VISIUM TECHNOLOGIES, INC. The following information should be read in conjunction with our financial statements and accompanying notes included in this Annual Report on Form 10-K.
Overview
The Company was incorporated in
Since
In
Results of Operations Development Expense
For the year ended
Selling, General, and Administrative Expenses
For the year endedJune 30, 2022 , selling, general and administrative expenses were$3,879,158 as compared to$3,879,158 for the year endedJune 30, 2021 , an increase of$2,961,165 or approximately 322.6%. For the years endedJune 30, 2022 and 2021 selling, general and administrative expenses consisted of the following: Increase/ 2022 2021 (Decrease) % Change Accounting expense$ 61,283 $ 50,305 $ 10,978 22 % Consulting fees 44,575 56,455 (11,880 ) (21 %) Salaries 1,001,435 374,000 627,435 168 % Legal and professional fees 488,995 144,180 344,815 239 % Travel expense 15,512 1,459 14,053 963 % Occupancy expense 1,702 369 1,333 361 % Telephone expense 4,037 3,630 407 11 % Marketing expense 203,527 5,877 197,650 3,363 % Website expense 34,505 6,284 28,221 449 % Investor relations expense - 15,000 (15,000 ) (100 %) Stock based consulting expense 385,329 372,553 12,776 3 % Stock based compensation 1,936,633 2,809,000 (872,637 ) (31 %) Other 138,658 40,046 98,612 246 %$ 4,316,191 $ 3,879,158 $ 437,033 11 %
The increase in selling, general and administrative expenses during fiscal 2022,
when compared with the prior year, is primarily due to an increase in salaries
of
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Change in Fair Value of Derivative Liability
Years ended
June 30,
2022 2021
Gain on change in fair value of derivative liabilities
Changes 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. The increase in fair value of derivative liabilities recognized during fiscal 2021 is primarily due to a change in accounting estimate related to the accounting for derivative liabilities as a result of a decrease in share price.
Derivative Liability Expense
Years Ended
June 30, %
2022 2021 Change
Derivative liability expense $ -
The Company issued convertible notes in
Interest Expense
Years Ended
June 30, %
2022 2021 Change
Interest Expense $ 705,075 $ 442,167 48 %
Interest expense represents the stated interest of notes and convertible notes
payable as well as the amortization of debt discount. The increase in interest
expense during fiscal 2021 is primarily due to higher amortization of debt
discount of
Gain on Debt Write-Off
Years Ended
June 30,
2022 2021
Gain (loss) on debt write off/conversions
In
Accrued interest payable$ 385,803 Convertible notes payable 401,469$ 787,272 11 Table of Contents
Liquidity and Capital Resources
Balance at June 30,
2022 2021
Cash $ 136,990 $ 125,166
Accounts payable and accrued expenses (596,464 ) (425,804 )
Accrued compensation (614,589 ) (672,529 )
Notes, convertible notes, and accrued interest
At
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 were unable to generate sufficient funds from operations to fund our ongoing
operating requirements through
We intend to finance our operations using equity financing. We do not anticipate
incurring capital expenditures for the foreseeable future. We anticipate that we
will need to raise approximately
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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
Years Ended
June 30,
2022 2021
Cash flows from operating activities:
Net loss $ (5,193,515 ) $ (3,373,459 ) Non-cash Adjustments: (Gain) loss on debt settlement and expense write off (187,930 ) (607,271 Stock based compensation
2,178,437 3,163,000
Amortization of debt discount 571,081 305,499
Derivative liability expense - 1,059,282
(Gain) on change in derivative liability (1,119 ) (1,844,460 )
Amortization of deferred compensation 143,529 -
Amortization of prepaid expenses 55,417 -
Warrant conversion expense - 211,411
Changes in assets and liabilities
Accrued interest 97,926 96,007
Accrued compensation (57,940 ) 20,000
Accounts payable and accrued expenses 169,538 445,850
Prepaid license fees - (55,417
Discount on note payable - (213,082 )
Net cash used in operations (2,224,572 ) (792,640 )
Cash flows from financing activities:
Advance from officers, net - (102,340 )
Repayment of convertible notes payable (115,000 ) (73,700 )
Proceeds from sale of common stock 1,500,000 -
Proceeds from issuance of short term notes payable - 225,000
Repayment of short term notes payable (225,000 ) -
Proceeds from issuance of convertible notes payable, net of debt issuance costs
1,076,400 838,595
Net cash provided by financing activities 2,236,400 887,555
Net increase in cash $ 11,824 $ 94,915
Year ended June 30, 2022 Net cash used in operations in fiscal year 2022 increased by
Year endedJune 30, 2021
Net cash used in operations in fiscal year 2021 increased by
Capital Raising Transactions
Issuance of Convertible Notes Payable
We generated net proceeds of
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Convertible Notes Payable
The Company had convertible promissory notes aggregating approximately
Balance at Balance at
June 30, 2022 June 30, 2021 Convertible notes payable
(412,944 ) (396,033 )
Notes payable, net of discount
Convertible notes payable to
On
In
Notes Payable
The Company had promissory notes aggregating approximately
Common Stock Warrants
In January and
In
The holders of the warrants issued in 2019 exercised all of their warrants on a
cashless basis, during the three months ended
A summary of the status of the Company's outstanding common stock warrants as ofJune 30, 2022 and changes during the fiscal year ending on that date is as follows: Number of Weighted Average Warrants Exercise Price Common Stock Warrants Balance at beginning of year 9,012 $ 14.85 Granted 2,781 $ 14.22 Exercised (4,863 ) 0.0002 Forfeited (1,881 ) 0.0002 Balance at end of period 5,049 $ 0.011 Warrants exercisable at end of period 5,049 $ 0.011 Derivative Liability
The Company recognizes all derivative financial instruments on its balance sheet at fair value.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Climate Change
Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.
Critical Accounting Policies
We have identified the policies below as critical to our understanding of the results of our business operations. We discuss the impact and any associated risks related to these policies on our business operations throughout Management's Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.
In the ordinary course of business, we have made a number of estimates and
assumptions in preparing our financial statements in conformity with accounting
principles generally accepted in
We consider the following accounting policies to be those most important to the portrayal of our results of operations and financial condition:
Revenue Recognition
We recognize revenue in accordance with the
The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. In the event any discounts, sales incentives, or similar arrangements are agreed to with a customer, such amounts are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue.
Convertible Instruments - The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with 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 in accordance with EITF 00-19. 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 that term is described).
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 the provisions of ASC 470 20 "Debt with Conversion 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 when necessary 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.
The Company believes the certain conversion features embedded in convertible notes payable are not clearly and closely related to the economic characteristics of the Company's stock price. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation is most appropriate for the instrument (e.g., Cox, Ross & Rubinstein Binomial Tree valuation model), the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate.
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Share-Based Compensation
We compute share-based payments in accordance with the provisions of ASC Topic 718, Compensation - Stock Compensation and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants.
Restricted stock awards are granted at the discretion of the compensation committee of our board of directors (the "Board of Directors"). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods (vesting on a straight-line basis). The fair value of a stock award is equal to the fair market value of a share of our common stock on the grant date.
We estimate the fair value of stock options and warrants by using the Cox, Ross & Rubinstein Binomial Tree model. The Cox, Ross & Rubinstein valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk-free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of our common stock over the expected term of the option. Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term.
Determining the appropriate fair value model and calculating the fair value of equity-based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity-based payment awards represent management's best estimates, which involve inherent uncertainties and the application of management's judgment. We are required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.
We account for share-based payments granted to non-employees in accordance with ASC 505-50, "Equity Based Payments to Non-Employees." We determine the fair value of the stock-based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more readily determinable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete.
Derivative Instruments
We enter into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. We recognize derivative instruments as either assets or liabilities in the balance sheet and measure such derivative instruments at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The fair values of derivative financial instruments are estimated using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the nature of the instrument, the market risks that it embodies and the expected means of settlement are considered. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Cox, Ross & Rubinstein model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes.
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