Visium Technologies, Inc 10-Q/A for FY2022 Q1
Visium Technologies, Inc. (VISM)
About this 10-Q/A
Visium Technologies, Inc filed this 10-Q/A on November 8, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net loss
- $1.82M
- compared with a net loss of $345.67K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No.1)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of registrant as specified in its charter) |
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(State of Incorporation) |
| (IRS Employer Identification No.) |
(Address of principal executive offices)
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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 |
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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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition 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 | ☐ |
☒ | Smaller Reporting Company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark 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
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value per share, as of November 5, 2021, was
When used in this quarterly report, the terms “Visium,” “the Company,” “we,” “our,” and “us” refer to Visium Technologies, Inc., a Florida corporation.
EXPLANATORY NOTE
The sole purpose of this Amendment No. 1 to the Annual Report on Form 10-Q for the period year ended September 30, 2021 of Visium Technologies Inc.. (the “Company”) filed with the Securities and Exchange Commission on November 8, 2021 (the “Form 10-Q”) is to include Exhibit 101 to the Form 10-Q, which contains the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes.
No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This quarterly report on Form 10-Q contains certain forward-looking statements. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other comparable terminology. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of Visium Technologies, Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under “Item 1A. Risk Factors” in our Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on October 13, 2021. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our registration statement on Form 10-K.
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| Table of Contents |
VISIUM TECHNOLOGIES, INC.
INDEX
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| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Visium Technologies, Inc.
CONSOLIDATED BALANCE SHEETS
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| September 30, 2021 |
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| June 30, 2021 |
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ASSETS |
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Current assets: |
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Cash |
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Prepaid license fee |
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Total current assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable and accrued expenses |
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Accrued compensation |
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Accrued interest |
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Convertible notes payable to ASC Recap LLC |
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Convertible notes payable, net of discount of $ |
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Derivative liability |
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Notes payable, net of discount of $ |
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Total current liabilities |
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Commitments and contingencies (Note 10) |
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Stockholders’ deficit: |
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Preferred stock |
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Series A Convertible Stock ($ |
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Series B Convertible Stock ($ |
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Series AA Convertible Stock ($ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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(1) | Derived from audited financial statements |
See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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| Table of Contents |
Visium Technologies, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| Three Months Ended September 30, |
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| 2021 |
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| 2020 |
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Net revenues |
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Operating expenses: |
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Selling, general and administrative |
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Development expense |
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Total Operating Expenses |
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Loss from Operations |
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Other income (expenses): |
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Gain (loss) on change in fair value of derivative liabilities |
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Interest expense |
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Loss on extinguishment of debt |
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Total other income (expenses) |
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Net loss |
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Loss per common share basic and diluted |
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Weighted average common shares outstanding - basic and diluted |
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See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
| 5 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
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| Preferred |
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| Preferred |
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| Common |
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| Additional Paid-in |
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| Accumulated |
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| Total Stockholders’ |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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Balance at June 30, 2021 |
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| $ | (2,837,188 | ) | |||||||||
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Shares issued as compensation to directors and officers |
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Shares issued for consulting services |
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Shares issued for conversion of notes payable |
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Shares issued for sale of common stock |
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Amortization of deferred compensation |
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Shares issued for cashless warrant exercise |
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Net loss for the three months ended September 30, 2021 |
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Balance at September 30, 2021 |
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| $ |
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See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
| 6 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
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| Preferred |
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| Preferred |
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| Common |
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| Additional Paid-in |
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| Accumulated |
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| Total Stockholders’ |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Capital |
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| Deficit |
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| Deficit |
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Balance at June 30, 2021 |
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| $ |
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| $ | (47,991,5748 | ) |
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Shares issued as compensation to directors and officers |
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Shares issued for consulting services |
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Shares issued for conversion of notes payable |
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Net loss for the three months ended September 30, 2021 |
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Balance at September 30, 2021 |
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See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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| Table of Contents |
Visium Technologies, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Three-months ended |
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| 2021 |
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| 2020 |
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock based compensation |
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Amortization of deferred compensation |
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(Gain) loss on change in derivative liabilities |
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Loss on extinguishment of debt |
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Amortization of debt discount |
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Changes in operating assets and liabilities: |
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Accounts payable and accrued expenses |
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Prepaid license fee |
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Accrued interest |
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Accrued compensation |
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Net cash used in operating activities |
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Cash flows from financing activities: |
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Advances from (repayment to) officers |
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Proceeds from sale of common stock |
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Repayment of convertible note payable |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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Cash paid for income taxes |
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Non-cash investing and financing activities: |
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Issuance of common stock for conversion of notes payable and accrued interest |
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See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
| 8 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 1: ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
Visium Technologies, Inc., or the Company, is a Florida corporation that was originally incorporated in Nevada in October 1987. It was formerly known as Jaguar Investments, Inc. between October 1987 and May 2003, Power2Ship, Inc. between May 2003 and November 2006, Fittipaldi Logistics, Inc. between November 2006 and December 2007, and as NuState Energy Holdings, Inc. between December 2007 and March 5, 2018 when it changed its name to Visium Technologies, Inc.
The Company is focused on digital risk management, cybersecurity, and technology services for network physical security, the Cloud, mobility solutions, critical infrastructure security, and the Internet of Things (“IOT”).
In April 2021 the Company created JAJ Advisory, LLC, a Viriginia limited liability company. The LLC was established to account for non-cybersecurity related business activities that the Company may pursue.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis. For the three months ended September 30, 2021 we had a net loss of $
COVID-19 Update
In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The pandemic has had significant impacts around the globe and in many locations in which we operate. While the impacts have not caused a material adverse financial impact to our business to date, the future impacts remain uncertain. The extent to which the COVID-19 pandemic may impact our business going forward will depend on numerous evolving factors that we cannot reliably predict. These factors may adversely impact business spending on technology as well as customers’ ability to pay for our products and services on an ongoing basis. The effect, if any, of the COVID-19 pandemic would not be fully reflected in our results of operations and overall financial performance until future periods.
Throughout the pandemic we have continued to make investments to support business growth and product development, including investments in research and development as we continue to introduce new applications to extend the functionality of our products, sales and marketing to support customer growth, and other critical functions to ensure the highest levels of customer service and support as well as ensuring that we maintain the required infrastructure to be a public company. We expect to continue to make these investments. As of September 30, 2021, COVID-19 has not had a material impact on our results of operations or financial condition.
Basis of Presentation
The unaudited interim consolidated financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management are necessary to fairly state Visium Technologies, Inc.’s (the “Company” or “we”, “us” or “our”) financial position, results of operations and cash flows for the dates and periods presented and to make such information not misleading. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”), nevertheless, management of the Company believes that the disclosures herein are adequate to make the information presented not misleading.
These unaudited consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended June 30, 2021, contained in the Company’s Annual Report on Form 10-K filed with the SEC on October 13, 2021. The results of operations for the three months ended September 30, 2021, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2022.
| 9 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The fiscal year ends on June 30. References to fiscal year 2021, for example, refer to the fiscal year ending June 30, 2021.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Actual results will differ from those estimates. Included in these estimates are assumptions used in Cox, Ross & Rubinstein Binomial Tree stock-based compensation valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate and in the valuation allowance of deferred tax assets and derivative liability.
Cash and Cash Equivalents
The Company considers all highly liquid, temporary, cash equivalents or investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company had no cash equivalents during the three months ended September 30, 2021 and year ended June 30, 2021.
Concentration of Credit Risks
The Company is subject to a concentration of credit risk from cash.
The Company’s cash account is held at a financial institution and is insured by the Federal Deposit Insurance Corporation, or FDIC, up to $
Derivative Liabilities
The Company assessed the classification of its derivative financial instruments as of September 30, 2021 and June 30, 2021 which consist of convertible instruments and rights to shares of the Company’s common stock and determined that such derivatives meet the criteria for liability classification under ASC 815.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
| 10 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance sheet thereafter and in determining which valuation method is most appropriate for the instrument, the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any. The Company recorded a derivative liability as of September 30, 2021 of $
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. |
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Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. |
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|
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
Additional Disclosures Regarding Fair Value Measurements
The carrying value of cash, accounts payable and accrued expenses, accrued compensation, notes payable and convertible promissory notes payable, approximate their fair value due to the short maturity of these items or the use of market interest rates.
Convertible Instruments
The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options. Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.
ASC 815-40, Contracts in Entity’s own Equity, generally provides that, among other things, if an event is not within the entity’s control, such contract could require net cash settlement and shall be classified as an asset or a liability.
The Company determines whether the instruments issued in the transactions are considered indexed to the Company’s own stock. During fiscal years 2014 through 2021 the Company’s issued convertible securities with variable conversion provisions that resulted in derivative liabilities. See discussion above under derivative liabilities that resulted in a change in derivative liability accounting.
| 11 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Revenue Recognition
All revenues are recorded in accordance with ASC 606, which is recognized when: (i) a contract with a client has been identified, (ii) the performance obligation(s) in the contract have been identified, (iii) the transaction price has been determined, (iv) the transaction price has been allocated to each performance obligation in the contract, and (v) the Company has satisfied the applicable performance obligation over time.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of September 30, 2021, the Company had not filed tax returns for the tax years ending June 30, 2008 through 2020 and such returns, when filed, potentially will be subject to audit by the taxing authorities for a minimum of three years beyond the filing date under the three-year statute of limitations. The Company has not accrued any potential tax penalties associated with not filing these tax returns. Due to recurring losses, management believes such potential tax penalties, if any, would not be material in amount.
Share-Based Payments
The Company accounts for stock-based compensation in accordance with ASU 2020-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees is substantially aligned.
Under ASC Topic 718, “Compensation - Stock Compensation”. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.
The Company has elected to use the Cox, Ross & Rubinstein Binomial Tree valuation model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Segment Reporting
The Company operates in one business segment which technologies are focused on cybersecurity.
| 12 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Recent Accounting Pronouncements
All new accounting pronouncements issued but not yet effective are not expected to have a material impact on our results of operations, cash flows or financial position. There have been no new accounting pronouncements not yet effective that have significance to our consolidated financial statements.
Basic and Diluted Earnings Per Share
Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of shares of Common Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common Stock and the dilutive Common Stock share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist of shares issuable upon the exercise of in-the-money stock options and warrants (calculated using the modified-treasury stock method) and conversion of other securities such as convertible debt or convertible preferred stock. Potential common shares that would be as follows:
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| September 30, |
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| June 30, |
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| 2021 |
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| 2021 |
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Weighted average common shares outstanding |
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Effect of dilutive securities-when applicable: |
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Convertible promissory notes |
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Preferred stock |
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Common stock options |
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| - |
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Warrants |
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Fully diluted earnings per share—adjusted weighted-average shares and assumed conversions |
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| 13 |
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VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 3: PREPAID LICENSE FEE
In April 2021, the Company entered into two-year software license agreement to enable product development. The license fee is prepaid at a rate of $
NOTE 4: DERIVATIVE LIABILITY
Derivative liability - warrants
The Company issued warrants in connection with convertible notes payable which were issued in January, February, and July 2021. These warrants have price protection provisions that allow for the reduction in the exercise price of the warrants in the event the Company subsequently issues stock or securities convertible into stock at a price lower than the stated conversion for each warrant, ranging from $0.0055 to $0.02 per share exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased or decreased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. Because it is indeterminate whether there is a sufficient number of authorized and unissued shares exists at the assessment date, the Company calculates a derivative liability associated with the warrants in accordance with FASB ASC Topic 815-40-25.
Accounting for Derivative Warrant Liability
The Company’s derivative warrant instruments have been measured at fair value at September 30, 2021 using the Cox, Ross & Rubinstein Binomial Tree valuation model. The Company recognizes the derivative liability related to those warrants that contain price protection features in its consolidated balance sheet as liabilities. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statements of operations. The initial recognition and subsequent changes in fair value of the derivative warrant liability have no effect on the Company’s cash flows.
Derivative liability – convertible notes
The Company has certain convertible notes with variable price conversion terms. Upon the issuance of these convertible notes and as a consequence of their conversion features, the convertible notes give rise to derivative liabilities. The Company’s derivative liabilities related to its convertible notes payable have been measured at fair value at September 30, 2021 and June 30, 2021 using the Cox, Ross & Rubinstein Binomial Tree valuation model.
The revaluation of the warrants and convertible debt at each reporting period, as well as the charges associated with issuing additional convertible notes, and warrants with price protection features, resulted in the recognition of a loss of $
The Company has determined its derivative liability to be a Level 3 fair value measurement. The significant assumptions used in the Cox, Ross & Rubinstein Binomial Tree valuation of the derivative are as follows:
|
| Three Months Ended September 30, |
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| 2021 |
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| 2020 |
| ||
Effective exercise price |
| $ |
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| $ |
| ||
Effective market price |
| $ |
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| $ |
| ||
Expected volatility |
| % |
| % | ||||
Risk-free interest |
| % |
| % | ||||
Expected terms |
| 60 – 1,073 days |
|
| 60 - 711 days |
| ||
Expected dividend rate |
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| 0 | % |
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| 0 | % |
Changes in the derivative liabilities during the three months ended September 30, 2021 is follows:
Derivative liability at June 30, 2021 |
| $ |
| |
Loss on change in fair value of derivative liability |
|
|
| |
Derivative liability at September 30, 2021 |
| $ |
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| 14 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 5: ACCRUED INTEREST PAYABLE
Changes in accrued interest payable during the three months ended September 30, 2021 is as follows:
Accrued interest payable at June 30, 2021 |
| $ |
| |
Interest expense accrued for the three months ended September 30, 2021 |
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| |
Interest paid in cash |
|
| ( | ) |
Conversion of accrued interest into common stock |
|
| ( | ) |
Accrued interest payable at September 30, 2021 |
| $ |
|
NOTE 6: CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
Convertible Notes Payable
At September 30, 2021 and June 30, 2021 convertible debentures consisted of the following:
|
| September 30, |
|
| June 30, |
| ||
|
| 2021 |
|
| 2021 |
| ||
Convertible notes payable |
| $ |
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| $ |
| ||
Discount on convertible notes |
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| ( | ) | |
Convertible notes, net |
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Convertible notes payable to ASC Recap |
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Total |
| $ |
|
| $ |
| ||
The Company had convertible promissory notes aggregating approximately $465,000 and $957,000 at September 30, 2021 and June 30, 2021, respectively. The related accrued interest amounted to approximately $
On July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC (“ASC”) two convertible promissory notes with principal amounts of $
| 15 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 6: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE, continued
For the three months ended September 30, 2021, the following summarizes the conversion of debt for common shares:
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| Amount of |
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| Amount of |
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| Conversion |
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| Shares |
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| Converted |
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| Converted |
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| Conversion |
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| Price |
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Name |
| Issued |
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| Principal |
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| Interest |
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| Expense |
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| Total |
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| Per Share |
| ||||||
Labrys Funds |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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TOTAL |
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| $ |
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| $ |
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| $ |
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| $ |
|
| $ |
| ||||||
Notes Payable
The Company had promissory notes aggregating $
NOTE 7: STOCKHOLDERS’ DEFICIT
Common Stock
At September 30, 2021, the Company had
Issuances of Common Stock During the Three Months Ended September 30, 2021
Convertible Notes Payable
During the three months ended September 30, 2021 the Company issued
| 16 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 7: STOCKHOLDERS’ DEFICIT, continued
Stock Based Compensation
During the three months ended September 30, 2021 the Company issued
During the three months ended September 30, 2021
Warrant Exercises
During the three months ended September 30, 2021 the Company issued
Sale of Common Stock
During the three months ended September 30, 2021 the Company entered into two securities purchase agreement (with a single institutional investor resulting in the raise of $
Preferred Stock
Series A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $
Series A Convertible Preferred Stock
The Series A Preferred Stock has a stated value of $
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 $
Series AA Convertible Preferred Stock
In March 2018, the Company authorized and issued one share of Series AA convertible preferred stock which provides for the holder to vote on all matters as a class with the holders of Common Stock and each share of Series AA Convertible Preferred Stock shall be entitled to 51% of the common votes on any matters requiring a shareholder vote of the Company. Each one share of Series AA Convertible Preferred Stock is convertible into one (1) share of Common Stock. Mark Lucky, our CFO, is the holder of the one share of Series AA Convertible Preferred Stock.
Common Stock Warrants
In January and February 2021, we issued
In July 2021 we issued
| 17 |
| Table of Contents |
In January 2019 we issued
A summary of the status of the Company’s outstanding common stock warrants as of September 30, 2021 and changes during the fiscal year ending on that date is as follows:
|
| Number of |
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| Weighted Average |
| ||
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| Warrants |
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| Exercise Price |
| ||
Common Stock Warrants |
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Balance at beginning of year |
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| $ |
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Granted |
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| $ |
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Exercised |
|
| (6,565,229 | ) |
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Forfeited |
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| (2,538,667 | ) |
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Balance at end of period |
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| 3,912,663 |
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| $ |
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Warrants exercisable at end of period |
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| $ |
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The following table summarizes information about common stock warrants outstanding at September 30, 2021:
|
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| Warrants Outstanding |
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| Warrants Exercisable |
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Range of Exercise Price |
|
| Number |
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| Weighted |
| Weighted |
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| Number |
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| Weighted |
| |||||
| $ | 0.0055 |
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| $ |
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| $ |
| |||||
| 0.0077 |
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| |||||
| 0.0200 |
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| |||||
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| 1.28 Years |
| $ |
|
|
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| $ |
| ||||
NOTE 8 - STOCK-BASED COMPENSATION
The Company adopted an Incentive Stock Plan on April 18, 2021. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. Options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.
Under the 2021 Stock Incentive Plan, the Company has issued options to purchase 16 million shares at an average price of $
For the three months ended September 30, 2021 and 2020, the Company recognized an expense of approximately $
| 18 |
| Table of Contents |
The Company uses a binomial option pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the binomial option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:
|
| Year ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Expected volatility |
| % |
| - | % | |||
Expected term |
|
|
|
| - |
| ||
Risk-free interest rate |
| % |
| - | % | |||
Forfeiture Rate |
|
| 0.00 | % |
| - | % | |
Expected dividend yield |
|
| 0.00 | % |
| - | % | |
The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.
A summary of the status of the Company’s outstanding stock options as of June 30, 2021 and 2020 and changes during the periods ending on that date is as follows:
|
|
|
| Weighted Average |
|
| Aggregate |
|
| Weighted Average |
| |||||||||
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|
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| Exercise |
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| Grant Date |
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| Intrinsic |
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| Remaining |
| ||||||
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| Shares |
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| Price |
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| Fair Value |
|
| Value |
|
| Term (Yrs) |
| |||||
Options |
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| |||||
At June 30, 2021 |
|
|
| $ |
|
| $ | - |
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| $ | 0 |
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|
|
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
|
|
| 0 |
|
|
|
| ||
Exercised |
|
| - |
|
|
|
|
| - |
|
|
| - |
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|
|
| |||
Forfeiture and cancelled |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
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| ||
At September 30, 2021 |
|
|
|
| $ | 0.015 |
|
| $ | - |
|
| $ |
|
|
|
| |||
The following table summarizes information about employee stock options outstanding at June 30, 2021:
|
|
| Outstanding Options |
|
| Vested Options |
| |||||||||||||||||||
|
|
| Number |
|
| Weighted |
|
| Weighted |
|
| Number |
|
| Weighted |
|
| Weighted |
| |||||||
|
|
| Outstanding at |
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| Averaged |
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| Averaged |
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| Exercisable at |
|
| Averaged |
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| Averaged |
| |||||||
|
|
| June 30, |
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| Remaining |
|
| Exercise |
|
| June 30, |
|
| Exercise |
|
| Remaining |
| |||||||
Range of Exercise Price |
|
| 2020 |
|
| Life |
|
| Price |
|
| 2020 |
|
| Price |
|
| Life |
| |||||||
| $ | 0.01 |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
| ||||||
| $ | 0.02 |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
| ||||||
Outstanding options |
|
|
|
|
|
|
|
| $ | 0.015 |
|
|
|
|
| $ |
|
|
|
| ||||||
As of September 30, 2021, the Company had approximately $
Restricted Stock Awards
Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the three months ended September 30, 2021 and June 30, 2021 is presented in the following table:
|
| For the Three months ended |
| |||||
|
| September 30, 2021 |
| |||||
|
|
|
| Weighted |
| |||
|
|
|
| Average |
| |||
|
|
|
| Grant Date |
| |||
|
| Shares |
|
| Fair Value |
| ||
Unvested at beginning of period |
|
|
|
| $ |
| ||
Granted |
|
|
|
| $ |
| ||
Forfeited |
|
| - |
|
|
|
| |
Vested |
|
| (56,500,000 | ) |
| $ |
| |
Unvested at end of period |
|
|
|
| $ |
| ||
Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2021 was $
| 19 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 9: RELATED PARTY TRANSACTIONS
Equity transactions with related parties are described in Note 7.
From time to time we have borrowed operating funds from Mr. Mark Lucky, our Chief Executive Officer and from certain Directors, for working capital. The advances were payable upon demand and were interest free. At September 30, 2021 there was $
NOTE 10: COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company operates virtually, with no office space rented. The Company has no future minimum annual payments under non-cancelable operating leases at September 30, 2021.
Contingencies
The Company accounts for contingent liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingencies. This guidance requires management to assess potential contingent liabilities that may exist as of the date of the financial statements to determine the probability and amount of loss that may have occurred, which inherently involves an exercise of judgment. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. For loss contingencies considered remote, no accrual or disclosures are generally made. Management has assessed potential contingent liabilities as of September 30, 2021, and based on the assessment there are no probable loss contingencies requiring accrual or disclosures within its financial statements.
License Contingent Consideration
Our license agreements with the sellers of Threat Surface Solutions Group, LLC includes a provision for a royalty payment based on ten percent (
Our license agreements with George Mason University and The MITRE Corporation include
Legal Claims
In July 2018 the Company was named as the defendant in a legal proceeding brought by Tarpon Bay Partners LLC (the “Plaintiff”) in the Judicial District Court of Danbury, Connecticut. Plaintiff asserts that the Company failed to convert two convertible notes held by Plaintiff. The Company is vigorously contesting this claim. There are no other proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
In January 2021 the Company won a dismissal of an involuntary bankruptcy petition that was filed against the Company in the Southern District Court of Florida on December 30, 2020, which had been brought by three parties, (i) Tarpon Bay Partners LLC, (ii) J.P. Carey Enterprises Inc., and (iii) Anvil Financial Mgmt LLC (collectively the “Petitioning Creditors”).
The Court ruled in the Company’s favor, dismissing the involuntary bankruptcy petition and allowing the Company to file a motion with the Court seeking compensatory and punitive damages. In addition, Visium plans to file an affidavit of fees and costs incurred in connection with Visium’s defense of the Involuntary Petition.
In March 2021 the Company filed a Complaint for Damages and Other Relief against Tarpon Bay Partners, LLC, a Florida limited liability company; J.P. Carey Enterprises, Inc., a Florida profit corporation; Anvil Financial Management, LLC, a Florida limited liability company; Stephen Hicks, an individual; Joseph C Canouse, an individual; Jeffrey M. Canouse, an individual; Paul A. Rachmuth, an individual; and Litt Law Group, LLC, a New York Limited Liability Company (collectively the “Defendants”) related to the involuntary bankruptcy petition. The Company is seeking damages from the Defendants for reasonable attorneys’ fees and costs, as well as compensatory, consequential special and punitive damages.
The Company is subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company’s cash flows, results of operations, or financial position.
| 20 |
| Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 10 – Fair Value Measurement
Fair value measurements
At September 30, 2021 and June 30, 2021, the fair value of derivative liabilities is estimated using the Cox, Ross & Rubinstein Binomial Tree valuation model using inputs that include the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate. The derivative liabilities are the only Level 3 fair value measures.
At September 30, 2021 the estimated fair values of the liabilities measured on a recurring basis are as follows:
|
| Fair Value Measurements at |
| |||||||||||
|
| September 30, 2021: |
| |||||||||||
|
| (Level 1) |
| (Level 2) |
|
| (Level 3) |
| ||||||
Derivative liability – Convertible notes |
| $ |
|
|
|
| $ |
|
|
| $ |
| ||
Derivative liability – Warrants |
|
|
|
|
|
|
|
|
|
| ||||
Total derivative liability |
| $ |
|
|
| $ |
|
| $ |
| ||||
NOTE 11: SUBSEQUENT EVENTS
In October 2021 our consultants vested
In October 2021 our directors and officers vested
In October 2021 the Company issued
| 21 |
| Table of Contents |
ITEM 2. Management’s Discussion and Analysis and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See ‘‘Cautionary Statement Regarding Forward Looking Information’’ elsewhere in this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Visium Technologies, Inc. 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 2018, the Company brought in a new management team and changed its name to Visium Technologies, Inc.
Visium is a provider of cyber security visualization, big data analytics, and automation that 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 is a military-grade highly scalable big data analytics tool for Cybersecurity, based on graph database technology. The development of the technology was sponsored by, and is currently in use by US Army Cyber Command. CyGraph provides advanced analytics for cybersecurity situational awareness that is scalable, flexible, and comprehensive. Visium has completed significant proprietary product development efforts to commercialize CyGraph whch the Company as rebranded as TruContext.
Plan of Operation
Visium operates in the traditional cyber security space, and provides solutions, tools and services related to Security information and event management (SIEM). Our TruContext technology provides visualization, advanced cyber monitoring intelligence, data modeling, analytics and automation to help reduce risk, simplify cyber security and deliver better security outcomes. Visium currently plans to generate revenue in three primary ways –
● | through a virtual appliance model, primarily targeted to the Federal government, charging a seat license |
● | through a SaaS model, charging a recurring monthly license fee for TruContext; and |
● | through professional services to support and deliver cybersecurity solutions and services to its customers |
The Company has developed integration partnerships with larger established technology companies and is using these partnerships as part of its go-to-market strategy. In addition, the Company has partnered with value-added resellers that sell to the federal government and commercial markets. The Company is focused on digital risk management, cybersecurity solutions, and technology services for network physical security, the Cloud, and mobility solutions. We solve mission-critical problems.
Employees
As of September 30, 2021, we had eight (8) full time employees.
Third-Party Service Providers
We are heavily reliant on our technology and infrastructure to provide our products and services to our customers. For example, we host many of our products using third-party data center facilities, and we do not control the operation of these facilities. In addition, we rely on certain technology that we license from third parties, including third-party commercial software and open source software, which is used with certain of our solutions.
Governmental Regulation
We collect, use, store or disclose an increasingly high volume, variety, and velocity of personal information, including from employees and customers, in connection with the operation of our business. The personal information we process is subject to an increasing number of federal, state, local, and foreign laws regarding privacy and data security.
| 22 |
| Table of Contents |
Competition
The markets for our solutions are highly competitive, and we expect both the requirements and pricing competition to increase, particularly given the increasingly sophisticated attacks, changing customer preferences and requirements, current economic pressures, and market consolidation. Competitive pressures in these markets may result in price reductions, reduced margins, loss of market share and inability to gain market share, and a decline in sales, any one of which could seriously impact our business, financial condition, results of operations, and cash flows. 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.
Available Information
All reports of the Company filed with the SEC are available free of charge through the SEC’s website at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
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”.
VISIUM TECHNOLOGIES, INC.
RESULTS OF OPERATIONS
Discussion of Results for Three Month Period Ended September 30, 2021 and 2020
|
|
|
| Increase/ |
|
| Increase/ |
| ||||||||
|
| Three-month period ended |
|
| (Decrease) |
|
| (Decrease) |
| |||||||
|
| September 30, |
|
| in $ 2021 |
|
| in % 2021 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| vs 2020 |
|
| vs 2020 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative |
| $ | 1,200,030 |
|
| $ | 193,196 |
|
| $ | 1,024,335 |
|
|
| 530.2 | % |
Development expense |
|
| 110,413 |
|
|
| 95,000 |
|
|
| 15,413 |
|
|
| 16.2 | % |
Total operating expenses |
|
| 1,310,443 |
|
|
| 288,196 |
|
|
| 1,039,748 |
|
|
| 360.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (1,310,443 | ) |
|
| (288,196 | ) |
|
| 1,039,748 |
|
|
| 360.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on change in fair value of derivative liabilities |
|
| (18,908 | ) |
|
| 124,332 |
|
|
| (143,240 | ) |
|
| (115.2 | )% |
Loss on extinguishment of debt |
|
| - |
|
|
| (154,901 | ) |
|
| (114,487 | ) |
|
| 100.0 | % |
Interest expense |
|
| (486,464 | ) |
|
| (26,908 | ) |
|
| (459,556 | ) |
|
| 1,707.9 | % |
|
|
| (505,372 | ) |
|
| (57,477 |
|
|
| (447,895 | ) |
|
| (779.3 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,815,815 | ) |
|
| (345,673 | ) |
| $ | (1,487,643 | ) |
|
| 430.4 | % |
| 23 |
| Table of Contents |
Selling, General, and Administrative Expenses
For the three months ended September 30, 2021, selling, general and administrative expenses were $1,200,030as compared to $193,196 for the three months ended September 30, 2020, an increase of $1,024,335 or approximately 530%. For the three months ended September 30, 2021 and 2020 selling, general and administrative expenses consisted of the following:
|
| Three Months Ended |
|
|
|
|
| |||||||||
|
| September 30, |
|
| Increase/ |
|
|
| ||||||||
|
| 2021 |
|
| 2020 |
|
| Decrease |
|
| % Change |
| ||||
Accounting expense |
| $ | 23,071 |
|
| $ | 22,950 |
|
| $ | 121 |
|
|
| 0.5 | % |
Consulting fees |
|
| 7,500 |
|
|
| - |
|
|
| 7,500 |
|
|
| 100.0 | % |
Salaries |
|
| 158,981 |
|
|
| 84,000 |
|
|
| 74,981 |
|
|
| 89.3 | % |
Legal and professional fees |
|
| 267,530 |
|
|
| 10,500 |
|
|
| 257,030 |
|
|
| 2,447.9 | % |
Occupancy expense |
|
| 567 |
|
|
| - |
|
|
| 567 |
|
|
| 100.0 | % |
Telephone expense |
|
| 1,149 |
|
|
| 900 |
|
|
| 249 |
|
|
| 27.7 | % |
Website expense |
|
| 6,498 |
|
|
| 651 |
|
|
| 5,847 |
|
|
| 898.2 | % |
Marketing Expense |
|
| 1,156 |
|
|
| - |
|
|
| 1,156 |
|
|
| 100.0 | % |
Stock based consulting expense |
|
| 367,273 |
|
|
| 27,000 |
|
|
| 340,273 |
|
|
| 1,260.3 | % |
Stock based compensation |
|
| 345,000 |
|
|
| 45,000 |
|
|
| 300,000 |
|
|
| 1,185.0 | % |
Other |
|
| 21,305 |
|
|
| 2,195 |
|
|
| 19,110 |
|
|
| 870.6 | % |
|
| $ | 1,200,030 |
|
| $ | 193,196 |
|
| $ | 1,006,834 |
|
|
| 521.1 | % |
The increase in selling, general and administrative expenses during fiscal Q1 of 2021, when compared with the prior year, is primarily due to an increase in stock-based consulting expense of $340,273, stock-based compensation expense of $300,000, legal and professional expenses of $257,030, higher salaries expense of $68,030.
We believe that our selling, general, and administrative expenses will decrease as the stock based consulting and compensation expenses and legal and professional expenses are not recurring expenses. Other expenses may increase as we increase our business activity over the remainder of fiscal 2022.
Development Expense
|
| Three-Months Ended |
|
|
| |||||||
|
| September 30, |
|
| % |
| ||||||
|
| 2021 |
|
| 2020 |
|
| Change |
| |||
Development expense |
| $ | 110,413 |
|
| $ | 95,000 |
|
|
| 16.2 | % |
Development expense represents the expense of further enhancing and commercializing CyGraph. We believe that our development expense will continue at a lower expense rate for the remainder of fiscal 2021.
Interest Expense
|
| Three-Months Ended |
|
|
| |||||||
|
| September 30, |
|
| % |
| ||||||
|
| 2021 |
|
| 2020 |
|
| Change |
| |||
Interest expense |
| $ | 486,464 |
|
| $ | 26,908 |
|
| $ | 1,707.9 | % |
Interest expense represents stated interest of notes and convertible notes payable, along with the amortization of debt discount. The increase in interest expense during the three-month period ended September 30, 2021 is primarily due to the acceleration of interest expense related to the repayment of outstanding notes payable held by Labrys Fund, LP. In addition, there was an increase in discount amortization expense primarily related to the repayment outstanding notes payable of $410,922.
Liquidity and Capital Resources
|
| Balance at |
| |||||
|
| September 30, 2021 |
|
| June 30, 2021 |
| ||
Cash |
| $ | 999,769 |
|
| $ | 125,166 |
|
Accounts payable and accrued expenses |
|
| 443,032 |
|
|
| 425,804 |
|
Accrued compensation |
|
| 732,529 |
|
|
| 672,529 |
|
Notes, convertible notes, and accrued interest payable |
| $ | 1,268,523 |
|
| $ | 1,753,057 |
|
At September 30, 2021 and June 30, 2021, our total assets consisted of cash and prepaid expenses.
We do not have any material commitments for capital expenditures.
| 24 |
| Table of Contents |
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 cannot ascertain that we have sufficient funds from operations to fund our ongoing operating requirements through June 30, 2022. 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 a mix of equity and debt 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. In the long-term, we anticipate we will need to raise a substantial amount of capital to complete an acquisition. We are unable to quantify the resources we will need to successfully complete an acquisition. If these funds cannot be obtained, we may not be able to consummate an acquisition or merger, and our business may fail as a result.
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 approximately $22,815 and $19,110 during the thee-month periods ended September 30, 2021 and 2020, respectively, and has a working capital deficit of approximately $3.4 million and $3.4 million at September 30, 2021 and June 30, 2021, 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.
Three months ended September 30, 2021
Net cash used in operations during the three months ended September 30, 2021 increased by $487,580 or 2,137% over the same period during fiscal year 2020.
Capital Raising Transactions
In September 2021 the Company entered into two securities purchase agreements (the “Purchase Agreements”) with a single institutional investor (the “Purchaser”) resulting in the raise of $1,500,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreements, the Company agreed to sell, in a registered director offering, an aggregate of 300,000,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price of $0.005 per Share (the “Offering”). The Offerings closed on September 15, 2021 and September 27, 2021, respectively.
Other outstanding obligations at September 30, 2021
Convertible Notes Payable
The Company had convertible promissory notes aggregating $317,431 outstanding at September 30, 2021. The accrued interest amounted to approximately $163,168 as of September 30, 2021. The Convertible Notes Payable bear interest at rates ranging between 0% and 18% per annum. Interest is generally payable monthly. The Convertible Notes Payable are generally convertible at rates ranging between $0.00483 and $22,500 per share, at the holders’ option. At September 30, 2021, approximately $317,000 of the promissory notes have matured.
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.
| 25 |
| Table of Contents |
Notes Payable
The Company had promissory notes aggregating $430,000 at September 30, 2021. The related accrued interest amounted to approximately $213,000 at September 30, 2021. The Notes Payable bear interest at a rate of 16% per annum. Interest is payable monthly. All promissory notes have matured as of September 30, 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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 September 30, 2021. 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 September 30, 2021, 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 consisted 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 and Chief Financial Officer, concluded that our internal control over financial reporting was not effective as of September 30, 2021.
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
During the quarter ended September 30, 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 26 |
| Table of Contents |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
With the exception of the item described below, at September 30, 2021 the Company is not the subject of, or party to, any pending or threatened, legal actions.
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. The plaintiff asserts that the Company failed to convert two convertible notes held by the Plaintiff. The Company is vigorously contesting this claim.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K filed on September 28, 2021, which could materially affect our business operations, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business operations and/or financial condition. There have been no material changes to our risk factors since the filing of our Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended September 30, 2021 the Company issued 20,960,217 shares of its common stock related to the conversion of $90,212 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.0043 per share. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.
During the three months ended September 30, 2021 the Company issued 483,333 shares of its $0.0001 par value common stock to two consultants, as compensation under two separate consulting agreements. The shares were valued at $29,000, or $0.06 per share.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable to our operations.
Item 5. Other Information.
None
| 27 |
| Table of Contents |
Item 6. Exhibits
* | Filed herein |
| 28 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements 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 |
|
November 8, 2021 |
| Mark Lucky |
|
|
| CEO, principal executive officer |
|
|
|
|
|
| By: | /s/ Mark Lucky |
|
November 8, 2021 |
| Mark Lucky |
|
|
| CFO, principal accounting officer |
|
| 29 |