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. is a Florida corporation with offices based in
Fairfax, Virginia, focused on building a global cybersecurity business, by
advancing technology and cybersecurity tools and services to support enterprises
in protecting their most valuable assets - their data, on their networks, in the
cloud, and Internet of Things ("IoT").
Visium is a provider of cyber security automation, analytics and visualization.
Visium operates in the traditional cyber security space, as well as in the
cloud-based technology and Internet of Things ("IOT") 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 visibility, advanced cyber monitoring intelligence,
analytics and automation to help reduce risk, simplify cyber security and
deliver better security outcomes.
In March 2019, Visium entered into a software license agreement with MITRE
Corporation to license a patented technology, known as CyGraph, a tool for cyber
warfare analytics, visualization and knowledge management. CyGraph provides
advanced analytics for cybersecurity situational awareness that is scalable,
flexible and comprehensive.
Key Corporate Developments for the Quarter Ended March 31, 2021
Securities Purchase Agreement and Promissory Note with Labrys Fund, L.P.
In January, and February 2021, the Company entered into two securities purchase
agreements with Labrys Fund, LP, a Delaware limited partnership pursuant to
which Labrys purchased two self-amortizing promissory notes as follows:
Principal Original Issued Discount Net Conversion Price
February 8, 2021 $500,000 $25,000 $475,000 $0.02
January 12, 2021 200,000 10,000 190,000 0.005
$700,000 $35,000 $665,000 $0.005304
Employees
At May 17, 2021, we had 5 full time employees. We currently outsource
significant development work to contractors.
Our principal offices are located at 4094 Majestic Lane, Suite 360, Fairfax,
Virginia 22033. Our telephone number is (703) 273-0383. We currently operate in
a virtual office arrangement.
Our common stock is quoted on the OTC Pink under the symbol "VISM".
20
VISIUM TECHNOLOGIES, INC.
RESULTS OF OPERATIONS
Three and Nine Month Periods Ended March 31, 2021 and 2020
Three Months Ended Nine Months Ended
March 31, March 31,
2021 2020 2021 2020
Net revenues $25,000 $- $25,000 $-
Operating expenses:
Selling, general and administrative 2,736,524 189,675 3,098,235 604,439
Development expense 37,206 - 143,200 35,500
Total Operating Expenses 2,773,730 189,675 3,241,435 639,939
Loss from Operations (2,748,730) (189,675) (3,216,435) (639,939)
Other income (expenses):
Gain (loss) on change in fair value of
derivative liabilities 1,405,081 (23,319) 855,587 462,249
Derivative liability expense (1,059,282) (61,396) (1,059,282) (61,396)
Gain (loss) on extinguishment of debt 28,863 (169,060) (180,001) (267,881)
Warrant exercise expense
- - (211,411) -
Interest expense (171,575) (72,190) (247,579) (271,645)
Total other income (expenses) (203,087) (11,041) (842,686) (138,493)
Net loss $(2,545,643) $(226,747) $(4,059,121) $(778,432)
Nine Month Period Ended March 31, 2021
Revenues
For the nine months ended March 31, 2021, we reported revenues of $25,000 as
compared to revenues of $0 for the nine months ended March 31, 2020. The
increase in revenue is due to consulting fees earned related to the development
of security operations procedures for secured data center operations, provided
to a customer.
Selling, General, and Administrative Expenses
For the nine months ended March 31, 2021, selling, general and administrative
expenses were $3,098,235 as compared to $604,439 for the nine months ended March
31, 2021. For the six-month periods ended March 31, 2021 and 2021 selling,
general and administrative expenses consisted of the following:
Nine Months Ended
March 31,
2021 2020
Accounting expense $42,488 $57,632
Consulting fees 49,900 30,000
Salaries 261,500 252,000
Legal and professional fees 113,274 27,050
Travel expense 1,086 9,786
Occupancy expense 184 4,719
Telephone expense 2,700 2,700
Marketing expense 763 8,199
Website expense 4,554 2,291
Investor relations expense 10,000 20,000
Stock based compensation 2,589,750 184,735
Other 22,040 5,327
$3,098,235 $604,439
The increase in selling, general and administrative expenses of $2,493,796
during fiscal 2021, when compared with the prior year, is primarily due to an
increase in stock-based compensation of $2,405,015, higher legal and consulting
fees of $86,224, and higher consulting fee expense of $19,900, offset by lower
accounting expense of $15,144, lower occupancy expense of $4,535, and lower
travel expense of $8,700.
We believe that our selling, general, and administrative expenses will remain
steady as we increase our business activity over the remainder of 2021, but
anticipate incurring lower legal and consulting expenses.
21
Development Expense
Nine-Months Ended
March 31, %
2021 2020 Change
Development expense $143,200 $35,500 303.4%
Development expense represents the expense to further enhance and commercialize
CyGraph and other technologies. We believe that we will incur an additional
$50,000 of development expense during the remainder of fiscal 2021.
Derivative Liability Expense
Nine-Months Ended
%
March 31,
2021 2020 Change
Derivative liability expense $(1,059,282) $(61,396) 1,625.3%
Derivative liability expense represents the expense related to our convertible
notes payable issued in October 2021 that include variable conversion features.
Change in Fair Value of Derivative Liabilities
Nine-Months Ended
March 31, %
2021 2020 Change
Gain on change in fair value of derivative liabilities $855,587 $462,249 85.1%
The change in fair value of derivative liabilities results from the changes in
the fair value of the derivative liability due to the application of ASC 815,
resulting in either income or expense, depending on the difference in fair value
of the derivative liabilities between their measurement dates driven by the
change in the per share price of the Company's common stock.
Interest Expense
Nine-Months Ended %
March 31, Change
2021 2020
Interest expense $247,579 $271,465 68.8%
Interest expense represents stated interest of notes and convertible notes
payable as well as amortization of debt discount. Interest expense is lower for
the nine months ended March 31, 2021 due to lower debt discount amortization as
compared to the prior year period.
Warrant Exercise Expense
Nine-Months Ended
March 31, %
2021 2020 Change
Warrant exercise expense $(211,411) $- N/A
During the nine months ended March 31, 2021 we issued 348,261,534 shares of our
common stock pursuant to the cashless exercise of outstanding warrants. The
Company recognized an expense of $211,411 associated with the issuance of
additional warrant shares related to this exercise.
Gain (loss) on Extinguishment of Debt
Nine-Months Ended
March 31, %
2021 2020 Change
Gain (loss) on extinguishment of debt $180,001 $(267,881) 32.8%
The loss on extinguishment of debt is related to the difference between the
conversion price used when convertible notes are converted into common and the
share price on the date of the conversion.
Three Month Period Ended March 31, 2021
Revenues
For the three months ended March 31, 2021, we reported revenues of $25,000 as
compared to revenues of $0 for the three months ended March 31, 2020. The
increase in revenue is due to consulting fees earned related to the development
of security operations procedures for secured data center operations, provided
to a customer.
Selling, General, and Administrative Expenses
For the three months ended March 31, 2021, selling, general and administrative
expenses were $2,736,524 as compared to $189,675 for the three months ended
March 31, 2021. For the three months ended March 31, 2021 and 2021 selling,
general and administrative expenses consisted of the following:
Three Months Ended
March 31,
2021 2020
Accounting expense $2,500 $398
Consulting fees 39,900 27,500
Salaries 93,500 84,000
Legal and professional fees 77,214 10,500
Occupancy expense 169 1,582
Telephone expense 900 900
Marketing expense 263 -
Website expense 2,991 760
Stock based compensation 2,505,750 63,735
Other 13,341 300
$2,736,524 $189,675
The increase in selling, general and administrative expenses of $2,546,849
during the fiscal quarter ended March 31, 2021, when compared with the prior
year period , is primarily due to an increase in stock-based compensation of
$2,442,015, higher consulting fees of $12,400, and higher legal and professional
expense of $66,714, offset by lower occupancy expense of $1,413.
Change in Fair Value of Derivative Liabilities
Three-Months Ended
March 31, %
2021 2020 Change
Gain (loss) on change in fair value of derivative
liabilities $1,405,081 $(23,319) 6,125%
The change in fair value of derivative liabilities results from the changes in
the fair value of the derivative liability due to the application of ASC 815,
resulting in either income or expense, depending on the difference in fair value
of the derivative liabilities between their measurement dates driven by the
change in the per share price of the Company's common stock.
23
Loss on Extinguishment of Debt
Three-Months Ended
%
March 31,
2021 2020 Change
Loss on extinguishment of debt $28,863 $(169,060) 117.1%
Interest Expense
Three-Months Ended
March 31, %
2021 2020 Change
Interest expense $171,575 $72,190 137.7%
Interest expense represents stated interest of notes and convertible notes
payable as well as amortization of debt discount. Interest expense is higher for
the three months ended March 31, 2021 due to higher principal balances and
higher debt discount amortization as compared to the prior year period.
Derivative Liability Expense
Three-Months Ended
March 31, %
2021 2020 Change
Derivative liability expense $(1,059,282) $- N/A
Liquidity and Capital Resources
Balance at
March 31, 2021 June 30, 2020
Cash $276,102 $30,251
Accounts payable and accrued expenses 383,980 333,805
Accrued compensation 615,029 652,529
Notes, convertible notes, and accrued interest payable $2,274,497 $1,833,784
We do not have any material commitments for capital expenditures.
The objective of liquidity management is to ensure that we have ready access to
sufficient funds to meet commitments and effectively implement our growth
strategy. Our primary sources are financing activities such as the issuance of
notes payable and convertible notes payable. In the past, we have mostly relied
on debt and equity financing to provide for our operating needs.
We cannot ascertain that we have sufficient funds from operations to fund our
ongoing operating requirements through June 30, 2021. 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 $603,109 and
$106,181 during the nine-month periods ended March 31, 2021 and 2020,
respectively, and has a working capital deficit of approximately $4.1 million
and $3.4 million at March 31, 2021 and June 30, 2020, 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 target. 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.
24
Nine Months ended March 31, 2021
Net cash used in operations during the nine months ended March 31, 2021
increased by approximately $497,000 or 468% from the same period during fiscal
year 2020. The increase in cash used in operations is primarily due to the
increase in consulting and business development expense and cash paid for legal
and professional fees. This cash was obtained through the sale of three
promissory notes and three convertible notes that netted the Company $1,025,000.
Nine Months ended March 31, 2020
Net cash used in operations during the nine months ended March 31, 2020
decreased by approximately $384,833 or 78% from the same period during fiscal
year 2019. The decrease in cash used in operations is primarily due to the
decrease in consulting and business development expense and cash paid for legal
and professional fees, and the decrease in cash paid for salaries to executives.
This cash was obtained through the sale of a convertible note that netted the
Company $48,000, and through advances of cash made to the Company by its
officers and directors of $39,840.
Capital Raising Transactions
Issuance of promissory notes payable
We generated net proceeds of $225,000 from the issuance of three promissory
notes payable and 225,000,000 shares or restricted common stock during the
nine-month period ended March 31, 2021.
Issuance of convertible notes payable
On February 8, 2021, the Company issued a promissory note to Labrys Fund, LP in
the principal amount of $500,000 for a purchase price of $475,000. Pursuant to
the Purchase Agreement, the Company issued to the Investor a warrant to purchase
12,500,000 shares of the Company's common stock as a condition to closing. The
closing of the Purchase Agreement occurred on February 10, 2021, with the
Purchase Price funded to the Company on such date.
The Note, which reflects a $25,000 original issuance discount, bears interest at
8% per year and matures on February 8, 2022. The Note includes an interim
payment of $65,000, payable to the Investor on August 8, 2021. The Company has
the right to prepay the Note in full, including accrued but unpaid interest,
without prepayment penalty provided an event of default, as defined therein, has
not occurred. The Note is convertible into shares of the Company's common stock
at conversion price of $0.02 per share, subject to adjustment as provided
therein.
The Warrant is exercisable for a term of two-years from the date of issuance, at
an exercise price equal to $0.02 per share, subject to adjustment as provided
therein. The Warrants provide for cashless exercise to the extent that the
market price (as defined therein) of one share of the Company's common stock is
greater than the exercise price of the Warrant.
On January 12, 2021, the Company issued a promissory note to Labrys Fund, LP in
the principal amount of $200,000 for a purchase price of $190,000. Pursuant to
the Purchase Agreement, the Company issued to the Investor a warrant to purchase
22,172,949 shares of the Company's common stock as a condition to closing. The
closing of the Purchase Agreement occurred on January 14, 2021, with the
Purchase Price funded to the Company on such date.
The Note, which reflects a $10,000 original issuance discount, bears interest at
8% per year and matures on January 12, 2022. The Note includes an interim
payment of $26,000, payable to the Investor on July 12, 2021. The Company has
the right to prepay the Note in full, including accrued but unpaid interest,
without prepayment penalty provided an event of default, as defined therein, has
not occurred. The Note is convertible into shares of the Company's common stock
at conversion price of $0.005 per share, subject to adjustment as provided
therein.
The Warrant is exercisable for a term of two-years from the date of issuance, at
an exercise price equal to 110% of the closing price of the Company's common
stock on the date of issuance, subject to adjustment as provided therein. The
Warrants provide for cashless exercise to the extent that the market price (as
defined therein) of one share of the Company's common stock is greater than the
exercise price of the Warrant.
On November 23, 2020, the Company issued a promissory note to Labrys Fund, LP in
the principal amount of $150,000 for a purchase price of $135,000. Pursuant to
the Purchase Agreement, the Company issued Labrys 90,000,000 shares of the
Company's common stock as a condition to closing.
The Note, which reflects a 10% original issuance discount, bears interest at 12%
per year and matures on November 23, 2021. The Note includes an interim payment
of $16,800, payable to the Investor payable within 90 calendar days from the
issuance of the Note. The Company has the right to prepay the Note in full,
including accrued but unpaid interest, without prepayment penalty provided an
event of default, as defined therein, has not occurred. The Note is convertible
into shares of the Company's common stock at conversion price of $0.001575 per
share, subject to adjustment as provided therein.
Other outstanding obligations at March 31, 2021
Convertible Notes Payable
The Company had convertible promissory notes aggregating $742,600 outstanding at
March 31, 2021. The accrued interest amounted to approximately $541,000 as of
March 31, 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
$0.09 and $0.60 per share, at the holders' option. At March 31, 2021, all
convertible promissory notes have matured and are in default.
Convertible notes payable to ASC Recap LLC
On July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC ("ASC")
two convertible promissory notes with principal amounts of $25,000 and $125,000,
respectively. These two notes were issued as a fee for services under a 3(a)10
transaction that was never consummated and therefore there was no performance by
ASC to earn the notes. As a result, while the Company continues to carry the
balance of these notes on its balance sheet, it does not believe the notes
payable balances are owed. The July 22, 2013 note matured on March 31, 2014 and
a balance of $22,965 remains unpaid. The May 6, 2014 note matured on May 6, 2016
and remains unpaid. The notes are convertible into the common stock of the
Company at any time at a conversion price equal to 50% of the lowest closing bid
price of our common stock for the twenty days prior to conversion.
Notes Payable
The Company had promissory notes aggregating $580,000 at March 31, 2021. The
related accrued interest amounted to approximately $188,400 at March 31, 2021.
The Notes Payable bear interest at rates ranging between 8% and 16% per annum.
Interest is generally payable monthly. All promissory notes have matured as of
March 31, 2021.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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