Visium Technologies Earnings 2020-12-31
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| [X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2020
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________.
Commission file number 000-25753
VISIUM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Florida | | 87-0449667 |
| (State of Incorporation) | | (IRS Employer Identification No.) |
4094 MAJESTIC LANE, SUITE 360
FAIRFAX, VA 22033
(Address of principal executive offices)
(703) 225-3443
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, $0.0001 Par Value | | VISM | | OTC Pink |
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.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]
Indicate by check mark 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 | ☐ |
| Non-accelerated filer | ☒ | Smaller Reporting Company | ☒ |
| Emerging growth company | [ ] | | |
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 [ ] No [X]
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value per share, as of February 12, 2021, was 2,745,849,167.
When used in this quarterly report, the terms “Visium,” “the Company,” “we,” “our,” and “us” refer to Visium Technologies, Inc., a Florida corporation.
| | | |
| | ||
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 registration statement on Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on October 9, 2020. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our Form 10-K.
| | | |
| | ||
VISIUM TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
| PART I - FINANCIAL INFORMATION | 3 |
| Item 1. Financial Statements | 3 |
| Consolidated Balance Sheets – December 31, 2020 (unaudited) and June 30, 2020 | 3 |
| Consolidated Statements of Operations - Three and Six Months ended December 31, 2020 and 2019 (unaudited) | 4 |
| Consolidated Statements of Changes in Stockholders’ Deficit – Three and Six Months ended December 31, 2020 and 2019 (unaudited) | 5 |
| Consolidated Statements of Cash Flows - Six Months Ended December 31, 2020 and 2019 (unaudited) | 7 |
| Notes to Consolidated Financial Statements (unaudited) | 8 |
| Item 2. Management’s Discussion and Analysis and Results of Operations | 20 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 26 |
| Item 4. Controls and Procedures | 26 |
| PART II - OTHER INFORMATION | 27 |
| Item 1. Legal Proceedings. | 27 |
| Item 1A. Risk Factors. | 27 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. | 27 |
| Item 3. Defaults Upon Senior Securities. | 27 |
| Item 4. Mine Safety Disclosures. | 27 |
| Item 5. Other Information. | 27 |
| Item 6. Exhibits | 27 |
| SIGNATURES | 28 |
| | 2 | |
| | ||
PART I - FINANCIAL INFORMATION
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
| | December 31, 2020 | June 30, 2020 (1) |
| | (Unaudited) | |
| ASSETS | | |
| Current assets: | | |
| Cash | $50,492 | $30,251 |
| | | |
| Total current assets | 50,492 | 30,251 |
| | | |
| Total assets | $50,492 | $30,251 |
| | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | |
| | | |
| Current liabilities: | | |
| Accounts payable and accrued expenses | $387,890 | $333,805 |
| Accrued compensation | 789,029 | 652,529 |
| Accrued interest | 714,323 | 677,857 |
| Convertible notes payable to ASC Recap LLC | 147,965 | 147,965 |
| Convertible notes payable | 742,600 | 852,962 |
| Notes payable , net of discount | 452,100 | 205,000 |
| Derivative liabilities | 988,047 | 438,553 |
| Due to officers | - | 102,340 |
| Total current liabilities | 4,221,954 | 3,411,011 |
| | | |
| Commitments and Contingencies (Note 9) | | |
| | | |
| Stockholders’ deficit: | | |
| Preferred stock, $0.001 par value, 100,000,000 shares authorized | | |
| Series A (65,000,000 shares designated, 13,992,340 shares issued and outstanding as of December 31, 2020 and June 30, 2020) | 13,992 | 13,992 |
| Series B (30,000,000 shares designated, 1,327,640 shares issued and outstanding as of December 31, 2020 and June 30, 2020) | 1,328 | 1,328 |
| Series AA Convertible Stock ($0.001 par value; 1 share authorized, 1 share issued and outstanding as of September 30, 2020 and June 30, 2020) | 0 | 0 |
| Common stock, $0.0001 par value, 10,000,000,000 shares authorized: 2,701,199,148 shares issued and 2,700,932,491 shares outstanding as of December 31, 2020 and 1,544,793,446 shares issued and 1,544,126,787 outstanding at June 30, 2020 (See Note 7) | 270,093 | 154,413 |
| Additional paid in capital | 45,048,181 | 44,441,085 |
| Accumulated deficit | (49,505,056) | (47,991,578) |
| Total stockholders’ deficit | (4,171,462) | (3,380,760) |
| | | |
| Total liabilities and stockholders’ deficit | $50,492 | $30,251 |
(1) Derived from audited financial statements
See Notes to Unaudited Consolidated Financial Statements.
| | 3 | |
| | ||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended | Six Months Ended | ||
| | December 31, | December 31, | ||
| | 2020 | 2019 | 2020 | 2019 |
| Net revenues | $- | $- | $- | $- |
| | | | | |
| 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) |
| Gain (loss) on extinguishment of debt | (53,963) | (58,407) | (208,864) | (98,821) |
| Warrant exercise expense | (211,411) | - | (211,411) | - |
| 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) |
| | | | | |
| Loss per common share basic and diluted | $(0.001) | $(0.003) | $(0.001) | $(0.005) |
| | | | | |
| Weighted average common shares outstanding – basic and diluted | 2,142,394,543 | 81,3346,603 | 1,929,418,649 | 63,855,369 |
See Notes to Unaudited Consolidated Financial Statements.
| | 4 | |
| | ||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2020
(UNAUDITED)
For the three months ended December 31, 2020
| | Preferred Stock -Series A $0.001 Par Value | Preferred Stock -Series B $0.001 Par Value | Preferred Stock -Series AA$ 0.001 Par Value | Common Stock $0.0001 Par Value | Additional Paid-in | Accumulated | Total Stockholders’ | ||||
| | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit |
| Balance at September 30, 2020 | 13,992,340 | 13,992 | 1,327,670 | $1,328 | 1 | $0 | 2,026,275,348 | $202,628 | $44,698,489 | $(48,337,251) | $(3,420,814) |
| | | | | | | | | | | | |
| Shares issued for consulting services | | | | | | | 200,000 | 20 | 11,980 | | 12,000 |
| Commitment shares issued pursuant to financings | | | | | | | 225,000,000 | 22,500 | 110,529 | | 133,029 |
| Shares issued for conversion of notes payable | | | | | | | 101,195,600 | 10,120 | 50,598 | | 60,718 |
| Shares issued for exercise of warrants | | | | | | | 348,261,534 | 34,826 | 176,585 | | 211,411 |
| Net loss for the three months ended December 31, 2020 | | | | | | | | | | (1,167,805) | (1,167,805) |
| Balance at December 31, 2020 | 13,992,340 | $13,992 | 1,327,670 | $1,328 | 1 | $0 | 2,700,932,482 | $270,093 | $45,048,181 | $(49,505,056) | $(4,171,462) |
For the six months ended December 31, 2020
| | Preferred Stock -Series A $0.001 Par Value | Preferred Stock -Series B$ 0.001 Par Value | Preferred Stock -Series AA $0.001 Par Value | Common Stock $0.0001 Par Value | Additional Paid-in | Accumulated | Total Stockholders’ | ||||
| | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit |
| Balance at June 30, 2020 | 13,992,340 | $13,992 | 1,327,670 | $1,328 | 1 | $0 | 1,544,126,787 | $154,413 | $44,441,085 | $(47,991,578) | $(3,380,760) |
| | | | | | | | | | | | |
| Shares issued for consulting services | | | | | | | 30,400,000 | 3,040 | 35,960 | | 39,000 |
| Shares issued as compensation | | | | | | | 90,000,000 | 9,000 | 36,000 | | 45,000 |
| Commitment shares issued pursuant to financings | | | | | | | 225,000,000 | 22,500 | 110,529 | | 133,029 |
| Shares issued for conversion of notes payable | | | | | | | 463,144,160 | 46,314 | 248,022 | | 294,336 |
| Shares issued for exercise of warrants | | | | | | | 348,261,534 | 34,826 | 176,585 | | 211,411 |
| Net loss for the six months ended December 31, 2020 | | | | | | | | | | (1,513,478) | (1,513,478) |
| Balance at December 31, 2020 | 13,992,340 | $13,992 | 1,327,670 | $1,328 | 1 | $0 | 2,700,932,482 | $270,093 | $45,048,181 | (49,505,056) | $(4,171,462) |
See Notes to Unaudited Consolidated Financial Statements.
| | 5 | |
| | ||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2019
(UNAUDITED)
For the three months ended December 31, 2019
| | Preferred Stock - Series A $0.001 Par Value | Preferred Stock -Series B $0.001 Par Value | Preferred Stock -Series AA $0.001 Par Value | Common Stock $0.0001 Par Value | Additional Paid-in | Accumulated | Total Stockholders’ | ||||
| | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit |
| Balance at September 30, 2019 | 13,992,340 | $13,992 | 1,327,640 | $1,328 | 1 | $0 | 63,509,820 | $6,351 | $43,386,679 | $(46,546,569) | $(3,138,219) |
| | | | | | | | | | | | |
| Shares issued for consulting services | | | | | | | 10,483,333 | 1,048 | 62,951 | | 64,000 |
| Shares issued as compensation | | | | | | | 8,000,000 | 800 | 27,200 | | 28,000 |
| Shares issued for conversion of notes payable | | | | | | | 31,856,990 | 3,186 | 126,852 | | 130,038 |
| Net loss for the three months ended December 31, 2019 | | | | | | | | | | (226,747) | (226,747) |
| | | | | | | | | | | | |
| Balance at December 31, 2019 | 13,992,340 | $13,992 | 1,327,640 | $1,328 | 1 | $0 | 113,850,143 | $11,385 | $43,603,682 | $(46,773,316) | $(3,142,928) |
For the six months ended December 31, 2019
| | Preferred Stock -Series A $0.001 Par Value | Preferred Stock -Series B $0.001 Par Value | Preferred Stock -Series AA $0.001 Par Value | Common Stock $0.0001 Par Value | Additional Paid-in | Accumulated | Total Stockholders’ | ||||
| | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit |
| Balance at June 30, 2019 | 13,992,340 | $13,992 | 1,327,640 | $1,328 | 1 | $0 | 42,066,269 | $4,207 | $43,189,121 | $(46,449,128) | $(3,244,617) |
| | | | | | | | | | | | |
| Shares issued for consulting services | | | | | | | 10,966,667 | 1,096 | 91,904 | | 93,000 |
| Shares issued as compensation | | | | | | | 8,000,000 | 800 | 27,200 | | 28,000 |
| Shares issued for conversion of notes payable | | | | | | | 52,817,207 | 5,282 | 299,595 | | 304,877 |
| Net loss for the six months ended December 31, 2019 | | | | | | | | | | (324,188) | (324,188) |
| | | | | | | | | | | | |
| Balance at December 31, 2019 | 13,992,340 | $13,992 | 1,327,640 | $1,328 | 1 | $0 | 113,850,143 | $11,385 | $43,603,682 | $(46,773,316) | $(3,142,928) |
See Notes to Unaudited Consolidated Financial Statements.
| | 6 | |
| | ||
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Six-month period ended | |
| | December 31, | |
| | 2020 | 2019 |
| Cash flows from operating activities: | | |
| Net loss | $(1,513,478) | $(324,188) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | |
| Stock-based compensation | 84,000 | 121,000 |
| Amortization of debt discount | 20,128 | 140,736 |
| Warrant exercise expense | 211,411 | - |
| (Gain) loss on change in fair value of derivative liability | 549,494 | (485,568) |
| Derivative liability expense | - | 61,396 |
| Loss on extinguishment of debt | 208,864 | 98,821 |
| Changes in operating assets and liabilities: | | |
| Accounts payable | 87,698 | 62,610 |
| Accrued interest | 36,466 | 58,530 |
| Accrued compensation | 136,500 | 168,000 |
| Net cash used in operating activities | (178,917) | (98,663) |
| | | |
| Cash flows from financing activities: | | |
| Proceeds from issuance of convertible notes payable | - | 42,500 |
| Repayment of convertible notes payable | (18,879) | - |
| Proceeds from notes payable | 320,377 | - |
| Advances from officers | (102,340) | 37,900 |
| | | |
| Net cash provided by financing activities | 199,158 | 80,400 |
| | | |
| Net increase (decrease) in cash | 20,241 | (18,263) |
| | | |
| Cash, beginning of period | 30,251 | 18,668 |
| | | |
| Cash, end of period | $50,492 | $405 |
| | | |
| Supplemental disclosures of cash flow information: | | |
| Cash paid for interest | $15,807 | $- |
| Cash paid for income taxes | $- | $- |
| | | |
| Non-cash investing and financing activities: | | |
| Issuance of common stock for conversion of notes payable and accrued interest | $93,256 | $304,877 |
See Notes to Unaudited Consolidated Financial Statements.
| | 7 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1: ORGANIZATION, GOING CONCERN AND BASIS OF PRESENTATION
Visium Technologies, Inc. (“Visium”) was incorporated in Nevada as Jaguar Investments, Inc. in 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 October 2015 the Company redomiciled from Nevada and became a Florida corporation. In March 2018 the Company changed its name to Visium Technologies, Inc.
Visium is a provider of cyber security visualization, analytics, and automation. Visium operates in the traditional cyber security space, as well as in the cloud-based technology and Internet of Things spaces. Visium provides cybersecurity technology solutions, tools, and services to support commercial enterprises and government’s ability to protect their data. Visium’s CyGraph technology provides visualization, advanced cyber monitoring intelligence, data modeling, analytics, and automation to help reduce risk, simplify cyber security, and deliver better security outcomes.
In March 2019, Visium entered into a software license agreement with MITRE Corporation to license a patented technology, known as CyGraph, a tool for cyber warfare analytics, visualization, and knowledge management. CyGraph provides advanced analytics for cybersecurity situational awareness that is scalable, flexible, and comprehensive.
Going Concern
The accompanying financial statements have been prepared on a going concern basis. For the six months ended December 31, 2020 we had a net loss of $1,513,478, had net cash used in operating activities of $178,917, and had negative working capital of $4,171,462. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
A novel strain of coronavirus, the COVID-19 virus, may adversely affect our business operations and financial condition.
In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. The pandemic may adversely affect our potential customers’ operations, our employees and our employee productivity. It may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. These supply chain effects, and the direct effect of the virus and the disruption on our employees and operations, may negatively impact both our ability to meet customer demand and our revenue and profit margins. Our employees are working remotely and using various technologies to perform their functions. We might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.
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, 2020, contained in the Company’s Annual Report on Form 10-K filed with the SEC on October 9, 2020. The results of operations for the six months ended December 31, 2020, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2021.
| | 8 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
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, Visium Analytics, LLC, and Threat Surface Solutions Group, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the 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 liabilities.
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 six months ended December 31, 2020 and June 30, 2020.
Concentration of Credit Risks
The Company is subject to a concentration of credit risk from cash.
The Company’s cash account is held at a financial institution and is insured by the Federal Deposit Insurance Corporation, or FDIC, up to $250,000. At December 31, 2020 and June 30, 2020, the Company had not reached a bank balance exceeding the FDIC insurance limit.
Convertible Instruments and Derivative Liabilities
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 assessed the potential classification of its derivative financial instruments as of December 31, 2020 and June 30, 2020, 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.
| | 9 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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.
Fair Value of Financial Instruments
The Company accounts for assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
| Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities. |
| | |
| Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. |
| | |
| Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
Additional Disclosures Regarding Fair Value Measurements
The carrying value of cash, accounts payable and accrued expenses, accrued compensation, notes payable and convertible promissory notes payable, approximate their fair value due to the short maturity of these items or the use of market interest rates.
| | 10 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. This standard is effective for reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company early adopted this standard effective July 1, 2019. Since the Company has not earned any revenue to date, there has been no impact to the financial statements upon adoption.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of June 30, 2020, the Company had not filed tax returns for the tax years ending June 30, 2008 through 2020 and such returns, when filed, potentially will be subject to audit by the taxing authorities for a minimum of three years beyond the filing date under the three-year statute of limitations. The Company has not accrued any potential tax penalties associated with not filing these tax returns. Due to recurring losses, management believes such potential tax penalties, if any, would not be material in amount.
Share-Based Payments
The Company accounts for stock-based compensation in accordance with ASU 2020-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned.
Under ASC Topic 718, “Compensation - Stock Compensation”. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.
The Company has elected to use the Cox, Ross & Rubinstein Binomial Tree valuation model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Segment Reporting
The Company operates in one business segment which technologies are focused on cybersecurity.
| | 11 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Recent Accounting Pronouncements
In May 2019, the FASB issued ASU No. 2020-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, regarding the accounting implications of the recently issued Tax Cuts and Jobs Act (the “Act”). This standard is effective immediately. The update clarifies that in a company’s financial statements that include the reporting period in which the Act was enacted, the company must first reflect the income tax effects of the Act in which the accounting under GAAP is complete. These amounts would not be provisional amounts. The company would also report provisional amounts for those specific income tax effects for which the accounting under GAAP is incomplete, but a reasonable estimate can be determined. The Company has recorded a provisional amount which it believes is a reasonable estimate of the effects of the Act on the Company’s financial statements as of December 31, 2020. Technical corrections or other forthcoming guidance could change how the Company interprets provisions of the Act, which may impact its effective tax rate and could affect its deferred tax assets, tax positions and/or its tax liabilities.
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 dilutive common shares would be as follows:
| | December 31, | December 31, |
| | 2020 | 2019 |
| Weighted average common shares outstanding | 1,929,418,649 | 63,855,369 |
| Effect of dilutive securities-when applicable: | | |
| Convertible promissory notes | 154,979,834 | 91,175,099 |
| Preferred Stock | 13,996,767 | 13,996,767 |
| Warrants | - | 500,000 |
| Adjusted weighted-average shares and assumed conversions | 2,098,395,250 | 169,527,235 |
| | 12 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 3: DERIVATIVE LIABILITIES
Derivative liability - warrants
The Company issued warrants in connection with convertible notes payable which were issued in January 2019. These warrants had price protection provisions that allowed for the reduction in the exercise price of the warrants in the event the Company subsequently issues stock or securities convertible into stock at a price lower than the $0.15 per share exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased or decreased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. Because it is indeterminate whether there is a sufficient number of authorized and unissued shares exists at the assessment date, the Company calculated a derivative liability associated with the warrants in accordance with FASB ASC Topic 815-40-25.
Those warrants which included price protection provisions were fully exercised on a cashless basis in the fiscal quarter ended December 31, 2020 by the issuance of 348,261,534 shares. There are currently no outstanding warrants that give rise to a derivative liability.
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 December 31, 2020 and December 31, 2019 using the Cox, Ross & Rubinstein Binomial Tree valuation model.
The revaluation of the 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 $549,494 and a gain of $485,568 for the six months ended December 31, 2020 and 2019, respectively in the Company’s consolidated statements of operations, under the caption “Gain (loss) in change of fair value of derivative liability”. The fair value of the warrants at December 31, 2020 and June 30, 2020 was $0 and $37,200, respectively. The fair value of the derivative liability related to the convertible debt at December 31, 2020 and June 30, 2020 is $988,047 and $438,553, respectively, which is reported on the consolidated balance sheet under the caption “Derivative liability”.
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:
| | | Six Months Ended December 31, | | |||||
| | | 2020 | | | 2019 | | ||
| Effective exercise price | | $ | 0.00125 - $ 0.00179 | | | $ | 0.494 - 0.616 | |
| Effective market price | | $ | .0076 | | | $ | 0.1014 | |
| Volatility | | | 352.72 | % | | | 204.78 | % |
| Risk-free interest | | | 0.08 | % | | | 2.56 | % |
| Terms | | | 60 | | | | 30 days | |
| Expected dividend rate | | | 0.00 | % | | | 0.00 | % |
Changes in the derivative liabilities during the six months ended December 31, 2020 is follows:
| Derivative liability at June 30, 2020 | $438,553 |
| Loss on change in fair value of derivative liability | 549,494 |
| Derivative liability at December 31, 2020 | $988,047 |
| | 13 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 4: ACCRUED INTEREST PAYABLE
Changes in accrued interest payable during the six months ended December 31, 2020 is as follows:
| Accrued interest payable at June 30, 2020 | $677,857 |
| Interest expense accrued for the six months ended December 31, 2020 | 55,876 |
| Cash paid for accrued interest | (15,807) |
| Conversion of accrued interest into common stock | (3,603) |
| Accrued interest payable at December 31, 2020 | $714,323 |
Interest expense for the six months ended December 31, 2020 was comprised of the following:
| Interest expense for the six months ended December 31, 2020 | $55,876 |
| Amortization of debt discount on notes payable | 31,123 |
| Total interest expense for the six months ended December 31, 2020 | $76,004 |
NOTE 5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE
Convertible Notes Payable
At December 31, 2020 and June 30, 2020 convertible debentures consisted of the following:
| | December 31, | June 30, |
| | 2020 | 2020 |
| Convertible notes payable | $742,600 | $852,962 |
| | | |
| Convertible notes payable to ASC Recap | 147,965 | 147,965 |
| Total | $890,565 | $1,000,927 |
The Company had convertible promissory notes aggregating approximately $742,600 and $853,000 at December 31, 2020 and June 30, 2020, respectively. The related accrued interest amounted to approximately $541,000 and $501,000 at December 30, 2020 and June 30, 2020, respectively. The convertible notes payable bear interest at rates ranging from 0% to 18% per annum. The convertible notes are generally convertible, at the holders’ option, at rates ranging from $0.0012 to $22,500 per share, as a result of the two reverse stock splits. At December 31, 2020, $742,600 of convertible promissory notes had matured, are in default and remain unpaid.
On July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC (“ASC”) two convertible promissory notes with principal amounts of $25,000 and $125,000, respectively. These two notes were issued as a fee for services under a 3(a)10 transaction. While the Company continues to carry the balance of these notes on its balance sheet, management is disputing the notes and does not believe that the balances of these notes are owed. See Note 9 – Commitments and Contingencies in the footnotes to the financial statements. The July 22, 2013 note matured on March 31, 2014 and a balance of $22,965 remains unpaid. The May 6, 2014 note matured on May 6, 2016 and remains unpaid. The notes are convertible into the common stock of the Company at any time at a conversion price equal to (i) 50% of the lowest closing bid price of our common stock for the twenty days prior to conversion or (ii) fixed price of $0.15 or $0.30 per share.
For the six months ended December 31, 2020, the following summarizes the conversion of debt for common shares:
| | | Amount | | | Adjustment | | Conversion |
| | Shares | Converted | | Conversion | to | | Price |
| Name | Issued | Principal | Interest | Expense | Fair Value | Total | Per Share |
| FirstFire Global Opportunities Fund LLC | 49,000,000 | $14,725 | $- | $1,200 | $18,375 | $34,300 | $0.0003 |
| Auctus Funds, LLC | 414,144,160 | 74,928 | 3,603 | 4,500 | 177,005 | 260,036 | $0.0002 |
| TOTAL | 463,144,160 | $89,653 | $3,603 | $5,700 | $195,380 | $294,336 | $0.00022 |
The adjustment to Fair Value column represents additional paid-in capital recorded with the conversion based on the fair value of the shares issued upon partial conversion of the note at the time of conversion. The adjustment to fair value on each conversion resulted in a loss on extinguishment of debt.
Notes Payable
The Company had promissory notes aggregating $580,000 and $205,000 at December 31, 2020 and June 30, 2020, respectively. The related accrued interest amounted to approximately $188,397 and $175,000 at December 31, 2020 and June 30, 2020, respectively. The notes payable bear interest at rates ranging from 8% to 16% per annum. As of December 31, 2020, promissory notes totaling $205,000 have matured, are in default, and remain unpaid.
On October 21, 2020, the Company entered into a securities purchase agreement with three individual investors pursuant to which the Company issued to each Investor an 8% Unsecured Promissory Note, in the total aggregate principal amount of $225,000 in exchange for $225,000 cash and 135,000,000 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 matures 12 months after the date of issuance. The Company recorded a discount on notes payable related to this transaction of $59,559, based on the relative fair value of the shares issued.
On November 23, 2020, the Company entered into a securities purchase agreement with Labrys Fund, LP, a Delaware limited partnership pursuant to which Labrys purchased a self-amortizing promissory note in the principal amount of $150,000 for $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 includes a 10% original issuance discount, bears interest at 12% per year and matures on November 23, 2021. The Note is to be repaid in nine equal installments in the amount of $16,800 per month, with the first payment due 90 calendar days from the issuance date of the Note. The Company has the right to accelerate payments or prepay the Note in full without prepayment penalty. In the event of default, Labrys has the right to convert the amount of any missed payment into shares of the Company’s common stock at the price equal to 105% of the closing bid price on the day prior to the issuance of such conversion notice. The Company recorded a discount on notes payable related to this transaction of $88,469.
A recap of loan discount amortization for the six months ended December 31, 2020 is as follows:
| | October 2020 | | |
| | Notes | Labrys | Total |
| Original discount | $59,559 | $88,469 | $148,028 |
| Amortization | $(11,528) | (8,600) | (20,128) |
| Unamortized discount as of December 31, 2020 | $48,031 | $79,869 | $127,900 |
| | 14 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 6: STOCKHOLDERS’ DEFICIT
Common Stock
At December 31, 2020, the Company had 10,000,000,000 authorized common shares.
Issuances of Common Stock During the Six Months Ended December 31, 2020
Convertible Notes Payable
During the six months ended December 31, 2020 the Company issued 463,144,160 shares of its common stock related to the conversion of $294,336 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.0002 per share. The conversions were recorded at fair value or at $294,336.
Stock Based Compensation
During the six months ended December 31, 2020 we issued 30,400,000 shares of its common stock to consultants, as compensation. The shares were valued at $0.00128, the market price on the date of issuance for a total value of $39,000. The expense is included in general and administrative expenses and was recognized on the date the stock was issued or vested.
During the six months ended December 31, 2020 the Company issued 90,000,000 shares of its $0.0001 par value common stock were issued to our Directors, as compensation for services rendered. The shares were valued at $45,000, or $0.0005 per share.
Warrant Exercises
During the six months ended December 31, 2020 we issued 348,261,534 shares of its 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.
Funding
During the six months ended December 31, 2020 we issued 225,000,000 shares of its common stock as commitment shares related to two financing transactions that raised an aggregate $360,000.
Issuances of Common Stock During the Six Months Ended December 31, 2019
Convertible Notes Payable
During the six months ended December 31, 2019 the Company issued 52,817,207 shares of its common stock related to the conversion of $304,877 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.00249 per share. The conversions were recorded at fair value or at $410,077.
Stock Based Compensation
During the six months ended December 31, 2019 the Company issued 966,667 shares of its $0.0001 par value common stock vested to two consultants, as compensation under two separate consulting agreements. The shares were valued at $58,000, or $0.06 per share.
During the six months ended December 31, 2019 the Company issued 10,000,000 shares of its $0.0001 par value common stock were issued to three consultants, as compensation for services rendered. The shares were valued at $35,000, or $0.0035 per share.
During the six months ended December 31, 2019 the Company issued 8,000,000 shares of its $0.0001 par value common stock were issued to one of our Directors, as compensation for services rendered. The shares were valued at $28,000, or $0.0035 per share.
| | 15 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 6: STOCKHOLDERS’ DEFICIT, continued
Preferred Stock
Series A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $0.001. All classes rank(ed) prior to any class or series of the Company’s common stock as to the distribution of assets upon liquidation, dissolution or winding up of the Company or as to the payment of dividends. All preferred stock shall have no voting rights except if the subject of such vote would reduce the amount payable to the holders of preferred stock upon liquidation or dissolution of the company and cancel and modify the conversion rights of the holders of preferred stock as defined in the certificate of designations of the respective series of preferred stock.
Series A Convertible Preferred Stock
The Series A Preferred Stock has a stated value of $750.00 per share. Each one share of Series A Preferred Stock is convertible into one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the Conversion shall be set at $0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements.
Series B Convertible Preferred Stock
Thirty million (30,000,000) shares of preferred stock were designated as a new Series B Preferred stock in April 2016. This new Series B Preferred Stock has a $0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock, with a stated value of $375 per share.
Series AA Convertible Preferred Stock
In March 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 2019 we issued 500,000 warrants with a three year life and a conversion price of $0.15 per share. These warrants had price protection provisions that allow for the reduction in the current exercise price upon the occurrence of certain events, including the Company’s issuance of common stock or securities convertible into or exercisable for common stock, such as options and warrants, at a price per share less than the exercise price then in effect. For instance, if the Company issues shares of its common stock or options exercisable for or securities convertible into common stock at an effective price per share of common stock less than the exercise price then in effect, the exercise price will be reduced to the effective price of the new issuance. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment.
The warrant holders exercised all of their warrants on a cashless basis, during the three months ended December 31, 2020. Due to the price protection features of these warrants, the Company issued 374,500,000 warrant shares to these warrant holders, which
A summary of the status of the Company’s outstanding common stock warrants as of December 31, 2020 and changes during the six months ending on that date is as follows:
| | Number of | Weighted Average |
| | Warrants | Exercise Price |
| Common Stock Warrants | | |
| Balance at beginning of year | 500,000 | $0.15 |
| Granted | - | - |
| Granted due to repricing | 374,500,000 | 0.0002 |
| Exercised | (348,261,534) | 0.0002 |
| Forfeited | (26,738,466) | 0.0002 |
| Balance at end of period | - | $- |
| | | |
| Warrants exercisable at end of period | - | $- |
| | | |
| Weighted average fair value of warrants granted due to repricing during the period | | $74,900 |
| | 16 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 7 - STOCK-BASED COMPENSATION
Restricted Stock Awards
Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the six months ended December 31, 2020 is presented in the following table:
| | For the six months ended | |
| | December 31, 2020 | |
| | | Weighted |
| | | Average |
| | | Grant Date |
| | Shares | Fair Value |
| Unvested at beginning of period | 666,659 | $0.06 |
| Granted | - | $- |
| Forfeited | - | - |
| Vested | (400,000) | $0.06 |
| Unvested at end of period | 266,659 | $0.06 |
Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of December 31, 2020 was $16,000 and is expected to be recognized over a weighted average period of 0.33 years.
NOTE 8: RELATED PARTY TRANSACTIONS
Equity transactions with related parties are described in Note 6.
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 December 31, 2020 there were no such advances made to the Company.
NOTE 9: COMMITMENTS AND CONTINGENCIES
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 December 31, 2020, and based on the assessment there are no probable loss contingencies requiring accrual or disclosures within its financial statements.
License Contingent Consideration
Our license agreements with the sellers of Threat Surface Solutions Group, LLC includes a provision for a royalty payment based on ten percent (10%) of sales generated by Threat Surface Solutions Group beginning on the Agreement Date and ending on October 12, 2021, capped at a maximum royalty of $2,500,000. As of December 31, 2020 we have not generated any revenue related to these license agreements.
Our license agreement with The MITRE Corporation includes a provision for a royalty payment on revenues collected of 6%. As of December 31, 2020 we have not generated any revenue related to this license agreement.
| | 17 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 9: COMMITMENTS AND CONTINGENCIES, continued
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 Visium's favor, dismissing the involuntary bankruptcy petition and allowing Visium 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.
The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company’s cash flows, results of operations, or financial position.
NOTE 10 – FAIR VALUE MEASUREMENT
Fair value measurements
At December 31, 2020 and 2019, the fair value of derivative liabilities is estimated using the Cox, Ross & Rubinstein Binomial Tree valuation model using inputs that include the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate. The derivative liabilities are the only Level 3 fair value measures.
NOTE 10 – FAIR VALUE MEASUREMENT, continued
At December 31, 2020 the estimated fair values of the liabilities measured on a recurring basis are as follows:
| | Fair Value Measurements at | ||
| | December 31, 2020: | ||
| | (Level 1) | (Level 2) | (Level 3) |
| Derivative liability – Convertible notes | $ | $ | $988,047 |
| Total derivative liability | $- | $- | $988,047 |
| | 18 | |
| | ||
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 11: SUBSEQUENT EVENTS
On January 12, 2021, the Company entered into a Securities Purchase Agreement with Labrys Fund, LP, a Delaware limited partnership pursuant to which the Investor purchased a promissory note 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 Note 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.
In January 2021 our consultants vested 66,676 shares of our $0.0001 par value common stock, valued at $4,000, or at an average price per share of $0.06
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 Visium's favor, dismissing the involuntary bankruptcy petition and allowing Visium 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.
The Company has submitted a Corporate Action to amend the Company’s articles of incorporation, which includes a sixty (60) for one reverse stock split, and a reduction of the Company’s authorized common shares from ten billion (10,000,000,000) to two billion (2,000,000,000). The Company is waiting for approval from FINRA for these Corporate Actions.
In February 2021, the Company issued 44,850,000 shares of its common stock upon the conversion of principal of $51,888.75, and $18,000 of accrued interest on its outstanding convertible notes, valued at $0.001575 per share.
In February 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. The Note bears interest at 8% per year, and 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 $0.02 per share, subject to adjustment as provided therein. Pursuant to the agreement, the Company issued to the Investor a two-year warrant to purchase 12,500,000 shares of the Company’s common at an exercise price of $0.02 per share.
| | 19 | |
| | ||
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. 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”.
| | 20 | |
| | ||
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 |
| | | |