UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to _________.
Commission file number
(Exact name of registrant as specified in its charter) |
| ||
(State of Incorporation) |
| (IRS Employer Identification No.) |
(Address of principal executive offices)
(
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 |
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 ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller Reporting Company | |
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value per share, as of November 17, 2023, was
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 Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on October 6, 2023. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our registration statement on Form 10-K.
2 |
VISIUM TECHNOLOGIES, INC.
INDEX
2 |
Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Visium Technologies, Inc.
CONSOLIDATED BALANCE SHEETS
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| September 30, 2023 |
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| June 30, 2023(1) |
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ASSETS |
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Current assets: |
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Cash |
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Prepaid license fee |
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Total current assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable and accrued expenses |
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Accrued compensation |
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Due to officer |
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Accrued interest |
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Convertible notes payable, net of discount of $ |
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Derivative liability |
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Notes payable, net of discount of $ |
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Total current liabilities |
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Commitments and contingencies (Note 11) |
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Stockholders’ deficit: |
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Preferred stock |
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Series A Convertible Stock ($ |
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Series B Convertible Stock ($ |
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Series AA Convertible Stock ($ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
| $ |
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| $ |
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(1) Derived from audited financial statements
See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3 |
Table of Contents |
Visium Technologies, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| Three Months Ended September 30, |
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| 2023 |
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| 2022 |
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Net revenues |
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Operating expenses: |
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Selling, general and administrative |
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Development expense |
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Total Operating Expenses |
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Loss from Operations |
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Other income (expenses): |
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Gain (loss) on change in fair value of derivative liabilities |
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Gain (loss) on extinguishment of debt |
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Interest expense |
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Total other income (expenses) |
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Net loss |
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| $ | ( | ) |
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Common stock deemed dividends |
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Net income attributable to common stock holders – basic and diluted |
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Loss per common share basic and diluted |
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| $ | ( | ) |
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Weighted average common shares outstanding - basic and diluted |
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See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023
(UNAUDITED)
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| Preferred Stock - Series A $0.001 Par Value |
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| Preferred Stock - Series B $0.001 Par Value |
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| Preferred Stock - Series AA $0.001 Par Value |
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| Common Stock $0.0001 Par Value |
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| Additional Paid-in |
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| Accumulated |
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| Total Stockholders’ |
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| Shares |
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| Amount |
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| Amount |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
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Balance at June 30, 2023 |
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| $ |
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| $ |
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| $ |
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| $ |
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Shares issued as compensation to directors and officers |
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Shares issued for consulting services |
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Shares issued to employees |
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Shares issued for conversion of notes payable |
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Deemed dividend |
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Net loss for the three months ended September 30, 2023 |
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Balance at September 30, 2023 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022
(UNAUDITED)
|
| Preferred Stock - Series A $0.001 Par Value |
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| Preferred Stock - Series B $0.001 Par Value |
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| Preferred Stock - Series AA $0.001 Par Value |
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| Common Stock $0.0001 Par Value |
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| Additional Paid-in |
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| Accumulated |
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| Total Stockholders’ |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
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Balance at June 30, 2022 |
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| $ |
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| $ |
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| $ |
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Shares issued as compensation to directors and officers |
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Shares issued for consulting services |
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Shares issued due to reverse split (rounding) |
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Warrants issued on extinguishment of debt |
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Net loss for the three months ended September 30, 2022 |
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Balance at September 30, 2022 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
6 |
Table of Contents |
Visium Technologies, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Three-months ended |
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| September 30, |
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| 2023 |
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| 2022 |
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Cash flows from operating activities: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock based compensation |
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(Gain) loss on change in derivative liabilities |
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Loss on extinguishment of debt |
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Amortization of debt discount |
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Changes in operating assets and liabilities: |
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Accounts payable |
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Prepaid expenses |
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Accrued interest |
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Accrued compensation |
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Net cash used in operating activities |
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Cash flows from financing activities: |
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Advances from (repayment to) officers |
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Repayment of convertible notes payable |
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Proceeds from convertible notes |
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Proceeds from promissory notes |
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Repayment of promissory notes payable |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
| $ |
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| $ |
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Cash paid for income taxes |
| $ |
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| $ |
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Non-cash investing and financing activities: |
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Issuance of common stock for conversion of notes payable and accrued interest |
| $ |
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| $ |
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See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
7 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 1: ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
Visium Technologies, Inc., or the Company, is a Florida corporation that was originally incorporated in Nevada in October 1987. It was formerly known as Jaguar Investments, Inc. between October 1987 and May 2003, Power2Ship, Inc. between May 2003 and November 2006, Fittipaldi Logistics, Inc. between November 2006 and December 2007, and as NuState Energy Holdings, Inc. between December 2007 and March 5, 2018 when it changed its name to Visium Technologies, Inc.
The Company is focused on professional technology services, digital risk management, and cybersecurity for network physical security, the Cloud, mobility solutions, critical infrastructure security, and the Internet of Things (“IOT”).
In April 2021 the Company created JAJ Advisory, LLC, a Viriginia limited liability company. The LLC was established to account for non-technology/cybersecurity related business activities that the Company may pursue.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis. For the three months ended September 30, 2023 we had a net loss of $
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, 2023, contained in the Company’s Annual Report on Form 10-K filed with the SEC on October 6, 2023. The results of operations for the three months ended September 30, 2023, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2024.
8 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The fiscal year ends on June 30. References to fiscal year 2024, for example, refer to the fiscal year ending June 30, 2024.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Actual results will differ from those estimates. Included in these estimates are assumptions used in Cox, Ross & Rubinstein Binomial Tree stock-based compensation valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate and in the valuation allowance of deferred tax assets and derivative liability.
Cash and Cash Equivalents
The Company considers all highly liquid, temporary, cash equivalents or investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company had no cash equivalents during the three months ended September 30, 2023 and year ended June 30, 2023.
Concentration of Credit Risks
The Company is subject to a concentration of credit risk from cash.
The Company’s cash account is held at a financial institution and is insured by the Federal Deposit Insurance Corporation, or FDIC, up to $
Derivative Liabilities
The Company assessed the classification of its derivative financial instruments as of September 30, 2023 and June 30, 2023 which consist of convertible instruments and rights to shares of the Company’s common stock and determined that such derivatives meet the criteria for liability classification under ASC 815.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
9 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance sheet thereafter and in determining which valuation method is most appropriate for the instrument, the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any. The Company recorded a derivative liability as of September 30, 2023 of $
Fair Value of Financial Instruments
The Company accounts for assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities. |
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Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. |
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Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
Additional Disclosures Regarding Fair Value Measurements
The carrying value of cash, accounts payable and accrued expenses, accrued compensation, notes payable and convertible promissory notes payable, approximate their fair value due to the short maturity of these items or the use of market interest rates.
Convertible Instruments
The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options. Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.
ASC 815-40, Contracts in Entity’s own Equity, generally provides that, among other things, if an event is not within the entity’s control, such contract could require net cash settlement and shall be classified as an asset or a liability.
The Company determines whether the instruments issued in the transactions are considered indexed to the Company’s own stock. During fiscal years 2014 through 2023 the Company’s issued convertible securities with variable conversion provisions that resulted in derivative liabilities. See discussion above under derivative liabilities that resulted in a change in derivative liability accounting.
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Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Revenue Recognition
All revenues are recorded in accordance with ASC 606, which is recognized when: (i) a contract with a client has been identified, (ii) the performance obligation(s) in the contract have been identified, (iii) the transaction price has been determined, (iv) the transaction price has been allocated to each performance obligation in the contract, and (v) the Company has satisfied the applicable performance obligation over time.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of September 30, 2023, the Company had not filed tax returns for the tax years ending June 30, 2008 through 2023 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 2022-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees is substantially aligned.
Under ASC Topic 718, “Compensation - Stock Compensation”. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.
The Company has elected to use the Cox, Ross & Rubinstein Binomial Tree valuation model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
11 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Segment Reporting
The Company operates in one business segment which technologies are focused on professional services and cybersecurity.
Recent Accounting Pronouncements
All new accounting pronouncements issued but not yet effective are not expected to have a material impact on our results of operations, cash flows or financial position. There have been no new accounting pronouncements not yet effective that have significance to our consolidated financial statements.
Basic and Diluted Earnings Per Share
Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of shares of Common Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common Stock and the dilutive Common Stock share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist of shares issuable upon the exercise of in-the-money stock options and warrants (calculated using the modified-treasury stock method) and conversion of other securities such as convertible debt or convertible preferred stock. Potential common shares that would be as follows:
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Weighted average common shares outstanding |
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Effect of dilutive securities-when applicable: |
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Preferred stock |
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Common stock options |
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Fully diluted earnings per share—adjusted weighted-average shares and assumed conversions |
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Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 3: PREPAID LICENSE FEE
In April 2022, the Company entered into two-year software license agreement to enable product development. The license fee is prepaid at a rate of $
NOTE 4: DERIVATIVE LIABILITY
Derivative liability – 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 embedded derivative liabilities. The Company’s derivative liabilities related to its convertible notes payable have been measured at fair value at September 30, 2023 and June 30, 2023 using the Cox, Ross & Rubinstein Binomial Tree valuation model.
The revaluation of the warrants and convertible debt at each reporting period, as well as the charges associated with issuing additional convertible notes, and warrants with price protection features, resulted in the recognition of a loss of $
The Company has determined its derivative liability to be a Level 3 fair value measurement. The significant assumptions used in the Cox, Ross & Rubinstein Binomial Tree valuation of the derivative are as follows:
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Effective exercise price |
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Effective market price |
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Expected volatility |
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Risk-free interest |
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Expected terms |
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Expected dividend rate |
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Changes in the derivative liabilities during the three months ended September 30, 2023 is follows:
Derivative liability at June 30, 2023 |
| $ |
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Loss on change in fair value of derivative liability |
| $ |
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Derivative liability at September 30, 2023 |
| $ |
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13 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 5: ACCRUED INTEREST PAYABLE
Changes in accrued interest payable during the three months ended September 30, 2023 is as follows:
Accrued interest payable at June 30, 2023 |
| $ |
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Conversion of accrued interest into common stock |
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Interest expense paid in cash |
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Interest expense accrued for the three months ended September 30, 2023 |
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Accrued interest payable at September 30, 2023 |
| $ |
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NOTE 6: CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
Convertible Notes Payable
At September 30, 2023 and June 30, 2023 convertible debentures consisted of the following:
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Convertible notes payable |
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Discount on convertible notes |
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Convertible notes, net |
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The Company had convertible promissory notes aggregating approximately $
The changes in the convertible notes payable balance is summarized below:
Convertible payable at June 30, 2023 |
| $ |
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Convertible notes issued during the three months ended September 30, 2023 |
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Convertible notes repaid in cash |
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Discount related to convertible notes payable |
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Conversion of convertible notes payable into common stock |
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Convertible payable at September 30, 2023 |
| $ |
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For the three months ended September 30, 2023, the following summarizes the conversion of debt for common shares:
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Talos Victory Fund |
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FirstFire |
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Mast Hill |
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Total |
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| $ |
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| $ |
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| $ |
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| $ |
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The noteholders converted the principal and interest related to these notes at a conversion rate of $
The Company repaid a convertible note in cash in September 2023. The repayment terms included a premium provision, resulting in a loss on the extinguishment of this debt of $
A recap of the Gain on extinguishment of debt follows:
Loss on extinguishment of debt related to payoff of convertible note |
| $ | ( | ) |
Gain on extinguishment of debt related to note conversions |
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In February 2022, the Company entered into Securities Purchase Agreements with three investors pursuant to which each investor purchased a promissory note, The Notes are convertible into shares of the Company’s common stock at a conversion price of $
These notes had price protection provisions that allow for the reduction in the current conversion 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 conversion 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 conversion price will be reduced to the effective price of the new issuance.
Due to the price protection features of these convertible notes, the difference between the amount of the fair value of the current conversion price and reduced conversion price amounted to $
Notes Payable
The Company had promissory notes aggregating $
14 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 7: STOCKHOLDERS’ DEFICIT
Common Stock
At September 30, 2023, the Company had
At September 30, 2023, the Company has
Issuances of Common Stock During the Three Months Ended September 30, 2023
Convertible Notes Payable
During the three months ended September 30, 2023 the Company issued
Stock Based Compensation
During the three months ended September 30, 2023 the Company issued
During the three months ended September 30, 2023
During the three months ended September 30, 2023
Preferred Stock
Series A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $
Series A Convertible Preferred Stock
The Series A Preferred Stock has a stated value of $
Series B Convertible Preferred Stock
Thirty million (
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 CEO, is the holder of the one share of Series AA Convertible Preferred Stock.
15 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 7: STOCKHOLDERS’ DEFICIT, continued
Common Stock Warrants
In September 2022 we issued
Due to the price protection features of these warrants, the Company issued
A summary of the status of the Company’s outstanding common stock warrants as of September 30, 2023 and changes during the fiscal year ending on that date is as follows:
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Common Stock Warrants |
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Weighted average fair value of warrants granted due to repricing during the period |
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The following table summarizes information about common stock warrants outstanding at September 30, 2023:
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Range of Exercise Price |
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16 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Note 8 - STOCK-BASED COMPENSATION
The Company adopted an Incentive Stock Plan on April 18, 2021. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. Options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.
Under the 2021 Stock Incentive Plan, the Company has issued options to purchase
For the three months ended September 30, 2023 and 2022, the Company recognized an expense of $
The Company uses a binomial option pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the binomial option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:
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Expected volatility |
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Expected term |
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Forfeiture Rate |
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Expected dividend yield |
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The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.
A summary of the status of the Company’s outstanding stock options as of September 30, 2023 and June 30, 2023 and changes during the periods ending on that date is as follows:
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Options |
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At June 30, 2023 |
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17 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Note 8 - STOCK-BASED COMPENSATION, continued
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Range of Exercise Price |
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| Price |
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$ | 27.00 |
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Outstanding options |
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As of September 30, 2023, the Company had no unrecognized pre-tax non-cash compensation expense.
Restricted Stock Awards
Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the three months ended September 30, 2023 is presented in the following table:
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Unvested at June 30, 2023 |
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Unvested at September 30, 2023 |
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Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2023 was $
18 |
Table of Contents |
VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
NOTE 9: RELATED PARTY TRANSACTIONS
Equity transactions with related parties are described in Note 7.
From time to time we have borrowed operating funds from Mr. Mark Lucky, our Chief Executive Officer and from certain Directors, for working capital. The advances were payable upon demand and were interest free. At September 30, 2023 there was $
NOTE 10 - ACCRUED PAYROLL
Accrued payroll consist of the following at:
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| 2023 |
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Accrued Payroll - officers |
| $ |
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NOTE 11: COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company operates virtually, with no office space rented. The Company has no future minimum annual payments under non-cancelable operating leases at September 30, 2023.
Contingencies
The Company accounts for contingent liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingencies. This guidance requires management to assess potential contingent liabilities that may exist as of the date of the financial statements to determine the probability and amount of loss that may have occurred, which inherently involves an exercise of judgment. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. For loss contingencies considered remote, no accrual or disclosures are generally made. Management has assessed potential contingent liabilities as of September 30, 2023, 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 MITRE Corporation
Legal Claims
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.
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VISIUM TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Note 12 – Fair Value Measurement
Fair value measurements
At September 30, 2023 and June 30, 2023, the fair value of derivative liabilities is estimated using the Cox, Ross & Rubinstein Binomial Tree valuation model using inputs that include the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate. The derivative liabilities are the only Level 3 fair value measures.
At September 30, 2023 the estimated fair values of the liabilities measured on a recurring basis are as follows:
|
| Fair Value Measurements at |
| |||||||||
|
| September 30, 2023: |
| |||||||||
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| |||
Derivative liability – Convertible notes |
| $ |
|
| $ |
|
| $ |
| |||
Total derivative liability |
| $ |
|
| $ |
|
| $ |
|
NOTE 13: SUBSEQUENT EVENTS
In October 2023 the Company issued
In October 2023 our directors and officers vested
In October 2023 our employees vested
In October 2023 the Company issued
On October 19, 2023, the Company amended the Company’s Amended and Restated Certificate of Incorporation, authorizing
The shares of the Series C Preferred shall rank (i) senior to the Company’s Common Stock and any other class or series of capital stock of the Company hereafter created, the terms of which specifically provide that such class or series shall rank junior to the Series C Preferred (each of the securities in clause (i) collectively referred to as “Junior Stock”) and (ii) pari passu with the Company’s Series A Preferred Stock, Series B Preferred Stock, Series AA Preferred Stock and any class or series of capital stock of the Company hereafter created and specifically ranking, by its terms, on par with the Series C Preferred, in each case as to dividend distributions or distributions of assets upon liquidation, dissolution or winding up of the Company or a Deemed Liquidation Event, whether voluntary or involuntary.
Holders of the Series C Preferred will vote together with the holders of the Company’s Common Stock on an as-converted basis on each matter submitted to a vote of holders of Common Stock (whether at a meeting of shareholders or by written consent).
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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. (“Visium”) was incorporated in Nevada as Jaguar Investments, Inc. during October 1987. During March 2003, a wholly owned subsidiary of the Company merged with Freight Rate, Inc., a development stage company in the logistics software business. During May 2003, the Company changed its name to Power2Ship, Inc. During October 2006, the Company merged with a newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc., a Nevada corporation, with the Company surviving but its name changed to Fittipaldi Logistics, Inc. effective November 2006. During December 2007, the Company merged with a newly formed, wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada corporation, with the Company surviving but renamed NuState Energy Holdings, Inc. effective December 2007. In March 2018, the Company brought in a new management team and changed its name to Visium Technologies, Inc.
Visium is a provider of cyber security visualization, big data analytics, automation, and IT infrastructure sevices. In March 2019, Visium entered into a software license agreement with MITRE Corporation to license a patented technology known as CyGraph, a tool for cyber warfare analytics, visualization and knowledge management. CyGraph is a military-grade, highly scalable big data analytics tool for cyber security, based on graph database technology. The development of the technology was sponsored by the US Army and is currently in use by the U.S. Army Cyber Command. CyGraph provides advanced analytics for cybersecurity situational awareness that is scalable, flexible and comprehensive. Visium has completed significant proprietary product development efforts to commercialize CyGraph, which the Company has rebranded as TruContextTM. The commercialization efforts included adding functionality to the core technology to make it a native cloud application, adding multi-user and multi-tenant capability, enhancing the graphical user interface, (“GUI”) to make the application more intuitive to use, and adding enhanced dashboard and reporting capabilities. TruContext would typically be deployed by an enterprise and be used by the security analyst to intuitively understand the massive amount of data flowing through the network environment, giving the analyst actionable information in real-time to ensure that the network is protected from threats. The analyst will understand the relationships of the assets in the data center, the communication patterns, and cybersecurity exposures, in real-time.
TruContext provides visualization, advanced cyber monitoring intelligence, threat hunting, forensic and root cause analysis, data modeling, analytics, and automation to help reduce risk, simplify security, and deliver better security outcomes. Our mission is to help people see and understand data, empowering decision-makers to make more informed and more timely decisions. Our solutions put the power of data into the hands of everyday people, allowing a broad population of business users to engage with their data, ask questions, solve problems, and create value.
Our products dramatically reduce the complexity and expense associated with traditional business intelligence applications. Our software allows people to access information, perform analysis, and share results without assistance from technical specialists. By putting powerful analytical technology directly into the hands of people who make decisions with data, we accelerate the pace of informed and intelligent decision-making. Our TruContext platform enables our customers to reduce or streamline their siloed and layered security products, simplifying operations while providing a comprehensive solution. Our solution automates certain previously manual tasks, freeing up personnel to focus on their most important objectives.
TruContext can be deployed in a broad range of use cases such as cyber security threat intelligence and forensics, IT/OT critical infrastructure security, supply chain analytics, anti-fraud, law enforcement, compliance, and health care. For example, a breach of your network might go undetected for months, as was the case with the Solar Winds hack that occurred in 2019-2020. In that case the hackers went undetected for 14 months. A Solar Winds type breach may not be preventable, but with TruContext analyzing streaming network data in real-time, this hack would almost certainly have been identified and remediated very quickly by the affected enterprise.
TruContext is a very effective tool for proactively and iteratively searching through networks to detect and isolate advanced threats that evade existing security solutions. Should a breach occur, TruContext can quickly perform forensics and root cause analysis, identifying when an incident occurred, how it occurred, and the downstream effects of the incident to the network.
One of the top challenges faced by Security practitioners is to keep up with the increase in new cyber attacks while investigating and remediating existing threats. Time is of the essence while investigating potential threats and determining the scope and root-cause of a potential reach.
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Shortage of resources and experienced personnel continues to limit the ability of companies to conduct thorough investigations. Root cause analysis and forensics are key to intelligently securing the network.
TruContext directly addresses these challenges by:
Providing real-time comprehensive visualized information on security events, that
| · | allow the cyber warrior to immediately pinpoint the root cause of the breach; and |
| · | know with certainty the priority and required remediation. |
The real-time ingestion of and visualization of massive amounts of data simplifies the cyber effort, allowing the cyber analyst to intuitively understand the security posture of the organization at a glance.
Using TruContext makes the cyber analyst significantly more productive by eliminating false positives and prioritizing threat events.
TruContext ingests cyber data from any source, making the data generated by other cyber tools easily understood and actionable. TruContext give the security analyst the ability to combine, layer, filter, and query data with a no-code user interface in a way that no other analytics platform can do.
There are some sophisticated and powerful cybersecurity tools currently available, but they all lack one thing – providing a comprehensive contextualized understanding of the data. Analysts have too many tools that don’t communicate, creating silos of data/information. TruContext brings all the information for a comprehensive visualization.
Our information technology consulting services division was launched in September 2023 to provide network engineering, system engineering, converged infrastructure deployment, software development, and cybersecurity services.
Visium currently plans to generate revenue in three (3) primary ways:
| · | through a virtual appliance model, primarily targeted to the Federal government, charging an annual seat license, with the seat license fee increasing based on the size of the network environment ; |
| · | through a SaaS model, charging a recurring monthly license fee for TruContext based on the size of the network environment and the number of TruContext Identifiers (nodes); and |
| · | through professional services to support and deliver project management, engineering, cybersecurity solutions and services to its customers, typically billed on an hourly basis, and delivered through a service contract. |
Partnership Ecosystem
We work with a number of technology alliance partners to design go-to-market strategies that combine our platform with products or services provided by our technology alliance partners. These partner integrations deliver more secure solutions and an improved end user experience to their customers. Our technology alliance partnerships focus on security analytics, network and infrastructure security, threat platforms and orchestration, and automation.
Visium heavily relies on our technology and infrastructure to provide our products and services to our customers. For example, we host many of our products using third-party data center facilities, and we do not control the operation of these facilities. In addition, we rely on certain technology that we license from third parties, including third-party commercial software and open-source software, which is used with certain of our solutions.
Competition
The markets for our solutions are highly competitive, and we expect both the requirements and pricing competition to increase, particularly given the increasingly sophisticated attacks, changing customer preferences and requirements, current economic pressures, and market consolidation. Competitive pressures in these markets may result in price reductions, reduced margins, loss of market share and inability to gain market share, and a decline in sales, any one of which could seriously impact our business, financial condition, results of operations, and cash flows. We may face competition due to changes in the manner that organizations utilize IT assets and the security solutions applied to them, such as the provision of privileged account security functionalities as part of public cloud providers’ infrastructure offerings, or cloud-based identity management solutions. Limited IT budgets may also result in competition with providers of other advanced threat protection solutions such as McAfee, LLC, Palo Alto Networks, Splunk Inc., and Dynatrace. We also may compete, to a certain extent, with vendors that offer products or services in adjacent or complementary markets to privileged access management, including identity management vendors and cloud platform providers such as Okta and Tableau.
Employees
As of September 30, 2023, we had eight (8) full time employees.
Available Information
All reports of the Company filed with the SEC are available free of charge through the SEC’s website at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
Our principal offices are located at 4094 Majestic Lane, Suite 360, Fairfax, Virginia 22033. Our telephone number is (703) 273-0383.
Our common stock is quoted on the OTC Pink under the symbol “VISM”.
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VISIUM TECHNOLOGIES, INC.
RESULTS OF OPERATIONS
Discussion of Results for Three Month Period Ended September 30, 2023 and 2022
|
|
|
| Increase/ |
|
| Increase/ |
| ||||||||
|
| Three-month period ended |
|
| (Decrease) |
|
| (Decrease) |
| |||||||
|
| September 30, |
|
| in $ 2023 |
|
| in % 2023 |
| |||||||
|
| 2023 |
|
| 2022 |
|
| vs 2022 |
|
| vs 2022 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative |
| $ | 508,140 |
|
| $ | 359,639 |
|
| $ | 148,501 |
|
|
| 41.30 | % |
Development expense |
|
| 28,363 |
|
|
| 54,892 |
|
|
| (26,529 | ) |
|
| (48.3 | )% |
Total operating expenses |
|
| 536,503 |
|
|
| 414,531 |
|
|
| 121,972 |
|
|
| 29.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (536,503 | ) |
|
| (414,531 | ) |
|
| (121,972 | ) |
|
| (29.4 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on change in fair value of derivative liabilities |
|
| (60,396 | ) |
|
| 11,371 |
|
|
| (71,767 | ) |
|
| (631.1 | )% |
Loss on reconstruction of debt |
|
| - |
|
|
| (504,925 | ) |
|
| 504,925 |
|
|
| 100.0 | % |
Gain on settlement of debt |
|
| 54,730 |
|
| - |
|
|
| 54,730 |
|
| 100.0 | % | ||
Interest expense |
|
| (46,530 | ) |
|
| (129,738 | ) |
|
| 83,208 |
|
|
| (64.1 | )% |
|
|
| (52,196 | ) |
|
| (623,292 | ) |
|
| 571,096 |
|
|
| (91.6 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (588,699 | ) |
|
| (1,037,823 | ) |
| $ | 449,124 |
|
|
| (43.3 | )% |
Selling, General, and Administrative Expenses
For the three months ended September 30, 2023, selling, general and administrative expenses were $508,140 as compared to $359,639 for the three months ended September 30, 2022, an increase of $148,501 or approximately 41.3%. For the three months ended September 30, 2023 and 2022 selling, general and administrative expenses consisted of the following:
|
| Three Months Ended |
|
|
|
|
| |||||||||
|
| September 30, |
|
| Increase/ |
|
|
| ||||||||
|
| 2023 |
|
| 2022 |
|
| Decrease |
|
| % Change |
| ||||
Accounting expense |
| $ | 30,579 |
|
| $ | 20,534 |
|
| $ | 10,045 |
|
|
| 48.9 | % |
Consulting fees |
|
| 75,001 |
|
|
| 10,000 |
|
|
| 65,001 |
|
|
| 650.0 | % |
Salaries |
|
| 243,390 |
|
|
| 276,662 |
|
|
| (33,272 | ) |
| (12.0 | %) | |
Legal and professional fees |
|
| 20,540 |
|
|
| 700 |
|
|
| 19,840 |
|
|
| 2834.3 | % |
Travel expense |
|
| 4,896 |
|
|
| 249 |
|
|
| 4,647 |
|
|
| 1866.3 | % |
Occupancy expense |
|
| 582 |
|
|
| 552 |
|
|
| 30 |
|
|
| 5.4 | % |
Telephone expense |
|
| 1,199 |
|
|
| 1,088 |
|
|
| 111 |
|
|
| 10.2 | % |
Website expense |
|
| - |
|
|
| 40 |
|
|
| (40 | ) |
| (100.0 | %) | |
Marketing expense |
|
| - |
|
|
| 172 |
|
|
| (72 | ) |
| (100.0 | %) | |
Stock based consulting expense |
|
| 47,347 |
|
|
| 15,772 |
|
|
| 31,575 |
|
|
| 200.2 | % |
Stock based compensation |
|
| 66,924 |
|
|
| 27,209 |
|
|
| 39,715 |
|
|
| 146.0 | % |
Other |
|
| 17,682 |
|
|
| 6,661 |
|
|
| 11,021 |
|
|
| 165.5 | % |
|
| $ | 508,140 |
|
| $ | 359,639 |
|
| $ | 148,501 |
|
|
| 41.4 | % |
The increase in selling, general and administrative expenses during fiscal Q1 of 2024, when compared with the prior year, is primarily due to an increase in consulting fees of $65,001, stock-based consulting expense of $31,575, stock-based compensation expense of $39,715, legal and professional expenses of $19,840, offset by lower salaries expense of $33,272.
We believe that our selling, general, and administrative expenses will increase as the stock based consulting and compensation expenses and legal and professional expenses may increase over the balance of the fiscal year. Other expenses may increase as we increase our business activity over the remainder of fiscal 2024.
23 |
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Development Expense
|
| Three-Months Ended |
|
|
|
| ||||||
|
| September 30, |
|
| % |
| ||||||
|
| 2023 |
|
| 2022 |
|
| Change |
| |||
Development expense |
| $ | 28,363 |
|
| $ | 54,892 |
|
|
| (48.3 | )% |
Development expense represents the expense of further enhancing and commercializing TruContext. We believe that our development expense will continue at a slightly lower expense rate for the remainder of fiscal 2024.
Interest Expense
|
| Three-Months Ended |
|
|
|
| ||||||
|
| September 30, |
|
| % |
| ||||||
|
| 2023 |
|
| 2022 |
|
| Change |
| |||
Interest expense |
| $ | 46,530 |
|
| $ | 129,738 |
|
| $ | (64.1 | )% |
Interest expense represents stated interest of notes and convertible notes payable, along with the amortization of debt discount. The decrease in interest expense during the three-month period ended September 30, 2023 is primarily due to the acceleration of discount amortization expense during fiscal 2023, and lower interest bearing note balances in the current year.
Liquidity and Capital Resources
|
| Balance at |
| |||||
|
| September 30, 2023 |
|
| June 30, 2023 |
| ||
Cash |
| $ | 30,531 |
|
| $ | 9,982 |
|
Accounts payable and accrued expenses |
|
| (1,034,918 | ) |
|
| (845,502 | ) |
Accrued compensation |
|
| (1,528,129 | ) |
|
| (1,371,879 | ) |
Notes, convertible notes, and accrued interest payable |
| $ | (1,882,921 | ) |
| $ | (1,865,630 | ) |
At September 30, 2023 and June 30, 2023, our total assets consisted of cash and prepaid expenses.
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, 2024. We may need to raise funds to enhance our working capital and use them for strategic purposes. If such need arises, we intend to generate proceeds from either debt or equity financing.
We intend to finance our operations using a mix of equity and debt financing. We do not anticipate incurring capital expenditures for the foreseeable future. We anticipate that we will need to raise approximately $180,000 per year in the near term to finance the recurring costs of being a publicly-traded company. In the long-term, we anticipate we will need to raise a substantial amount of capital to complete an acquisition. We are unable to quantify the resources we will need to successfully complete an acquisition. If these funds cannot be obtained, we may not be able to consummate an acquisition or merger, and our business may fail as a result.
Going Concern
The accompanying financial statements have been prepared on a going concern basis. The Company has used net cash in its operating activities of approximately $145,709 and $167,466 during the three-month periods ended September 30, 2023 and 2022, respectively, and has a working capital deficit of approximately $4.6 million and $4.3 million at September 30, 2023 and June 30, 2023, respectively. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future, once a merger with an operating company is consummated. Management plans may continue to provide for its capital requirements by issuing additional equity securities and debt and the Company will continue to find possible acquisition targets. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.
24 |
Table of Contents |
Three months ended September 30, 2023
Net cash used in operations during the three months ended September 30, 2023 decreased by $21,757 or 13% over the same period during fiscal year 2023.
Capital Raising Transactions
During the quarter ending September 30, 2023 we generated net proceeds of $135,000 from the issuance of three promissory notes and we generated net proceeds of $83,000 from the issuance of two convertible notes.
Other outstanding obligations at September 30, 2023
Convertible Notes Payable
The Company had convertible promissory notes aggregating $845,803 outstanding at September 30, 2023. The accrued interest amounted to approximately $301,660 as of September 30, 2023. 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 $0.0169 and $22,500 per share, at the holders’ option. At September 30, 2023, approximately $769,000 of the promissory notes have matured.
Notes Payable
The Company had promissory notes aggregating $500,316 at September 30, 2023. The related accrued interest amounted to approximately $235,142 at September 30, 2023. The Notes Payable bear interest at a rate of 0% to16% per annum. Interest is payable monthly. Promissory notes totaling $205,000 have matured as of September 30, 2023.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2023. In making this assessment, our management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.
During our assessment of the design and the effectiveness of internal control over financial reporting as of September 30, 2023, management identified the following material weaknesses:
A material weakness is “a significant deficiency, or a combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by us in a timely manner.” A significant deficiency is a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.
We intend to gradually improve our internal control over financial reporting to the extent that we can allocate resources to such improvements. We intend to prioritize the design of our internal control over financial reporting starting with our control environment and risk assessments and ending with control activities, information and communication activities, and monitoring activities. Although we believe the time to adapt in the next year will help position us to provide improved internal control functions into the future, in the interim, these changes caused control deficiencies, which in the aggregate resulted in a material weakness. Due to the existence of these material weaknesses, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was not effective as of September 30, 2023.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit smaller reporting companies to provide only the management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2023, 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
At September 30, 2023 the Company is not the subject of, or party to, any pending or threatened, legal actions.
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 6, 2023, 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.
Convertible Notes Payable
During the three months ended September 30, 2023 the Company issued 10,578,500 shares of its common stock related to the conversion of $111,905 of principal and accrued interest for two of its convertible notes payable, at an average contract conversion price of $0.0169 per share.
Stock Based Compensation
During the three months ended September 30, 2023 the Company issued 3,720,000 shares of its $0.0001 par value common stock as compensation to its directors and officers. The shares were valued at $62,868, or $0.0169 per share, based on the share price at the time of the transactions.
During the three months ended September 30, 2023 240,000 shares of its $0.0001 par value common stock vested to employees, as compensation under a consulting agreement. The shares were valued at $4,056, or $0.0169 per share.
During the three months ended September 30, 2023 1,139,166 shares of its $0.0001 par value common stock vested to consultants, as compensation under a consulting agreement. The shares were valued at $47,351, or $0.042 per share.
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
* Filed herein
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.