10-Q: Visium Technologies Reports Continued Losses in Q3 2024, Cites Going Concern Uncertainty

Visium Technologies reports a net loss of $2.275 million for the nine months ended March 31, 2024, raising concerns about its ability to continue as a going concern.

Summary

• Visium Technologies, Inc. reported its financial results for the quarter ended March 31, 2024.
• The company had no net revenues for the three and nine months ended March 31, 2024 and 2023.
• The net loss for the nine months ended March 31, 2024, was $2,275,069, compared to a net loss of $2,491,484 for the same period in 2023.
• Selling, general, and administrative expenses increased to $1,990,912 for the nine months ended March 31, 2024, from $1,461,560 in the prior year.
• Development expenses decreased to $67,256 for the nine months ended March 31, 2024, from $175,707 in the prior year.
• The company's auditors have raised substantial doubt about its ability to continue as a going concern.
• The company is dependent on obtaining financing to meet its obligations and generate profitable operations.
• As of March 31, 2024, the company had a working capital deficit of $4,909,651.
• The company plans to continue issuing additional equity and debt securities to meet its capital requirements.
• The company is entering the West Africa data center construction market with a contract valued at over $20 million, but no activity has occurred as of March 31, 2024.
• The company identified material weaknesses in its internal control over financial reporting as of March 31, 2024.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to the company's continued losses, going concern uncertainty, and material weaknesses in internal control. While there are some positive aspects, such as decreased cash used in operations, the overall financial situation is concerning.

Positives

• Net cash used in operations decreased by approximately 14.6% from the same period during fiscal year 2023.
• The company has a contract in West Africa valued at over $20 million to oversee the design and construction of data centers.
• Development expenses decreased by 36% for the nine months ended March 31, 2024.

Negatives

• The company had no net revenues for the three and nine months ended March 31, 2024 and 2023.
• The company's net loss for the nine months ended March 31, 2024, was $2,275,069.
• Selling, general, and administrative expenses increased by $529,302 during fiscal 2024 compared to the prior year.
• The company's auditors have raised substantial doubt about its ability to continue as a going concern, with a working capital deficit of $4,909,651 as of March 31, 2024.
• The company identified material weaknesses in its internal control over financial reporting as of March 31, 2024.
• Approximately $634,000 of convertible promissory notes have matured and are in default as of March 31, 2024.
• $355,000 of the promissory notes have matured and are in default as of March 31, 2024.

Risks

• The company's ability to continue as a going concern is dependent on obtaining financing and generating profitable operations.
• The company faces intense competition in the cybersecurity market.
• The company relies on third-party data center facilities and licensed technology.
• The company has material weaknesses in its internal control over financial reporting.
• The company has a significant amount of debt that has matured and is in default.
• The company has a history of losses and negative cash flow from operations.

Future Outlook

The company anticipates that selling, general, and administrative expenses will be lower over the rest of the current fiscal year, driven by decreased stock-based compensation expense, offset by an increase in expenses related to greater business activity over the remainder of fiscal 2024. The company believes that it will incur an additional $50,000 of development expense during the remainder of fiscal 2024. The company anticipates that it 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, the company anticipates it will need to raise a substantial amount of capital to complete an acquisition.

Management Comments

• Management plans to provide for the Company's capital requirements by continuing to issue additional equity and debt securities.
• Management believes that selling, general, and administrative expenses will be lower over the rest of the current fiscal year, driven by decreased stock-based compensation expense, offset by an increase in expenses related to greater business activity over the remainder of fiscal 2024.

Industry Context

Visium operates in the competitive cybersecurity market, facing competition from established players like McAfee, Palo Alto Networks, Splunk Inc., and Dynatrace. The company's focus on visualization and data analytics with its TruContextTM platform aims to differentiate it in a market where many tools lack comprehensive contextual understanding. The West Africa data center construction contract represents an expansion into a new geographic market, but its success depends on the company's ability to execute the project effectively.

Comparison to Industry Standards

• It's difficult to directly compare Visium's financial performance to industry standards due to its small size and lack of revenue.
• Companies like Palo Alto Networks and Splunk Inc. have significantly higher revenue and market capitalization.
• Visium's reliance on debt and equity financing is common for early-stage companies, but the going concern warning indicates a higher level of risk.
• The material weaknesses in internal control are a concern, as strong internal controls are essential for maintaining investor confidence and accurate financial reporting, similar to what is expected of companies like Okta and Tableau.

Related Party Transactions

• From time to time we have borrowed operating funds from Mr. Mark Lucky, our Chief Executive Officer and from certain Directors, for working capital.
• At March 31, 2024 there was $178,633 outstanding of such advances made to the Company.

Stakeholder Impact

• Shareholders face significant risk due to the company's going concern uncertainty and potential dilution from future equity issuances.
• Employees face uncertainty due to the company's financial instability.
• Creditors face increased risk of non-payment due to the company's financial difficulties.

Next Steps

• The company plans to continue issuing additional equity and debt securities to meet its capital requirements.
• The company intends to gradually improve its internal control over financial reporting.
• The company intends to prioritize the design of its internal control over financial reporting starting with its control environment and risk assessments and ending with control activities, information and communication activities, and monitoring activities.

Key Dates

Keywords

financial results, cybersecurity, going concern, net loss, Visium Technologies, TruContext, convertible notes, stock compensation, internal control, data centers