which there is little or no market data, which require
the use of the reporting entity’s own
assumptions.
|
Additional Disclosures Regarding Fair Value
Measurements
The
carrying value of cash, accounts payable and accrued expenses,
accrued compensation, notes payable and convertible promissory
notes payable, approximate their fair value due to the short
maturity of these items or the use of market interest
rates.
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 2020 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.
|
|
F-9
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 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, 2019. Early adoption
is permitted. The Company early adopted this standard effective
July 1, 2019. Since the Company has not earned any revenue to date,
there has been no impact to the financial statements upon
adoption.
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, 2020, 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 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.
|
|
F-10
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Recent Accounting Pronouncements
In May
2019, the FASB issued ASU No. 2020-05, Income Taxes (Topic 740):
Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting
Bulletin No. 118, regarding the accounting implications of the
recently issued Tax Cuts and Jobs Act (the “Act”). This
standard is effective immediately. The update clarifies that in a
company’s financial statements that include the reporting
period in which the Act was enacted, the company must first reflect
the income tax effects of the Act in which the accounting under
GAAP is complete. These amounts would not be provisional amounts.
The company would also report provisional amounts for those
specific income tax effects for which the accounting under GAAP is
incomplete, but a reasonable estimate can be determined. Technical
corrections or other forthcoming guidance could change how the
Company interprets provisions of the Act, which may impact its
effective tax rate and could affect its deferred tax assets, tax
positions and/or its tax liabilities.
In July
2017, the FASB issued Accounting Standards Update
(“ASU”) No. 2017-11. “Earnings Per Share (Topic
260); Distinguishing Liabilities from Equity (Topic 480);
Derivatives and Hedging (Topic 815): I. Accounting for Certain
Financial Instruments with Down Round Features, II. Replacement of
the Indefinite Deferral for Mandatorily Redeemable Financial
Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Non-controlling Interests with a Scope Exception
(“ASU 2017-11”) ASU 2017-11 revises the guidance for
instruments with down round features in Subtopic 815-40,
Derivatives and Hedging - Contracts in Entity’s Own Equity,
which is considered in determining whether an equity-linked
financial instrument qualifies for a scope exception from
derivative accounting. An entity still is required to determine
whether instruments would be classified in equity under the
guidance in Subtopic 815-40 in determining whether they qualify for
that scope exception. If they do qualify, freestanding instruments
with down round features are no longer classified as liabilities.
ASU 2017-11 is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019, and
early adoption is permitted, including adoption in an interim
period. ASU 2017-11 provides that upon adoption, an entity may
apply this standard retrospectively to outstanding financial
instruments with a down round feature by means of a cumulative-
effect adjustment to the opening balance of accumulated deficit in
the fiscal year and interim period adoption. The Company has
adopted ASU 2017-11 retrospectively as of January 1, 2020. The
adoption of this ASU did not have any impact on its 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 includable in
the computation of fully diluted per-share results are not
presented in the financial statements for the year ended June 30,
2020 and 2019 as their effect would be anti-dilutive. Potential
common shares that would be as follows:
|
|
|
For the Years ended June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Weighted
average common shares outstanding
|
|
|
312,626,670
|
|
|
|
22,992,865
|
|
|
Effect
of dilutive securities-when applicable:
|
|
|
|
|
|
|
|
|
|
Convertible
promissory notes
|
|
|
1,014,701,330
|
|
|
|
14,604,829
|
|
|
Preferred
Stock
|
|
|
13,996,767
|
|
|
|
13,996,767
|
|
|
Warrants
|
|
|
500,000
|
|
|
|
500,000
|
|
|
Fully
diluted earnings per share—adjusted weighted-average shares
and assumed conversions
|
|
|
1,341,824,767
|
|
|
|
52,094,461
|
|
|
|
F-11
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 3: DERIVATIVE LIABILITY
Derivative liability - warrants
The
Company issued warrants in connection with convertible notes
payable which were issued in January 2020. These warrants have
price protection provisions that allow for the 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 June 30, 2020 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. U
pon the
issuance of these convertible notes and as a consequence of their
conversion features, the convertible notes give rise to derivative
liabilities.
The Company’s derivative liabilities
related to its convertible notes payable have been measured at fair
value at June 30, 2020 and June 30, 2019 using the Cox, Ross &
Rubinstein Binomial Tree valuation model.
The
revaluation of 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 $385,367 and a loss of
$183,130 for the years ended June 30, 2020 and 2019, respectively
in the Company’s consolidated statements of operations, under
the caption “Gain (loss) in change of fair value of
derivative liability”. The fair value of the warrants at June
30, 2020 and June 30, 2019 was $250 and $37,200, respectively. The
fair value of the derivative liabilities related to the convertible
debt at June 30, 2020 and June 30, 2019 is $438,303 and $807,053,
respectively, which is reported on the consolidated balance sheet
under the caption “Derivative
liabilities”.
The
Company has determined 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:
|
|
|
Year Ended June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Effective
exercise price
|
|
$
|
0.00024
– $0.00039
|
|
|
$
|
0.0355
- $ 0.0449
|
|
|
Effective
market price
|
|
$
|
0.0007
|
|
|
$
|
0.0745
|
|
|
Expected
volatility
|
|
|
275.5%
to 338.5
|
%
|
|
|
329.6%
to 411.42
|
%
|
|
Risk-free
interest
|
|
|
0.14
|
%
|
|
|
1.92% -
2.18
|
%
|
|
Expected
terms
|
|
|
60 -
559 days
|
|
|
|
92 -
946 days
|
|
|
Expected
dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Changes
in the derivative liabilities during the year ended June 30, 2020
was follows:
|
Derivative liability at June 30, 2019
|
|
$
|
807,053
|
|
|
Derivative liability reduced as a result of note
conversions
|
|
|
(92,529
|
)
|
|
Gain on change in fair value of derivative liabilities
|
|
|
(385,367
|
)
|
|
Increase due to issuance of convertible note
|
|
|
109,396
|
|
|
Derivative liability at June 30, 2020
|
|
$
|
438,553
|
|
|
|
F-12
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 4: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible Notes Payable
At June
30, 2020 and June 30, 2019 convertible debentures consisted of the
following:
|
|
|
June 30,
|
|
|||||
|
|
|
2020
|
|
|
2019
|
|
||
|
Convertible
notes payable
|
|
$
|
852,962
|
|
|
$
|
1,075,428
|
|
|
Discount
on convertible notes
|
|
|
-
|
|
|
|
(158,333
|
)
|
|
Convertible
notes, net
|
|
|
852,962
|
|
|
|
917,095
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes payable to ASC Recap
|
|
|
147,965
|
|
|
|
147,965
|
|
|
Total
|
|
$
|
1,000,927
|
|
|
$
|
1,065,060
|
|
The
Company had convertible promissory notes aggregating approximately
$1.0 million and $1.1 million at June 30, 2020 and June 30, 2019,
respectively. The related accrued interest amounted to
approximately $503,068 and $434,835 at June 30, 2020 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 $0.00024 to $22,500 (as a result of two reverse stock
splits) per share. At June 30, 2020, $841,000 of convertible
promissory notes had matured, are in default and remain unpaid.
There is no provision in the note agreements for adjustments to the
interest rates on these notes in the event of default.
On July
22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC
(“ASC”) two convertible promissory notes with principal
amounts of $25,000 and $125,000, respectively. These two notes were
issued as a fee for services under a 3(a)10 transaction. While the
Company continues to carry the balance of these notes on its
balance sheet, management is disputing the notes and does not
believe that the balances of these notes are owed (see Note 12).
The July 22, 2013 note matured on March 31, 2014 and a balance of
$22,965 remains unpaid. The May 6, 2014 note matured on May 6, 2016
and remains unpaid. The notes are convertible into the common stock
of the Company at any time at a conversion price equal to (i) 50%
of the lowest closing bid price of our common stock for the twenty
days prior to conversion or (ii) fixed price of $0.15 or $0.30 per
share.
For the
year ended June 30, 2020, the following summarizes the conversion
of debt for common shares:
|
|
|
|
|
Amount of
|
|
|
Amount of
|
|
|
|
|
|
Adjustment
|
|
|
|
|
|
Conversion
|
|
|
Shares
|
|
|
Converted
|
|
|
Converted
|
|
|
Conversion
|
|
|
To
|
|
|
|
|
|
Price
|
|
Name
|
Issued
|
|
|
Principal
|
|
|
Interest
|
|
|
Expense
|
|
|
Fair Value
|
|
|
Total
|
|
|
Per Share
|
|
Auctus Funds, LLC
|
364,978,008
|
|
$
|
85,856
|
|
$
|
22,167
|
|
$
|
21,000
|
|
$
|
313,405
|
|
$
|
442,428
|
|
$
|
$0.0012
|
|
FirstFire Global Opportunities Fund LLC
|
268,413,286
|
|
|
133,710
|
|
|
0
|
|
|
19,000
|
|
|
253,849
|
|
|
406,559
|
|
|
$0.0015
|
|
Power Up
|
309,918,093
|
|
|
48,000
|
|
|
2,880
|
|
|
0
|
|
|
95,388
|
|
|
146,268
|
|
|
$0.0005
|
|
Mark Lucky
|
10,901,131
|
|
|
32,900
|
|
|
7,707
|
|
|
0
|
|
|
23,710
|
|
|
64,317
|
|
|
$0.0059
|
|
TOTAL
|
954,210,518
|
|
$
|
300,466
|
|
$
|
32,754
|
|
$
|
40,000
|
|
$
|
686,351
|
|
$
|
1,059,572
|
|
$
|
$0.0011
|
The
adjustment to Fair Value of $686,351 is comprised of the
following:
|
Loss
on settlement of debt
|
$
593,907
|
|
Change in fair value of derivative liability related to debt
conversions
|
92,444
|
|
|
$
686,351
|
Covenants and Other Matters
Certain of our convertible loan agreements contain customary
covenants and events of default and termination, including
cross-default provisions,
whereby a default under
one loan and security agreement triggers a default under those
certain other convertible notes
. The Auctus Funds note has a provision whereby a
default annual interest rate of 24% applies after the one year
anniversary of the note, and the FirstFire note has a provision
whereby the default annual interest rate of 15% applies after the
one year anniversary of the note, both of which occurred in
January, 2020. The Auctus Funds note contains a 150% payoff
provision if the note is in default, and is due and payable only
when the Company receives a notice of default from the
noteholder. As of June 30, 2020 and subsequently, the Company
has not received any notice of default.
Transactions
Convertible Notes Payable
In
October 2019 we issued a convertible note to an investor, with a
face value totaling $48,000 which generated net proceeds of
$48,000. The notes bore interest at 8% and have a term of one year.
This note was fully converted and retired as of June 30,
2020.
In June
2020, in exchange for net proceeds of $30,000, we amended the
outstanding convertible notes held by Auctus Funds, LLC and
FirstFire Global Opportunities Fund, LLC, to increase the
outstanding principal balance of each note in the amount of
$15,000.
Notes Payable
The
Company had promissory notes aggregating $205,000 at June 30, 2020
and June 30, 2019. The related accrued interest amounted to
approximately $175,000 and $159,000 at June 30, 2020 and June 30,
2019, respectively. The notes payable bear interest at rates
ranging from 0% to 16% per annum and are payable monthly. All
promissory notes outstanding as of June 30, 2020 have matured, are
in default, and remain unpaid. There is no provision in the note
agreements for adjustments to the interest rates on these notes in
the event of default.
The
Company recognized interest expense on promissory notes payable of
approximately $16,000 and $16,000 during the fiscal years 2020 and
2019, respectively.
|
|
F-13
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 5: ACCRUED INTEREST PAYABLE
Changes
in accrued interest payable during the year ended June 30, 2020, is
as follows:
|
Accrued
interest payable at June 30, 2019
|
|
$
|
593,838
|
|
|
Interest
expense on notes payable for the year ended June, 2020
|
|
|
116,772
|
|
|
Conversion
of accrued interest into common stock
|
|
|
(32,753
|
)
|
|
Accrued
interest payable at June 30, 2020
|
|
$
|
677,857
|
|
Interest
expense for year ended June 30, 2020 was comprised of the
following:
|
Interest
expense for the year ended June 30, 2020
|
|
$
|
116,772
|
|
|
Amortization
of debt discount
|
|
|
206,249
|
|
|
Total
interest expense for the year ended June 30, 2020
|
|
$
|
323,021
|
|
NOTE 6: STOCKHOLDERS’ DEFICIT
Common Stock
At June
30, 2020, the Company had 10,000,000,000 authorized common shares.
At June 30, 2020, the Company has 1,544,793,446 common shares
issued of which 1,544,126,787 were outstanding, which is net of
666,659 unvested shares issued for the restricted stock awards
granted during the year. See Note 7.
Issuances of Common Stock During 2020
Convertible Notes Payable
During
the fiscal year ended June 30, 2020 the Company issued 954,210,518
shares of its common stock related to the conversion of $333,220 of
principal and accrued interest of its convertible notes payable, at
an average contract conversion price of $0.00041 per share. The
fair value of these conversions was $1,059,572, resulting in a net
loss of $593,907.
Stock Based Compensation
During
the fiscal year ended June 30, 2020 the Company issued 348,000,000
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 $148,000, or $0.00043 per share,
based on the share price at the time of the
transactions.
During
the fiscal year ended June 30, 2020 we issued
199,850,000
shares of its
common stock to consultants, as compensation. The shares were
valued at $0.001, the market price on the date of issuance for a
total value of $198,735. The expense is included in general and
administrative expenses and was recognized on the date the stock
was issued or vested.
Issuances of Common Stock During the Year ended June 30,
2019
Convertible Notes Payable
During
the fiscal year ended June 30, 2019 the Company issued 1,985,327
shares of its common stock related to the conversion of $201,054 of
principal and accrued interest of its convertible notes payable, at
an average contract conversion price of $0.101 per
share.
Sale of Restricted Common Stock
During
the fiscal year ended June 30, 2019 the Company issued 2,505,000
shares of its common stock related to the sale of its common stock
resulting in proceeds of $250,501, at an average price of $0.10 per
share.
Acquisition of Threat Surface Solutions Group, LLC
During
the fiscal year ended June 30, 2019 the Company issued 1,538,387
shares of its common stock related to its acquisition of Threat
Surface Solutions Group, LLC, valued at $500,000, or an average
price of $0.325 per share.
Stock Based Compensation
During
the fiscal year ended June 30, 2019 the Company issued 23,427,772
shares of its $0.0001 par value common stock as compensation to its
directors and officers related to the vesting of restricted stock
grants. The shares were valued at $1,901,500, or $0.081 per share,
based on the share price at the time of the
transactions.
During
the fiscal year ended June 30, 2019 we issued
3,233,341 shares of its
common stock to consultants, as compensation. The shares were
valued at $0.054, the market price on the date of issuance for a
total value of $174,500. The expense is included in general and
administrative expenses and was recognized on the date the stock
was issued or vested.
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 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 2019, the Company authorized and issued one (1) share of
Series AA convertible preferred stock which provides for the holder
to vote on all matters as a class with the holders of Common Stock
and each share of Series AA Convertible Preferred Stock shall be
entitled to 51% of the common votes on any matters requiring a
shareholder vote of the Company. Each one share of Series AA
Convertible Preferred Stock is convertible into one (1) share of
Common Stock. Mark Lucky, our Chief Executive Officer, is the
holder of the one (1) share of Series AA Convertible Preferred
Stock.
|
|
F-14
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
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
year ended
June 30,
2020
and 2019 is presented in the following
table:
|
|
|
For the Year ended
|
|
|||||||||||||
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
||||||||||
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
||||
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
||||
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
||||
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
||||
|
Unvested
at beginning of period
|
|
|
3,544,447
|
|
|
$
|
0.06
|
|
|
|
13,836,108
|
|
|
$
|
0.06
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,500,000
|
|
|
$
|
0.37
|
|
|
Forfeited
|
|
|
(1,227,788
|
)
|
|
|
0.06
|
|
|
|
(930,955
|
)
|
|
|
0.36
|
|
|
Vested
|
|
|
(1,650,000
|
)
|
|
$
|
0.06
|
|
|
|
(10,861,106
|
)
|
|
$
|
0.08
|
|
|
Unvested
at end of period
|
|
|
666,659
|
|
|
$
|
0.06
|
|
|
|
3,544,447
|
|
|
$
|
0.06
|
|
Unrecognized
compensation expense related to outstanding restricted stock awards
to consultants as of
June
30, 2020
was $40,000 and is expected to be recognized over a
weighted average period of 0.83 years.
NOTE 8: INCOME TAXES
The
Company has not filed its corporate tax returns since fiscal
2007.
Due to
recurring losses, the Company’s tax provision for the years
ended June 30, 2020 and 2019 was $0.
The
difference between the effective income tax rate and the applicable
statutory federal income tax rate is summarized as
follows:
|
|
|
2020
|
|
|
2019
|
|
||
|
Statutory
federal rate
|
|
|
(21.7
|
)%
|
|
|
(21.0
|
)%
|
|
State
income tax rate, net of federal benefit
|
|
|
(3.6
|
)%
|
|
|
(3.6
|
)%
|
|
Permanent
differences, including stock-based compensation
|
|
|
8.6
|
%
|
|
|
8.6
|
%
|
|
Change
in valuation allowance
|
|
|
16.7
|
%
|
|
|
16.0
|
%
|
|
Effective
tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
At June
30, 2020 and 2019 the Company’s deferred tax assets were as
follows:
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
||
|
Tax
benefit of net operating loss carry forward
|
|
$
|
7,047,000
|
|
|
$
|
6,961,000
|
|
|
Intangible
|
|
|
-
|
|
|
|
85,000
|
|
|
Total
deferred tax assets
|
|
|
7,047,000
|
|
|
|
7,046,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
valuation allowance
|
|
|
(7,047,000
|
)
|
|
|
(7,046,000
|
)
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
As of
June 30, 2020, the Company had unused net operating loss carry
forwards of approximately $33.6 million available to reduce future
federal taxable income. Net operating loss carryforwards expire
through fiscal years ending 2038. Internal Revenue Code Section 382
places a limitation on the amount of taxable income that can be
offset by carryforwards after a change in control (generally a
greater than 50% change in ownership).
|
|
F-15
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 8: INCOME TAXES, continued
The
Company’s ability to offset future taxable income, if any,
with tax net operating loss carryforwards may be limited due to the
non-filing of tax returns and the impact of the statute of
limitations on the Company’s ability to claim such benefits.
Furthermore, changes in ownership may result in limitations under
Internal Revenue Code Section 382. Due to these limitations, and
other considerations, management has established full valuation
allowances on deferred tax assets relating to net operating loss
carryforward, as the realization of any future benefits from these
assets is uncertain.
The
Company’s valuation allowance at June 30, 2020 and 2019 was
$7,047,000 and $7,046,000, respectively. The change in the
valuation allowance during the year ended June 30, 2020 was an
increase of approximately $105,000. The change in the valuation
allowance during the year ended June 30, 2019 was a decrease of
$720,000. Effective December 22, 2018 a new tax bill was signed
into law that reduced the federal income tax rate for corporations
from 35% to 21.7% for the year ended June 30, 2019. Going forward
the blended rate will be 25.4% for future years. The change in
blended tax rate reduced the 2019 net operating loss carry forward
deferred tax assets by approximately $3.3 million.
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. During year ended June 30, 2020 Mr. Lucky advanced $40,340 to
the Company. $102,340 in advances remain outstanding as of June 30,
2020. Mr. Lucky is owed $11,805 for out-of-pocket expenses as
of June 30, 2020, which is included on the balance sheet in
Accounts payable and accrued expenses.
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 June 30, 2020.
|
|
F-16
|
|
|
|
||
VISIUM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 AND 2019
NOTE 10: COMMITMENTS AND CONTINGENCIES, continued
Contingencies
The
Company accounts for contingent liabilities in accordance with
Accounting Standards Codification (“ASC”) Topic 450,
Contingencies
. This
guidance requires management to assess potential contingent
liabilities that may exist as of the date of the financial
statements to determine the probability and amount of loss that may
have occurred, which inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the
liability can be estimated, then the estimated liability would be
accrued in the Company’s financial statements. If the
assessment indicates that a potential material loss contingency is
not probable but is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and
material, would be disclosed. For loss contingencies considered
remote, no accrual or disclosures are generally made. Management
has assessed potential contingent liabilities as of June 30, 2020,
and based on the assessment there are no probable loss
contingencies requiring accrual or disclosures within its financial
statements.
License Contingent Consideration
Our license agreements with the sellers of Threat Surface Solutions
Group, LLC includes a provision for a royalty payment based
on
ten percent (10%) of sales generated by Threat Surface
Solutions Group beginning on the Agreement Date and ending on
October 12, 2021, capped at a maximum royalty of
$2,500,000
. As of June 30,
2020, we have not generated any revenue related to these license
agreements.
Our license agreements with George Mason University and The MITRE
Corporation include provisions for a royalty payment on revenues
collected of 5% and 6%, respectively. As of June 30, 2020, we have
not generated any revenue related to these license
agreements.
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 11 – Fair Value Measurement
Fair value measurements
At June
30, 2020 and 2019, the fair value of derivative liabilities is
estimated using the Cox, Ross & Rubinstein Binomial Tree
valuation model using inputs that include the expected volatility,
the implied risk-free interest rate, as well as the expected
dividend rate. The derivative liabilities are the only Level 3 fair
value measures.
At June
30, 2020, the estimated fair values of the liabilities measured on
a recurring basis are as follows:
|
|
|
Fair Value Measurements at
|
|
|||||||||
|
|
|
June 30, 2020:
|
|
|||||||||
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|||
|
Derivative
liability – Convertible notes
|
|
|
|
|
|
|
|
|
|
|
438,303
|
|
|
Derivative
liability – Warrants
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
250
|
|
|
Total
derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
438,553
|
|
NOTE 12: SUBSEQUENT EVENTS
In July 2020, the Company issued 155,557,900 shares of
its common stock upon the conversion of principal of $27,007, and
$1,431 of accrued interest on its outstanding convertible notes,
valued at $0.0002 per share.
In
August 2020, the Company issued 110,432,492 shares of its common
stock upon the conversion of principal of $15,769, and $1,182 of
accrued interest on its outstanding convertible notes, valued at
$0.00017 per share.
In
September 2020, the Company issued 95,958,168 shares of its common
stock upon the conversion of principal of $21,599, and $681 of
accrued interest on its outstanding convertible notes, valued at
$0.00024 per share.
In October 2020, the Company issued 101,195,600 shares of its
common stock upon the conversion of principal of $19,181, and $309
of accrued interest on its outstanding convertible notes, valued at
$0.0002 per share.
In July and August 2020, 200,001 restricted shares which were
previously issued to consultants have vested.
In July 2020, the Company issued 30,000,000 shares to consultants
for services rendered. The share shares were valued at the market
price on the date of issuance, at $0.0005/share, or
$15,000.
In July 2020, the Company issued 90,000,000 shares to officers and
directors as compensation. The share shares were valued at the
market price on the date of issuance, at $0.0005/share, or
$45,000.
|
|
F-17
|
|
|
|
||
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters, and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholders MattersItem 13. Certain Relationship and Related Party Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement SchedulesNote 1: Organization, Description Of Business and Going ConcernNote 2: Summary Of Significant Accounting PoliciesNote 2: Summary Of Significant Accounting Policies, ContinuedNote 3: Derivative LiabilityNote 4: Convertible Notes Payable and Note PayableNote 5: Accrued Interest PayableNote 6: Stockholders DeficitNote 7 - Stock-based CompensationNote 8: Income TaxesNote 8: Income Taxes, ContinuedNote 9: Related Party TransactionsNote 10: Commitments and ContingenciesNote 10: Commitments and Contingencies, ContinuedNote 11 Fair Value MeasurementNote 12: Subsequent Events