UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2021

 

Or

 

☐     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.)

 

1650 West End Boulevard, Suite 100

Minneapolis, Minnesota

55416

(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 ☒ Yes    ☐ No

 

Indicate by check mark whether the registrant has submitted electronically 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). ☒ Yes    ☐ No

 

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

 

Large, accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

  

Indicate the number of the registrant’s shares of common stock outstanding, as of the latest practicable date: 440,153,287 shares of common stock are outstanding as of May 19, 2021.

   

 

 

   

Table of Contents

 

Page No.

Part I

 

 

 

 

Item 1

Consolidated Financial Statements (unaudited)

3

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

26

 

Item 4

Controls and Procedures

26

 

 

Part II

 

 

 

 

 

Item 1

Legal Proceedings

27

 

Item 1A

Risk Factors

27

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

27

 

Item 3

Defaults Upon Senior Securities

27

 

Item 4

Mine Safety Disclosures

27

 

Item 5

Other Information

27

 

Item 6

Exhibits

28

 

Corporate Contact Information

 

Our executive, administrative and operational offices are now temporarily located at 1650 West End Boulevard, Suite 100, Minneapolis, MN 55416; our telephone number is (612) 927-3700; and we maintain a website at www.FisionOnline.com.

  

 

2

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1 FINANCIAL STATEMENTS

 

FISION CORPORATION

CONSOLIDATED BALANCE SHEET

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

Cash

 

$ 2,556

 

 

$ 7,504

 

Accounts receivable, net

 

 

10,946

 

 

 

767

 

Notes Receivable, net of allowance for doubtful accounts (See Note 5)

 

 

-

 

 

 

-

 

Total Current Assets

 

 

13,502

 

 

 

8,271

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

$ -

 

 

$ 173

 

 

 

 

 

 

 

 

 

 

Other Assets:

 

 

 

 

 

 

 

 

Goodwill

 

 

8,800

 

 

 

8,800

 

Intellectual property/software code, net of accumulated amortization

 

 

30,580

 

 

 

35,473

 

Deposits

 

 

206

 

 

 

206

 

Total Assets

 

$ 53,088

 

 

$ 52,923

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$ 1,040,823

 

 

$ 983,789

 

Derivative liability

 

 

814,226

 

 

 

4,251,179

 

Current portion of long-term debt: SBA/PPP Loan

 

 

88,600

 

 

 

88,600

 

Notes payable and accrued interest - related party, net of debt discount of $0 and $20,951 respectively

 

 

69,500

 

 

 

632,832

 

Notes payable, net of debt discount of $13,912 and $33,568 respectively

 

 

926,510

 

 

 

1,141,957

 

Total Current Liabilities

 

 

2,939,659

 

 

 

7,098,357

 

 

 

 

 

 

 

 

 

 

Long-Term Liabilities:

 

 

 

 

 

 

 

 

Long-Term SBA/PPP Loan

 

 

88,600

 

 

 

88,600

 

Long-Term Convertible Notes Payable and accrued interest - related party, net of debt discount of $0 and $67,963 respectively

 

 

-

 

 

 

163,704

 

Long-Term Convertible Notes Payable, net of debt discount of $36,777 and $130,816 respectively

 

 

102,223

 

 

 

199,349

 

Total Long-Term Liabilities

 

 

190,823

 

 

 

451,653

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

3,130,482

 

 

 

7,550,010

 

 

 

 

 

 

 

 

 

 

Contingencies and Commitments (See Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' 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 431,508,916 and 381,923,708 shares issued and outstanding, respectively

 

 

43,150

 

 

 

38,192

 

Additional paid in capital

 

 

28,314,866

 

 

 

26,768,046

 

Accumulated deficit

 

 

(31,435,410 )

 

 

(34,303,325 )

Total Stockholders' Deficit

 

 

(3,077,394 )

 

 

(7,497,087 )

Total Liabilities and Stockholders' Deficit

 

$ 53,088

 

 

$ 52,923

 

    

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

      

 
3

Table of Contents

   

FISION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

REVENUE

 

$ 60,965

 

 

$ 104,044

 

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD

 

 

25,283

 

 

 

28,732

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN

 

$ 35,682

 

 

$ 75,312

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Sales and Marketing

 

 

3,520

 

 

 

1,949

 

Development and Support

 

 

52,420

 

 

 

108,394

 

General and Administrative

 

 

151,378

 

 

 

810,614

 

TOTAL OPERATING EXPENSES

 

$ 207,318

 

 

$ 920,957

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

$ (171,636 )

 

$ (845,645 )

 

 

 

 

 

 

 

 

 

OTHER INCOME / (EXPENSES)

 

 

 

 

 

 

 

 

Amortization expense, interest expense, and amortization of debt discount

 

 

(589,604 )

 

 

(443,905 )

Gain on change in fair value of derivative liabilities

 

 

2,190,076

 

 

 

1,396,698

 

Gain (loss) on extinguishment of debt / gain (loss) on settlement of debt

 

 

1,439,079

 

 

 

(28,595 )

Bad debt expense on notes receivable

 

 

(12,065 )

 

 

(12,065 )

Other income (expenses)

 

 

12,065

 

 

 

12,065

 

TOTAL OTHER INCOME (EXPENSES)

 

$ 3,039,551

 

 

$ 924,198

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$ 2,867,915

 

 

$ 78,553

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$ 0.01

 

 

$ 0.00

 

Diluted

 

$ 0.01

 

 

$ 0.00

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

414,728,633

 

 

 

193,786,582

 

Diluted

 

 

441,076,853

 

 

 

770,100,769

 

   

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

    

 
4

Table of Contents

 

FISION CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2021

(Unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance, December 31, 2019

 

 

135,685,981

 

 

$ 13,569

 

 

$ 24,108,264

 

 

$ (31,811,792 )

 

$ (7,689,959 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

2,083,333

 

 

 

208

 

 

 

12,292

 

 

 

 

 

 

 

12,500

 

Stock issued for true-up and penalty shares

 

 

9,625,000

 

 

 

963

 

 

 

47,740

 

 

 

 

 

 

 

48,703

 

Warrants/Options granted for services

 

 

-

 

 

 

-

 

 

 

324,392

 

 

 

-

 

 

 

324,392

 

Conversion of notes payable and accrued interest/expenses

 

 

102,044,226

 

 

 

10,204

 

 

 

635,943

 

 

 

 

 

 

 

646,147

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78,553

 

 

 

78,553

 

Balance, March 31, 2020

 

 

249,438,540

 

 

$ 24,944

 

 

$ 25,128,631

 

 

$ (31,733,239 )

 

$ (6,579,664 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020

 

 

381,923,708

 

 

$ 38,192

 

 

$ 26,768,046

 

 

$ (34,303,325 )

 

$ (7,497,087 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

2,004,994

 

 

 

200

 

 

 

49,800

 

 

 

 

 

 

 

50,000

 

Conversion of notes payable and accrued interest/expenses

 

 

47,580,214

 

 

 

4,758

 

 

 

1,497,020

 

 

 

 

 

 

 

1,501,778

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,867,915

 

 

 

2,867,915

 

Balance, March 31, 2021

 

 

431,508,916

 

 

$ 43,150

 

 

$ 28,314,866

 

 

$ (31,435,410 )

 

$ (3,077,394 )

  

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

   

 
5

Table of Contents

   

FISION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net Income for the Period

 

$ 2,867,915

 

 

$ 78,553

 

Net cash used in operating activities:

 

 

 

 

 

 

 

 

Common stock issued for services

 

 

50,000

 

 

 

336,892

 

Amortization of pre-paid stock issued

 

 

-

 

 

 

525,368

 

Depreciation and amortization

 

 

5,066

 

 

 

3,133

 

True-up and penalty shares issued

 

 

-

 

 

 

48,703

 

Gain on change in fair value of derivative liabilities

 

 

(2,190,076 )

 

 

(1,396,698 )

Loss (gain) on extinguishment of debt/gain on settlement of debt

 

 

(1,439,079 )

 

 

28,596

 

Bad debt expense

 

 

12,065

 

 

 

12,065

 

Amortization of debt discount

 

 

544,577

 

 

 

50,722

 

Change in interest receivable

 

 

(12,065 )

 

 

(12,065 )

Changes in Operating Assets and Liabilities

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,179 )

 

 

6,850

 

Customer contracts – unrecognized revenue

 

 

-

 

 

 

(39,000 )

Increase (decrease) in:

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

 

111,083

 

 

 

269,471

 

Net Cash Used in Operating Activities

 

 

(60,693 )

 

 

(87,410 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from note payable

 

 

55,000

 

 

 

75,000

 

Proceeds from related party notes and line of credit

 

 

745

 

 

 

-

 

Repayments for related party notes and line of credit

 

 

-

 

 

 

(2,100 )

Net Cash Provided by Financing Activities

 

 

55,745

 

 

 

72,900

 

 

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash

 

 

(4,948 )

 

 

(14,510 )

 

 

 

 

 

 

 

 

 

Cash at Beginning of Period

 

 

7,504

 

 

 

14,510

 

Cash at End of Period

 

$ 2,556

 

 

$ -

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Noncash operating and financing activities:

 

 

 

 

 

 

 

 

Conversion of debt and accrued interest to common stock

 

$ 1,501,778

 

 

$ 694,850

 

Prepaid stock issuance

 

$ -

 

 

$ 532,368

 

Common stock issued for services

 

$ 50,000

 

 

$ 12,500

 

Accrued Interest increasing notes receivable

 

$ 12,065

 

 

$ 12,065

 

Derivative liability write-off related to conversions

 

$ 1,246,877

 

 

$ -

 

     

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

    

 
6

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FISION CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020

(Unaudited)

 

NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

FISION Corporation, a Delaware corporation (the “Company”) was incorporated under a former name 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 in Minnesota in 2010, and has developed and 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 consolidated financial statements are unaudited. These unaudited consolidated 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 consolidated financial statements are adequate to make the information not misleading.

 

Although these interim consolidated financial statements for the three-month periods ended March 31, 2021 and 2020 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 the 2021 interim period are not necessarily indicative of the results to be expected for the year ended December 31, 2021 or for any future period.

 

These unaudited interim consolidated financial statements should be read and considered in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2020, included in our annual report on Form 10-K filed with the SEC on April 15, 2021.

 

Principles of Consolidation

 

These consolidated interim financial statements include the accounts of FISION Corporation, a Delaware corporation, and its wholly-owned Minnesota subsidiary Fision Holdings, Inc, a Minnesota corporation. 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 allowance for doubtful accounts, valuations of property and equipment and intangible assets, stock-based compensation, fair value of financial instruments, derivative liabilities, impairment of long-lived assets, and the valuation allowance for deferred 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, 2021 and December 31, 2020, 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 year ended December 31, 2020 and the three months ended March 31, 2021, 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.

 

 
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For the three months ended March 31, 2021, three customers exceeded 10% of our revenues, including one for 49% of revenues, one for 30% of revenues, and one for 12 % of revenues. We face the material risk factor that a significant reduction for any reason in the use of our software solutions by one of these major customers may 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, originally effective for public business entities with annual reporting periods beginning after December 15, 2017. On August 12, 2015, the FASB issued an Accounting Standards Update (“ASU”), Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year. ASC 606 provides accounting guidance related to revenue from contracts with customers. For public business entities, ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. 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 adopted the application of ASC 606 and has evaluated the impact of ASC 606, and the application of ASC 606 did not have a material impact on its consolidated financial statements and disclosures, as the Company had already implemented the five-step process 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.

 

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. 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 ASU 2016-02 on leases and has evaluated the impact of ASU 2016-02 on the Company’s financial statements and disclosures, and currently does not believe that its application will have a material impact on its consolidated financial statements. As of March 31, 2021, the Company had no leases, and pays for a virtual office on a month-to-month basis.

 

Income (Loss) Per Common Share

 

Earnings per Share - Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Under ASC 260-10-45-16, the calculation of diluted earnings per share, the numerator should be adjusted to add back any convertible dividends and the after-tax amount of interest recognized in the period associated with any convertible debt. The denominator should include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Please refer to the below table for additional details:

 

 
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Table of Contents

 

 

 

For the three months

ended March 31,

 

 

 

2021

 

 

2020

 

Net income (loss)

 

$ 2,867,915

 

 

$ 78,553

 

Adjustments for diluted earnings:

 

 

 

 

 

 

 

 

Income (Loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$ 0.01

 

 

$ 0.00

 

Diluted

 

$ 0.01

 

 

$ 0.00

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

414,728,633

 

 

 

193,786,582

 

Diluted

 

 

441,076,853

 

 

 

770,100,769

 

 

For the three months ended March 31, 2021 and March 31, 2020, there were 26,348,220 and 576,314,187 potentially dilutive securities respectively, included in the calculation of weighted-average shares outstanding, relating to terms of certain convertible notes.

  

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.

 

Recently Issued Accounting Pronouncements

 

See above “Revenue Recognition” and “Lease Accounting” sections in this Note 1.

 

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 our present or future financial statements.

 

NOTE 2 -- GOING CONCERN

 

Our consolidated 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. Our ability to continue as a going concern is contingent upon our future ability to achieve and maintain profitable operations, and to raise substantial additional capital as required until we attain profitable operations.

 

 
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At March 31, 2021 we had a working capital deficiency of $2,926,157 and an accumulated deficit of $31,435,410 and the Company had an operating loss of $171,636 for the three months ended March 31, 2021. These conditions raise substantial doubt about our ability to continue as a going concern for a period of 1 year from the issuance date of this report. 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 developing and acquiring new business opportunities and raising funds to support such activities to obtain increased revenues, and otherwise addressing our ability to continue as a going concern. Our management believes that if we can succeed in raising substantial additional capital to implement and support such new activities, we will be able to generate material increased revenues and continue as a going concern. Unless we can raise significant additional working capital, however, we most likely will be unable to continue our business and operations as a going concern.

 

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, 2021:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$ -

 

 

$ -

 

 

$ 814,226

 

 

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 provides a reconciliation of the beginning and ending balances of the liabilities:

 

 

 

Fair Value

Dec 31,

2020

 

 

Additions

 

 

Change in

fair

Value

 

 

Extinguishment

 

 

Fair Value

Mar 31,

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$ 4,251,179

 

 

$ -

 

 

$ (2,190,076 )

 

$ (1,246,877 )

 

$ 814,226

 

 

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 income and expensed in these financial statements. We also recognized a gain on extinguishment of debt of $1,246,877 during the period ending March 31, 2021.

  

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

 

Exercise price

$

.0095-.05

 

Expected Volatility

 

 

153 %

Expected Term

 

Due on demand to 36 mos.

 

Risk free interest rate

 

0.03%-0.10

Expected dividends

 

 

-

 

 

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 – ACCOUNTS RECEIVABLE

 

Our accounts receivable at March 31, 2021 and December 31, 2020 consisted of the following:

 

 

 

March 31,

2021

 

 

Dec. 31,

2020

 

Accounts receivable

 

$ 10,946

 

 

$ 767

 

Less: Allowance for doubtful accounts

 

-0-

 

 

-0-

 

Accounts Receivable, net of allowance for doubtful accounts

 

$ 10,946

 

 

$ 767

 

 

NOTE 5 – NOTES RECEIVABLE

 

The Company had no notes receivable balance, due to an allowance for doubtful accounts, at March 31, 2021 and December 31, 2020.

 

 

 

March 31,

2021

 

 

Dec. 31,

2020

 

Notes receivable

 

$ 804,300

 

 

$ 804,300

 

Accrued interest

 

 

113,264

 

 

 

101,200

 

Total

 

$ 917,564

 

 

$ 905,500

 

Less allowance for doubtful accounts

 

 

(917,564 )

 

 

(905,500 )

Notes receivable, net

 

$ -

 

 

$ -

 

 

While the failed Continuity Logic merger was pending, the Company made various bridge loans to Continuity Logic for working capital purposes, of which a total balance including accrued interest of $917,564 is still outstanding and in default as of March 31, 2021, with a secured loan balance of $460,447. These loans matured on August 31, 2019, bear interest at 6% per annum, and a portion of the Notes for these loans are secured by a first-priority perfected security interest on the accounts receivable of Continuity Logic, pursuant to a Security Agreement dated November 27, 2018. On February 4, 2019, the merger with Continuity Logic LLC was terminated. The termination of the merger does not change or affect the continuing obligation of Continuity Logic to satisfy the future payment of these loans to the Company, and in 2019 the Company commenced a Complaint against Continuity Logic LLC regarding the unpaid balance of these Notes Receivable. Continuity Logic is not a related party to the Company.

 

 
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Court action is ongoing, while we also pursue reasonable collection activities. Due to the uncertainty of obtaining payment for these Notes, however, the Company has created an allowance for doubtful accounts of the entire amount of this Continuity Logic receivable, resulting in no balance being recorded in our outstanding Notes Receivable. Continuity Logic, LLC is not a related party to the Company. Further court action is ongoing.

 

Additionally, the Company as a Petitioning Creditor has participated in an involuntary bankruptcy petition for Continuity Logic LLC, in order to expedite the collection efforts, and to appoint a Trustee in the United States Bankruptcy Court, District of New Jersey to oversee all collection matters. Since we are the only secured lender, as a first priority and perfected lienholder, we expect the first $460,447 of collected proceeds to be released to us less any bankruptcy court related costs.

 

NOTE 6 – PROPERTY AND EQUIPMENT

 

Property and equipment, stated at cost, less accumulated depreciation, consist of the following at March 31, 2021 and December 31, 2020.

 

 

 

March 31,

2021

 

 

Dec. 31,

2020

 

Equipment

 

$ 15,720

 

 

$ 15,720

 

Furniture & Fixtures

 

 

471

 

 

 

471

 

Less: Accumulated Depreciation

 

 

(16,191 )

 

 

(16,018 )

Net Property and Equipment

 

$ -

 

 

$ 173

 

 

For the period ending March 31, 2021, we accounted for $173 of depreciation expense.

 

NOTE 7 – INTELLECTUAL PROPERTY: SOFTWARE AND GOODWILL

 

 

 

March 31,

2021

 

 

Dec. 31,

2020

 

Intellectual Property: Software Code

 

$ 68,500

 

 

$ 68,500

 

Less: Accumulated Amortization

 

 

(37,920 )

 

 

(33,027 )

Net Intellectual Property: Software Code

 

$ 30,580

 

 

$ 35,473

 

 

Intangible asset amortization expense on our software code in each of the five succeeding years will amount to approximately $30,580 as we will fully amortize the intellectual property in 2024. For fiscal 2021 through 2024, the amortization period for identifiable intangible assets on our software code is 7 years, with amortization expense of approximately $9,786, $9,786, $9,786 and $6,115 to be recognized, respectively.

 

A summary of changes in the Company’s goodwill consists of the following during the three months ending March 31, 2021 and December 31, 2020:

 

Intellectual Property: Goodwill:

 

March 31,

2021

 

 

Dec. 31,

2020

 

 

 

 

 

 

 

 

Goodwill

 

$ 8,800

 

 

$ 13,800

 

Less: Impairment Expense

 

 

-

 

 

 

(5,000 )

Goodwill

 

$ 8,800

 

 

$ 8,800

 

 

 
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Impairment Testing of Goodwill

 

Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely than not impaired.

 

In connection with the annual goodwill impairment analysis performed during the fourth quarter of 2020, the Company determined that the fair value of our goodwill on customer contracts was slightly less than our book value, and therefore we took a $5,000 goodwill impairment charge in the fourth quarter of 2020, as some of our customers did not renew our software licensing and hosing contracts at the end of fiscal year 2020. The Company did not take any goodwill impairment expense during the three month’s ending March 31, 2021.

 

NOTE 8 – NOTES PAYABLE

  

At March 31, 2021, we were indebted under various Notes Payable with interest rates of 1% to 15%, including a COVID-related PPP SBA loan of $177,200, current related party short term Notes payable of $69,500, current Notes payable, mostly in default, of $926,510 net of debt discount of $13,912, and long-term Convertible Notes Payable, having a long-term debt discount amount of $36,777, resulting in a balance of $102,223.

  

During the quarter ended March 31, 2021, related parties converted outstanding notes payable and accrued interest in the total amount of $732,525 into common stock of the Company. See Note 11.

 

NOTE 9 - COMMITMENTS AND CONTINGENCIES

 

In 2019, we entered into a consulting contract with Capital Market Solutions LLC, a Delaware limited liability company (“CMS”), an affiliate, under which for a term of one year, CMS provided us with management, operational, 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 which we valued at $1,797,000 based on the closing stock price on the date of the transaction, which was recorded as a pre-paid expense and amortized over one year. This consulting contract also provided for a five-year warrant granting CMS the right to purchase an additional 30 million shares of our common stock exercisable at $.20 per share, which warrant we valued at $1,297,570 with the warrant expense amortized as consulting expense on a straight-line basis over the term of the consulting agreement of one year. As of March 31, 2020, except for the outstanding warrant, the one-year term and all other provisions of this CMS consulting agreement expired.

 

COVID-19 -- Management of the Company has concluded that the COVID-19 outbreak in 2020 has had and may continue to have a material impact on business in general, but the potential impact on the Company is not currently measurable. Due to the level of risk this virus may have on the global economy, it is at least reasonably possible that it could have and/or has had an impact on the operations of the Company that could materially impact the Company’s financials. Management has not been able to measure the potential financial impact on the Company. The Company continues to monitor the impact of this pandemic closely, although the extent to which the COVID-19 outbreak will impact our operations, financing ability or future financial results is uncertain.

 

NOTE 10 -- STOCKHOLDERS’ DEFICIT

  

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, 2021 there were 431,508,916 outstanding shares of common stock and no outstanding shares of preferred stock.

 

Director Services - During the first quarter ended March 31, 2021, we issued a total of 2,004,994 restricted common shares valued at $50,000 to our four directors for their quarterly management services as a director, including 459,559 shares valued at $12,500 to director John Bode, 515,145 shares valued at $12,500 to director Michael Brown, 515,145 shares valued at $12,500 to director William Gerhauser, and 515,145 shares valued at $12,500 to director Greg Nagel.

 

Note Conversions - During the first quarter ended March 31, 2021, Noteholders who are accredited investors converted their outstanding Notes and related interest totaling $1,501,778 into an aggregate of 47,580,214 shares of restricted common stock, including: i) Garry Lowenthal converting his Note balance of $187,877 at $.05 per share into 3,757,537; ii) director Michael Brown converting his Note balance of $254,227 at $.05 per share into 5,084,535 shares; iii) affiliate Capital Market Solutions LLC (controlled by Mr. Gerhauser) converting its Note balances of $214,556 at $.05 per share into 4,291,122 shares; iv) affiliate Ignition Capital (also controlled by Mr. Gerhauser) converting its Note balance of $165,292 at $.03 per share into 5,509,733 shares; v) affiliate MGA Holdings (also controlled by Mr. Gerhauser) converting its Note balance of $98,450 at $.03 per share into 3,281,667 shares; and vi) remaining noteholders converting aggregate Note balances of $581,375 into 25,655,620 shares.

   

 
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NOTE 11-- RELATED PARTY

 

During the three months ended March 31, 2021 we issued a total of 2,004,994 shares of our restricted common stock to our four directors for director services. See above Note 7.

 

Incident to Note Conversions during the first quarter ended March 31, 2021, certain related party Noteholders converted an aggregate of $732,525 of their Notes and accrued interest into 18,167,057 shares of our common stock. See above Note 10.

 

NOTE 12 – COVID-19 LOAN

 

In April 2020, we obtained an SBA long-term loan under the federal COVID-19 Payroll Protection Program (PPP) for $177,200, administered by Richfield/Bloomington Credit Union, having a term of 24 months and bearing interest of 1% per annum. The portion of the loan proceeds used for labor, office costs and utilities may be subject to loan forgiveness under the terms of the SBA/PPP program.

  

NOTE 13 – SUBSEQUENT EVENTS

 

As of the date of this interim report, the following material subsequent events occurred after March 31, 2021.

 

Exercise of Warrants - In April 2021, two warrant holders who are accredited investors exercised their outstanding Common Stock Purchase Warrants at an exercise price of $.025 per share, thereby purchasing a total of 8,644,371 shares of our common stock for total proceeds to us of $216,109.

 

MOU to Acquire Score Inc. – On April 1, 2021 we entered into a Memorandum of Understanding (MOU) with Score, Inc. and its 100% owner Joshua Carbona to acquire Score Inc. For a description of the material terms of this MOU, see the section titled “Pending Acquisition of Score, Inc.” set forth in Item 2 of this quarterly report on Form 10-Q. Also, this transaction was disclosed in a Current Report on Form 8-K filed with the SEC on April 6, 2021, which included as Exhibit 10.l a full copy of the MOU.

   

 
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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 specific Risk Factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

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

 

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 in raising substantial working capital as needed to support our business plan for future growth.  We have also recently in this reporting period ending March 31, 2021, we have received proceeds from the exercise of certain warrants from existing warrant holders of the Company.

    

During most of 2019 and until March 2020, our executive management consisted primarily of two persons who are partners of our major affiliate and principal shareholder, Capital Markets Solutions, LLC (“CMS”), and who served us on an interim basis under the terms of a Consulting Agreement between us and CMS. This Consulting Agreement expired in March 2020, and the two CMS partners acting as our interim executive management then resigned as executive officers and directors of the Company. Since April 2020, our management has consisted of four directors, Michael Brown, John Bode (independent), William Gerhauser and Gregory Nagel (independent), with Michael Brown also acting as our principal executive and financial officer.

 

After the termination of the Continuity Logic LLC merger in early 2019, and for the past two years, our primary business operations focused on supporting our current customer base, in addition to enhancing our Fision software platform, and also improving our financial position. We also added Alistair Hancock, CEO of Rubicon Software Ltd, as our acting Chief Technology Officer in September 2019.  Rubicon Software Ltd is a U.K. based company providing experienced IT solutions and services. This IT outsourcing relationship has allowed us to enhance our professional services to our existing customers and new customers we may acquire.

 

Completed Acquisition to Engage in Ambulatory Surgery Center (ASC) Business

 

In November 2020, the Company acquired 100% of the equity membership interests of two Florida limited liability companies from Capital Market Solutions, LLC (“CMS”), which are Ft Myers ASC LLC (“Ft Myers ASC”) and ASC SoftDev LLC (“SoftDev”). These two LLCs were organized by CMS in the fall of 2020 to engage in the development and operation of a medical Ambulatory Surgery Center. Our agreement with CMS for this acquisition was set forth in full as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 19, 2020.

 

CMS is an affiliate of the Company and its largest shareholder, and is controlled by William Gerhauser, a director of the Company. This acquisition and its terms were specifically considered and approved by our two independent and disinterested directors, who also were advised by independent outside legal counsel. Neither Mr. Gerhauser nor any other representative of CMS participated in the vote of our Board of Directors to approve this acquisition.

 

Fort Myers ASC was formed for the purpose of owning and operating in Ft. Myers, Florida an Ambulatory Surgery Center, a medical facility specializing in elective same-day or outpatient surgical procedures, not including emergency surgery.

  

We anticipate opening the Ft Myers Ambulatory Surgery Center for commercial operations during the second quarter of 2022.

  

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 Rubicon Software Ltd. We expect to have completed our proprietary Ambulatory Surgery Center software platform applications prior to opening our Ft Myers Ambulatory Surgery Center.

   

 
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Pending Acquisition of Score, Inc.

 

On April 1, 2021, through a Memorandum of Understanding (MOU) between the Company, Score, Inc., a Puerto Rico corporation (“Score”) and Joshua Carmona (Carmona”) (100% owner of Score), we agreed to acquire Score based on the following material terms of this MOU. Upon the anticipated closing of this acquisition, Score will become a wholly-owned subsidiary of the Company.

 

Score, Inc. is a Puerto Rico corporation in good standing, and is engaged in the enterprise software industry where it provides business-to-business solutions in credit repair for approximately 100 US companies. Score owns 100% of its significant subsidiary VIP Solutions LLC. Joshua Carmona owns 100% of all equity stock of Score, free and clear of all liens and encumbrances.

 

Score is an Act 73 company under Puerto Rico law, and our acquisition of Score will be conducted to ensure that Score maintains this important Act 73 status after becoming our subsidiary. Under the terms of the MOU, all corporate actions and due diligence for this acquisition of Score must be completed by the Closing, and there cannot be any material change in the operations or financial condition of Score until the Closing. The Company has 70 days from the date of the MOU to conduct full due diligence on the operations and financial condition of Score.

 

The Closing of this Score acquisition is contingent upon: i) the satisfactory completion of due diligence as determined and approved by Fision; ii) the presentation and delivery by Score to Fision of audited financial statements of Score satisfactory to Fision’s auditors; and iii) the Closing occurring within five (5) business days of conditions i) and ii) being satisfied. Upon Closing, Fision will provide to Score at least $500,000 during the 18 months following Closing, to be used as working capital for software development and integration, and marketing expenses, including adding additional employees. We anticipate such funding will among other things support integration of the Fision and Score software platforms to allow them to be marketed jointly.

 

In consideration for acquiring Score, we will issue and deliver to Carmona a Senior Secured Convertible Promissory Note in the principal amount of $500,000, convertible into common stock of the Company at the higher conversion price of USD $.05 per share or the volume weighted average price (VWAP) over the last 10 trading days prior to conversion. By March 31, 2023, we also will issue and deliver to Carmona an unsecured promissory note in an amount equal to Score’s average gross annual revenue for calendar years 2021 and 2022, convertible into our common stock at $.20 per share but not for more than 10 million shares. Also, upon Closing, Carmona will become a member of our Board of Directors and he has agreed to serve as our Chief Operating Officer (COO), being compensated at any annual rate of $50,000, with quarterly payments of $12,500 paid through issuance of our restricted common stock to Carmona based on the closing price of such stock on the last trading day of each quarter.

  

The complete MOU for this Score acquisition was filed April 6, 2021 with the SEC as Exhibit 10.1 of Form 8-K.

 

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 totaled $4,788,692 including $1,198,106 converted in 2019, $2,088,809 converted in 2020, and $1,501,777 converted in the recent quarter ended March 31, 2021. Just recently, our outstanding current short-term Notes Payable have decreased substantially from $1,863,389 as of December 31, 2020 to $1,084,610, as of March 31, 2021, net of debt discounts.

 

 
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ii) These many debt conversions have substantially reduced our required interest payments. For example, our interest expenses for 2020 were $983,789 compared to interest expenses for 2019 of $2,155,065, and our interest expenses for the recent first quarter period ended March 31, 2021 were $45,027 compared to interest expenses for the first quarter ended March 31, 2020 of $390,737.

 

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 $4,251,179 as of December 31, 2020 as compared to $814,226 as of March 31, 2021.

  

iv) Total Liabilities – We have reduced our total liabilities substantially from $7,550,010 as of December 31, 2020 to $3,130,482 as of March 31, 2021.

  

Background of Company

 

FISION Corporation (the “Company”) was incorporated in Delaware in 2010 under a former name and conducted no active business operations until December 2015 when the Company merged with Fision Holdings, Inc., (“Minnesota Fision”) an operating Minnesota corporation based in Minneapolis. As a result of this 2015 Merger, Fision Holdings, Inc. became our wholly-owned subsidiary, and control of the Company was acquired by the pre-merger shareholders of Fision Holdings, Inc.

  

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 Delaware parent was the acquired company.

  

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.

 

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

 

Termination of Continuity Logic Merger - In late 2018 the Company entered into a Merger Agreement with Continuity Logic, L.L.C., a New Jersey limited liability company (the “Continuity Logic Merger”) to effect a merger which would have resulted in our shareholders as a group and the equity holders of Continuity Logic as a group each owning 50% of the post-merger combined companies. A key provision of this Continuity Logic Merger provided that the parties and their representatives were required to raise enough working capital to support the post-merger funding requirements of the combined companies, and also that the merger be completed by December 31, 2018. Although the Company and Continuity Logic conducted extensive due diligence regarding this merger during the last few months of 2018, they were unable to raise or receive future commitments from investors to provide sufficient capital to support the projected post-merger combined business operations of both companies. Accordingly, in February 2019 Continuity Logic terminated this merger since it was not consummated by December 31, 2018 as well as insufficient working capital being available to sustain projected post-merger business operations. The Company no longer has any relationship or involvement with the business operations or future prospects of Continuity Logic.

 

 
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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 are still outstanding in the total amount as of March 31, 2021 of $460,447 including accrued interest. These loans matured on August 31, 2019, bear interest at 6% per annum, and a substantial portion of the Notes is secured by a first-priority perfected security interest on the accounts receivable of Continuity Logic. The termination of the Continuity Logic Merger does not change or affect the continuing obligation of Continuity Logic to satisfy the payment of these loans to the Company. Although we have commenced legal proceedings to attempt to collect the overdue principal and interest owed to us by Continuity Logic on these Notes, the Company took a reserve as of December 31, 2019 for the entire principal plus accrued interest against these notes receivables.

 

Incident to legal proceedings relating to Continuity Logic, we also are a Petitioning Creditor in a New Jersey federal bankruptcy court to have a court-appointed Trustee take over the assets of Continuity Logic and collect proceeds from its customers for the benefit of its creditors. Since we are the only secured lender of Continuity Logic, and thus a first priority and perfected lienholder, we expect the first $460,447 of any such proceeds to be released to us less any court-related costs associated with the bankruptcy case.

 

Contemplated Business Combination

 

We have been seeking a merger or other business combination, with our chosen target being an established private software services company 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 Minnesota corporate subsidiary, Fision Holdings, Inc.

 

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.

 

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.

 

 
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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 certain customers have maintained written contracts with us for years. 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.

 

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.

 

 
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We believe that our past marketing focus toward large enterprises was relatively effective, since during 2018-2019 we closed and implemented material contracts with, and are receiving recurring revenues from, several 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 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 May 2017 we acquired substantially all the assets of Volerro Corporation (“Volerro”), a Minneapolis-based company, including its proprietary cloud-based software and development technology and its customer base. Volerro has developed and marketed “content collaboration” software services to enhance and improve the overall sales and marketing activities of its clients. Volerro software enables the marketing, sales and brand personnel of its clients to collaborate in real time in the creation, refinement, and distribution of all types of their strategic content including print, packaging, high quality image and video content. For example, Volerro’s primary application allows all product, brand, marketing and creative teams of a business enterprise the ability to work on and create a document in real-time with integrated chat and voice conferencing. Marketing of Volerro cloud-based software solutions has been primarily focused on large financial and retail enterprises.

 

Employees and Properties

 

We currently have several independent contractors to perform most of the necessary activities of the Company.

  

 We have been conducting our current business and operations under a short-term lease from a temporary “virtual” office in Minneapolis which provides us with telephone, mail and basic conference facilities adequate for our current activities, as well as storage of certain computers, hardware servers, software assets and other technology development and office equipment, furniture and supplies owned by us. We do not own any real estate. However, the Company intends to establish an office in Florida, to assist in the development of the Ambulatory Service Center, sometime in the near future.

   

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. 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.

 

 
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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 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 to 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 Continuity Logic LLC.

 

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.

 

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.

 

 
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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.

 

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 March 31, 2021 and 2020

 

Revenue -- Revenue was $60,965 for the quarter ended March 31, 2021 compared to revenue of $104,044 for the quarter ended March 31, 2020, which decrease in revenue in the 2021 first quarter compared to the 2020 first quarter was primarily because of decreased use by established customers of our Fision software platform due to the COVID-19 pandemic.

 

 
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Cost of Goods Sold – Cost of goods sold for the quarter ended March 31, 2021 was $25,283 (41.5% of revenue) compared to cost of goods sold of $28,732 (27.6% of revenue) for the quarter ended March 31, 2020, basically the same amount for these two quarterly periods.

 

Gross Margin – Gross margin for the quarter ended March 31, 2021 was $35,682 compared to $75,312 for the quarter ended March 31, 2020. Gross margin as a percentage of revenue was 58.5% for the first quarter of 2021 compared to 72.4% of revenue for the first quarter of 2020.

 

Operating Expenses – Operating expenses for the quarter ended March 31, 2021 were $207,318 compared to those of $920,957 for the quarter ended March 31, 2020. Sales and marketing expenses for the quarter ended March 31, 2021 were $3,520 compared to $1,949 for the quarter ended March 31, 2020, which small expense amount during both quarterly periods was due to having no marketing/sales personnel or material marketing activities. Development and support expenses for the quarter ended March 31, 2021 were $52,420 compared to $108,394 for the quarter ended March 31, 2020, which decrease in the first quarter of 2021 was due primarily to completion of certain software development projects prior to the first quarter of 2021. General and administrative expenses for the quarter ended March 31, 2021 were $151,378 compared to $810,614 for the quarter ended March 31, 2020, which substantial decrease in the 2021 first quarter was primarily due to no longer having any consulting and advisory services in the first quarter of 2021.

 

Operating Loss -- Operating loss for the quarter ended March 31, 2021 was $171,636 compared to $845,645 for the quarter ended March 31, 2020, which substantially decreased operating loss for the first quarter of 2021 was primarily due to substantial decreases in general and administrative expenses.

   

Other Income / (Expenses) – Other income/(expenses) for the quarter ended March 31, 2021 was income of $3,039,551 (consisting of $2,190,076 of gain on change in fair value of derivative liabilities, $1,439,079 gain on extinguishment of debt and other income of $12,065, offset by $(45,027) of debt interest, debt amortization expense of $(544,577), and $(12,065) of bad debt expense, compared to other income/(expenses) of income of $924,198 for the quarter ended March 31, 2020 (consisting of $1,396,698 of gain in fair value of derivatives and other income of $12,065, offset by debt interest of $(390,737), debt amortization expense of $(53,168), debt settlement loss of $(28,595) and $(12,065) of bad debt expense. The substantial increase in other income in the 2021 first quarter was due primarily to a substantially increased recorded accounting gain in fair value of derivatives when compared to such derivative gain recorded in the 2020 first quarter.

     

Net Income – Our net income for the quarter ended March 31, 2021 was net income of $2,867,915 compared to net income of $78,553 for the quarter ended March 31, 2020, which substantial increase for the 2021 first quarter was primarily due to the much larger accounting gain on change in fair value of derivative liabilities and gain on extinguishment of debt recorded in the 2021 first quarter as compared to such gain recorded in the 2020 first quarter.

     

Liquidity and Capital Resources

 

Our revenues have decreased over the past few years, and accordingly 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 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 due indebtedness, which there is no assurance we can accomplish.

    

As of March 31, 2021, we had total current liabilities of $2,939,659 including accounts payable and accrued expenses of $1,040,823, short-term Notes Payable of $996,010 (net of short-term debt discount of $13,912), derivative liabilities of $814,226, and the current portion of a long-term SBA/PPP loan of $88,600. In addition, we had long-term liabilities of $102,223 as of March 31, 2021, net of debt discount of $36,777 and the long-term portion of the SBA/PPP loan of $88,600.

    

 
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Currently, as of the date of this filing, we have approximately $60,000 cash, which we believe along with our projected receipt of accounts receivable and customer revenues will last only until sometime in June, 2021. Accordingly, we need to continue raising substantial capital to support our operations. Our management estimates that based on our current monthly expenses net of expected revenue, we will require at least $500,000 in additional financing to fund our operational working capital needs for the next 12 months. Financing may be sought from a number of sources such as sales of equity, cash from exercise of warrants, 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 may 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. Over the past few years, we have continued to incur substantial losses without any 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 and convertible Notes.

   

Net Cash Used in Operating Activities During the three months ended March 31, 2021, we used net cash in operating activities of $60,693 compared to $87,410 of net cash used in operating activities in the three months ended March 31, 2020.

  

Net Cash Used in Investing Activities – There were no investing activities in either of the three-month periods ended March 31, 2021 and March 31, 2020.

 

Net Cash Provided By (Used in) Financing Activities -- During the three months ended March 31, 2021, we were provided with net cash in financing activities of $55,745 including proceeds of $55,000 short-term debt and $745 from our line of credit. In comparison, during the three months ended March 31, 2020, we were provided net cash by financing activities of $72,900 including proceeds of $75,000 from issuance of notes payable offset by $2,100 paid on a line of credit.

 

Convertible Note Financing

 

A majority of our financing during the past couple years has consisted of Convertible Notes sold to various accredited investors. We raised a total of $2,959,500 from such convertible debt financing in 2018; we raised a total of $964,000 from convertible debt financing in 2019; we raised a total of $75,000 from convertible debt financing in 2020; and we raised a total of $55,000 from non-convertible debt financing in the period ending March 31, 2021.

  

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, 2021, we incurred an operating loss of $(171,636) and for the year ended December 31, 2020 we incurred an operating loss of $(1,193,004). And our accumulated deficit as of March 31, 2021 is $31,435,410. 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, 2021, or as of the date of this report.

 

 
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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 that 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 principal executive officer/principal financial officer has 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, 2021 (the end of the period covered by this Quarterly Report on Form 10-Q). Based on his evaluation as of the end of the quarterly period covered by this report, he has 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 and principal officers 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, 2020.

 

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, 2021 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

 

Not applicable.

 

ITEM 1A RISK FACTORS

 

Not applicable.

 

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Unregistered sales of our equity securities in the first quarter of our fiscal year ended March 31, 2021 are as follows:

 

Director Services - In the first quarter ended March 31, 2021, we issued a total of 2,004,994 restricted common shares to our four directors in consideration for director services provided by them valued at $50,000.

 

Note Conversions – During the three months ended March 31, 2020, Noteholders who are accredited investors converted outstanding Notes in the aggregate amount of $1,501,778 into a total of 47,580,214 restricted common shares.

 

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 principal executive officer pursuant to Securities Exchange Act (filed herewith)

31.2

 

Certification of principal financial officer pursuant to Securities Exchange Act (filed herewith)

32.1

 

Certification of principal executive officer/principal financial officer 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

 

Dated: May 19, 2021

By:

/s/ Michael Brown

 

 

Michael Brown

 

Principal executive officer and

Principal financial and accounting officer

 

 
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