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 governments 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 December 31, 2020
Securities Purchase Agreement and Promissory Notes
On October 21, 2020, we entered into a securities purchase agreement (the "SPA")
with two individual investors (the "Investors") pursuant to which the Company
issued to each Investor an 8% Unsecured Promissory Note, (collectively the
"Notes") in the total aggregate principal amount of $150,000 in exchange for
$150,000 cash and 90,000,000 shares of restricted common stock of the Company,
par value $0.0001 in the aggregate. The Notes were funded by the Investors on
October 21, 2020. The Note proceeds will be used by the Company to pay off in
full two convertible notes and for general working capital purposes. The SPA
includes customary representations, warranties and covenants. The Note matures
12 months after the date of issuance.
Securities Purchase Agreement and Promissory Note with Labrys Fund, L.P.
On November 23, 2020, we entered into that certain Securities Purchase Agreement
(the "Purchase Agreement") with Labrys Fund, LP, a Delaware limited partnership
("Labrys") pursuant to which Labrys purchased a self-amortizing promissory note
made by the Company in favor of Labrys (the "Note") in the principal amount of
$150,000 (the "Principal Amount") for $135,000 in immediately available funds
(the "Purchase Price"). Pursuant to the Purchase Agreement, the Company issued
Labrys 90,000,000 shares of the Company's common stock (the "Shares") as a
condition to closing. The closing of the Purchase Agreement occurred on November
25, 2020, with the Purchase Price funded to the Company on such date.
Employees
At February 13, 2020, we had 4 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".
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VISIUM TECHNOLOGIES, INC.
RESULTS OF OPERATIONS
Three and Six Month Periods Ended December 31, 2020 and 2019
Three Months Ended Six Months Ended
December 31, December 31,
2020 2019 2020 2019
Operating expenses:
Selling, general and administrative $168,515 $215,706 $361,711 $414,764
Development expense 10,994 - 105,994 35,500
Total Operating Expenses 179,509 215,706 467,705 450,264
Loss from Operations (179,509) (215,706) (467,705) (450,264)
Other income (expenses):
Gain (loss) on change in fair value of
derivative liabilities (673,826) 207,556 (549,494) 485,568
Derivative liability expense - (61,396) - (61,396)
Warrant exercise expense (211,411) - (211,411) -
Gain (loss) on extinguishment of debt (53,963) (58,407) (208,864) (98,821)
Interest expense
(49,096) (98,794) (76,004) (199,275)
Total other income (expenses) (988,296) (11,041) (1,045,773) 126,076
Net loss $(1,167,805) $(226,747) $(1,513,478) $(324,188)
Selling, General, and Administrative Expenses
Six Month Period Ended December 31, 2020
For the six months ended December 31, 2020, selling, general and administrative
expenses were $348,329 as compared to $414,764 for the six months ended December
31, 2019. For the six-month periods ended December 31, 2020 and 2019 selling,
general and administrative expenses consisted of the following:
Six Months Ended
December 31,
2020 2019
Accounting expense $39,988 $29,734
Consulting fees 10,000 30,000
Salaries 168,000 168,000
Legal and professional fees 36,060 16,550
Travel expense 1,086 9,786
Occupancy expense 15 3,137
Telephone expense 1,800 1,800
Marketing expense 500 8,199
Website expense 1,563 1,531
Investor relations expense 10,000 20,000
Stock based compensation 84,000 121,000
Other 8,699 5,027
$361,711 $414,764
The decrease in selling, general and administrative expenses of $53,053 during
fiscal 2020, when compared with the prior year, is primarily due to a decrease
in stock-based compensation of $37,000, lower legal and consulting fees of
$20,000, and lower travel expense of $8,700, offset by higher legal and
professional fees of $19,510, and higher accounting expense of $10,254.
We believe that our selling, general, and administrative expenses will remain
steady as we increase our business activity over the remainder of 2020, but
anticipate incurring lower legal and consulting expenses.
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Development Expense
Six-Months Ended
December 31, %
2020 2019 Change
Development expense $105,994 $35,500 199%
Development expense represents the expense to further enhance and commercialize
CyGraph. We believe that we will incur an additional $50,000 of development
expense during the remainder of fiscal 2021.
Derivative Liability Expense
Six-Months Ended
December 31, %
2020 2019 Change
Derivative liability expense $- $61,396 100%
Derivative liability expense represents the expense related to our convertible
notes payable issued in October 2020 that include variable conversion features.
Change in Fair Value of Derivative Liabilities
Six-Months Ended
December 31, %
2020 2019 Change
Gain (loss) on change in fair value of derivative
liabilities $(549,494) $485,568 350.0%
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.
22
Interest Expense
Six-Months Ended
December 31, %
2020 2019 Change
Interest expense $76,004 $199,275 78.6%
Interest expense represents stated interest of notes and convertible notes
payable as well as amortization of debt discount. Interest expense is lower for
the six months ended December 31, 2020 due to lower debt discount amortization
as compared to the prior year period.
Gain (Loss) on Extinguishment of Debt
Six-Months Ended
December 31, %
2020 2019 Change
Loss on extinguishment of debt $(208,864) $(98,821) (968.3)%
The loss on settlement 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 December 31, 2020
For the three months ended December 31, 2020, selling, general and
administrative expenses were $168,511 as compared to $215,706 for the three
months ended December 31, 2019. For the three months ended December 31, 2020 and
2019 selling, general and administrative expenses consisted of the following:
Three Months Ended
December 31,
2020 2019
Accounting expense $17,038 $972
Consulting fees 10,000 5,750
Salaries 84,000 84,000
Legal and professional fees 25,560 9,490
Travel expense 1,086 1,002
Occupancy expense 15 1,706
Telephone expense 900 900
Marketing expense 500 (1,749
Website expense 912 871
Investor relations expense 10,000 20,000
Stock based compensation 12,000 92,000
Other 6,504 764
$168,511 $215,706
The decrease in selling, general and administrative expenses of $47,191 during
the fiscal quarter ended December 31, 2020, when compared with the prior year
period , is primarily due to a decrease in stock-based compensation of $80,000,
and lower investor relations expense of $10,000, offset by higher legal and
professional fees of $16,070, higher accounting expense of $16,066, and higher
consulting fees of $4,250.
Change in Fair Value of Derivative Liabilities
Three-Months Ended
December 31, %
2020 2019 Change
Gain (loss) on change in fair value of derivative
liabilities $(673,826) $207,556 (425.6)%
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
Interest Expense
Three-Months Ended
December 31, %
2020 2019 Change
Interest expense $49,096 $98,794 (39.2)%
Interest expense represents stated interest of notes and convertible notes
payable as well as amortization of debt discount. Interest expense is lower for
the three months ended December 31, 2020 due to lower principal balances and
lower debt discount amortization as compared to the prior year period.
Liquidity and Capital Resources
Balance at
December 31, 2020 June 30, 2020
Cash $50,492 $30,251
Accounts payable and accrued expenses 387,890 333,805
Accrued compensation 789,029 652,529
Notes, convertible notes, and accrued interest payable $2,056,988 $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, 2020. 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 $178,918 and
$98,663 during the six-month periods ended December 31, 2020 and 2019,
respectively, and has a working capital deficit of approximately $4.2 million
and $3.4 million at December 31, 2020 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.
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Six months ended December 31, 2020
Net cash used in operations during the six months ended December 31, 2020
increased by approximately $80,000 or 81% from the same period during fiscal
year 2019. 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 four
promissory notes that netted the Company $360,000.
Six months ended December 31, 2019
Net cash used in operations during the six months ended December 31, 2019
decreased by approximately $151,000 or 60% from the same period during fiscal
year 2018. 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,
offset by the increase in cash paid for audit and related services. This cash
was obtained through the sale of a convertible note that netted the Company
$42,500, and through advances of cash made to the Company by its officers and
directors of $37,900.
Capital Raising Transactions
Issuance of promissory notes payable
We generated net proceeds of $360,000 from the issuance of four promissory notes
payable and 225,000,000 shares or restricted common stock during the six-month
period ended December 31, 2020.
Other outstanding obligations at December 31, 2020
Convertible Notes Payable
The Company had convertible promissory notes aggregating $742,600 outstanding at
December 31, 2020. The accrued interest amounted to approximately $541,000 as of
December 31, 2020. 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 December 31, 2020, 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 December 31, 2020. The
related accrued interest amounted to approximately $188,400 at December 31,
2020. 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 December 31, 2020.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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