Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2019

¨ TRANSITION REPORT Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to _________

Commission File No. 000-53929

FISION Corporation

(Exact name of registrant as specified in its charter)

Delaware		27-2205792
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

100 N. Sixth Street, Suite 308 B

Minneapolis, Minnesota

55403

(Address of principal executive offices)

(Zip Code)

(612) 927-3700

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the period 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (#232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer or a smaller reporting company:

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the act). ¨ Yes x No

Indicate the number of the registrant’s shares of common stock outstanding, as of the latest practicable date: 111,648,147 shares of common stock are outstanding as of May 22, 2019.

Table of Contents

		Page No.
Part I
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4	Controls and Procedures	22

Part II
Item 1	Legal Proceedings	23
Item 1A	Risk Factors	23
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3	Defaults Upon Senior Securities	23
Item 4	Mine Safety Disclosures	23
Item 5	Other Information	23
Item 6	Exhibits	24

Corporate Contact Information

Our executive, sales and marketing offices, as well as our software development spaces and equipment, are located at 100 N. Sixth Street, Suite 308 B, Minneapolis, MN 55403; our telephone number is (612) 927-3700; and we maintain a website at www.FisionOnline.com.

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PART I – FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

FISION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

	March 31,			December 31,
	2019			2018
ASSETS

Current Assets:
Cash	$	47,849		$	121,900
Accounts receivable, net		34,689			19,498
Notes Receivable		817,674			811,234
Prepaid Expenses		31,536			31,955
Total Current Assets		931,748			984,587

Property and equipment, net	$	5,818		$	6,599

Other Assets:
Goodwill		13,800			13,800
Intellectual property/software code, net of accumulated amortization		50,152			52,598
Deposits		8,053			8,053
Total Assets	$	1,009,571		$	1,065,637

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	1,020,859		$	856,096
Customer advances		135,665			181,469
Derivative liability		948,529			1,480,978
Note payable and accrued interest - related party		462,881			284,377
Notes payable, net of debt discount of $477,415 and $1,050,602 respectively		623,091			590,636
Total Current Liabilities		3,191,025			3,393,556

Long-Term Liabilities:
Long-Term Convertible Notes Payable, net of debt discount of $462,045 and $541,275 respectively		443,955			607,725
Total Long-Term Liabilities		443,955			607,725

Total Liabilities		3,634,980			4,001,281

Contingencies and Commitments

Stockholders' Equity (Deficit):
Preferred Stock, $0.0001 Par value, 20,000,000 shares authorized, no shares issued and outstanding		-			-
Common Stock, $0.0001 Par value, 500,000,000 shares authorized 78,363,863 and 67,454,276 shares issued and outstanding, respectively		7,836			6,745
Additional paid in capital		20,866,321			19,572,322
Accumulated deficit		(23,499,566	)		(22,514,711	)
Total Stockholders' Equity (Deficit)		(2,625,409	)		(2,935,644	)
Total Liabilities and Stockholders' Equity	$	1,009,571		$	1,065,637

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

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FISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2019			2018

REVENUE	$	133,153		$	126,880

COST OF SALES		20,977			22,059

GROSS MARGIN	$	112,176		$	104,821

OPERATING EXPENSES
Sales and Marketing		166,965			212,380
Development and Support		148,638			173,132
General and Administrative		316,197			452,421

TOTAL OPERATING EXPENSES	$	631,800		$	837,933

OPERATING LOSS	$	(519,624	)	$	(733,112	)

OTHER INCOME / (EXPENSES)
Interest expense and debt discount		(289,957	)		(594,730	)
Amortization expense/amortization of debt discount		(217,966	)		(14,370	)
OID and other expenses (income)		-			(32,500	)
Change in fair value of derivatives		(228,339	)		744,319
Gain on settlement of debt, net		264,591			215,488
Other Interest Income		6,440			-
TOTAL OTHER INCOME / (EXPENSES)	$	(465,231	)	$	318,207

NET LOSS	$	(984,855	)	$	(414,905	)

Net loss per common share - basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average common shares outstanding:
Basic and diluted		74,514,874			47,940,631

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

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FISION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the Period	$	(984,855	)	$	(414,905	)
Adjustments to reconcile Net Loss to net cash used in operating activities:
Common stock issued for services		54,056			134,000
Depreciation and Amortization		3,227			780
Stock warrants/Stock Options issued for services		89,079			110,307
Changes in fair value of Derivatives		228,339			(744,319	)
Interest expense for derivatives and debt discount		-			415,611
Gain on Settlement of Debt		(264,591	)		-
Amortization of Debt Discount		217,965			14,370
Changes in Operating Assets and Liabilities
(Increase) decrease in:
Accounts receivable		(15,191	)		21,549
Customer Contracts - Unrecognized Revenue		-			11,924
Notes Receivable - Interest Receivable/Notes Receivable		(6,440	)		-
Prepaid expenses		863			84,375
Increase (decrease) in:
Accounts payable & accrued expenses		62,218			(4,952	)
Change in Customer Advances		(45,804	)		-
Net Cash Used in Operating Activities		(661,134	)		(371,260	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Disposal of property and equipment Purchase of Property and Equipment		-			(5,000	)
Net Cash Used In Investing Activities		-			(5,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on note payable		(431,000	)		(77,000	)
Proceeds from note payable		348,693			524,000
Proceeds from related party notes		325,390			20,000
Repayments for related party notes		(6,000	)		-
Repayments on line of credit		-			(3,000	)
Proceeds from issuance of common stock		350,000			-
Net Cash Provided by Financing Activities		587,083			464,000

Net (Decrease) Increase in Cash		(74,051	)		87,740

Cash at Beginning of Period		121,900			10,773
Cash at End of Period	$	47,849		$	98,513

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period:
Interest	$	(40,363	)	$	(12,906	)
Noncash operating and financing activities:
Common Stock Issued for Services	$	-		$	134,000
Stock warrants/Stock Options issued for services	$	-		$	110,907
Conversion of debt and accrued interest to common stock	$	742,391		$	291,462
Warrants issued as debt discount	$	59,121		$	-

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

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FISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

									Additional			Retained
	Preferred		Preferred		Common		Common		Paid in			Earnings
	Shares		Stock		Shares		Stock		Capital			(Deficit)			Total

Balance, December 31, 2017		-		-		45,935,369	$	4,593	$	15,822,262		$	(18,521,865	)	$	(2,695,010	)

Common stock issued for cash						7,000,000		700		1,399,300						1,400,000
Stock issued for services						4,154,960		416		460,654						461,070
Warrants/Options granted for services						1,284,564		128		1,249,537.00						1,249,665
Conversion of notes payable and accrued interest/expenses						9,079,383		908		640,697						641,605
Exercise of warrants								-		(128.46	)					(128	)
Net loss													(3,992,846	)		(3,992,846	)
Balance, December 31, 2018		-		-		67,454,276	$	6,745	$	19,572,322		$	(22,514,711	)	$	(2,935,644	)

Common stock issued for cash						1,750,000		175		349,825						350,000
Stock issued for services						537,500		54		54,446						54,500
Warrants/Options granted for services										89,079						89,079
Warrants Issued as a debt discount										59,121						59,121
Conversion of notes payable and accrued interest/expenses						8,622,087		862		741,528						742,390
Net loss													(984,855	)		(984,855	)
Balance, March 31, 2019		-		-		78,363,863	$	7,836	$	20,866,321		$	(23,499,566	)	$	(2,625,409	)

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

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FISION CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2019 AND 2018

(Unaudited)

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

FISION Corporation, (formerly DE 6 Acquisition, Inc.), a Delaware corporation (the “Company”) was incorporated on February 24, 2010, and was inactive until December 2015 when it merged with Fision Holdings, Inc., an operating business based in Minneapolis, Minnesota. As a result of this reverse merger, Fision Holdings, Inc. became a wholly-owned subsidiary of the Company. Fision Holdings, Inc. was incorporated under the laws of the State of Minnesota in 2010, and has developed and successfully commercialized a proprietary cloud-based software platform which automates and integrates digital marketing assets and marketing communications to “bridge the gap” between marketing and sales of any enterprise. The Company generates its revenues primarily from software licensing contracts typically having terms of from one to three years and requiring monthly subscription fees based on the customer’s number of users and the locations where used. The Company’s business model provides it with a high percentage of recurring revenues.

The terms “Fision,” “we,” “us,” and “our,” refer to FISION Corporation, a Delaware corporation and its wholly-owned operating subsidiary Fision Holdings, Inc., a Minnesota corporation (including our Volerro software services).

Basis of Presentation

The accompanying condensed unaudited consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and note disclosures which are included in annual financial statements have been omitted pursuant to these rules and regulations. We believe the disclosures made in these interim unaudited financial statements are adequate to make the information not misleading.

Although these interim financial statements for the three-month periods ended March 31, 2019 and 2018 are unaudited, in the opinion of our management, such statements include all adjustments, consisting of normal and recurring accruals, necessary to present fairly our financial position, results of operations and cash flows for the periods presented. The results for this 2019 interim period is not necessarily indicative of the results to be expected for the full year ended December 31, 2019 or for any other future period.

These unaudited interim financial statements should be read and considered in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2018, included in our annual report on Form 10-K filed with the SEC on April 5, 2019.

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Principles of Consolidation

These condensed consolidated interim financial statements include the accounts of FISION Corporation, a Delaware corporation, and its wholly-owned Minnesota subsidiary Fision Holdings, Inc. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

GAAP accounting principles require our management to make estimates and assumptions in the preparation of these interim financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates and assumptions.

The most significant areas requiring management judgment and which are susceptible to possible later change include our revenue recognition, cost of revenue, allowance for doubtful accounts, valuations of property and equipment and intangible assets, stock-based compensation, fair value of financial instruments, derivative securities, research and development, impairment of long-lived assets, and income taxes.

Cash and Cash Equivalents

We consider all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. At March 31, 2019 and December 31, 2018, we had no cash equivalents.

Concentration of Credit Risk and Customers

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. During the quarter ended March 31, 2019, we may have had cash deposits in our bank that exceeded FDIC insurance limits. We maintain our bank accounts at high quality institutions and in demand accounts to mitigate this risk. Regarding our customers, we perform ongoing credit evaluations of them, and generally we do not require collateral from them to do business with us.

For the three months ended March 31, 2019, three customers exceeded 10% of our revenues, including one for 25.1% of revenues, one for 16.2% of revenues, and one for 12.9% of revenues. We do not believe that we face any material customer concentration risks currently, although a significant reduction for any reason in the use of our software solutions by one or more of our major customers could harm our business materially.

Revenue recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers, which was updated in August 2015. ASC 606 provides accounting guidance related to revenue from contracts with customers. This new revenue recognition standard (new guidance) has a five-step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The Company has implemented the five-step process of ASC 606 in determining revenue recognition from contracts with customers.

Revenue is recognized in the period the services are provided over the contract period, normally one (1) to three (3) years. We invoice one-time startup and implementation costs, such as consolidating and uploading digital assets of the customer, upon completion of those services as one performance obligation and recorded as revenue when completed. Monthly services, such as internet access to software as a service (SaaS), hosting and weekly backups are invoiced monthly as another performance obligation and recorded as revenue over time.

Company Recognizes Contract Liability for Its Performance Obligation

Upon receipt of a prepayment from a customer, the Company recognizes a contract liability in the amount of the prepayment 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.

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Lease Accounting

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has adopted and implemented ASU 2016-02 on the Company’s financial statements and disclosures. There will be no material impact of ASU 2016-02 on the Company’s financial statements and disclosures, as our two-year lease is expiring in December 2019.

Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding and potential common shares under the treasury stock method. Diluted net loss per common share is not shown, since the assumed exercise of stock options and warrants using the treasury stock method are anti-dilutive. For the period ending March 31, 2019 and March 31, 2018, there were 25,871,403 and 10,438,069 respectively, potentially dilutive securities not included in the calculation of weighted-average common shares outstanding since they would be anti-dilutive.

Property and Equipment

Property and equipment are capitalized and stated at cost, and any additions, renewals or betterments are also capitalized. Expenditures for maintenance and repairs are charged to earnings as incurred. If property or equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from our accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method with estimated lives as follows:

Furniture and fixtures		5 years

Computer and office equipment		5 years

Stock-Based Compensation

We record stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, which requires us to measure the cost for any stock-based employee compensation at fair value and recognize the expense over the related service period. We recognize the fair value of stock options, warrants and any other equity-based compensation issued to employees and non-employees as of the grant date. We use the Black Scholes model to measure the fair value of options and warrants.

NOTE 2 -- GOING CONCERN

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s ability to continue as a going concern is contingent upon its future ability to achieve and maintain profitable operations, and to raise substantial additional capital as required until it attains profitable operations.

At March 31, 2019 the Company had a working capital deficiency of approximately $2.3 million and an accumulated deficit of approximately $23.5 million. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

We are in the process of raising funds, increasing our marketing and sales activities to obtain materially increased revenues, and otherwise addressing our ability to continue as a going concern, and our management believes that our actions being taken to raise needed capital and implement our business plan for increased revenues will enable us to continue as a going concern.

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NOTE 3 -- 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.

The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at March 31, 2019:

	Level 1		Level 2		Level 3

Derivative liability	$	-	$	-	$	948,529

The following assets and liabilities are measured on the consolidated balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following table provide a reconciliation of the beginning and ending balances of the liabilities:

Fair Value

January 1,

2019

Convertible

Notes

Change in fair

Value

Conversions

Fair Value

March 31,

2019

Derivative liability

1,480,978

209,101

228,339

-$969,889

948,529

All gains and losses on assets and liabilities measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy are recognized in other interest income and expense in these financial statements.

The significant unobservable inputs used in the fair value measurement of the liabilities described above are as follows;

Exercise price		$.0135 - $.063
Expected Volatility		97.59% - 122.4	%
Expected Term	6 mos.
Risk free interest rate		2.21	%
Expected dividends		-

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Derivative Instruments

The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

NOTE 4 -- NOTES PAYABLE

At March 31, 2019 we were indebted under various Notes Payable in the total amount of $2,726,766 including accrued interest. Following is a summary of our outstanding Notes Payable indebtedness as of March 31, 2019:

Summary Description of Notes Payable and Accrued Interest	Amount Owed
Decathlon LLC – Senior Secured Note, due 9/30/18, in default, interest at 15%	$	114,255
Finquest Capital Inc – Secured Note, due 4/15/18, in default, interest at 15%		42,005
Brajoscal, LLC – Secured Note, due 12/31/18, in default, interest at 18%		42,813
Nottingham Securities Inc, monthly settlement payments, in default		72,276
MGA Holdings LLC, due 11/26/18, in default, interest at 8%		85,800
Greentree Financial Group, Inc, due 8/28/18 – 9/9/18, interest at 11%		313,952
L&H, Inc, due 6/26/19 –7/12/19, interest at 8%		52,000
Power Up Lending Group, due 10/12/19 – 1/10/20, interest at 12%		56,598
Ignition Capital, LLC, due 11/30/18, in default, interest at 6%		106,833
Collision Capital, due 12/31/18, in default, interest at 6%		20,900
Capital Market Solutions LLC due on demand, interest at 6%, related party		319,390
Note payable to individual accredited investor, due 12/31/18, in default, interest at 12%		137,320
Note payable to individual accredited investor, due 4/24/19-7/3/19, interest at 12%		122,695
Note payable to individual accredited investor, due 12/31/18, in default, interest at 6%		1,970
Note payable to individual accredited investor, due 5/25/19, non-interest bearing		176,000
Notes payable to four individual accredited investors, due October-November 2019, interest at 12%		348,875
Notes payable to six individual accredited investors, due January-May 2020, interest at 12%		218,154
Notes payable to five individual accredited investors, due March 2022, interest at 6%		351,439
Note payable to CEO, due on demand, interest at 6%		143,491
Total	$	2,726,766

Note: Excludes discounts on convertible notes payables in the amount of $939,460 for derivative securities.

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NOTE 5 – CONVERTIBLE AND OTHER NOTES

Long-Term 2019 Convertible Notes

In March 2019, we issued a total of $350,000 in Convertible Notes sold to five accredited individual investors who purchased these notes from our 2019 private placement of $50,000 Notes bearing interest at 6% per annum and maturing three years from their purchase with the noteholders having the right to convert the notes into our common stock at a conversion price equal to the lower of $.20 per share or the Volume Weighted Average Price (VWAP) of our common shares for the ten days prior to conversion. There are 1,750,000 detachable warrants issued in conjunction with Notes of $350,000. Pursuant to ASC 470, the fair value of the warrants attributable to a discount on the debt is $59,121 (See Note 7), this amount will be amortized to interest expense on a straight-line basis over the term of the loans.

NOTE 6 – CONSULTING CONTRACT WITH CAPITAL MARKET SOLUTIONS, LLC.

In April 2019 we entered into a consulting contract with Capital Market Solutions, LLC, a Delaware limited liability company (“CMS”) which provides that for a term of one year, CMS will provide the Company with various management, operational, accounting and financial services in consideration for our payments to CMS of $50,000 monthly along with issuance to CMS of 30 million shares of our common stock valued at $1,797,000 and a five-year warrant to purchase an additional 30 million common shares exercisable at $.20 per share, with the warrant having a value of $1,297,570 under our Black-Scholes pricing model.

NOTE 7 -- STOCKHOLDERS’ EQUITY

The Company is authorized to issue 500,000,000 shares of common stock and 20,000,000 shares of preferred stock, both having $.0001 par value per share. At March 31, 2019 there were 78,363,863 outstanding shares of common stock and no outstanding shares of preferred stock.

During the three months ended March 31, 2019, we completed the following equity transactions:

In February 2019 we issued 300,000 common shares valued at $26,730 for advisory services to be provided to us during February-April 2019.

In February 2019 we also issued 62,500 common shares to our independent director, John Bode for his service as a director in the fourth quarter of his first year of service, and we also granted him $12,500 worth of our common stock at the end of each quarter of board service, for four quarters, for agreeing to serve on our Board of Directors for a second year commencing March 1, 2019.

During January-March 2019 we received proceeds of $350,000 from certain accredited investors who made payments of their second tranche under our recent private placement, for which we issued to them a total of 1,750,000 purchased common shares and 175,000 advisory common shares.

During February-March 2019 we issued an aggregate of 8,622,087 common shares and two-year warrants to purchase 3,182,834 common shares (exercisable at $.20 per share and valued at $63,502 under Black-Scholes pricing) to noteholders who converted their outstanding notes in the amount of $742,841, with the conversion prices and warrant terms based on specific terms contained in the notes. Of the $742,841 converted debt, $490,000 was a mandatory conversion for certain noteholders converting at $0.15 to $0.16 per share for 3,182,834 common shares.

During March 2019, we issued 1,750,000 warrants, three year warrant with a strike price of $0.20 per share, with a Black-Scholes value of $59,121 and recorded as debt discount, in connection with a $350,000 convertible debt offering sold to five individual accredited investor who purchased the note from our 2019 private placement of $50,000 Notes bearing interest at 6% per annum and maturing three years from their purchase with the noteholders having the right to convert the notes into our common stock at a conversion price equal to the lower of $.20 per share or the Volume Weighted Average Price (VWAP) of our common shares for the ten days prior to conversion.

In March 2019, we recognized an option expense of $20,946 for our employee stock options previously granted to employees.

NOTE 8 -- RELATED PARTY TRANSACTIONS

Our Notes Payable as of March 31, 2019 include $143,491 owed to our CEO, Michael Brown, and $137,603 owed to our former CFO, Garry Lowenthal, for unpaid past salary compensation, payable on demand with an interest rate of 6% per annum.

In February 2019 we entered into an Independent Director Agreement compensating to John Bode $12,500 worth of our common stock at the end of each quarter of board service, for four quarters, for agreeing to serve on our Board of Directors for a second year.

NOTE 9 -- SUBSEQUENT EVENTS

In April 2019 we entered into a one-year consulting contract in consideration for our payment to the consultant of $50,000 monthly, 30 million shares of our common stock valued at $1,797,000 and a five-year warrant to purchase an additional 30 million common shares exercisable at $.20 per share, with the warrant having a value of $1,297,570 under our Black-Scholes pricing model. See foregoing Note 6.

In April through May 2019, we issued an aggregate of 3,284,284 common shares to noteholders who converted total outstanding debt of $51,500, with the conversion price based on specific terms contained in these notes.

In April 2019, we issued a $50,000 in Convertible Note sold to an accredited investor who purchased the note from our 2019 private placement of $50,000 Notes bearing interest at 6% per annum and maturing three years from their purchase with the noteholders having the right to convert the notes into our common stock at a conversion price equal to the lower of $.20 per share or the Volume Weighted Average Price (VWAP) of our common shares for the ten days prior to conversion, along with a three year warrant with a strike price of $0.20 per share, with a Black-Scholes value of $8,280.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

There are certain statements in this Quarterly Report on Form 10-Q that are not historical facts. These “forward-looking statements” can be identified by terminology such as “believe,” “may,” “intend,” “plan,” “will,” “could,” “expect,” estimate,” “strategy,” and similar expressions. These forward-looking statements are subject to material risks and uncertainties that are beyond our control. Although our management believes that the assumptions underlying these forward-looking statements are reasonable, they do not assure or guarantee our future performance. Our actual results could differ materially from those contemplated by these forward-looking statements. The assumptions used for these forward-looking statements require considerable exercise of judgment, since they represent estimates of future events and are thus subject to material uncertainties involving possible changes in economic, governmental, industry, marketplace, and other circumstances. To the extent any assumed events do not occur, the outcome may vary materially and worse from our anticipated or projected results. In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by these forward-looking statements will in fact transpire. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements. Before determining to make an investment in any of our securities, you should read and consider the specific Risk Factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2018.

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ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 develop and offer 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 are conducted from Minneapolis through our wholly owned Minnesota subsidiary, Fision Holdings, Inc.

We have developed and successfully commercialized a unique 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. We believe that our innovative Fision platform, proprietary technology, forward-looking strategy, and experienced management have now positioned us to become a future leader in the agile marketing and sales enablement segment of the rapidly growing software-as-a-service (SaaS) industry.

We are a global software development and licensing company offering our Fision platform marketing software solutions to promote and improve sales enablement functions of any entity. Our innovative cloud-based software platform is readily scalable to adapt to fast business growth of any customer, regardless of size. Except for future customary software enhancements and periodic upgrades, the primary 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.

In May 2017, we acquired substantially all the assets of Volerro Corporation, a Delaware corporation based in Minneapolis and engaged in the development and marketing of proprietary cloud-based “content collaboration” software services.

Our Business

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.

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We derive our revenues primarily through recurring revenue payments from customers having software licensing contracts typically having 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. As of March 31, 2019, we have written license contracts with fourteen (14) customers actively using our Fision platform for their marketing and sales operations. And currently we are engaged in negotiations with or procurement of several additional material customers.

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 targeted customer base ranges 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 technology companies, product manufacturers, telecommunications companies, and numerous other companies selling familiar branded products or services.

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. Our customers typically “stick” with us and our Fision platform, and accordingly we receive substantial recurring revenues from them. Certain customers have maintained written contracts with us for years. We regard our high percentage of recurring revenues to be particularly significant to our marketing strategy which emphasizes long-term relationships with our customers under written contracts. We believe the ability of our software platform to realize such recurring revenues is a key feature of our business model.

We market and license 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 known as our “channel partners.” To date we have entered into three significant channel partnership arrangements, and we have realized material revenues from the sales efforts of our channel partners.

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. In particular, large enterprise customers with extensive global sales branches and 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 is a leading provider and 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 us.

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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 crucial 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.

Strategic Marketing Change

During the years prior to 2017 while our Fision software platform was being designed and developed, our marketing sales efforts were directed primarily toward local or regional small and medium sized companies whose operational, management and other commercial activities are conducted from one local or a couple regional facilities. Since our Fision platform and its cloud-based applications were developed to be readily scalable for any size company, however, during early 2017 we revised our marketing strategy and activities to primarily target and sell our software products to large global enterprise companies having many and widespread national and international branches and operations.

We believe that our enhanced marketing focus toward large enterprise companies has been effective, since during the past couple years, we closed and implemented material contracts with and are receiving recurring revenues from several large enterprise companies in various industries. And we currently are in the process of closing and implementing material contracts with certain additional large enterprise companies.

The increased length of our sales cycle necessary to sell our products to large enterprises, however, has been considerably longer than we earlier incurred while selling primarily to local and regional customers. This substantial increase in our sales cycle to negotiate and close contracts with new large enterprise customers resulted in a substantial decline in our revenues during the past couple years. We now believe this period of decreased revenues due to our change in marketing strategy has ended, and that due to the large enterprise contracts we have recently closed or are in the process of being procured, our revenues will increase materially during 2019 and following years.

Significant Marketing Developments

Our primary marketing strategy focused toward large enterprise companies has succeeded in various industries. We believe these significant recent clients will result in substantial increases in our future recurring revenues from our cloud-based Fision software platform. Our recent large enterprise customers include:

	·	a worldwide provider of SaaS software services for procurement and contract management.
	·	a Fortune 50 global provider of aerospace and building systems.
	·	a nationwide leading provider of accredited online higher education courses and degrees.
	·	the world’s largest RV dealership with retail operations in Florida, Colorado and Arizona.
	·	a national insurance and financial company having more than 20,000 employees and advisors.
	·	an operator of the world’s largest business network.
	·	a leading healthcare innovator led by former key executives of Amazon, Google and 2d.MD.

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Our Employees and Properties

We currently have eleven (11) full-time employees, including our Chief Executive Officer, Vice President of Product Engineering, Chief Revenue Officer, Controller/Office Manager, Finance and Accounting Specialist, Customer Support Specialist, Client Services Manager, Marketing Manager, and three Programmer/Developers. None of our employees are subject to a collective bargaining agreement, and we believe that our relations with our employees are good.

Our corporate headquarters and development and operational facilities are located at Butler Square, a large office building complex in downtown Minneapolis, Minnesota, where we occupy 5,229 square feet of office and development spaces. We lease these facilities under a two-year lease expiring in December 2019 for $8,323 monthly including rent, utilities and maintenance. We do not own any real estate.

Our computers, hardware servers, software assets and other technology development equipment, as well as considerable office and administrative computer and other equipment, furniture, and office and marketing supplies, are also located in our Minneapolis facility. We believe that our current facilities and equipment are adequate to satisfy our current operations and to support substantial future growth.

Revenue and Marketing Models

Revenue Model -- Our 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. We consistently commit substantial expenses and sales personnel toward targeting, negotiating and procuring significant licensing agreements with new 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, particularly since each new contract provides considerable one-time start-up revenues derived from initial set-up and integration fees.

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.

A substantial majority of our revenues have been and are “sticky” and thus of a recurring nature. Most of our customers have remained with and consistently used our software platform once they have integrated it into their digital marketing model and experienced the benefits provided from our cloud-based Fision marketing solutions.

Marketing Model – We have marketed, sold and licensed our proprietary software products through our direct sales force including management and other direct sales personnel, and also through independent national sales agencies who sell (license) our branded software products as agents being paid commissions based on their actual sales. We regard and refer to these experienced sales agencies as our “channel partners.” To date we have entered into three channel partner arrangements with experienced and recognized technology sales agencies, and we have realized material revenues from their sales efforts.

We market and sell our products and services in the agile marketing software segment of the broad software-as-a-service (SaaS) industry, with virtually all our revenues derived from our proprietary cloud-based Fision marketing software platform.

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Intellectual Property (IP) Protection

We commit 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), and in 2018 we were granted Patent No. US 9,984,094 B2 from the USPTO, which were entitled “Computerized Sharing of Digital Asset Localization Between Organizations.” We also have a couple additional patent claims involving our software technology which are filed and pending with the USPTO, and we expect to obtain patent grants for them.

Inflation and Seasonality

We do not consider our operations and business to be materially affected by either inflation or seasonality.

Litigation

From time to time, we become subject to legal proceedings, claims and litigation arising in the ordinary course of business. Except for the following threatened litigation, we currently are not a party to any material legal proceedings, nor are we aware of any material pending or threatened litigation against or involving us.

We have threatened litigation from Continuity Logic LLC, the private company we entered into an Agreement and Plan of Merger on August 3, 2018 that was terminated on February 4, 2019, for long term loans to investors, an aggregate of $490,000 due on September 30, 2020. The majority of the proceeds of these long term loans were used to fund the operations of Continuity Logic, LLC, as the Company continued its due diligence on the August 3, 2018 merger transaction. Subsequently on March 15, 2019, a mandatory conversion clause in the notes were converted into shares of common stock and warrants of the Company. See Note #7 in the Notes to the condensed consolidated financial statements.

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.

Research and Development -- We expense all our research and development operations and activities as they occur. Our development activities are conducted both internally from our Minneapolis headquarters facility by our development personnel, and externally from outsourced contracts with experienced independent software development companies and individuals. We own considerable servers and other computer equipment located at our Minneapolis facility, which are used by our development personnel to develop and enhance our marketing software platform.

Derivative Securities – 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.

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Revenue Recognition -- A substantial majority of our revenues are derived from our customers having written licensing agreements with us, which revenues are recognized by us on a one-time or monthly basis as specified in these written contracts. Regarding secondary revenues from one-time custom software projects or any other services provided to our customers at their request, we recognize revenue when the specific project or service is completed. The Company recognizes revenues based on these policies only when services have been provided by us, our fees are fixed or determinable, persuasive evidence of the arrangement for our services exists, and collectability of revenues is reasonably assured.

Cost of Revenue -- Cost of revenue 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 revenue 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.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The new standard is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. We have adopted and implemented ASU 2016-02 for this interim and future consolidated financial statements.

Other recent accounting pronouncements issued by the FASB, the AICPA, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the our present or future financial statements.

Results of Operations for the Three Months Ended March 31, 2019 and 2018

Revenue -- Revenue was $133,153 for the quarter ended March 31, 2019 compared to revenue of $126,880 for the quarter ended March 31, 2018, which revenues for the first quarters of 2019 and 2018 were similar.

Cost of Sales – Cost of sales for the quarter ended March 31, 2019 was $20,977 (15.8% of revenue) compared to cost of sales of $22,059 (17.4% of revenue) for the quarter ended March 31, 2018. This percentage decrease in cost of sales for the 2019 quarter compared to the 2018 quarter was due primarily to more efficient use of our Microsoft cloud service provider in the 2019 period.

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Gross Margin – Gross margin for the quarter ended March 31, 2019 was $112,176 compared to $104,821 for the quarter ended March 31, 2018. Gross margin as a percentage of revenue was 84.2 % for the first quarter of 2019 compared to 82.6% of revenue for the first quarter of 2018.

Operating Expenses – Operating expenses totaled $631,800 for the quarter ended March 31, 2019 compared to $837,933 for the quarter ended March 31, 2018. This decrease of $206,133 in operating expenses for the first quarter of 2019 was due primarily to lower marketing, development and administrative expenses in the 2019 quarter since the 2018 quarter included considerable one-time costs to support our new large enterprise customers and for a decrease in general and administrative expenses for stock-based related compensation for consulting services.

Other Income (Expenses) – Other income (expenses) for the first quarter ended March 31, 2019 were ($465,231) in expenses compared to other income (expenses) of $318,207 in income for the first quarter ended March 31, 2018. Other income (expenses) for the 2019 first quarter included (i) $507,923 for net interest expense, debt discount and amortization costs related to our convertible debt (compared to $641,600 for such convertible debt costs in the 2018 first quarter), (ii) $228,339 expense for the accounting adjustment in the change of fair value of our derivatives (compared to $744,319 income for such change in fair value of derivatives in the 2018 first quarter), and (iii) $264,591 net gain on settlement of debt (compared to $215,488 net gain on settlement of debt in the 2018 first quarter.

Net loss – Our net loss for the quarter ended March 31, 2019 was $984,855 compared to $414,905 for the quarter ended March 31, 2018, which greater loss of $569,950 in the 2019 first quarter was due primarily to the much larger accounting adjustment for the change in fair value of our derivative liability and amortization of debt discount in the 2018 period.

Liquidity and Capital Resources

Our financial condition and future prospects critically depend on our access to financing in order to continue funding our operations. Much of our cost structure is based on costs related to personnel and facilities and our cloud-based service provider, and not subject to material variability. We will need to raise substantial additional capital through private or public 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 or soon due indebtedness, which there is no assurance we can accomplish.

As of March 31, 2019, we had total liabilities of $3,634,980 including Notes Payable with related accrued interest of $2,726,766. A summary of our current outstanding Notes Payable indebtedness as of March 31, 2019 is set forth in Note 4 of our foregoing interim financial statements included in this quarterly report.

Currently we have approximately $28,000 in cash, which we believe along with our projected receipt of accounts receivable and customer revenues will last only until June 2019. Accordingly, we need to continue raising substantial capital to support our current and future operations. Our management estimates that based on our current monthly expenses net of expected revenue and receivables, we will require approximately $2,500,000 in additional financing to fund our operational working capital and satisfy certain debt payments for the next 12 months. Financing may be sought from a number of sources such as sales of equity or debt (including convertible debt) securities, and loans from affiliates, banks or other financial institutions. We may not be able to sell any such securities or otherwise obtain such financing when needed on terms acceptable to us, if at all. If further financing is not available as needed, our business would suffer substantially or could even fail.

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. As of March 31, 2019, we had cash and current accounts receivable of only $82,538 and a working capital deficiency of $2,259,277. 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 and from financial and other 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 sales of our common stock and convertible debt Notes.

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Net Cash Used in Operating Activities – We used $661,134 of net cash in operating activities for the three months ended March 31, 2019 compared to $371,260 of net cash used in operating activities for the three months ended March 31, 2018. This increase of $289,874 of net cash used in operating activities in the 2019 first quarter was due primarily to a larger net loss in the 2019 first quarter and increased payments of outstanding accounts payable in the 2019 quarter.

Net Cash Used in Investing Activities -- During the three months ended March 31, 2019, we used no net cash in investing activities, compared to net cash used in investing activities of $5,000 for an equipment purchase during the three months ended March 31, 2018.

Net Cash Provided by Financing Activities -- During the three months ended March 31, 2019 we were provided net cash by financing activities of $587,083 including proceeds from sales of common stock of $350,000 and from notes payable of $668,083, offset by $431,000 used for repayments on notes payable. In comparison, during the three months ended March 31, 2018 we were provided net cash by financing activities of $464,000 in proceeds from issuance of notes payable of $544,000 offset by $77,000 used for repayments on notes payable and a $3,000 payment on our line of credit.

Convertible Note Financing

For the past couple years, a majority of our financing consisted of Convertible Notes sold to accredited investors in private transactions. In 2017 we raised a total of $1,020,000 through issuance of Convertible Notes, and in 2018 we raised a total of $2,959,500 through issuance of Convertible Notes. From January through March 2019, we raised a total of $350,000 through the issuance of long term Convertible Notes and $318,083 from promissory notes with Capital Market Solutions, LLC.

Our Recent Private Placement of Securities

In October 2018 we commenced a private offering of $2,000,000 of our common stock at $.20 per share (10,000,000 shares), offered only to accredited investors. All private investors in this placement also received additional Advisory Shares, Warrants and potential True-Up Shares as follows:

Advisory Shares – Each investor also received an amount of Advisory Shares equal to 10% of the common shares purchased by the investor at $.20 per share.

Warrants -- Each private investor also received three-year warrants to purchase additional common shares equal to their purchased shares at an exercise price of $.20 per share.

True-Up Shares -- Each private investor also received the right to receive True-Up shares in the event the True-Up Price as defined in the Stock Purchase Agreement for this placement is lower than the $.20 price for the purchased shares. The True-Up Price represents the average of the fifteen lowest public market closing prices during a specified 90-day period and having a floor of $.10 per share. Based on current trading of our common stock, the True-Up Price calculation per share has become lower than this $.10 floor. Accordingly, if our common stock does not appreciate substantially, we could be required to issue a total of 10,000,000 True-Up Shares to the private investors.

In addition, the warrants issued to investors in this private offering are subject to the same True-Up Price adjustment regarding their exercise price.

Payment by investors in this private placement is payable in two equal tranches, with the first tranche due upon entering into the Stock Purchase Agreement, and the second tranche payable anytime thereafter but no later than that date occurring three days after the effectiveness with the Securities and Exchange Commission (SEC) of an S-1 Registration Statement covering all common shares obtained by investors in this private offering. We have filed this Registration Statement with the SEC.

We have sold and received subscriptions for all 10,000,000 common shares offered in this private placement, and to date we have received proceeds of $1,750,000 from accredited investors, for which we have issued an aggregate of 8,750,000 purchased shares and 875,000 Advisory Shares. Accordingly, an amount of $250,000 is still outstanding to complete the second tranche of this private offering.

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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 three months ended March 31, 2019 we continued to incur a substantial net loss of $984,855, our accumulated deficit as of March 31, 2019 is $23,499,566, and our working capital deficiency as of March 31, 2019 is $2,259,277. These adverse financial conditions raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or the amounts and classification of liabilities that might be necessary if we are unable to continue as a going concern.

Off-Balance Sheet Arrangements

We have no off-balance sheet items as of March 31, 2019, or as of the date of this report.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable

ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures -- We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating these disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired objectives. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatement. Moreover, the design of any disclosure controls and procedures is based in large part upon certain assumptions regarding the likelihood of future events, and there can be no assurance than any such design will succeed in achieving its stated goals under all potential future conditions.

Our management will apply its best judgment in evaluating the cost-benefit relationship of any disclosure controls and procedures adopted by us. The design of our disclosure controls and procedures must reflect the fact that we will face personnel and financial restraints for some time, and accordingly the benefit of such controls must be considered relative to their costs.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2019 (the end of the period covered by this Quarterly Report on Form 10-Q). Based on their evaluation as of the end of the quarterly period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company and required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure, because of continuing material weaknesses in our internal control over financial reporting as reported in our Annual Report on Form 10-K for the period ended December 31, 2018.

Changes in Internal Control over Financial Reporting -- There have been no changes in our internal control over financial reporting during our last fiscal quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II -- OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

None

ITEM 1A RISK FACTORS

Not applicable.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES

Unregistered sales of our equity securities in the first quarter ended March 31, 2019 are as follows:

In February 2019, we issued 300,000 unregistered common shares valued at $26,730 to a consultant for advisory services to be provided to us during February-April 2019.

In February 2019 we also issued 62,500 common shares to our independent director, John Bode for his service as a director in the fourth quarter of his first year of service, and we also agreed to grant him $12,500 worth of our common stock at the end of each quarter of board service, for four quarters, for agreeing to serve on our Board of Directors for a second year commencing March 1, 2019.

In February-March 2019 we issued an aggregate of 8,622,087 common shares and two-year warrants to purchase 3,182,834 common shares (exercisable at $.20 per share and valued at $63,502 under Black-Scholes pricing) to noteholders who converted their outstanding notes in the amount of $742,841, with the conversion prices and warrant terms based on specific terms contained in the notes. Of the $742,841 converted debt, $490,000 was a mandatory conversion for certain noteholders converting at $0.15 to $0.16 per share for 3,182,834 common shares.

During January-March 2019, we received proceeds of $350,000 from accredited investors making payments of their second tranche funding under our recent private placement, for which we issued a total of 1,750,000 unregistered purchased common shares and 175,000 unregistered advisory common shares. These proceeds were used by us for working capital and general corporate purposes.

In April 2019, we entered into a one-year consulting contract in consideration for our payment to the consultant of $50,000 monthly, 30 million shares of our common stock valued at $1,797,000 and a five-year warrant to purchase an additional 30 million common shares exercisable at $.20 per share, with the warrant having a value of $1,297,570 under our Black-Scholes pricing model. See foregoing Note 6.

The issuances of all of our securities in the foregoing unregistered transactions were exempt from registration under the Securities Act of 1933, as amended, in reliance on the exemption under Section 4(a)(2) of the Securities Act.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 OTHER INFORMATION

None.

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ITEM 6 EXHIBITS

Exhibit No.		Description

31.1		Certification of CEO pursuant to Securities Exchange Act (filed herewith)
31.2		Certification of CFO pursuant to Securities Exchange Act (filed herewith)
32.1		Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350 (filed herewith)
101		Interactive data files pursuant to Rule 405 of Regulation S-T

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FISION Corporation

By:	/s/ Michael Brown	May 22, 2019
	Michael Brown,
	Chief Executive Officer

And:	/s/ Daniel Dorsey	May 22, 2019
	Daniel Dorsey
	Chief Financial Officer