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 September 30, 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 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 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: 456,420,027 shares of common stock are outstanding as of November 23, 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	18
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	29
Part II
Item 1	Legal Proceedings	30
Item 1A	Risk Factors	30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3	Defaults Upon Senior Securities	30
Item 4	Mine Safety Disclosures	30
Item 5	Other Information	30
Item 6	Exhibits	31

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
	September 30,			December 31,
	2021			2020
	(Unaudited)
ASSETS
Current Assets:
Cash	$	45,411		$	7,504
Accounts receivable, net		21,721			767
Notes Receivable, net of allowance for doubtful accounts (See Note 5)		24,129			-
Total Current Assets		91,261			8,271
Property and equipment, net	$	-		$	173
Other Assets:
Goodwill		8,800			8,800
Goodwill - Score, Inc Acquisition (See Note 13)		1,041,096			-
Intellectual property/software code, net of accumulated amortization		25,687			35,473
Deposits		206			206
Total Assets	$	1,167,050		$	52,923
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	1,076,539		$	983,789
Derivative liability		379,616			4,251,179
Current portion of long-term debt: SBA/PPP Loan		-			88,600
Notes payable and accrued interest - related party, net of debt discount of $0 and $20,951 respectively		74,000			632,832
Notes payable, net of debt discount of $0 and $33,568 respectively		904,300			1,141,957
Total Current Liabilities		2,434,455			7,098,357
Long-Term Liabilities:
Long-Term SBA/PPP Loan		-			88,600
Long-Term Convertible Notes Payable and accrued interest - related party, net of debt discount of $0 and $67,963 respectively		500,000			163,704
Long-Term Convertible Notes Payable, net of debt discount of $8,137 and $130,816 respectively		117,863			199,349
Long-Term Contingency on Score, Inc. Acquisition (See Note 13)		491,096			-
Total Long-Term Liabilities		1,108,959			451,653
Total Liabilities		3,543,414			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 453,670,316 and 381,923,708 shares issued and outstanding, respectively		45,367			38,192
Additional paid in capital		28,792,441			26,768,046
Accumulated deficit		(31,214,172	)		(34,303,325	)
Total Stockholders' Deficit		(2,376,364	)		(7,497,087	)
Total Liabilities and Stockholders' Deficit	$	1,167,050		$	52,923

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

3

FISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
REVENUE	$	200,159		$	83,935		$	565,621		$	264,424
COST OF SALES		22,458			22,275			71,691			73,996
GROSS MARGIN	$	177,701		$	61,660		$	493,930		$	190,428
OPERATING EXPENSES
Sales and Marketing		65,187			2,136			71,625			6,535
Development and Support		285,330			77,404			388,686			273,697
General and Administrative		343,710			92,456			961,450			1,009,239
TOTAL OPERATING EXPENSES	$	694,227		$	171,996		$	1,421,761		$	1,289,471
OPERATING LOSS	$	(516,526	)	$	(110,336	)	$	(927,831	)	$	(1,099,043	)
OTHER INCOME / (EXPENSES)
Amortization expense, interest expense and amortization of debt discount		(58,820	)		(238,929	)		(695,311	)		(816,321	)
OID, excess derivative expense, goodwill impairment expense and other expenses (income)		-			-						-
Gain (Loss) in the change  fair value of derivatives liabilities		95,779			1,476,697			2,624,687			2,826,397
Gain (Loss) on extinguishment of debt / gain (loss) on settlement of debt		-			-			1,446,207			(40,482	)
Bad debt expense on notes receivable		-			(12,064	)		(12,065	)		(36,194	)
Other income: SBA-PPP Loan Forgiveness		-			-			179,183			-
Other income (expenses)/Settlement of Continuity Logic		580,058			11,837			604,187			35,966
TOTAL OTHER INCOME	$	617,017		$	1,237,541		$	4,016,984		$	1,969,366
NET INCOME	$	100,491		$	1,127,205		$	3,089,153		$	870,323
Net income per common share:
Basic	$	0.00		$	0.00		$	0.01		$	0.00
Diluted	$	0.00		$	0.00		$	0.01		$	0.00
Weighted average common shares outstanding:
Basic		446,688,184			273,676,683			437,938,076			233,796,266
Diluted		466,131,778			273,676,683			457,381,670			233,796,266

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

4

FISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)
						Additional		Retained			Total
	Common		Common			Paid in		Earnings			Stockholders’
	Shares		Stock			Capital		(Deficit)			Deficit
Balance, December 31, 2019	135,685,981		$	13,569		$	24,108,264	$	(31,811,792	)	$	(7,689,959	)
Common stock issued for cash												-
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	)
Common stock issued for cash												-
Stock issued for services	7,604,167			760			26,240					27,000
Conversion of notes payable and accrued interest/expenses	28,397,286			2,840			76,840					79,680
Net (Loss)									(335,435	)		(335,435	)
Balance, June 30, 2020	285,439,993		$	28,544		$	25,231,711	$	(32,068,673	)	$	(6,808,419	)
Common stock issued for cash	5,000,000			500			49,500					50,000
Stock issued for services	5,467,343			547			36,953					37,500
Warrants/Options granted for sale of stock							70,500					70,500
Conversion of notes payable and accrued interest/expenses	50,443,423			5,044			256,643					261,687
Net income									1,127,205			1,127,205
Balance, September 30, 2020	346,350,759		$	34,635		$	25,645,307	$	(30,941,469	)	$	(5,261,527	)
	Common Shares			Common Stock			Additional Paid in Capital		Retained Earnings (Deficit)			Total Stockholders’ Deficit
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	)
Exercise of stock options for cash	8,644,371			864			215,245					216,109
Stock issued for services	1,659,450			166			49,834					50,000
Conversion of notes payable and accrued interest/expenses	9,442,455			944			150,239					151,183
Correction of prior period error	(76,330	)		(8	)		8
Net income									120,747			120,747
Balance, June 30, 2021	451,178,862		$	45,116		$	28,730,192	$	(31,314,663	)	$	(2,539,355	)
Stock issued for services	2,491,454			251			62,249					62,500
Net income									100,491			100,491
Balance, September 30, 2021	453,670,316		$	45,367		$	28,792,441	$	(31,214,172	)	$	(2,376,364	)

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

5

FISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine Months Ended
	September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income for the Period		3,089,153		$	870,323
Net cash used in operating activities:
Common stock issued for services		162,500			77,000
Amortization of pre-paid stock issued		-			525,368
Depreciation and amortization		9,959			9,397
True-up and penalty shares issued		-			48,703
Stock warrants/stock options issued for services		-			394,893
Change in fair value of derivative liabilities		(2,624,687	)		(2,826,397	)
Loss (Gain) on extinguishment of debt/gain on settlement of debt		(1,446,207	)		40,482
Loan Forgiveness (SBA-PPP Loan)		(179,183	)		-
Bad debt expense		(567,993	)		36,194
Amortization of debt discount		766,805			190,991
Changes in Operating Assets and Liabilities
(Increase) decrease in:
Accounts receivable		(20,954	)		(51,324	)
Change in interest receivable		(24,129	)		(36,193	)
Other current assets and prepaid expenses		-			33,089
Increase (decrease) in:
Accounts payable, accrued expenses  and other current liabilities		42,750			499,012
Contract Liability		-			(42,500	)
Net Cash  (Used) in Operating Activities		(791,986	)		(230,962	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes receivable		567,993			-
Net Cash Provided in Investing Activities		567,993			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on note payable		-			(75,000	)
Proceeds from note payable		55,000			75,000
Proceeds from SBA-PPP Loan		-			177,200
Repayments for related party notes and line of credit		(9,209	)		(4,635	)
Proceeds from issuance of common stock from warrant exercise		216,109			50,000
Net Cash Provided by Financing Activities		261,900			222,565
Net Increase (Decrease) in Cash		37,907			(8,397	)
Cash at Beginning of Period	$	7,504			14,510
Cash at End of Period	$	45,411		$	6,113
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash investing and financing activities:
Accrued interest increasing notes receivable	$	24,129		$	12,064
Conversion of debt and accrued interest to common stock	$	1,652,961		$	987,513
Common stock issued for services	$	100,000		$	37,500
Acquisition of subsidiary with long-term debt		1,041,096			-

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

6

FISION CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 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’s software licensing contracts typically have terms of from one to three years, 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.

In May-August 2021, we acquired Scoreinc.com, Inc., a Puerto Rico corporation (“Score”), a leading provider of SaaS credit repair software solutions, resulting in Score becoming a wholly-owned subsidiary of the Company.  See Note 14.

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

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 and nine-month periods ended September 30, 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 these 2021 interim periods 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,  its wholly-owned Minnesota subsidiary Fision Holdings, Inc, a Minnesota corporation and its Score subsidiary in Puerto Rico from the date of the Score acquisition.  All material intercompany transactions and balances have been eliminated in consolidation.

7

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 September 30, 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 nine months ended September 30, 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.

For the nine months ended September 30, 2021, two customers each exceeded 10% of our revenues, including 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 or more of our 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.

8

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 September 30, 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:

	For the nine months ended September 30,
	2021		2020
Net income	$	3,089,153	$	870,323
Adjustments for diluted earnings:
Income per share:
Basic	$	0.01	$	0.00
Diluted	$	0.01	$	0.00
Weighted average shares outstanding:
Basic		437,938,076		233,796,266
Diluted		457,381,670		233,796,266

For the nine months ended September 30, 2021 and September 30, 2020, there were 19,443,594 and 206,848,608 potentially dilutive securities respectively, included in the calculation of weighted-average shares outstanding.

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

9

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

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.

At September 30, 2021 we had a working capital deficiency of $2,343,194, an accumulated deficit of $31,214,172 and net cash used in operating activities of $791,986, and the Company had an operating loss of $927,831 for the nine months ended September 30, 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.

10

The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at September 30, 2021:

	Level 1		Level 2		Level 3
Derivative liability	$	-	$	-	$	379,616

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 Sept. 30, 2021
Derivative liability	$	4,251,179		199,332	$	(2,624,687	)	$	(1,446,207	)	$	379,616

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 $1,446,207 during the period ending September 30, 2021.

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

Exercise price	$	.0298-.05
Expected Volatility		153	%
Expected Term		Due on demand to 36 mos.
Risk free interest rate		0.04%-0.09	%
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.

11

NOTE 4 - ACCOUNTS RECEIVABLE

Our accounts receivable at September 30, 2021 and December 31, 2020 consisted of the following:

	Sept. 30, 2021		Dec. 31, 2020
Accounts receivable	$	21,721	$	767
Less: Allowance for doubtful accounts	-0-		-0-
Accounts Receivable, net of allowance for doubtful accounts	$	21,721	$	767

NOTE 5 - NOTES RECEIVABLE

The Company had a notes receivable balance of $24,129 at September 30, 2021 and $0 at December 31, 2020.

	Sept. 30, 2021			Dec. 31, 2020
Notes receivable	$	366,634		$	804,300
Accrued interest		7,067			101,200
Total	$	373,701		$	905,500
Less allowance for doubtful accounts		(349,572	)		(905,500	)
Notes receivable, net	$	24,129		$	-

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 was 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 did 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. 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 for this debt.

Additionally, the Company as a Petitioning Creditor has participated in an involuntary bankruptcy petition for Continuity Logic LLC in the United States Bankruptcy Court, District of New Jersey. Since we are the only secured lender, as a first priority and perfected lienholder, we expected the first $567,993 of collected proceeds to be released to us less any bankruptcy court related costs, as of the date of the settlement with Continuity Logic LLC.

In June 2021, we obtained a settlement in the Bankruptcy Court proceeding which should enable us to collect a material amount of this Continuity Logic debt through future installment payments, in an amount that exceeds our allowance for doubtful accounts.  Any future payments received by us will be recorded and accounted for as Other Income. Additionally, as a settlement has been reached with Continuity Logic, LLC, we recorded the quarterly interest income on the notes receivable of $24,129 as the likelihood of collection is imminent, whereby no bad debt reserve was recorded.

As of September 30, 2021, we received $567,993 in settlement proceeds, whereby we booked these proceeds as other income-settlement proceeds. Our Notes Receivable balance from Continuity Logic LLC is reduced to $373,701 inclusive of accrued interest, as of September 30, 2021. Our settlement agreement also indicates a final settlement payment of $466,633.70 plus accrued interest at 7% per annum, on or before April 30, 2022, whereby $100,000 of this settlement amount has been paid and collected (this $100,000 is included in the $567,993 settlement proceeds from above), with an outstanding principal balance owed by Continuity Logic, LLC to us of $366,633.70 plus accrued interest of $7,067.30, as of September 30, 2021. In addition, Continuity Logic LLC shall pay us an additional $45,000 on or before May 30, 2022 in consideration for certain mutual general releases of all claims, and Fision, together with its officers and directors have agreed that they shall not, directly or indirectly, take any action to purchase, or otherwise obtain, any equity interest in Continuity Logic LLC, for at least two years.

During the period, we settled and satisfied the complaint against us in a Minnesota District Court regarding our debt to Decathlon Alpha L.P.  We used $60,000 of these Continuity Logic LLC settlement proceeds to make an initial payment on a this settled complaint with Decathlon Alpha L.P., with a final payment due no later than September 15, 2022. Details of this Decathlon Alpha L.P. settlement is disclosed in the litigation section in Item 2 of the Management Discussion and Analysis of financial condition and results of operations of this Form 10Q report.

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Furthermore, during the period ending September 30, 2021, we used the Continuity Logic LLC settlement proceeds as follows: i) $87,193 payments to our law firm for the Continuity Logic LLC bankruptcy petition and settlement; ii) $178,750 for reimbursement to Capital Market Solutions for expenses incurred for the surgery center business; iii) $46,862 other surgery center expenses, including architects ; iv) $27,568 to our Florida Ft. Myers ASC LLC subsidiary bank account,; iv) $50,000 marketing expenses for Score, Inc., pursuant to the May 30, 2021 acquisition agreement; v) $50,000 for Fision development expenses with Rubicon Software; vi) $65,000 to Fision bank account; and vii)  $2,620 remains at the law firm trust account.

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment, stated at cost, less accumulated depreciation, consist of the following at September 30, 2021 and December 31, 2020.

	Sept. 30, 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 nine-month period ending September 30, 2021, we accounted for $173 of depreciation expense.

NOTE 7 - INTELLECTUAL PROPERTY: SOFTWARE AND GOODWILL

	Sept. 30, 2021			Dec. 31, 2020
Intellectual Property: Software Code	$	68,500		$	68,500
Less: Accumulated Amortization		(42,813	)		(33,027	)
Net Intellectual Property: Software Code	$	25,687		$	35,473

Intangible asset amortization expense on our software code for years 2021 through 2024 will amount to approximately $25,687 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 and $6,115 to be recognized, respectively.

A summary of changes in the Company’s goodwill consists of the following during the nine months ending September 30, 2021:

Intellectual Property: Goodwill:	Sept. 30, 2021		Dec. 31, 2020
Goodwill - Scoreinc.com acquisition (See Note 14)	$	1,041,096		-
Goodwill - customer contracts	$	8,800	$	13,800
Less: Impairment Expense		-		(5,000	)
Goodwill	$	1,049,896	$	8,800

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 on customer contracts during the nine months ending September 30, 2021.

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NOTE 8 - NOTES PAYABLE

At September 30, 2021, we were indebted under various Notes Payable with interest rates of 6% to 15%, including current related party short term Notes payable of $74,000, other current Notes payable, mostly in default, of $904,300, and long-term Convertible Notes Payable having a long-term debt discount amount of $8,137, resulting in a balance of $617,863, including $500,000 to a related party.

During the first 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 Notes 10 and 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.

During the period, we settled and satisfied the complaint against us in a Minnesota District Court regarding our debt to Decathlon Alpha L.P.  We used $60,000 of these Continuity Logic LLC settlement proceeds to make an initial payment on a this settled complaint with Decathlon Alpha L.P., with a final payment due no later than September 15, 2022. Details of this Decathlon Alpha L.P. settlement is disclosed in the litigation section in Item 2 of the Management Discussion and Analysis of financial condition and results of operations of this Form 10Q report.

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 September 30, 2021 there were 453,670,316 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 directors for their quarterly management services, 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.

During the second quarter ended June 30, 2021, we issued a total of 1,659,450 restricted common shares valued at $50,000 to our directors for their quarterly management services, including 396,825shares valued at $12,500 to John Bode, 420,875 share valued at $12,500 to Michael Brown, 420,875 shares valued at $12,500 to William Gerhauser, and 420,875 shares valued at $12,500 to Greg Nagel.

During the third quarter ended September 30, 2021, we issued a total of 2,491,454 restricted common shares valued at $62,500 to our directors for their quarterly management services, including 592,417 shares valued at $12,500to John Bode, 435,540 shares valued at $12,500 to Michael Brown, 435,540 shares valued at $12,500 to William Gerhauser, 435,540 shares valued at $12,500 to Greg Nagel, and 592,417 shares valued at $12,500 to Joshua Carmona.   

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 shares; 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 director William 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) certain other noteholders converting aggregate Note balances of $581,375 into 25,655,620 shares.

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During the second quarter ended June 30, 2021, unaffiliated Noteholders who are accredited investors converted their Notes and related accrued interest totaling $151,183 into an aggregate of 9,442,445 restricted common shares.

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 common share, thereby purchasing a total of 8,644,371 restricted common shares for total proceeds to us of $216,109.

Reconciling Difference - During the second quarter ended June 30, 2021, we discovered a reconciling item in our outstanding common stock account whereby we cancelled and removed 76,330 shares from our total outstanding common shares.

NOTE 11-- RELATED PARTIES

During the nine months ended September 30, 2021 we issued a total of 6,155,894 shares of our restricted common stock to our directors for management services. See above Note 10.

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 restricted common stock. See above Note 11.

NOTE 12 - COVID-19 LOAN and LOAN FORGIVENESS

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 loan proceeds used for labor, office costs and utilities were subject to loan forgiveness under the terms of the SBA/PPP program. During the second quarter ended June 30, 2021, the SBA and Richfield/Bloomington Credit Union forgave any repayment of the entire loan and related accrued interest pursuant to which we recorded a total loan forgiveness of $179,182 as Other Income.

NOTE 13 - ACQUISITION OF SCORE

On April 1, 2021, the Company entered into a Memorandum of Understanding (“MOU”) with Scoreinc.com, Inc., a Puerto Rico Corporation (“Score”) and Joshua Carmona (“Carmona”), an individual who owned 100% of Score. This MOU contained the material terms of the acquisition by Fision Corporation of 100% of Score including its subsidiaries.  On May 30, 2021, the Company entered into a definitive Purchase and Sale Agreement (“PSA”) with Score, Carmona, and VIP Solutions, LLC (“VIP”), a subsidiary of Score, and pursuant to the PSA, the Company acquired 100% of Score to become a wholly owned subsidiary of Fision Corporation. The Company also acquired certain assets of VIP listed in the PSA. Score is an Act 73 company under Puerto Rico law that is in the enterprise software space and currently provides business to business solutions for approximately 100 US companies in the credit repair sector.   Mr. Carmona owned 100% of Score capital stock free and clear of all liens and encumbrances of any kind, and VIP owned its assets acquired by the Company free and clear of all liens and encumbrances of any kind.

For accounting and general purposes, the date of acquisition of Score was considered to be the May 30, 2021 date of the PSA, although the final closing occurred in August 2021 only after a required certified audit of Score’s business operations and financial position was completed and accepted by Fision.

In consideration for this acquisition of Score, we issued to Carmona a Senior Secured Promissory Note for $500,000 substantially in the form attached as Exhibit 1 of the PSA, convertible into not more than ten (10) million shares of common stock of Fision at the higher of USD $0.05 per share or at the volume weighted average price (VWAP) over the last 10 trading days prior to conversion. Fision will also issue to Carmona not later than March 31, 2023 a second, unsecured promissory note in a form satisfactory to Fision and Carmona in an amount equal to Score’s average gross revenue during calendar years ending 2021 and 2022, which will be convertible into not more than 10 million shares of common stock of Fision at USD $0.20 per share and will contain the usual and customary protections and adjustments for future corporate actions, including but not limited to pricing adjustments for reverse stock splits. We also appointed Carmona as a member of our Board of Directors and as our Chief Operating Officer. His sole compensation for these management services will be $50,000 per year paid at $12,500 quarterly in shares of restricted common stock of Fision as determined by the closing stock price on the last trading day of each calendar quarter.

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The acquisition was accounted for using the purchase method of accounting. Score is a leading industry provider of software and services that empower credit repair organizations to be compliant and successful.  ScoreCEO, its credit repair software as a service (SaaS) platform is  used by many credit repair organizations to achieve success. The purchase of Score was a stock purchase, which included the acquisition of all its assets and the assumption of certain liabilities of $50,000. The aggregate purchase price consisted of the following:

Fair value convertible note, with conversion into common stock	$	500,000
Net liabilities assumed		50,000
Contingent consideration liability		491,096
Goodwill-Score, Inc. Acquisition	$	1,041,096

The following table summarizes the estimated fair values of Score assets acquired and certain liabilities assumed at the date of acquisition:

Cash	$	10,109
Accounts Receivable, including related party		96,136
Accounts payable and accrued expenses (limited to $50,000)		(50,000	)
	$	56,245

We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of acquired assets, certain assumed liabilities and goodwill based on its customer base and ongoing business. The allocation of purchase price consideration was considered preliminary as of May 30, 2021 and is subject to change. We expect to finalize the allocation of purchase price no later than one year from the acquisition date.

The following table presents the unaudited pro-forma condensed consolidated statements of operations for the nine months ended September 30, 2021:

	FISION			SCORE, Inc.			SURGERY CENTER			Pro-forma Adjustments		Pro-forma   Combined
Sales, net	$	240,899		$	324,722		$	-		$	-	$	565,621
Cost of goods sold		71,691			-						-		71,691
Gross profit	$	169,208		$	324,722		$	-		$	-	$	493,930
Operating expenses		793,983			395,278			232,500			-		1,421,761
Net loss before other expenses		(624,775	)		(70,556	)		(232,500	)		-		(927,831	)
Other income (expenses)		4,016,984			-			-			-		4,016,984
Net income (loss)	$	3,392,209		$	(70,556	)	$	(232,500	)	$	-	$	3,089,153

See these accompanying notes to the foregoing condensed consolidated unaudited proforma financial information.

Proforma Note 1. - Basis of presentation

The unaudited pro forma condensed consolidated financial statements, as of September 30, 2021, are based on Fision Corporation’s  historical consolidated financial statements as adjusted to give effect to the acquisition of Score as if it had occurred on January 1, 2021.

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Proforma Note 2 -Purchase price allocation

The unaudited pro forma condensed financial information includes various assumptions, including those related to the purchase price allocation of the stock purchase and the assumption of certain liabilities assumed from Score based on management’s best estimates of fair value. For a description of the material terms of this acquisition of Score, see the section in Item 2 of this quarterly report entitled “Acquisition of Score”

NOTE 14- SUBSEQUENT EVENTS

As of the date of this quarterly report, the following material subsequent events occurred after September 30, 2021.

Stock issued for conversion of debt – In November, 2021, we issued 2,749,711 shares of common stock for the conversion of $74,242.10 debt to an accredited investor.

Effective November 19, 2021, the Board of Directors approved William Gerhauser, a director, the Chief Executive Officer of the Company.

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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.

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 to raise the substantial working capital as needed to support our business plan for future growth.

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 as our principal management 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 until May 2021, our management 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 which incident to the Score acquisition we added Joshua Carmona as our fifth director and our Chief Operating Officer.

After the termination of the Continuity Logic LLC merger in 2019, for the past couple years our business operations and goals have focused on supporting our customer base who use our Fision software platform, on improving our financial position, and on seeking and acquiring businesses perceived to benefit the Company. 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 customers.

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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 in mid-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.

We used $232,500 of the Continuity Logic LLC settlement proceeds for the development of the surgery center business for the period ending September 30, 2021 (see Note 5).

Acquisition of Score, Inc.

On April 1, 2021, through a Memorandum of Understanding (MOU) between the Company, Scoreinc.com, Inc., a Puerto Rico corporation (“Score”) and Joshua Carmona (Carmona”) (100% owner of Score), we agreed to acquire Score based on the material terms of the MOU. The MOU terms were made definitive and binding in May 2021 through a Purchase and Sale Agreement (“PSA”) entered into by all parties to the MOU.

After completing satisfactory due diligence regarding Score and its business operations and financial position/results, we closed and completed this acquisition in August 2021 after receiving and accepting a certified independent audit of Score required by the PSA, resulting in Score then becoming a wholly-owned subsidiary of the Company.

Score is a Puerto Rico corporation in good standing and is engaged in the enterprise software industry where it provides business-to-business software solutions in credit repair for approximately 100 US companies. Score owns 100% of its significant subsidiary VIP Solutions LLC. Score is an Act 73 company under Puerto Rico law, and our acquisition of Score was conducted to ensure that Score maintained this important Act 73 status after becoming our subsidiary. Through this Score acquisition, we obtained 11 employees based in Score headquarters in Puerto Rico.

A requirement of this Score acquisition requires us to provide future working capital to Score of at least $500,000 during the 18 months following the acquisition, to be used for software development and integration, marketing expenses, and hiring additional employees as needed. We anticipate that such funding also will support integration of the Fision and Score software platforms to allow them to be marketed jointly.

In consideration for acquiring Score, (i) we issued to Carmona a Senior Secured Convertible Promissory Note in the principal amount of $500,000, maturing in two years, and 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, and (ii) by March 31, 2023, we 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.

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We also appointed Carmona as a member of our Board of Directors and as our Chief Operating Officer (COO), while being compensated at an annual rate of $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.

Significant Improvement of Our Financial Position

Since 2019, much of our management efforts have been focused toward improving our balance sheet and overall financial position, in order to increase our ability to raise additional capital and also to enhance our status as a prospective merger partner with an operating company. We believe we have successfully accomplished this goal based on the following and other matters:

i) Debt to Equity - Most important for this improvement of our financial position, we successfully converted a majority of our outstanding Notes Payable and their accrued interest into common stock of the Company. These Notes Payable conversions have totaled $4,939,876 including $1,198,106 converted in 2019, $2,088,809 converted in 2020, and $1,652,961 converted during the first nine months of 2021.  For example, even recently our outstanding short-term Notes Payable have decreased substantially from $1,863,389 as of December 31, 2020 to $978,300 as of September 30, 2021.

ii) These many debt conversions have substantially reduced our required interest expenses. For example, our interest expenses for the period ending September 30, 2021 were $226,064, compared for fiscal year 2020 were $343,551.

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 at December 31, 2020 as compared to $379,616 at September 30, 2021.

iv) Total Liabilities - We have also recently reduced our total liabilities substantially from $7,550,010 as of December 31, 2020 to $3,543,414 as of September 30, 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), as well as our Florida LLCs acquisition and Puerto Rico Score acquisition.

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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.

While the Continuity Logic Merger was pending, the Company made various bridge loans to Continuity Logic for working capital, which loans have been long overdue and matured on August 31, 2019. The Company was a petitioner with the U.S. Bankruptcy Court in the District of New Jersey, whereby the outcome was a settlement with Continuity Logic LLC. After the recent settlement, we received $567,993 proceeds during the period ending September 30, 2021, and we are expecting the final settlement proceeds of $366,633.70 by April 30, 2022, plus accrued interest, and an additional $45,000 on or before May 30, 2022. Our note receivable balance, as of September 30, 2021 is $366,633.70 plus accrued interest of $7,067.30 earning 7% interest income per annum, less allowance for doubtful accounts of $349,572, resulting in a net note receivable balance of $24,129. When we receive the additional settlement payments, we will recognize the proceeds as other income-settlement of Continuity Logic.

Contemplated Business Combination

We have been seeking a merger or other business combination, with our primary target being one or more established private software services companies which could be complementary with our Fision business and structure. We believe such a merger would be very beneficial to such a private entity due to our public company status, our large tax loss position, our commercially developed proprietary Fision software platform, our customer base, and other benefits. We intend to target and pursue such a merger only with one or more private entities having material and growing revenues.

Fision Platform Overview

We are an Internet platform technology company providing proprietary cloud-based software solutions to automate and improve the marketing and sales enablement functions and activities of our customers. Our focus is to provide software technology tools through our Fision platform to enable our customers to maximize their marketing assets and initiatives. Our development, management, marketing and other operations have been conducted through our wholly-owned 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.

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We derive our revenues primarily through recurring revenue payments from customers having software licensing contracts with terms of one to three years, and requiring monthly fees based on the customer’s number of users and locations where used. A substantial majority of our revenues are recurring, due to the nature of our licensing contracts. We currently have written license contracts with six (6) customers actively using our Fision platform in their marketing and sales operations.

Our typical customer implementation process includes integrating our cloud-based Fision platform with the marketing infrastructure of the customer, initiating and conducting customer training, and providing marketing development support while our Fision platform is being actively launched by the customer. We also continue to offer technical and maintenance support after implementation.

Our current and former customer base has ranged across diverse industries of all sizes, including banks and other financial enterprises, insurance companies, hotels and other hospitality businesses, healthcare and fitness companies, retailers, software and other computer technology companies, product manufacturers, and tele- communications companies.

Our market and potential customer base are global and virtually unlimited, since our Fision platform software solutions provide significant benefits to the marketing and sales departments and personnel of any commercial enterprise, regardless of size and widespread locations. We receive substantial recurring revenues, and we regard our high percentage of recurring revenues to be particularly significant to our business strategy which emphasizes long-term relationships with our customers under written contracts. We believe that our ability to realize such recurring revenues is a keystone feature of our business model.

We have marketed and licensed our proprietary software platform both through direct sales obtained by our management and in-house sales personnel, and through utilizing experienced independent national technology sales agencies.

Our Fision Platform - Our Fision marketing software centrally collects, stores, prioritizes, organizes, streamlines, integrates and distributes the numerous digital marketing assets of our customers including videos, images, logos and other brand materials, presentations, social media content and any other digital marketing assets. Using Fision’s automated software technology, these digital assets become readily available for user access as determined by each of our customers. Our Fision platform is designed to provide any corporate marketing department with the ability to instantly and seamlessly update its sales force and other users with the latest digital marketing content and materials, while providing them with a simple, intuitive software interface to quickly find what they need on any digital device, anytime and anywhere. Large enterprise customers with extensive global sales networks have the ability to quickly and efficiently create and deliver customized sales campaigns or presentations to selectively targeted consumer audiences while conveying a positive, personalized and consistent brand experience. We believe that the use of our software marketing solutions by our customers results in a substantial increase in their return on investment (ROI) and their profitability.

Cloud-Based Platform - Storage and operation of our Fision software solutions platform along with the digital marketing and sales assets and related data of our customers are outsourced by us to reside and take place in the digital “cloud.” Providers of cloud services are typically referred to as “virtual servers” since they provide all digital data storage and related software application services to their clients. Our cloud service provider is Microsoft’s Azure Cloud, which leading provider offers readily scalable, high quality and secure cloud services capable of satisfying any increasing demand or changing circumstances in the needs of our customers or of us.

We regard the hosting of our software applications, the ready digital interface with our customers, and the storage of unlimited customer data with our premier cloud provider as being significant to our operating strategy. Our major savings in expensive computer equipment, high salaried technology personnel, and costly security measures through our use of Microsoft’s cloud is vital to our cost of doing business. Moreover, we believe that our experienced and leading cloud provider is more effective in delivering our Fision software solutions to our customers than we could perform in any event.

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Strategic Marketing Change

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

We believe that our past marketing focus toward large enterprises was somewhat effective, since during 2018-2019 we closed and implemented material contracts with, and are receiving recurring revenues from, certain large enterprise companies. Unfortunately, the increased length of time of our sales cycle necessary to sell to large enterprises has been substantially more expensive and much longer than we earlier incurred while selling primarily to local and regional sized companies. This substantial increase in our sales cycle to negotiate and close contracts with new large enterprise customers resulted in a material decline in our revenues during the past few years.  Accordingly, we failed to raise enough working capital to support and continue the substantial marketing resources and time necessary to secure and retain enough large enterprise customers to achieve material increased revenues. We currently are attempting to raise the substantial capital necessary to launch an effective marketing campaign including obtaining whatever personnel and other resources are needed to properly address and sell our software services to additional large enterprise customers. There is no assurance that such funds will be available to us in the future.

2017 Asset Acquisition

In 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. 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.

Employees and Properties

We currently utilize several independent contractors to perform most of the necessary operational, development and customer support activities for the Company’s Fision software platform, and except for our recent Score acquisition, we have no fulltime employees.  Regarding our Score acquisition, which is now being absorbed into the Company, we have obtained 8 employees in Puerto Rico who operate that software business and platform, as well as the Score facilities in Puerto Rico.

For the past couple years, we have been conducting our current business and operations under a month-to-month basis from a temporary “virtual” office in 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, in the near future the Company intends to establish an office in Florida, to assist in the development of the Ambulatory Service Center business.

Revenue and Marketing Models

Revenue Model - Our Fision platform revenue model is primarily based on prescribed software licensing fees received by us on a regular monthly basis from customers which are under written licensing agreements with us. Over the past several years, we consistently committed substantial expenses and sales personnel toward targeting, negotiating and procuring significant licensing agreements with large enterprise customers. Because of the long-term nature and the substantial expense commitment required by each new customer to enter into a binding licensing agreement with us, the sales cycle involved in our revenue model is quite lengthy. Accordingly, the unpredictable and different timing involved from customer to customer to procure our licensing contracts has prevented us from receiving overall consistent revenues or accurately forecasting our future revenue stream.

We generate our revenues primarily from payments from customers having a license from one to three years to access and use our proprietary agile marketing software platform, which payments include monthly fees based on actual usage of the Fision platform, and a prescribed substantial one-time set-up and integration fee payable to us at the outset of the license. We also receive certain secondary fees from time to time for customized software development projects ordered from us, and for processing emails for certain customers.

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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 past revenues derived from our proprietary cloud-based Fision marketing software platform.

Prior to 2020, we marketed, sold, and licensed our proprietary software products through a direct sales force including management, and also through independent national sales agencies who sold (licensed) our branded software products as agents being paid commissions based on their actual sales. Since then, we have lacked sufficient available working capital to hire and support marketing/sales personnel or agents and provide them with adequate resources, and accordingly we have not conducted any material marketing and sales activities since 2019.

Intellectual Property (IP) Protection

We have committed substantial attention and resources toward obtaining patent and trademark rights and otherwise protecting our trade secrets, development know-how technology, trademarks, trade names, patent rights and other proprietary intellectual property (IP). Our IP protection includes written provisions relating to non-compete, non-recruit, confidentiality, and invention assignments as applicable with employees, vendors, sales agents, consultants, and others.

In 2017 we were granted Patent No. US 9,639,551 B2 from the United States Patent and Trademark Office (USPTO) entitled “Computerized Sharing of Digital Asset Localization Between Organizations.” In 2018 we were granted another Patent No. US 9,984,094 B2 from the United States Patent and Trademark Office (USPTO) entitled “Computerized Sharing of Digital Asset Localization Between Organizations”. And in 2019 we were granted another Patent No. US 10,235,380 B2 from the United States Patent and Trademark Office (USPTO) entitled “Computerized Sharing of Digital Asset Localization Between Organizations”.

Inflation and Seasonality

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

Litigation

See Note 5 of our interim financial statements included in this quarterly report for disclosure regarding our recent legal proceedings to collect a substantial amount of Notes Receivable owed to us by Continuity Logic LLC, whereby we collected $567,993 during the period, with an additional $366,633.70, plus accrued interest, expected on or before April 30, 2022 and an additional $45,000 expected by May 30, 2022.

We recently settled and satisfied the complaint against us in a Minnesota District Court regarding our debt to Decathlon Alpha L.P.  We paid $60,000 for an initial payment on this Decathlon settlement, with a full and final payment due to Decathlon on the earlier of: (a) five business days from the Company’s receipt of the Continuity Logic LLC final settlement funds (detailed in the above paragraph), or (b) an amount not to exceed $117,500 if paid by September 15, 2022.

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.

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Research and Development -- We expense all our research and development operations and activities as they occur. Our development activities have been conducted both internally from our headquarters facility by our former development personnel, and externally from outsourced contracts with experienced independent software development companies and individuals.

Derivative Instrument Liabilities - We evaluate all of our agreements and financial instruments to determine if they contain features that qualify as embedded derivatives. For any derivative financial instruments accounted for as liabilities, they initially will be accounted for at fair value and if necessary revalued at each reporting date, with any changes in fair value reported in our statements of operations. For any stock-based derivative financial instruments or securities, we use an option pricing model to value them at inception and on any subsequent valuation dates. The classification of derivative instruments, including whether they should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments -- FASB ASC Topic 820 requires disclosure of and defines fair value of financial instruments, and also establishes a three-level valuation hierarchy for these disclosures. The carrying amounts reported in a balance sheet for receivables and current liabilities qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between their origination and their expected realization and their current market rate of interest. The three levels of valuation hierarchy for fair value determinations are defined as follows:

Level 1 inputs include quoted prices for identical assets or liabilities in active markets.

Level 2 inputs include observable quoted prices for similar assets and liabilities in active markets, and quoted prices for identical assets or liabilities in inactive markets.

Level 3 inputs include one or more unobservable inputs which we have assessed and assumed that market participants would use in pricing the asset or liability.

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

The Company recognizes contract liability for its performance obligation upon receipt of a prepayment from a customer for its performance obligation to transfer goods and services in the future. When the Company transfers those goods and services and, therefore, satisfies its performance obligation to the customer, the Company will then recognize the revenue.

Cost of Goods Sold -- Cost of goods sold primarily represents third-party hosting, data storage and other services provided by Microsoft’s Azure Cloud service, as well as certain other expenses directly related to customer access and use of our marketing software platform. Cost of goods sold relating to our cloud services is recognized monthly.

Income Taxes -- We account for income taxes in accordance with the asset and liability method of accounting for income taxes, whereby any deferred tax assets are recognized for deductible temporary differences and any deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of our management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Long-lived Assets -- We evaluate the recoverability of our identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. In determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds their fair value.

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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 September 30, 2021 and 2020

Revenue -- Revenue was $200,159 for the quarter ended September 30, 2021 compared to revenue of $83,935 for the quarter ended September 30, 2020, which increase in revenue in the 2021 third quarter compared to the 2020 third quarter was primarily because of increased use by a major customer of our Fision software platform and added revenue from the acquisition of Score.

Cost of Sales - Cost of sales for the quarter ended September 30, 2021 was $22,458 (11.2% of revenue) compared to cost of sales of $22,275 (26.5% of revenue) for the quarter ended September 30, 2020, basically the same amount for these two quarterly periods, however, our cost of sales, as a percentage of gross revenue, significantly decreased during this period.

Gross Margin - Gross margin for the quarter ended September 30, 2021 was $177,701 compared to $61,660 for the quarter ended September 30, 2020. Gross margin as a percentage of revenue was 88.8% for the third quarter of 2021 compared to 73.5% of revenue for the third quarter of 2020. The gross margin increase is due primarily to the increase in revenue from the acquisition of Score.

Operating Expenses - Operating expenses for the quarter ended September 30, 2021 were $694,227 compared to operating expenses of $171,996 for the quarter ended September 30, 2020. Sales and marketing expenses for the quarter ended September 30, 2021 were $65,187 compared to $2,136 for the quarter ended September 30, 2020, which increase in the third quarter of 2021 was primarily due to marketing expenses incident to sales and marketing costs related to Score customers.  Development and support expenses for the quarter ended September 30, 2021 were $285,330 compared to $77,404 for the quarter ended September 30, 2020, which increase for the second quarter of 2021 was due primarily to the development costs for the surgery center business. General and administrative expenses for the quarter ended September 30, 2021 were $343,710 compared to $92,456 for the quarter ended September 30, 2020, which substantial increase in the 2021 third quarter was primarily due to increased consulting, professional and administrative expenses related to our two acquisitions of the Florida surgery center project and of Score in Puerto Rico.

Operating Loss -- Operating loss for the quarter ended September 30, 2021 was $516,526 compared to $110,336 for the quarter ended September 30, 2020, which increased operating loss for the third quarter of 2021 was primarily due to increased general and administrative expenses to support our recent acquisitions and the development of the surgery center business.

Other Income/(Expenses) - Other income/(expenses) for the quarter ended September 30, 2021 was $617,017 consisting of other income of $675,837 (consisting of a gain of $580,058 related to our settlement of the Continuity Logic receivables, interest income and a $95,779 gain on change in fair value of derivatives), offset by $(58,820) of debt interest/debt amortization expenses), compared to other income of $1,237,541 for the quarter ended September 30, 2020 (consisting of a gain of $1,476,697 in fair value of derivatives and other income of $11,837, offset by $(238,929) of debt interest/debt amortization expenses and a bad debt expense of $(12,064).  The substantially larger amount of other income in the 2020 third quarter was due primarily to a much greater recorded accounting gain in fair value of derivatives compared to the 2021 third quarter.

Net Income - Our net income for the quarter ended September 30, 2021 was $100,491 compared to net income of $1,127,205 for the quarter ended September 30, 2020, which substantially larger net income for the 2020 third quarter was primarily due to the much greater  recorded accounting gain in change in fair value of derivatives compared to the 2021 third quarter.

Results of Operations for the Nine Months Ended September 30, 2021 and 2020

Revenue – Revenue was $565,621 for the nine months ended September 30, 2021 compared to $264,424 for the nine months ended September 30, 2020, which increase in revenue for the nine-month period of 2021 was due primarily to revenue from the acquisition of Score.

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Cost of Sales - Cost of sales was $71,691 (12.7% of revenue) for the nine months ended September 30, 2021 compared to $73,996 (28% of revenue) for the nine months ended September 30, 2020, basically the same amount for these two nine-month periods, however, our cost of sales, as a percentage of gross revenue, significantly decreased during this period.

Gross Margin - Gross Margin was $493,930 for the nine months ended September 30, 2021 compared to $190,428 for the nine months ended September 30, 2020. Gross margin as a percentage of revenue was 87.3% for the first nine months of 2021 compared to 72% of revenue for the first nine months of 2020. The gross margin increase is due primarily to the increase in revenue from the acquisition of Score.

Operating Expenses - Operating expenses for the nine months ended September 30, 2021 were $1,421,761 compared to operating expenses of $1,289,471 for the nine months ended September 30, 2020. Sales and marketing expenses for the nine months ended September 30, 2021 were $71,625 compared to sales and marketing expenses of $6,535 for the nine months ended September 30, 2020, which increase in the 2021 nine-month period was due to sales and marketing costs related to the Score acquisition.  Development and support expenses for the nine months ended September 30, 2021 were $388,686 compared to development and support expenses of $273,697 for the nine months ended September 30, 2020, which increase in the nine-month period of 2021 was primarily due to development costs with our surgery center business.  General and administrative expenses for the nine months ended September 30, 2021 were $961,450 compared to general and administrative expenses of $1,009,239 for the nine months ended September 30, 2020, relatively the same for both nine-month periods.

Operating Loss - Operating loss for the nine months ended September 30, 2021 was $927,831 compared to an operating loss of $1,099,043 for the nine months ended September 30, 2020, which decrease for the nine-month period of 2021 was due primarily to increased.

Other Income/(Expenses) - Other income/(expenses) for the nine months ended September 30, 2021 was income of $4,016,984 (consisting of a gain of $2,624,687 in the fair value of derivatives, a gain of $1,446,207 on extinguishment of debt, and other income of $783,370 primarily including proceeds from our settlement of the Continuity Logic receivables and the loan forgiveness of the SBA/PPP loan, offset by debt interest/debt amortization of $(825,215) and $(12,065) of bad debt expense), compared to other income/(expenses) for the nine months ended September 30, 2020 of income of $1,969,366 (consisting of a gain in fair value of derivatives of $2,826,397 and other income of $35,966, offset by debt interest/debt amortization expenses of $(816,321), a settlement of debt expense of $(40,482), and a $(36,194) bad debt expense). 

Net Income - Our net income for the nine months ended September 30, 2021 was $3,089,153 compared to net income of $870,323 for the nine months ended September 30, 2020. The substantial gain in net income for the 2021 nine-month period was due primarily to non-operating gains from accounting procedures used to record fair value of derivatives and debt extinguishment, the loan forgiveness income of our SBA-PPP loan and proceeds from the collection of the Continuity Logic note receivable settlement proceeds and increased revenues due to the Score acquisition.

Liquidity and Capital Resources

Our financial condition and future prospects critically depend on our access to financing in order to continue our operations. Much of our cost structure for our Fision marketing software platform is based on costs related to personnel and contracted operational services including our cloud-based service provider, and not subject to material variability. We will need to raise substantial additional capital through offerings of equity or debt securities, or a combination thereof, and we may have to use a material portion of the capital raised to repay certain past due debt obligations. To the extent any capital raised is insufficient to satisfy operational working capital needs and meet any required debt payments, we will need to either extend, refinance, or convert to equity our past due indebtedness, which there is no assurance we can accomplish.

As of September 30, 2021, we had total current liabilities of $2,434,455 including accounts payable and accrued expenses of $1,076,539, short-term Notes Payable of $978,300, and derivative liabilities of $379,616. In addition, our long-term liabilities as of September 30, 2021 included Convertible Notes of $617,863 net of debt discount of $8,137 and a long-term contingent liability $491,096 on the Score, Inc. acquisition.

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As of the date of this filing, we have approximately $50,000 cash, which we believe along with our projected receipt of accounts receivable and customer revenues will last only until the end of 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 or debt securities (including convertible debt), cash from exercise of warrants, 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 material increase in revenues or liquid assets, which has caused a serious and harmful effect to our liquidity and a substantial strain on our ongoing business operations.

Along with our revenues, we have financed our operations to date through various means including loans from management, affiliates, and other private lenders; stock-based compensation issued to employees, outsourced software developers, consultants, and professionals; common stock issued to satisfy outstanding loans and accounts payable/accrued expenses; and equity sales of our common stock, convertible Notes, and stock purchase warrants.

Net Cash (Used) in Operating Activities - During the nine months ended September 30, 2021, we used net cash in operating activities of ($791,986) compared to using ($230,962) of net cash used in operating activities in the nine months ended September 30, 2020.

Net Cash Provided (Used) in Investing Activities – During the nine months ended September 30, 2021, we  had $567,993 provided to us from the collections of the notes receivable from the Continuity Logic settlement compared to not having any funds used in investing activities for the period ending September 30, 2020.

Net Cash Provided By Financing Activities -- During the nine months ended September 30, 2021, we were provided with net cash by financing activities of $261,900 including proceeds of $55,000 from a note payable and $216,109 from proceeds from the exercise of warrants to common stock, offset by a repayment of our line of credit. In comparison, during the nine months ended September 30, 2020, we were provided with net cash by financing activities of $222,565 including proceeds of $50,000 from sale of common stock, proceeds of $177,200 from a SBA PPP loan, and issuance of a note payable of $75,000, offset by repayment of the $75,000 note payable and repayments of $4,635 on related party notes and a line of credit.  

Convertible Note Financing

A majority of our financing during the past three years has consisted of Convertible Notes sold to various accredited investors. We raised a total of $2,959,500 from such convertible debt financing in 2018; we raised a total of $964,000 from convertible debt financing in 2019; and we raised a total of $75,000 from convertible debt financing in 2020. In addition, we raised a total of $55,000 from non-convertible debt financing in the period ending June 30, 2021. We also issued a $500,000 convertible note, at $.05 per share, for the acquisition of Score. (See Note 13 of the financial statements herein).

Going Concern

Our financial statements contained in this quarterly report have been prepared on a going concern basis, which contemplates and implies that we will continue to realize our assets and satisfy our liabilities and commitments in the normal course of business. For the nine months ended September 30, 2021, we incurred an operating loss of $(927,831). And our accumulated deficit as of September 30, 2021 is $(31,214,172). 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.

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Off-Balance Sheet Arrangements

We have no off-balance sheet items as of September 30, 2021, or as of the date of this report.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable

ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures -- We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating these disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired objectives. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatement. Moreover, the design of any disclosure controls and procedures is based in large part upon certain assumptions regarding the likelihood of future events, and there can be no assurance 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 September 30, 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 September 30, 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 third quarter of our fiscal year ended September 30, 2021 are as follows:

Director Services - In the third quarter ended September 30, 2021, we issued a total of 2,491,454  restricted common shares to our directors in consideration for management services provided by them valued in total at $62,500.

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.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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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: November 23, 2021	By:	/s/ William Gerhauser
		William Gerhauser
		Principal executive officer and Principal financial and accounting officer

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