Quarterly Report (10-q)

 

 

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 March 31, 2021

 

 

[ ]	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)

 

[phone]

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 May 17, 2021, was 2,885,598,159.

 

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 – March 31, 2021 (unaudited) and June 30, 2020	3
Consolidated Statements of Operations - Three and Nine Months ended March 31, 2021 and 2020 (unaudited)	4
Consolidated Statements of Changes in Stockholders’ Deficit – Three and Nine Months ended March 31, 2021 and 2020 (unaudited)	5
Consolidated Statements of Cash Flows - Nine Months Ended March 31, 2021 and 2020 (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

 

Item 1. Consolidated Financial Statements

 

VISIUM TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

 

 

	March 31, 2021	June 30, 2020 (1)
	(Unaudited)
ASSETS
Current assets:
Cash	$276,102	$30,251
Total current assets	276,102	30,251
Total assets	$276,102	$30,251
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$383,980	$333,805
Accrued compensation	615,029	652,529
Accrued interest	709,574	677,857
Convertible notes payable to ASC Recap LLC	147,965	147,965
Convertible notes payable, net of discount of $416,912 at March 31, 2021	1,074,785	852,962
Notes payable , net of discount of $87,827 at March 31, 2021	342,173	205,000
Derivative liabilities	1,117,248	438,553
Due to officers	-	102,340
Total current liabilities	4,390,753	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 March 31, 2021 and June 30, 2020)	13,992	13,992
Series B (30,000,000 shares designated, 1,327,640 shares issued and outstanding as of March 31, 2021 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 March 31, 2021 and June 30, 2020)	0	0
Common stock, $0.0001 par value, 10,000,000,000 shares authorized: 3,050,598,148 shares issued and 2,869,031,492 shares outstanding as of March 31, 2021 and 1,544,793,446 shares issued and 1,544,126,787 outstanding at June 30, 2020 (See Note 7)	286,903	154,413
Additional paid in capital	47,633,824	44,441,085
Accumulated deficit	(52,050,699)	(47,991,578)
Total stockholders’ deficit	(4,114,652)	(3,380,760)
Total liabilities and stockholders’ deficit	$276,102	$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		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)	-	(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	(264,569)	(842,686)	(138,493)
Net loss	$(2,545,643)	$(454,244)	$(4,059,121)	$(778,432)
Loss per common share basic and diluted	$(0.00)	$(0.00)	$(0.00)	(0.005)
Weighted average common shares outstanding – basic and diluted	2,769,958,917	191,033,101	1,961,232,893	105,939,637

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

 

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VISIUM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2021

(UNAUDITED)

 

For the three months ended March 31, 2021

 

	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 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)
Shares issued for consulting services							6,700,001	670	86,080		86,750
Shares issued as compensation							100,000,000	10,000	2,409,000		2,419,000
Shares issued for conversion of notes payable and accrued interest							61,399,000	6,140	90,563		96,703
Shares issued for exercise of warrants
Net loss for the three months ended March 31, 2021										(2,545,643)	(2,545,643)
Balance at March 31, 2021	13,992,340	$13,992	1,327,670	$1,328	1	$0	2,869,031,483	$286,903	$47,633,824	$(52,050,699)	$(4,114,652)

 

For the nine months ended March 31, 2021

 

	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							37,100,000	3,710	122,040		125,750
Shares issued as compensation							190,000,000	19,000	2,445,000		2,464,000
Commitment shares issued pursuant to financings							225,000,000	22,500	110,529		133,029
Shares issued for conversion of notes payable  and accrued interest							524,543,160	52,454	338,535		391,039
Shares issued for exercise of warrants							348,261,534	34,826	176,585		211,411
Net loss for the Nine Months ended March 31, 2021										(4,059,121)	(4,059,121 )
Balance at March 31, 2021	13,992,340	$13,992	1,327,670	$1,328	1	$0	2,869,031,483	$286,903	$47,633,824	$(52,050,699)	$(4,114,652)

 

See Notes to Unaudited Consolidated Financial Statements.

	5

 

 

 

 

 

 

 

VISIUM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2020

(UNAUDITED)

 

For the three months ended March 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 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)	$(3,142,929)
Shares issued for consulting services							8,683,333	868	38,867		39,735
Shares issued as compensation							20,000,000	2,000	22,000		24,000
Shares issued for conversion of notes payable  and accrued interest							181,396,034	18,140	289,440		307,580
Net loss for the three months ended March 31, 2020										(454,244)	(454,244)
Balance at March 31, 2020	13,992,340	$13,992	1,327,640	$1,328	1	$0	323,929,510	$32,393	$43,953,989	$(47,227,560)	$(3,225,858)

 

For the nine months Ended March 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, 2019	13,992,340	$13,992	1,327,640	$1,328	1	$0	42,066,269	$4,207	$43,184,984	$(46,449,128)	$(3,244,617)
Shares issued for consulting services							19,650,000	1,965	130,770		132,735
Shares issued as compensation							28,000,000	2,800	49,200		52,000
Shares issued for conversion of notes payable  and accrued interest							234,213,241	23,421	589,035		612,456
Net loss for the Nine Months Ended March 31, 2020										(778,432)	(778,432)
Balance at March 31, 2020	13,992,340	$13,992	1,327,640	$1,328	1	$0	323,929,510	$32,393	$43,953,989	$(47,227,560)	$(3,225,858)

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

 

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VISIUM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

	Nine-month period ended
	March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$(4,059,121)		$(778,432)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	2,589,750		184,735
Amortization of debt discount	168,804		179,106
Warrant exercise expense	211,411		-
Gain on change in fair value of derivative liability	(855,587)		(462,249)
Derivative liability expense	1,059,282		61,396
Loss on extinguishment of debt	180,001		267,881
Changes in operating assets and liabilities:
Accounts payable	86,222		121,907
Accrued interest	53,629		67,475
Accrued compensation	(37,500)		252,000
Net cash used in operating activities	(603,109)		(106,181)
Cash flows from financing activities:
Proceeds from issuance of convertible notes payable	800,000		48,000
Repayment of convertible notes payable	(73,700)		-
Proceeds from notes payable	225,000		-
Advances from (repayments to) officers	(102,340)		39,840
Net cash provided by financing activities	848,960		87,840
Net increase (decrease) in cash	245,849		(18,341)
Cash, beginning of period	30,251		18,668
Cash, end of period	$276,102		326
Supplemental disclosures of cash flow information:
Cash paid for interest	$40,970		$-
Cash paid for income taxes	$-		$-
Non-cash investing and financing activities:
Issuance of common stock for conversion of notes payable and accrued interest (fair value of the shares issued - $383,839)	$188,460		$223,679

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

 

	7

 

 

 

  VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

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 nine months ended March 31, 2021 we had a net loss of $4,059,121, had net cash used in operating activities of $603,109, and had negative working capital of $4,114,651. 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 nine months ended March 31, 2021, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2021.

 

 

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VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Fiscal Year

 

The fiscal year ends on June 30. References to fiscal year 2021, for example, refer to the fiscal year ending June 30, 2021.

 

Principles of Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries, 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 nine months ended March 31, 2021 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 March 31, 2021 and June 30, 2020, the Company had 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 March 31, 2021 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.

 

 

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  VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

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.

 

 

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VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

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). Under the new guidance, an entity will recognize revenue to depict the transfer of promised goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. A five-step model has been introduced for an entity to apply when recognizing revenue. The new guidance also includes enhanced disclosure requirements. The guidance was effective January 1, 2018 and was applied on a modified basis. The Company generates revenue through the sale of cybersecurity solutions as a Software as a Service. The adoption did not have an impact on the Company's financial statements.

 

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 is focused on cybersecurity technologies.

 

 

	11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Recently Issued Accounting Standards Not Yet Adopted

 

During August 2020, the FASB issued ASU 2020-06, to modify and simplify the application of U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The standard is effective for the Company as of November 1, 2024, with early adoption permitted. The Company is reviewing the impact of this guidance but does not currently expect the adoption of this guidance to have a material impact on its consolidated financial statements.

 

Basic and Diluted Earnings Per Share

 

Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of shares of Common Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common Stock and the dilutive Common Stock share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist of shares issuable upon the exercise of in-the-money stock options and warrants (calculated using the modified-treasury stock method) and conversion of other securities such as convertible debt or convertible preferred stock. Potential dilutive common shares would be as follows:

 

 

	March 31,	March 31,
	2021	2020
Weighted average common shares outstanding	1,961,232,893	105,939,637
Effect of dilutive securities-when applicable:
Convertible promissory notes	132,505,208	676,820,102
Preferred Stock	13,996,767	13,996,767
Warrants	48,609,807	500,000
Adjusted weighted-average shares and assumed conversions	2,156,344,675	797,256,506

 

 

	12

 

 

 

 

 

 

 

 

 

 

 

VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

NOTE 3: DERIVATIVE LIABILITIES

 

Derivative liability - warrants

 

The Company issued warrants in connection with convertible notes payable which were issued in January and February 2021. These warrants had fixed exercise prices ranging from $0.0055 to $0.02 per share, with each warrant having a two-year life.

 

Accounting for Derivative Warrant Liability

 

The Company’s derivative warrant instruments have been measured at fair value at March 31, 2021 using the Cox, Ross & Rubinstein Binomial Tree valuation model. The Company recognizes the derivative liability related to those warrants at the time that the warrants were issued in its consolidated balance sheet as liabilities. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statements of operations. The initial recognition and subsequent changes in fair value of the derivative warrant liability have no effect on the Company’s cash flows.

 

Derivative liability – convertible notes

 

The Company has certain convertible notes with variable price conversion terms. Upon the issuance of these convertible notes and as a consequence of their conversion features, the convertible notes give rise to derivative liabilities. The Company’s derivative liabilities related to its convertible notes payable have been measured at fair value at March 31, 2021 and March 31, 2020 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, resulted in the recognition of a gain of $855,587 and $462,249 for the nine months ended March 31, 2021 and 2020, 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 March 31, 2021 and June 30, 2020 was $732,295 and $350, respectively. The fair value of the derivative liability related to the convertible debt at March 31, 2021 and June 30, 2020 is $214,140 and $361,671, 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:

 

	Nine Months Ended March 31,
	2021	2020
Effective exercise price	$0.0055 - 0.01089	$0.00049 - 0.0033
Effective market price	$0.0189	$0.009
Volatility	248.4% - 319.5%	223% - 521%
Risk-free interest rate	0.01%	0.05% - 1.68%
Terms	60 days – 652 days	30 days – 650 days
Expected dividend rate	0.00%	0.00%

 

 

 

Changes in the derivative liabilities during the nine months ended March 31, 2021 is follows:

 

Derivative liability at June 30, 2020	$438,553
Derivative liability expense	1,059,282
Derivative liability related to discount on convertible note	475,000
Gain on change in fair value of derivative liability	(855,587)
Derivative liability at March 31, 2021	$1,117,248

 

 

	13

 

  

 

 

 

VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

NOTE 4: ACCRUED INTEREST

 

Changes in accrued interest during the nine months ended March 31, 2021 is as follows:

 

 

Accrued interest at June 30, 2020	$677,857
Interest expense accrued for the nine months ended March 31, 2021	94,289
Cash paid for accrued interest	(40,970)
Conversion of accrued interest into common stock	(21,602)
Accrued interest at March 31, 2021	$709,574

 

Interest expense for the nine months ended March 31, 2021 was comprised of the following:

 

 

Interest expense for the nine months ended March 31, 2021	$94,289
Amortization of debt discount on notes payable	153,290
Total interest expense for the nine months ended March 31, 2021	$247,579

 

 

NOTE 5: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE

 

Convertible Notes Payable

 

At March 31, 2021 and June 30, 2020 convertible notes payable consisted of the following:

 

 

	March 31,		June 30,
	2021		2020
Convertible notes payable	$1,491,696		$852,962
Discount on convertible notes payable	(416,911 )		-
Convertible notes payable to ASC Recap	147,965		147,965
Total	$1,222,750		$1,000,927

 

The Company had convertible promissory notes aggregating approximately $1,492,000 and $853,000 at March 31, 2021 and June 30, 2020, respectively. The related accrued interest amounted to approximately $554,000 and $503,000 at March 31, 2021 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 March 31, 2021, $718,900 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 nine months ended March 31, 2021, 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
Labrys	61,399,000	77,203	18,000	1,500	-	97,203	0.0016
TOTAL	524,543,160	$166,856	$21,603	$7,200	$195,380	$391,539	$0.00037

 

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.

 

 

In November 2020, January, and February 2021, the Company entered into three securities purchase agreement with Labrys Fund, LP, a Delaware limited partnership pursuant to which Labrys purchased three self-amortizing promissory notes as follows:

 

	Principal	Discount	Net Cash	Conversion Price
February 8, 2021	$500,000	$25,000	$475,000	$0.02
January 12, 2021	200,000	10,000	190,000	0.005
November 23, 2020	150,000	15,000	135,000	0.001575
	$850,000	$50,000	$800,000	$0.005304

 

 

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.

 

Notes Payable

 

The Company had promissory notes aggregating $430,000 and $205,000 at March 31, 2021 and June 30, 2020, respectively. The related accrued interest amounted to approximately $194,907 and $175,000 at March 31, 2021 and June 30, 2020, respectively. There is no provision in the note agreements for adjustments to the interest rates on these notes in the event of default. The notes payable bear interest at rates ranging from 8% to 16% per annum. As of March 31, 2021, 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.

 

A recap of loan discount amortization for the nine months ended March 31, 2021 is as follows:

 

	October 2020
	Promissory Notes	Labrys Notes	Total
Original discount	$59,559	$598,469	$658,028
Amortization	(26,417)	(126,871)	(153,289)
Unamortized discount as of March 31, 2021	$33,142	$471,598	$504,739

 

	14

 

 

 

 

 

VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 NOTE 6: STOCKHOLDERS’ DEFICIT

 

Common Stock

 

At March 31, 2021, the Company had 10,000,000,000 authorized common shares.

 

Issuances of Common Stock During the nine months Ended March 31, 2021

 

Convertible Notes Payable

 

During the nine months ended March 31, 2021 the Company issued 524,543,160 shares of its common stock related to the conversion of $188,460 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.004 per share. The conversions were recorded at fair value or at $2,422,722.

 

Stock Based Compensation

 

During the nine months ended March 31, 2021 we issued 37,100,000 shares of its common stock to consultants, as compensation. The shares were valued at $0.0034, the market price on the date of issuance for a total value of $125,750. The expense is included in general and administrative expenses and was recognized on the date the stock was issued or vested.

 

During the nine months ended March 31, 2021 the Company issued 190,000,000 shares of its $0.0001 par value common stock were issued to our Directors, as compensation for services rendered. The shares were valued at $2,464,000, or $0.013 per share.

 

Warrant Exercises

 

During the nine months ended March 31, 2021 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 nine months ended March 31, 2021 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 nine months Ended March 31, 2020

 

Convertible Notes Payable

 

During the nine months ended March 31, 2020 the Company issued 234,213,241 shares of its common stock related to the conversion of $223,679 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.00095 per share.  The fair value of the shares issued was $612,456.

 

Stock Based Compensation and Stock Based Consulting Services Expense

 

During the nine months ended March 31, 2020 the Company issued 19,650,000 shares of its $0.0001 par value common stock to five consultants, as compensation for services rendered. The shares were valued at $132,735, or $0.006 per share.

 

During the nine months ended March 31, 2020 the Company issued 28,000,000 shares of its $0.0001 par value common stock to two of our Directors, as compensation for services rendered. The shares were valued at $52,000, or $0.00186 per share.

 

	15

 

 

 

 

 

 

 

VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

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 and February 2021, we issued 39,370,677 warrants with a two year life, and fixed exercise prices ranging from $0.0055 to $0.02 per share. An additional 9,239,130 warrant shares were issued due to repricing certain warrants with a $0.02 exercise price to a $0.0115 exercise price.

 

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 March 31, 2021. 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 March 31, 2021 and changes during the nine 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	39,370,677	0.011
Granted due to repricing	383,739,130	0.0002
Exercised	(348,261,534)	0.0002
Forfeited	(26,738,466)	0.0002
Balance at end of period	48,609,807	$0.011
Warrants exercisable at end of period	48,609,807	$0.011
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

MARCH 31, 2021

 

NOTE 6: STOCKHOLDERS’ DEFICIT, continued

 

Common Stock Warrants, continued

The following table summarizes information about common stock warrants outstanding at March 31, 2021:

 

Warrants Outstanding			Warrants Exercisable
Number Outstanding at	Weighted Average	Weighted Average	Number Exercisable at	Weighted Average
March 31, 2021	Remaining Life	Exercise Price	March 31, 2021	Exercise Price
25,445,677	1.79 Years	$0.0055	25,445,677	$0.0055
21,739,130	1.86 Years	0.0115	21,739,130	0.0115
1,425,000	1.86 Years	0.02	1,425,000	0.02
48,609,807	1.81 Years	$0.011	48,609,807	$0.011

 

 

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 nine months ended March 31, 2021 is presented in the following table:

 

 

	For the Nine Months ended
	March 31, 2021
		Weighted
		Average
		Grant Date
	Shares	Fair Value
Unvested at beginning of period	666,659	$0.06
Granted	198,000,000	$0.012
Forfeited	-	$-
Vested	(17,100,000)	$0.012
Unvested at end of period	181,566,659	$0.012

 

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of March 31, 2021 was $2,087,250 and is expected to be recognized over a weighted average period of 0.92 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 March 31, 2021 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 March 31, 2021, and based on the assessment there are no probable loss contingencies requiring accrual or disclosures within its financial statements.

 

License Contingent Consideration

 

Our license agreements with the sellers of Threat Surface Solutions Group, LLC has expired, but included 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 March 31, 2021 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 March 31, 2021 we have not generated any revenue related to this license agreement.

 

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.

 

In March 2021 the Company filed a Complaint for Damages and Other Relief against Tarpon Bay Partners, LLC, a Florida limited liability company; J.P. Carey Enterprises, Inc., a Florida profit corporation; Anvil Financial Management, LLC, a Florida limited liability company; Stephen Hicks, an individual; Joseph C Canouse, an individual; Jeffrey M. Canouse, an individual; Paul A. Rachmuth, an individual; and Litt Law Group, LLC, a New York Limited Liability Company (collectively the “Defendants”) related to the involuntary bankruptcy petition. The Company is seeking damages from the Defendants for reasonable attorneys’ fees and costs, as well as compensatory, consequential special and punitive damages.

 

The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company’s cash flows, results of operations, or financial position.

 

NOTE 10 – FAIR VALUE MEASUREMENT

 

Fair value measurements

 

At March 31, 2021 and 2020, 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 March 31, 2021 the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

 

	Fair Value Measurements at
	March 31, 2021:
	(Level 1)	(Level 2)	(Level 3)
Derivative liability	$-	$-	$1,117,248
Total derivative liability	$-	$-	$1,117,248

 

 

 

 

 

	18

 

  

 

 

 

VISIUM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

NOTE 11: SUBSEQUENT EVENTS

 

In April 2021 the Company created JAJ Advisory, LLC, a Viriginia limited liability company. The LLC was established to account for non-cybersecurity related business activities that the Company is working towards.

 

In April 2021, the Board of Directors adopted the 2021 Equity Incentive Plan (the “Plan”) for directors, officers, employees, and consultants that provides for non-qualified and incentive stock options to be issued enabling holders thereof to purchase common shares of the Company at exercise prices determined by the Company’s Board of Directors.

 

In April 2021 our consultants vested 6,566,667 shares of our $0.0001 par value common stock, valued at $78,750, or at an average price per share of $0.012.

 

In April 2021 our directors and officers vested 10,000,000 shares of our $0.0001 par value common stock, valued at $115,000, or at an average price per share of $0.0115.

 

 

	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 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 [phone]. 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.

 

 

	25

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable to a smaller reporting company.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2021. In making this assessment, our management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.

 

During our assessment of the design and the effectiveness of internal control over financial reporting as of March 31, 2021, management identified the following material weaknesses:

 

 

	●	While we have processes in place, there are no formal written policies and procedures related to certain financial reporting processes;
	●	There is no formal documentation in which management specified financial reporting objectives to enable the identification of risks, including fraud risks;
	●	Our Board of Directors consisted of four members, however we lack the resources and personnel to implement proper segregation of duties or other risk mitigation systems.

 

A material weakness is “a significant deficiency, or a combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by us in a timely manner.” A significant deficiency is a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.

 

We intend to gradually improve our internal control over financial reporting to the extent that we can allocate resources to such improvements. We intend to prioritize the design of our internal control over financial reporting starting with our control environment and risk assessments and ending with control activities, information and communication activities, and monitoring activities. Although we believe the time to adapt in the next year will help position us to provide improved internal control functions into the future, in the interim, these changes caused control deficiencies, which in the aggregate resulted in a material weakness. Due to the existence of these material weaknesses, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was not effective as of March 31, 2021.

 

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit smaller reporting companies to provide only the management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended March 31, 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

	26

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

With the exception of the item described below, at March 31, 2021 the Company is not the subject of, or party to, any pending or threatened, legal actions.

 

In July 2019 the Company was named as the defendant in a legal proceeding brought by Tarpon Bay Partners LLC (the plaintiff) in the Judicial District Court of Danbury, Connecticut. The plaintiff asserts that the Company failed to convert two convertible notes held by the Plaintiff. The Company is vigorously contesting this claim. There is no current estimate on when this issue will be resolved.

 

In March 2021 the Company filed a Complaint for Damages and Other Relief against Tarpon Bay Partners, LLC, a Florida limited liability company; J.P. Carey Enterprises, Inc., a Florida profit corporation; Anvil Financial Management, LLC, a Florida limited liability company; Stephen Hicks, an individual; Joseph C Canouse, an individual; Jeffrey M. Canouse, an individual; Paul A. Rachmuth, an individual; and Litt Law Group, LLC, a New York Limited Liability Company (collectively the “Defendants”) related to the involuntary bankruptcy petition. The Company is seeking damages from the Defendants for reasonable attorneys’ fees and costs, as well as compensatory, consequential special and punitive damages.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K filed on October 9, 2020, which could materially affect our business operations, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business operations and/or financial condition. There have been no material changes to our risk factors since the filing of our Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the three months ended March 31, 2021 the Company issued 61,399,000 shares of its common stock related to the conversion of $95,203 of principal and accrued interest of its convertible notes payable, at an average contract conversion price of $0.00155 per share. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

 

During the three months ended March 31, 2021 the Company issued 6,700,001 shares of its $0.0001 par value common stock to three consultants, as compensation. The shares were valued at $86,750, or $0.013 per share.

 

During the three months ended March 31, 2021 the Company issued 100,000,000 shares of its $0.0001 par value common stock to its directors and officers as compensation for services rendered. The shares were valued at $2,419,000, or $0.024 per share.

 

During the nine months ended March 31, 2021 the Company issued 348,261,583 shares of its $0.0001 par value common stock pursuant to the cashless exercise of warrants. The warrant shares were valued at $211,411, or 0.00061 per share.

 

During the nine months ended March 31, 2021 the Company issued 225,000,000 shares of its $0.0001 par value common stock to four investors as commitment shares pursuant to the issuance of promissory notes.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable to our operations.

 

Item 5. Other Information.

 

None.

 

 

Item 6. Exhibits

 

 

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

*	Filed herewith.

 

 

	27

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	VISIUM TECHNOLOGIES, INC.
	By:	/s/ Mark B. Lucky
May 17, 2021		Mark B. Lucky
		CEO, principal executive officer
	By:	/s/ Mark Lucky
May 17, 2021		Mark Lucky
		CFO, principal accounting officer

 

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