VISIUM TECHNOLOGIES : Management's Discussion and Analysis and Results of Operations (form 10-Q)

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".

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                           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.

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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.

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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.

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Nine Months ended March 31, 2021

Net cash used in operations during the nine months ended March 31, 2021 increased by approximately $497,000 or 468% from the same period during fiscal year 2020. The increase in cash used in operations is primarily due to the increase in consulting and business development expense and cash paid for legal and professional fees. This cash was obtained through the sale of three promissory notes and three convertible notes that netted the Company $1,025,000.

Nine Months ended March 31, 2020

Net cash used in operations during the nine months ended March 31, 2020 decreased by approximately $384,833 or 78% from the same period during fiscal year 2019. The decrease in cash used in operations is primarily due to the decrease in consulting and business development expense and cash paid for legal and professional fees, and the decrease in cash paid for salaries to executives. This cash was obtained through the sale of a convertible note that netted the Company $48,000, and through advances of cash made to the Company by its officers and directors of $39,840.

Capital Raising Transactions

Issuance of promissory notes payable

We generated net proceeds of $225,000 from the issuance of three promissory notes payable and 225,000,000 shares or restricted common stock during the nine-month period ended March 31, 2021.

Issuance of convertible notes payable

On February 8, 2021, the Company issued a promissory note to Labrys Fund, LP in the principal amount of $500,000 for a purchase price of $475,000. Pursuant to the Purchase Agreement, the Company issued to the Investor a warrant to purchase 12,500,000 shares of the Company's common stock as a condition to closing. The closing of the Purchase Agreement occurred on February 10, 2021, with the Purchase Price funded to the Company on such date.

The Note, which reflects a $25,000 original issuance discount, bears interest at 8% per year and matures on February 8, 2022. The Note includes an interim payment of $65,000, payable to the Investor on August 8, 2021. The Company has the right to prepay the Note in full, including accrued but unpaid interest, without prepayment penalty provided an event of default, as defined therein, has not occurred. The Note is convertible into shares of the Company's common stock at conversion price of $0.02 per share, subject to adjustment as provided therein.

The Warrant is exercisable for a term of two-years from the date of issuance, at an exercise price equal to $0.02 per share, subject to adjustment as provided therein. The Warrants provide for cashless exercise to the extent that the market price (as defined therein) of one share of the Company's common stock is greater than the exercise price of the Warrant.

On January 12, 2021, the Company issued a promissory note to Labrys Fund, LP in the principal amount of $200,000 for a purchase price of $190,000. Pursuant to the Purchase Agreement, the Company issued to the Investor a warrant to purchase 22,172,949 shares of the Company's common stock as a condition to closing. The closing of the Purchase Agreement occurred on January 14, 2021, with the Purchase Price funded to the Company on such date.

The Note, which reflects a $10,000 original issuance discount, bears interest at 8% per year and matures on January 12, 2022. The Note includes an interim payment of $26,000, payable to the Investor on July 12, 2021. The Company has the right to prepay the Note in full, including accrued but unpaid interest, without prepayment penalty provided an event of default, as defined therein, has not occurred. The Note is convertible into shares of the Company's common stock at conversion price of $0.005 per share, subject to adjustment as provided therein.

The Warrant is exercisable for a term of two-years from the date of issuance, at an exercise price equal to 110% of the closing price of the Company's common stock on the date of issuance, subject to adjustment as provided therein. The Warrants provide for cashless exercise to the extent that the market price (as defined therein) of one share of the Company's common stock is greater than the exercise price of the Warrant.

On November 23, 2020, the Company issued a promissory note to Labrys Fund, LP in the principal amount of $150,000 for a purchase price of $135,000. Pursuant to the Purchase Agreement, the Company issued Labrys 90,000,000 shares of the Company's common stock as a condition to closing.

The Note, which reflects a 10% original issuance discount, bears interest at 12% per year and matures on November 23, 2021. The Note includes an interim payment of $16,800, payable to the Investor payable within 90 calendar days from the issuance of the Note. The Company has the right to prepay the Note in full, including accrued but unpaid interest, without prepayment penalty provided an event of default, as defined therein, has not occurred. The Note is convertible into shares of the Company's common stock at conversion price of $0.001575 per share, subject to adjustment as provided therein.

Other outstanding obligations at March 31, 2021

Convertible Notes Payable

The Company had convertible promissory notes aggregating $742,600 outstanding at March 31, 2021. The accrued interest amounted to approximately $541,000 as of March 31, 2021. The Convertible Notes Payable bear interest at rates ranging between 0% and 18% per annum. Interest is generally payable monthly. The Convertible Notes Payable are generally convertible at rates ranging between $0.09 and $0.60 per share, at the holders' option. At March 31, 2021, all convertible promissory notes have matured and are in default.

Convertible notes payable to ASC Recap LLC

On July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC ("ASC") two convertible promissory notes with principal amounts of $25,000 and $125,000, respectively. These two notes were issued as a fee for services under a 3(a)10 transaction that was never consummated and therefore there was no performance by ASC to earn the notes. As a result, while the Company continues to carry the balance of these notes on its balance sheet, it does not believe the notes payable balances are owed. The July 22, 2013 note matured on March 31, 2014 and a balance of $22,965 remains unpaid. The May 6, 2014 note matured on May 6, 2016 and remains unpaid. The notes are convertible into the common stock of the Company at any time at a conversion price equal to 50% of the lowest closing bid price of our common stock for the twenty days prior to conversion.

Notes Payable

The Company had promissory notes aggregating $580,000 at March 31, 2021. The related accrued interest amounted to approximately $188,400 at March 31, 2021. The Notes Payable bear interest at rates ranging between 8% and 16% per annum. Interest is generally payable monthly. All promissory notes have matured as of March 31, 2021.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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