FISION CORPORATION Current Status of the Company
In order to fund and conduct our business over the past few years, we have relied significantly on working capital obtained from private sales of our equity and convertible debt securities to various accredited investors. Due primarily to our continued operating losses for several years, it has been difficult to raise the substantial working capital as needed to support our business plan for future growth.
During most of 2019 and until
After the termination of the
18
Table of Contents
Acquisition to Engage in Ambulatory Surgery Center (ASC) Business
In
CMS is an affiliate of the Company and its largest shareholder, and is
controlled by
Fort Myers ASC was formed for the purpose of owning and operating in
We anticipate opening the
SoftDev was formed for the purpose of developing software applications to
support the medical procedures and operations of Ambulatory Surgery Centers,
including Ft Myers ASC and others. SoftDev has engaged experienced software
development consultants and others to assist in the development of its
proprietary software platform and other business operations, including
We used
Acquisition ofScore, Inc.
On
After completing satisfactory due diligence regarding Score and its business
operations and financial position/results, we closed and completed this
acquisition in
Score is a
A requirement of this Score acquisition requires us to provide future working
capital to Score of at least
In consideration for acquiring Score, (i) we issued to Carmona a Senior Secured
Convertible Promissory Note in the principal amount of
19
Table of Contents
We also appointed Carmona as a member of our Board of Directors and as our Chief
Operating Officer (COO), while being compensated at an annual rate of
Significant Improvement of Our Financial Position
Since 2019, much of our management efforts have been focused toward improving our balance sheet and overall financial position, in order to increase our ability to raise additional capital and also to enhance our status as a prospective merger partner with an operating company. We believe we have successfully accomplished this goal based on the following and other matters:
i) Debt to Equity - Most important for this improvement of our financial
position, we successfully converted a majority of our outstanding Notes Payable
and their accrued interest into common stock of the Company. These Notes Payable
conversions have totaled
ii) These many debt conversions have substantially reduced our required interest
expenses. For example, our interest expenses for the period ending
iii) These debt conversions of Notes Payable also resulted in substantial
reductions of related Derivative Liabilities recorded as current liabilities on
our balance sheet. For example, our Derivative Liabilities were recorded as
iv) Total Liabilities - We have also recently reduced our total liabilities
substantially from
Background of Company
In connection with this 2015 Merger, we issued an aggregate of 28,845,090 shares
of our common stock to the former shareholders of Minnesota Fision, and also
issued derivative securities to holders of Minnesota Fision outstanding options
and warrants. As a result of this 2015 Merger, our pre-merger shareholders
including their pre-merger derivative securities held less than five percent
(5%) of our total combined post-merger outstanding common stock. The 2015 Merger
was accounted for as a "reverse merger" and recapitalization. Accordingly, for
financial reporting purposes, our Minnesota Fision subsidiary was the acquirer,
and the
In
When used in this report, the terms "the Company," "Fision," "we," "us," and
"our," refer to
20
Table of Contents
Termination of Continuity Logic Merger
In late 2018 the Company entered into a Merger Agreement with
While the Continuity Logic Merger was pending, the Company made various bridge
loans to Continuity Logic for working capital, which loans have been long
overdue and matured on
Contemplated Business Combination
We have been seeking a merger or other business combination, with our primary target being one or more established private software services companies which could be complementary with our Fision business and structure. We believe such a merger would be very beneficial to such a private entity due to our public company status, our large tax loss position, our commercially developed proprietary Fision software platform, our customer base, and other benefits. We intend to target and pursue such a merger only with one or more private entities having material and growing revenues.
Fision Platform Overview
We are an Internet platform technology company providing proprietary cloud-based
software solutions to automate and improve the marketing and sales enablement
functions and activities of our customers. Our focus is to provide software
technology tools through our Fision platform to enable our customers to maximize
their marketing assets and initiatives. Our development, management, marketing
and other operations have been conducted through our wholly-owned
We have developed and commercialized a proprietary cloud-based software platform which automates and integrates all digital marketing assets and marketing communications of our customers, and thus "bridges the gap" between marketing and sales functions and personnel of an enterprise. Our Fision platform marketing solutions promote and improve sales enablement functions of any entity. This cloud-based software platform is readily scalable to adapt to fast business growth of any customer, regardless of size. Except for future customary periodic upgrades, the basic development of our Fision software marketing platform has been completed.
Our proprietary Fision platform enables every member of the marketing and sales teams of our customers, by having easy and automated access to all their digital marketing and media assets, to leverage the full power of their distinctive brands and digital marketing assets in every interaction with their consumers or buyers.
Our Fision software platform enables our customers to easily and quickly create and implement marketing campaigns to support their sales personnel while still emphasizing, protecting and enhancing their valuable brand assets. Use of our software solutions by our customers reduces substantially the time and cost incurred by them to produce and present marketing and sales campaigns and presentations for specific products or services.
We believe that the agile marketing software solutions of our Fision platform provide three major benefits to our customers, which are (i) accelerating their revenues, (ii) improving their marketing and brand effectiveness, and (iii) significantly reducing their marketing and sales costs.
21
Table of Contents
We derive our revenues primarily through recurring revenue payments from customers having software licensing contracts with terms of one to three years, and requiring monthly fees based on the customer's number of users and locations where used. A substantial majority of our revenues are recurring, due to the nature of our licensing contracts. We currently have written license contracts with six (6) customers actively using our Fision platform in their marketing and sales operations.
Our typical customer implementation process includes integrating our cloud-based Fision platform with the marketing infrastructure of the customer, initiating and conducting customer training, and providing marketing development support while our Fision platform is being actively launched by the customer. We also continue to offer technical and maintenance support after implementation.
Our current and former customer base has ranged across diverse industries of all sizes, including banks and other financial enterprises, insurance companies, hotels and other hospitality businesses, healthcare and fitness companies, retailers, software and other computer technology companies, product manufacturers, and tele- communications companies.
Our market and potential customer base are global and virtually unlimited, since our Fision platform software solutions provide significant benefits to the marketing and sales departments and personnel of any commercial enterprise, regardless of size and widespread locations. We receive substantial recurring revenues, and we regard our high percentage of recurring revenues to be particularly significant to our business strategy which emphasizes long-term relationships with our customers under written contracts. We believe that our ability to realize such recurring revenues is a keystone feature of our business model.
We have marketed and licensed our proprietary software platform both through direct sales obtained by our management and in-house sales personnel, and through utilizing experienced independent national technology sales agencies.
Our Fision Platform - Our Fision marketing software centrally collects, stores, prioritizes, organizes, streamlines, integrates and distributes the numerous digital marketing assets of our customers including videos, images, logos and other brand materials, presentations, social media content and any other digital marketing assets. Using Fision's automated software technology, these digital assets become readily available for user access as determined by each of our customers. Our Fision platform is designed to provide any corporate marketing department with the ability to instantly and seamlessly update its sales force and other users with the latest digital marketing content and materials, while providing them with a simple, intuitive software interface to quickly find what they need on any digital device, anytime and anywhere. Large enterprise customers with extensive global sales networks have the ability to quickly and efficiently create and deliver customized sales campaigns or presentations to selectively targeted consumer audiences while conveying a positive, personalized and consistent brand experience. We believe that the use of our software marketing solutions by our customers results in a substantial increase in their return on investment (ROI) and their profitability.
Cloud-Based Platform - Storage and operation of our Fision software solutions platform along with the digital marketing and sales assets and related data of our customers are outsourced by us to reside and take place in the digital "cloud." Providers of cloud services are typically referred to as "virtual servers" since they provide all digital data storage and related software application services to their clients. Our cloud service provider is Microsoft's Azure Cloud, which leading provider offers readily scalable, high quality and secure cloud services capable of satisfying any increasing demand or changing circumstances in the needs of our customers or of us.
We regard the hosting of our software applications, the ready digital interface with our customers, and the storage of unlimited customer data with our premier cloud provider as being significant to our operating strategy. Our major savings in expensive computer equipment, high salaried technology personnel, and costly security measures through our use of Microsoft's cloud is vital to our cost of doing business. Moreover, we believe that our experienced and leading cloud provider is more effective in delivering our Fision software solutions to our customers than we could perform in any event.
22
Table of Contents
Strategic Marketing Change
During the years prior to 2017 while our Fision software platform was being designed and developed, our marketing and sales efforts were directed toward local or regional small-to-medium sized companies whose operational, management and commercial activities are conducted from one local or a couple regional facilities. Since our Fision platform and its cloud-based marketing software were designed and developed to be readily adaptable to and scalable for any size company, however, in 2017 we revised our marketing strategy and activities to target and sell our software products primarily to large global enterprise corporations having many and widespread national and international branches and operations.
We believe that our past marketing focus toward large enterprises was somewhat effective, since during 2018-2019 we closed and implemented material contracts with, and are receiving recurring revenues from, certain large enterprise companies. Unfortunately, the increased length of time of our sales cycle necessary to sell to large enterprises has been substantially more expensive and much longer than we earlier incurred while selling primarily to local and regional sized companies. This substantial increase in our sales cycle to negotiate and close contracts with new large enterprise customers resulted in a material decline in our revenues during the past few years. Accordingly, we failed to raise enough working capital to support and continue the substantial marketing resources and time necessary to secure and retain enough large enterprise customers to achieve material increased revenues. We currently are attempting to raise the substantial capital necessary to launch an effective marketing campaign including obtaining whatever personnel and other resources are needed to properly address and sell our software services to additional large enterprise customers. There is no assurance that such funds will be available to us in the future.
2017 Asset Acquisition
In
Employees and Properties
We currently utilize several independent contractors to perform most of the
necessary operational, development and customer support activities for the
Company's Fision software platform, and except for our recent Score acquisition,
we have no fulltime employees. Regarding our Score acquisition, which is now
being absorbed into the Company, we have obtained 8 employees in
For the past couple years, we have been conducting our current business and
operations under a month-to-month basis from a temporary "virtual" office in
Revenue and Marketing Models
Revenue Model - Our Fision platform revenue model is primarily based on prescribed software licensing fees received by us on a regular monthly basis from customers which are under written licensing agreements with us. Over the past several years, we consistently committed substantial expenses and sales personnel toward targeting, negotiating and procuring significant licensing agreements with large enterprise customers. Because of the long-term nature and the substantial expense commitment required by each new customer to enter into a binding licensing agreement with us, the sales cycle involved in our revenue model is quite lengthy. Accordingly, the unpredictable and different timing involved from customer to customer to procure our licensing contracts has prevented us from receiving overall consistent revenues or accurately forecasting our future revenue stream.
We generate our revenues primarily from payments from customers having a license from one to three years to access and use our proprietary agile marketing software platform, which payments include monthly fees based on actual usage of the Fision platform, and a prescribed substantial one-time set-up and integration fee payable to us at the outset of the license. We also receive certain secondary fees from time to time for customized software development projects ordered from us, and for processing emails for certain customers.
23
Table of Contents
Marketing Model - Our products and services have been marketed and sold in the agile marketing software segment of the broad software-as-a-service (SaaS) industry, with virtually all our past revenues derived from our proprietary cloud-based Fision marketing software platform.
Prior to 2020, we marketed, sold, and licensed our proprietary software products through a direct sales force including management, and also through independent national sales agencies who sold (licensed) our branded software products as agents being paid commissions based on their actual sales. Since then, we have lacked sufficient available working capital to hire and support marketing/sales personnel or agents and provide them with adequate resources, and accordingly we have not conducted any material marketing and sales activities since 2019.
Intellectual Property (IP) Protection
We have committed substantial attention and resources toward obtaining patent and trademark rights and otherwise protecting our trade secrets, development know-how technology, trademarks, trade names, patent rights and other proprietary intellectual property (IP). Our IP protection includes written provisions relating to non-compete, non-recruit, confidentiality, and invention assignments as applicable with employees, vendors, sales agents, consultants, and others.
In 2017 we were granted Patent No. US 9,639,551 B2 from the United States Patent and Trademark Office (USPTO) entitled "Computerized Sharing of Digital Asset Localization Between Organizations." In 2018 we were granted another Patent No. US 9,984,094 B2 from the United States Patent and Trademark Office (USPTO) entitled "Computerized Sharing of Digital Asset Localization Between Organizations". And in 2019 we were granted another Patent No. US 10,235,380 B2 from the United States Patent and Trademark Office (USPTO) entitled "Computerized Sharing of Digital Asset Localization Between Organizations".
Inflation and Seasonality
We do not consider our operations and business to be materially affected by either inflation or seasonality.
Litigation
See Note 5 of our interim financial statements included in this quarterly report
for disclosure regarding our recent legal proceedings to collect a substantial
amount of Notes Receivable owed to us by
We recently settled and satisfied the complaint against us in a
From time to time, we have been subject to legal proceedings, claims and litigation arising in the ordinary course of business. We currently are not a party to any material legal proceedings against us, nor are we aware of any material pending or threatened litigation against or involving us.
Significant Accounting Policies
Stock-Based Compensation Valuations - Our estimated valuations for stock-based compensation grants are based primarily on the quoted prices for our common stock in the public trading market.
Accounts Receivable - We maintain allowances for potential credit losses on accounts receivable. In connection with the preparation of our financial statements, management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, changes in customer payment patterns, and current economic trends in order to evaluate the adequacy of these allowances. Accounts determined to be uncollectible are charged to operations when that determination is made.
24
Table of Contents
Research and Development -- We expense all our research and development operations and activities as they occur. Our development activities have been conducted both internally from our headquarters facility by our former development personnel, and externally from outsourced contracts with experienced independent software development companies and individuals.
Derivative Instrument Liabilities - We evaluate all of our agreements and financial instruments to determine if they contain features that qualify as embedded derivatives. For any derivative financial instruments accounted for as liabilities, they initially will be accounted for at fair value and if necessary revalued at each reporting date, with any changes in fair value reported in our statements of operations. For any stock-based derivative financial instruments or securities, we use an option pricing model to value them at inception and on any subsequent valuation dates. The classification of derivative instruments, including whether they should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Fair Value of Financial Instruments -- FASB ASC Topic 820 requires disclosure of and defines fair value of financial instruments, and also establishes a three-level valuation hierarchy for these disclosures. The carrying amounts reported in a balance sheet for receivables and current liabilities qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between their origination and their expected realization and their current market rate of interest. The three levels of valuation hierarchy for fair value determinations are defined as follows:
Level 1 inputs include quoted prices for identical assets or liabilities in active markets.
Level 2 inputs include observable quoted prices for similar assets and liabilities in active markets, and quoted prices for identical assets or liabilities in inactive markets.
Level 3 inputs include one or more unobservable inputs which we have assessed and assumed that market participants would use in pricing the asset or liability.
Revenue Recognition -- Revenue is recognized in the period the services are provided over the license contract period, normally one (1) to three (3) years. We invoice onetime startup and implementation costs, such as consolidating and uploading digital assets of the customer, upon completion of those services. Monthly services, such as internet access to software as a service (SaaS), hosting and weekly backups are invoiced monthly.
The Company recognizes contract liability for its performance obligation upon receipt of a prepayment from a customer for its performance obligation to transfer goods and services in the future. When the Company transfers those goods and services and, therefore, satisfies its performance obligation to the customer, the Company will then recognize the revenue.
Cost of Goods Sold -- Cost of goods sold primarily represents third-party hosting, data storage and other services provided by Microsoft's Azure Cloud service, as well as certain other expenses directly related to customer access and use of our marketing software platform. Cost of goods sold relating to our cloud services is recognized monthly.
Income Taxes -- We account for income taxes in accordance with the asset and liability method of accounting for income taxes, whereby any deferred tax assets are recognized for deductible temporary differences and any deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of our management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Long-lived Assets -- We evaluate the recoverability of our identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. In determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds their fair value.
25
Table of Contents
Recently Issued Accounting Pronouncements
See Note 1 to the interim financial statements included in this quarterly report on Form 10-Q.
Results of Operations for the Three Months Ended
Revenue -- Revenue was
Cost of Sales - Cost of sales for the quarter ended
Gross Margin - Gross margin for the quarter ended
Operating Expenses - Operating expenses for the quarter ended
Operating Loss -- Operating loss for the quarter ended
Other Income/(Expenses) - Other income/(expenses) for the quarter ended
Net Income - Our net income for the quarter ended
Results of Operations for the Nine Months Ended
Revenue - Revenue was
26
Table of Contents
Cost of Sales - Cost of sales was
Gross Margin - Gross Margin was
Operating Expenses - Operating expenses for the nine months ended
Operating Loss - Operating loss for the nine months ended
Other Income/(Expenses) - Other income/(expenses) for the nine months ended
Net Income - Our net income for the nine months ended
Liquidity and Capital Resources
Our financial condition and future prospects critically depend on our access to financing in order to continue our operations. Much of our cost structure for our Fision marketing software platform is based on costs related to personnel and contracted operational services including our cloud-based service provider, and not subject to material variability. We will need to raise substantial additional capital through offerings of equity or debt securities, or a combination thereof, and we may have to use a material portion of the capital raised to repay certain past due debt obligations. To the extent any capital raised is insufficient to satisfy operational working capital needs and meet any required debt payments, we will need to either extend, refinance, or convert to equity our past due indebtedness, which there is no assurance we can accomplish.
As of
27
Table of Contents
As of the date of this filing, we have approximately
Liquidity represents the ability of a company to generate sufficient cash to provide for its immediate needs for cash, which our continued losses have made it difficult for us to accomplish. Over the past few years, we have continued to incur substantial losses without any material increase in revenues or liquid assets, which has caused a serious and harmful effect to our liquidity and a substantial strain on our ongoing business operations.
Along with our revenues, we have financed our operations to date through various means including loans from management, affiliates, and other private lenders; stock-based compensation issued to employees, outsourced software developers, consultants, and professionals; common stock issued to satisfy outstanding loans and accounts payable/accrued expenses; and equity sales of our common stock, convertible Notes, and stock purchase warrants.
Net Cash Provided (Used) in Investing Activities - During the nine months ended
Net Cash Provided By Financing Activities -- During the nine months ended
Convertible Note Financing
A majority of our financing during the past three years has consisted of
Convertible Notes sold to various accredited investors. We raised a total of
Going Concern
Our financial statements contained in this quarterly report have been prepared
on a going concern basis, which contemplates and implies that we will continue
to realize our assets and satisfy our liabilities and commitments in the normal
course of business. For the nine months ended
28
Table of Contents
Off-Balance Sheet Arrangements
We have no off-balance sheet items as of
© Edgar Online, source
