VISIUM TECHNOLOGIES, INC. 10-Q

Item 1. Financial Statements Visium Technologies, Inc. CONSOLIDATED BALANCE SHEETS September 30, 2023 June 30, 2023(1) (Unaudited) ASSETS Current assets: Cash $ 30,531 $ 9,982 Prepaid license fee 58,339 - Total current assets 88,870 9,982 Total assets $ 88,870 $ 9,982 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable and accrued expenses $ 1,034,918 $ 845,502 Accrued compensation 1,528,129 1,371,879 Due to officer 117,633 99,578 Accrued interest 536,802 548,041 Convertible notes payable, net of discount of $ 3,512 and $ 0 , as of September 30, 2023 and June 30, 2023, respectively 845,803 937,576 Derivative liability 141,103 80,707 Notes payable, net of discount of $ 15,954 and $ 26,805 , as of September 30, 2023 and June 30, 2023, respectively 500,316 380,013 Total current liabilities 4,704,704 4,263,296 Commitments and contingencies (Note 11) Stockholders’ deficit: Preferred stock Series A Convertible Stock ($ 0.001 par value; 20,000,000 shares authorized, 13,992,340 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively) 13,992 13,992 Series B Convertible Stock ($ 0.001 par value 30,000,000 shares authorized, 1,327,670 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively) 1,328 1,328 Series AA Convertible Stock ($ 0.001 par value; 1 share authorized, 1 share issued and outstanding as of September 30, 2023 and June 30, 2023, respectively) 0 0 Common stock, $ 0.0001 par value, 1,000,000,000 shares authorized: 47,845,713 shares issued and 45,522,379 outstanding at September 30, 2023, and 37,199,647 shares issued and 29,844,713 outstanding at June 30, 2023, respectively (See Note 7) 4,554 2,987 Additional paid in capital 56,306,851 55,597,779 Accumulated deficit ( 60,942,559 ) ( 59,869,400 ) Total stockholders’ deficit ( 4,615,834 ) ( 4,253,314 ) Total liabilities and stockholders’ deficit $ 88,870 $ 9,982 (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) Three Months Ended September 30, 2023 2022 Net revenues $ - $ - Operating expenses: Selling, general and administrative 508,140 359,639 Development expense 28,363 54,892 Total Operating Expenses 536,503 414,531 Loss from Operations ( 536,503 ) ( 414,531 ) Other income (expenses): Gain (loss) on change in fair value of derivative liabilities ( 60,396 ) 11,371 Gain (loss) on extinguishment of debt 54,730 ( 504,925 ) Interest expense ( 46,530 ) ( 129,738 ) Total other income (expenses) ( 52,196 ) ( 623,292 ) Net loss $ ( 588,699 ) $ ( 1,037,823 ) Common stock deemed dividends ( 484,460 ) - Net income attributable to common stock holders – basic and diluted ( 1,073,159 ) ( 1,037,823 ) Loss per common share basic and diluted $ ( 0.03 ) $ ( 0.36 ) Weighted average common shares outstanding - basic and diluted 36,316,174 2,896,601 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) Preferred Stock - Series A $0.001 Par Value Preferred Stock - Series B $0.001 Par Value Preferred Stock - Series AA $0.001 Par Value Common Stock $0.0001 Par Value Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Balance at June 30, 2023 13,992,340 $ 13,992 1,327,670 $ 1,328 1 $ 0 29,844,713 $ 2,987 $ 55,597,779 $ ( 59,869,400 ) $ ( 4,253,314 ) Shares issued as compensation to directors and officers 3,720,000 372 62,496 62,868 Shares issued for consulting services 1,139,166 114 47,237 47,351 Shares issued to employees 240,000 24 4,031 4,055 Shares issued for conversion of notes payable 10,578,500 1,057 110,848 111,905 Deemed dividend 484,460 ( 484,460 ) - Net loss for the three months ended September 30, 2023 ( 588,699 ) ( 588,699 ) Balance at September 30, 2023 13,992,340 $ 13,992 1,327,670 $ 1,328 1 $ 0 45,522,379 $ 4,554 $ 56,306,851 $ ( 60,942,559 ) $ ( 4,615,834 ) 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 Preferred Stock - Series B $0.001 Par Value Preferred Stock - Series AA $0.001 Par Value Common Stock $0.0001 Par Value Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Balance at June 30, 2022 13,992,340 $ 13,992 1,327,670 $ 1,328 1 $ 0 2,896,385 $ 288 $ 53,749,386 $ ( 56,558,605 ) $ ( 2,793,611 ) Shares issued as compensation to directors and officers 3,705 2 27,208 27,210 Shares issued for consulting services 1,482 - 15,772 15,772 Shares issued due to reverse split (rounding) 18 - - Warrants issued on extinguishment of debt 186,972 186,972 Net loss for the three months ended September 30, 2022 ( 1,037,823 ) ( 1,037,823 ) Balance at September 30, 2022 13,992,340 $ 13,992 1,327,670 $ 1,328 1 $ 0 2,901,590 $ 290 $ 53,979,338 $ ( 57,596,428 ) $ ( 3,601,480 ) See NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. 6 Table of Contents Visium Technologies, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three-months ended September 30, 2023 2022 Cash flows from operating activities: Net loss $ ( 588,699 ) $ ( 1,037,823 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 114,275 43,016 (Gain) loss on change in derivative liabilities 60,396 ( 11,371 ) Loss on extinguishment of debt ( 54,730 ) 504,925 Amortization of debt discount 11,235 94,956 Changes in operating assets and liabilities: Accounts payable 150,702 50,564 Prepaid expenses ( 58,339 ) ( 52,500 ) Accrued interest 63,201 34,782 Accrued compensation 156,250 205,986 Net cash used in operating activities ( 145,709 ) ( 167,466 ) Cash flows from financing activities: Advances from (repayment to) officers 18,056 53,000 Repayment of convertible notes payable ( 44,250 ) - Proceeds from convertible notes 83,000 - Proceeds from promissory notes 135,000 - Repayment of promissory notes payable ( 25,548 ) - Net cash provided by (used in) financing activities 166,258 53,000 Net increase (decrease) in cash 20,549 ( 114,466 ) Cash, beginning of period 9,982 136,940 Cash, end of period $ 30,531 $ 22,524 Supplemental disclosures of cash flow information: Cash paid for interest $ 9,541 $ - Cash paid for income taxes $ - $ - Non-cash investing and financing activities: Issuance of common stock for conversion of notes payable and accrued interest $ 111,905 $ - 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 $ 588,699 had net cash used in operating activities of $ 145,709 and negative working capital of $ 4,615,834 . These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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 $ 250,000 . As of September 30, 2023 and June 30, 2023, the Company did not exceed these FDIC limits. 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 $ 141,103 . Fair Value of Financial Instruments The Company accounts for assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. Additional Disclosures Regarding Fair Value Measurements The carrying value of cash, accounts payable and accrued expenses, accrued compensation, notes payable and convertible promissory notes payable, approximate their fair value due to the short maturity of these items or the use of market interest rates. 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. 10 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: September 30, June 30, 2023 2023 Weighted average common shares outstanding 36,316,174 6,306,120 Effect of dilutive securities-when applicable: Convertible promissory notes 29,138,973 38,998,249 Preferred stock 11,348 11,348 Common stock options 2,222 2,222 Warrants 5,114,576 5,115,207 Fully diluted earnings per share—adjusted weighted-average shares and assumed conversions 70,583,293 50,433,146 12 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 $ 77,850 annually, beginning July 1 of each year. The prepaid license fee is amortized on a straight-line basis over the term of the license agreement, and is included in Development expense in our Statement of Operations. As of September 30, 2023 the prepaid license fee was $ 58,339 . 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 $ 60,396 and gain of $ 11,371 for the three months September 30, 2023 and 2022, respectively in the Company’s consolidated statements of operations, under the caption “Gain in change of fair value of derivative liability”. The fair value of the warrants at September 30, 2023 and June 30, 2023 was $ 0 and $ 0 , respectively. The fair value of the derivative liability related to the convertible debt at September 30, 2023 and June 30, 2023 is $ 141,103 and $ 80,707 , respectively, which is reported on the consolidated balance sheet under the caption “Derivative liability”. The Company has determined its derivative liability to be a Level 3 fair value measurement. The significant assumptions used in the Cox, Ross & Rubinstein Binomial Tree valuation of the derivative are as follows: Three Months Ended September 30, 2023 2022 Effective exercise price $ 0.00784 $ 0.80 – $ 27.00 Effective market price $ 0.0252 $ 0.65 Expected volatility 192.39 % 289.4 % to 619.1 % Risk-free interest 5.6 % 3.2 %- 4.2 % Expected terms 60 days 60 – 732 days Expected dividend rate 0 % 0 % Changes in the derivative liabilities during the three months ended September 30, 2023 is follows: Derivative liability at June 30, 2023 $ 80,707 Loss on change in fair value of derivative liability $ 60,396 Derivative liability at September 30, 2023 $ 141,103 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 $ 548,041 Conversion of accrued interest into common stock ( 39,009 ) Interest expense paid in cash ( 9,541 ) Interest expense accrued for the three months ended September 30, 2023 37,311 Accrued interest payable at September 30, 2023 $ 536,802 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: September 30, June 30, 2023 2023 Convertible notes payable $ 849,315 $ 937,576 Discount on convertible notes ( 3,512 ) - Convertible notes, net $ 845,803 $ 937,576 The Company had convertible promissory notes aggregating approximately $ 845,803 and $ 937,576 at September 30, 2023 and June 30, 2023, respectively. The related accrued interest amounted to approximately $ 301,660 and $ 324,031 at September 30, 2023 and June 30, 2023, respectively. The convertible notes payable bear interest at rates ranging from 0 % to 18 % per annum. The convertible notes are generally convertible, at the holders’ option, at rates ranging from $ 0.0169 to $ 22,500 per share, as a result of the two reverse stock splits. At September 30, 2023, approximately $ 768,992 of convertible promissory notes had matured, are in default and remain unpaid. There are no punitive default provisions included in the terms of these convertible promissory notes. The changes in the convertible notes payable balance is summarized below: Convertible payable at June 30, 2023 $ 937,576 Convertible notes issued during the three months ended September 30, 2023 86,900 Convertible notes repaid in cash ( 44,250 ) Discount related to convertible notes payable ( 3,512 ) Conversion of convertible notes payable into common stock ( 130,911 ) Convertible payable at September 30, 2023 $ 845,803 For the three months ended September 30, 2023, the following summarizes the conversion of debt for common shares: Amount of Amount of Adjustment Conversion Shares Converted Converted Conversion To Price Name Issued Principal Interest Expense Fair Value Total Per Share Talos Victory Fund 778,500 7,474 3,826 1,750 ( 5,265 ) 7,785 $ 0.0169 FirstFire 2,000,000 33,800 - - ( 7,800 ) 26,000 0.0169 Mast Hill 7,800,000 89,637 35,183 7,000 ( 53,700 ) 78,120 0.0169 Total 10,578,500 $ 130,911 $ 39,009 $ 8,750 $ ( 66,765 ) $ 111,905 $ 0.0169 The noteholders converted the principal and interest related to these notes at a conversion rate of $ 0.0169 per share when the then prevailing market price was at a lower price, resulting in a gain on the extinguishment of this debt of $ 66,765 . 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 $ 12,035 . A recap of the Gain on extinguishment of debt follows: Loss on extinguishment of debt related to payoff of convertible note $ ( 12,035 ) Gain on extinguishment of debt related to note conversions 66,765 $ 54,730 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 $ 2.43 per share, subject to adjustment as provided therein. 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 $ 484,460 and is recorded as a deemed dividend with a corresponding increase and decrease in additional paid in capital as of September 30, 2023. Additionally, for the three months ended September 30, 2023, it is reflected as a reduction to the net loss for the year to arrive at the net loss attributable to common shareholders to recognize the effect of the price protection provisions. Notes Payable The Company had promissory notes aggregating $ 500,316 and $ 380,013 at September 30, 2023 and June 30, 2023, respectively. The related accrued interest amounted to approximately $ 235,142 and $ 224,010 at September 30, 2023 and June 30, 2023, respectively. The notes payable bear interest at rates ranging from 0 % to 16 % per annum and are payable monthly. Promissory notes totaling $ 205,000 have matured as of September 30, 2023. 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 1,000,000,000 authorized common shares. At September 30, 2023, the Company has 47,845,713 common shares issued of which 45,522,379 were outstanding, which is net of approximately 2,323,000 unvested shares issued for the restricted stock awards granted during the year. 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 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 $ 0.0416 per share. Preferred Stock Series A and B issued and outstanding shares of the Company’s convertible preferred stock have a par value of $ 0.001 . All classes rank(ed) prior to any class or series of the Company’s common stock as to the distribution of assets upon liquidation, dissolution or winding up of the Company or as to the payment of dividends. All preferred stock shall have no voting rights except if the subject of such vote would reduce the amount payable to the holders of preferred stock upon liquidation or dissolution of the company and cancel and modify the conversion rights of the holders of preferred stock as defined in the certificate of designations of the respective series of preferred stock. Series A Convertible Preferred Stock The Series A Preferred Stock has a stated value of $ 750.00 per share. Each one share of Series A Preferred Stock is convertible into one (1) share of Common Stock. In the event the Common Stock price per share is lower than $0.10 (ten cents) per share then the Conversion shall be set at $ 0.035 per share. The Common Stock shares are governed by Lock-Up/Leak-Out Agreements. Series B Convertible Preferred Stock Thirty million ( 30,000,000 ) shares of preferred stock were designated as a new Series B Preferred stock in April 2016. This new Series B Preferred Stock has a $ 0.001 par value, and each 300 shares is convertible into one share of the Company’s common stock, with a stated value of $ 375 per share. Series AA Convertible Preferred Stock In March 2018, the Company authorized and issued one share of Series AA convertible preferred stock which provides for the holder to vote on all matters as a class with the holders of Common Stock and each share of Series AA Convertible Preferred Stock shall be entitled to 51% of the common votes on any matters requiring a shareholder vote of the Company. Each one share of Series AA Convertible Preferred Stock is convertible into one (1) share of Common Stock. Mark Lucky, our 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 138,667 warrants with a five year life, and a fixed exercise price of $ 1.35 per share, as part of a modification to three outstanding convertible notes payable. The Company evaluated these amendments under ASC 470-50, “ Debt - Modification and Extinguishment” , and concluded that the issuance of these warrants in exchange for deferring the interim interest payments that were due resulted in significant and consequential changes to the economic substance of the debt and thus resulted in accounting for these modifications as an extinguishment of the debt. The Company recorded a loss of extinguishment of debt of $ 504,925 . These warrants had price protection provisions that allow for the reduction in the current exercise price upon the occurrence of certain events, including the Company’s issuance of common stock or securities convertible into or exercisable for common stock, such as options and warrants, at a price per share less than the exercise price then in effect. For instance, if the Company issues shares of its common stock or options exercisable for or securities convertible into common stock at an effective price per share of common stock less than the exercise price then in effect, the exercise price will be reduced to the effective price of the new issuance. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. Due to the price protection features of these warrants, the Company issued 5,048,426 warrant shares to these warrant holders. 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: Weighted Average Number of Warrants Exercise Price Common Stock Warrants Balance at beginning of year 5,115,207 $ 0.025 Granted - - Exercised - - Forfeited ( 631 ) 10.395 Balance at end of period 5,114,716 $ 0.023 Warrants exercisable at end of period 5,114,576 $ 0.023 Weighted average fair value of warrants granted due to repricing during the period - The following table summarizes information about common stock warrants outstanding at September 30, 2023: Warrants Outstanding Warrants Exercisable Range of Exercise Price Number Outstanding At September 30, 2023 Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable At September 30, 2023 Weighted Average Exercise Price $ 0.0169 5,112,426 3.92 Years $ 0.0169 5,112,426 $ 0.0169 12.285 1,339 1.01 Years 12.285 1,339 12.285 20.385 811 1.01 Years 20.385 811 20.385 5,114,576 3.92 Years $ 0.023 5,114,576 $ 0.023 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 16 million shares at an average price of $ 27.00 with a fair value of $ 0.00 . For the three months ended September 30, 2023 and 2022, the Company did not issue any options to purchase shares, respectively. Upon exercise, shares of new common stock are issued by the Company. For the three months ended September 30, 2023 and 2022, the Company recognized an expense of $ 0 and $ 0 , respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a binomial option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of September 30, 2023, the Company had $ 0 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 0.83 years. The Company used straight-line amortization of compensation expense over the one-year requisite service or vesting period of the grant. The Company recognizes forfeitures as they occur. There are options to purchase approximately 2,222 shares that have vested as of September 30, 2023. 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: Year ended June 30, 2023 2022 Expected volatility - % - % Expected term - - Risk-free interest rate - % - % Forfeiture Rate - % - % Expected dividend yield - % - % 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: Weighted Average Weighted Exercise Grant Date Fair Aggregate Intrinsic Average Remaining Shares Price Value Value Term (Yrs) Options At June 30, 2023 2,222 $ 27.00 $ - $ - 2.59 Granted - - - - Exercised - - - - Forfeiture and cancelled - - - - At September 30, 2023 2,222 $ 27.00 $ - $ - 2.59 17 Table of Contents VISIUM TECHNOLOGIES, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 Note 8 - STOCK-BASED COMPENSATION, continued The following table summarizes information about employee stock options outstanding at September 30, 2023: Outstanding Options Vested Options Number Number Outstanding Weighted Weighted Exercisable Weighted Weighted at Averaged Averaged at Averaged Averaged September 30, Remaining Exercise September 30, Exercise Remaining Range of Exercise Price 2023 Life Price 2023 Price Life $ 27.00 2,222 2.59 $ 27.00 2,222 $ 27.00 2.59 Outstanding options 2,222 2.59 $ 27.00 2,222 $ 27.0 0 2.59 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: For the three months ended September 30, 2023 Weighted Average Grant Date Shares Fair Value Unvested at June 30, 2023 7,297,475 $ 0.06 Granted 125,000 $ 0.0179 Forfeited - $ - Vested ( 5,099,166 ) $ 0.02 Unvested at September 30, 2023 2,323,309 $ 0.129 Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2023 was $ 298,715 and is expected to be recognized over a weighted average period of 0.5 years. The recognition of expense related to vested shares is accounted for as stock-based consulting expense and stock-based compensation expense for a total of $ 114,275 for the three months ended September 30, 2023. 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 $ 117,633 outstanding of such advances made to the Company. NOTE 10 - ACCRUED PAYROLL Accrued payroll consist of the following at: September 30 June 30 2023 2023 Accrued Payroll - officers $ 963,346 $ 900,846 Accrued payroll - staff 564,783 471,033 $ 1,528,129 $ 1,371,879 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 include provisions for a royalty payment on revenues collected of 6% . As of September 30, 2023, we have not generated any revenue related to these license agreements. 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. 19 Table of Contents 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 $ $ $ 141,103 Total derivative liability $ - $ - $ 141,103 NOTE 13: SUBSEQUENT EVENTS In October 2023 the Company issued 3,915,833 shares of our $ 0.0001 par value common stock to eight consultants for services provided, valued at $ 22,192 , or at an average price per share of $ 0.057 . In October 2023 our directors and officers vested 18,990,000 shares of our $ 0.0001 par value common stock, valued at $ 319,156 , or an average price per share of $ 0.0168 . In October 2023 our employees vested 3,630,000 shares of our $ 0.0001 par value common stock to four employees as compensation, valued at $ 60,992 , or an average price per share of $ 0.0168 . In October 2023 the Company issued 5,867,930 shares of its $ 0.0001 par value common stock upon the conversion of principal and interest of $ 93,918 of its outstanding convertible notes, valued at $ 0.0169 per share. On October 19, 2023, the Company amended the Company’s Amended and Restated Certificate of Incorporation, authorizing 30,000 shares of a newly created and designated class of Series C Preferred Stock, par value $ 0.001 per share (the “Series C Preferred”). Shares of Series C Preferred have a stated value of $ 100 per share and are convertible into shares of the Company’s common stock, par value $0.0001 per share, at the price of $ 0.075 per share, subject to customary adjustment, including in the event of certain issuances at a price lower than $0.075 per share, as set forth in the Certificate of Designations for the Series C Preferred. 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). 20 Table of Contents