VISIUM TECHNOLOGIES, INC. 10-Q

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 TruContext TM . 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. 21 Table of Contents 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”. 22 Table of Contents 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 Table of Contents 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.