NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying audited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries, Visium Analytics, LLC and PTNA Acquisition Corp. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Significant estimates include the fair value of the Series D Convertible Preferred Stock issued in debt exchanges, the fair value of derivative liabilities, the fair value of share-based awards and the valuation allowance on deferred tax assets. Actual results may differ from those estimates.

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, 2026 and 2025.

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. As of June 30, 2026 and 2025, the Company did not exceed these FDIC limits.

Derivative Liabilities

The Company evaluates convertible notes and warrants at issuance and each reporting date to determine whether embedded or freestanding features require liability classification under ASC 815, Derivatives and Hedging, including the applicable scope exception in ASC 815-10 and the indexation and settlement conditions in ASC 815-40. The Company’s derivative liabilities at June 30, 2025 related solely to embedded conversion features in certain variable-price convertible notes. No warrant derivative liability was recognized in either period.

For convertible notes with features that require bifurcation, the Company recognizes the embedded derivative at fair value on the issuance date and remeasures it at each reporting date, with changes in fair value recognized in earnings. The analysis is performed for each instrument using its contractual conversion, settlement, and anti-dilution terms.

The Company uses judgment in determining the fair value of convertible-note derivative liabilities at issuance and at each reporting date, including the valuation methodology, expected volatility, risk-free interest rate, expected term, and expected dividend rate, as applicable. The Company had no derivative liability as of June 30, 2026 (see Note 3).

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:

The following is the Level 3 activity for the Company’s convertible-note derivative liabilities:

Convertible Instruments

The Company accounts for convertible instruments under the applicable guidance in ASC 470, Debt, and ASC 815. Following the adoption of ASU 2020-06, the Company does not separately recognize a beneficial-conversion-feature discount for instruments within that guidance. Conversion features that require bifurcation under ASC 815 are accounted for separately as derivative liabilities; other conversion features remain embedded in the host instrument. Debt issuance costs and discounts, when applicable, are amortized to interest expense over the applicable term using the effective interest method.

Under ASC 815-40, a contract indexed to the Company’s own stock that does not meet the equity-classification conditions is classified as an asset or liability and remeasured through earnings. The Company’s Talos and FirstFire warrants met the ASC 815-40 equity-classification criteria, including the down-round feature exception in ASC 815-10-15-75A, and therefore were classified as equity while outstanding.

Certain of the Company’s convertible securities have variable-price conversion provisions that resulted in derivative liabilities. No warrant is included in the derivative liability balance as of June 30, 2026 or 2025.

Redeemable Preferred Stock Classification Policy

The Company evaluates its authorized preferred stock instruments under the provisions of ASC 480, Distinguishing Liabilities from Equity. Shares of preferred stock that are contingently redeemable upon the occurrence of an event that is not solely within the control of the Company are classified as temporary equity (mezzanine equity) outside of permanent stockholders’ equity on the Consolidated Balance Sheet.The Series D Convertible Preferred Stock is classified as temporary equity because its Liquidation Preference becomes payable upon a Deemed Liquidation Event under Section 5 of its Certificate of Designation, an event that is not solely within the control of the Company (see Note 7).

Transaction costs and initial fair value allocations at the time of issuance are recorded as a component of the mezzanine equity carrying value. The Company reviews the probability of redemption at each balance sheet reporting date to determine if modification to the carrying value is required.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606. Revenue is recognized when the Company satisfies a performance obligation by transferring control of promised goods or services to a customer, either over time or at a point in time, as applicable. The Company applies the following steps: (i) identify the contract with a customer; (ii) identify the performance obligation(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when, or as, each performance obligation is satisfied.

The Company recognized no revenue during the years ended June 30, 2026 and 2025. This policy is presented because it is the Company’s accounting policy for revenue upon the commencement of sales activity; it was not applied to any transactions in the periods presented.

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, tax positions must be evaluated to determine whether recognition of a tax benefit is more likely than not based on technical merits and available evidence. At June 30, 2026, management had not recorded a liability for unrecognized tax benefits. This conclusion is subject to reassessment as the Company prepares and files its historical returns and evaluates potential penalties and interest.

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, 2026, the Company had not filed tax returns for the tax years ending June 30, 2008 through 2025 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. The amount of any such penalties and interest cannot currently be reasonably estimated (see Note 11).

Share-Based Payments

The Company accounts for stock-based compensation in accordance with ASU 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees is substantially aligned.

Under ASC Topic 718, “Compensation - Stock Compensation”. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company has elected to use the Cox, Ross & Rubinstein Binomial Tree valuation model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. The Company accounts for forfeitures as they occur, as permitted by ASC 718-10-35-3.

Common stock is recorded at par value of $0.0001 per share. Dollar amounts in the accompanying financial statements and notes are presented in whole dollars.

Segment Reporting

The Company operates in a single business segment, with all technologies, products, and services focused on cybersecurity. This includes advanced AI-driven cybersecurity solution development, related IT infrastructure professional services, and digital transformation initiatives, all managed as an integrated business. The proprietary TruContext™ platform, together with professional services for deployment and integration within complex enterprise environments, represents the core of operations.

In accordance with ASC 280, Segment Reporting, the Company’s Chief Operating Decision Maker (CODM), the Chief Executive Officer, reviews financial performance and makes resource allocation decisions on a consolidated basis. All significant operational and strategic decisions are made considering the Company as a single operating unit.

As a result, the Company does not have multiple operating segments with separate financial results, and segment reporting is not applicable. All revenues, operating results, and assets are attributable to this single cybersecurity segment, encompassing both product and service offerings, consistent with how the CEO evaluates performance and allocates resources.

Recent Accounting Pronouncements

The Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, effective for its fiscal year ended June 30, 2025 (its first fiscal year beginning after December 15, 2023) and applies it retrospectively to all periods presented. The Company has one reportable segment and its Chief Executive Officer is the chief operating decision maker. The measure of segment profit or loss reviewed by the chief operating decision maker is consolidated net income (loss), and consolidated assets are the measure of segment assets. The chief operating decision maker uses consolidated net income (loss) to assess performance, to monitor actual results against the Company’s budget, and to decide how to allocate resources, including decisions regarding financing and debt-reduction transactions. The significant segment expenses regularly provided to the chief operating decision maker, which together constitute selling, general and administrative expense, were, for the years ended June 30, 2026 and 2025, respectively: salaries, $749,302 and $816,006; stock-based compensation, $341,400 and $323,400; stock-based consulting, $10,750 and $60,860; consulting fees, $125,000 and $120,000; legal and professional fees, $42,000 and $192,108; accounting, $62,226 and $74,242; and other selling, general and administrative expenses, $33,487 and $63,201. Development expense ($0 and $325), interest expense and the other non-operating items presented in the consolidated statements of operations are also provided to the chief operating decision maker. There are no other segment items.

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, for the annual period ended June 30, 2026; the enhanced annual rate-reconciliation and income-tax disclosure information is included in Note 11.

Recently issued accounting pronouncements not yet adopted: In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), as clarified by ASU 2025-01, which requires disaggregated disclosure of certain costs and expenses in the notes to the financial statements. The guidance is effective for the Company’s fiscal year ending June 30, 2028, and interim periods thereafter. In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which is effective for the Company’s fiscal year ending June 30, 2027. The Company is evaluating the effect of these ASUs on its consolidated financial statements and disclosures. Other accounting standards issued but not yet effective are not expected to have a material effect on the Company’s consolidated financial statements.

Basic and Diluted Earnings Per Share

Basic earnings per share are calculated by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during each period, after deducting cumulative undeclared Series D preferred dividends. The equity-classified Talos and FirstFire warrants did not result in a deemed dividend in the periods presented. Diluted earnings per share are computed using the weighted-average number of common shares and the dilutive common-share equivalents outstanding during the period. Dilutive common-share equivalents consist of shares issuable upon the exercise of in-the-money stock options and warrants, calculated using the treasury-stock method where applicable, and conversion of other securities using the if-converted method where applicable. For the year ended June 30, 2025, potential common shares are excluded because the Company reported a net loss and their effect would be anti-dilutive. For the year ended June 30, 2026, management evaluated each potentially dilutive security in sequence from most to least dilutive and excluded securities that were anti-dilutive. For the year ended June 30, 2026, the Series D Convertible Preferred Stock was excluded from the computation of diluted earnings per share because its effect was anti-dilutive (incremental earnings per incremental share of approximately $0.0015, compared with basic earnings per share of approximately $0.0014). The convertible notes payable were also excluded because, after adding back the related interest expense under the if-converted method, their effect was anti-dilutive.

The following table sets forth the weighted-average common shares outstanding and the potential common shares associated with securities outstanding during each period. The final row is an informational aggregation and is not a diluted EPS denominator because the potential securities have different issuance dates and may be anti-dilutive.

Reconciliation of Basic to Diluted Earnings Per Share – Year Ended June 30, 2026