Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2016 | |
Document And Entity Information | |
Entity Registrant Name | FISION Corp |
Entity Central Index Key | 1,487,931 |
Document Type | S1 |
Document Period End Date | Sep. 30, 2016 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Is Entity a Well-known Seasoned Issuer? | No |
Is Entity a Voluntary Filer? | No |
Is Entity's Reporting Status Current? | Yes |
Entity Filer Category | Smaller Reporting Company |
Document Fiscal Year Focus | 2,016 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets | |||
Cash and cash equivalents | $ 2,666 | $ 8,495 | $ 2,924 |
Accounts receivable, net | 12,488 | 32,134 | 55,929 |
PrePaid Expenses | 16,784 | 15,318 | |
Total current assets | 31,938 | 55,947 | 58,853 |
Property and equipment, net | 9,936 | 7,754 | 21,630 |
Other Assets: | |||
Deposits | 6,456 | 6,456 | 6,456 |
Total Assets | 48,330 | 70,157 | 86,939 |
Current Liabilities: | |||
Accounts payable and accrued expenses | 620,765 | 185,172 | 1,282,642 |
Note payable and accrued interest - related party | 349,857 | 445,224 | 702,700 |
Notes payable | 506,550 | 986,082 | 1,707,420 |
Total current liabilities | 1,477,172 | 1,616,478 | 3,692,762 |
Commitments and contingencies | |||
Stockholders' Equity: | |||
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 19,662,809 and 27,797,950 shares issued and outstanding, respectively | 3,419 | 2,780 | 1,967 |
Additional paid-in capital | 11,951,815 | 9,071,663 | 4,753,742 |
Accumulated deficit | (13,384,076) | (10,620,764) | (8,361,532) |
Total stockholders' deficit | (1,428,842) | (1,546,321) | (3,605,823) |
Total Liabilities & Stockholders' Deficit | $ 48,330 | $ 70,157 | $ 86,939 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Stockholders' deficit: | |||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | 20,000,000 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 | 0 |
Common stock, shares authorized | 500,000,000 | 500,000,000 | 500,000,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Common stock, shares issued | 34,186,572 | 19,662,809 | 27,797,950 |
Common stock, shares outstanding | 34,186,572 | 19,662,809 | 27,797,950 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Statements Of Operations | ||||||
Revenue | $ 94,552 | $ 140,652 | $ 320,690 | $ 459,027 | $ 604,799 | $ 699,110 |
Cost of sales | 44,824 | 32,206 | 109,421 | 100,745 | 136,856 | 138,664 |
Gross margin | 49,728 | 108,447 | 211,270 | 358,282 | 467,943 | 560,446 |
Operating Expenses: | ||||||
Selling and marketing | 294,401 | 167,025 | 1,060,839 | 481,890 | 620,288 | 1,562,348 |
Development and support | 181,898 | 40,603 | 560,226 | 174,699 | 232,476 | 437,787 |
General & administrative | 335,121 | 866,577 | 1,248,374 | 1,570,776 | 1,569,020 | 1,062,762 |
Total operating expenses | 811,420 | 1,074,205 | 2,869,440 | 2,227,364 | 2,421,785 | 3,062,897 |
Loss from operations | (761,693) | (965,758) | (2,658,170) | (1,869,082) | (1,953,842) | (2,502,451) |
Other expense: | ||||||
Interest expense | 45,749 | 68,975 | 113,091 | 231,678 | (305,390) | (281,593) |
Total other expense | 450 | (305,390) | (281,593) | |||
Net loss before income taxes | (807,442) | (1,034,733) | (2,770,811) | (2,100,760) | (2,259,232) | (2,784,044) |
Provision for income taxes | ||||||
Net Loss | $ (807,442) | $ (1,034,733) | $ (2,770,811) | $ (2,100,759) | $ (2,259,232) | $ (2,784,044) |
Net loss per share - basic and diluted | $ (0.03) | $ (0.05) | $ (0.09) | $ (0.10) | $ (0.10) | $ (0.18) |
Weighted average number of shares outstanding - basic and diluted | 31,535,392 | 22,979,171 | 30,247,220 | 21,540,974 | 22,655,221 | 15,151,207 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 1,535 | $ 2,999,782 | $ (5,577,488) | $ (2,576,171) | |
Beginning Balance, Shares at Dec. 31, 2013 | 15,350,309 | ||||
Common stock issued for cash, Amount | $ 38 | 99,962 | 100,000 | ||
Common stock issued for cash, Shares | 377,359 | ||||
Stock issued for services, Amount | $ 394 | 1,042,418 | 1,042,812 | ||
Stock issued for services, Shares | 3,935,141 | ||||
Warrants granted for services | 611,580 | 611,580 | |||
Net Loss | (2,784,044) | (2,784,044) | |||
Ending Balance, Amount at Dec. 31, 2014 | $ 1,967 | 4,753,742 | (8,361,532) | (3,605,823) | |
Ending Balance, Shares at Dec. 31, 2014 | 19,662,809 | ||||
Common stock issued for cash, Amount | $ 193 | 729,807 | 730,000 | ||
Common stock issued for cash, Shares | 1,930,188 | ||||
Stock issued for services, Amount | $ 171 | 616,717 | 616,888 | ||
Stock issued for services, Shares | 1,714,431 | ||||
Warrants granted for services | 331,603 | 331,603 | |||
Conversion of notes payable and accrued interest, Amount | $ 419 | 2,639,824 | 2,640,243 | ||
Conversion of notes payable and accrued interest, Shares | 4,190,522 | ||||
Acquisition of the net assets and liabilities DE Acquistion, Amount | $ 30 | (30) | |||
Acquisition of the net assets and liabilities DE Acquistion, Shares | 300,000 | ||||
Net Loss | (2,259,232) | (2,259,232) | |||
Ending Balance, Amount at Dec. 31, 2015 | $ 2,780 | $ 9,071,663 | $ (10,620,764) | (1,546,321) | |
Ending Balance, Shares at Dec. 31, 2015 | 27,797,950 | ||||
Net Loss | (2,770,811) | ||||
Ending Balance, Amount at Sep. 30, 2016 | $ (1,428,842) |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss for the period | $ (2,770,811) | $ (2,100,759) | $ (2,259,232) | $ (2,784,044) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Common stock issued for services | 1,244,298 | 854,642 | 616,888 | 1,042,812 |
Depreciation | 4,349 | 17,641 | 18,592 | 23,671 |
Stock warrants issued for services | 162,667 | 59,778 | 331,603 | 611,850 |
(Increase) decrease in: | ||||
Accounts receivable | 19,646 | 12,181 | 33,795 | (19,250) |
Other receivable | ||||
Prepaid expenses | (1,466) | (159,404) | (15,318) | |
Increase (decrease) in: | ||||
Accrued Wages | 355,829 | |||
Accounts payable & accrued expenses | 274,945 | 363,572 | 362,533 | 361,749 |
Net cash used in operating activities | (710,544) | (783,830) | (911,134) | (763,212) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Purchase of property and equipment | (6,531) | (4,716) | (4,716) | |
Net cash used In investing activities | (6,531) | (4,716) | (4,716) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Repayments on note payable | (187,787) | (211,689) | (112,000) | |
Proceeds from note payable | 120,000 | 330,078 | 430,921 | |
Proceeds from related party notes | 39,300 | 295,112 | 222,147 | |
Repayments on line of credit | (5,266) | (3,295) | 3,069 | |
Proceeds from issuance of common stock | 745,000 | 680,000 | 730,000 | 100,000 |
Net cash provided by financing activities | 711,247 | 795,094 | 921,418 | 753,068 |
Net (decrease) in cash | (5,828) | 6,548 | 5,568 | (10,144) |
Cash at beginning of year | 8,495 | 2,924 | 2,924 | 13,068 |
Cash at end of year | 2,666 | 9,472 | 8,495 | 2,924 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during period: Interest | 18,129 | 39,809 | 42,881 | 136 |
Cash paid during period: Franchise and income taxes | ||||
Noncash operating and financing activities: | ||||
Conversion of debt and accrued interest to common stock | 2,640,243 | 1,159,557 | ||
Common Stock Issued to Convertible Debt | 728,826 | |||
Common Stock Issued for Services | 1,244,298 | 854,642 | $ 616,888 | $ 1,042,812 |
Common Stock Warrants Issued for Services | $ 30,000 | $ 59,778 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS | Fision Corporation, (formerly DE 6 Acquisition, Inc.), a Delaware corporation (the Company) was incorporated on February 24, 2010, and was inactive until December 2015 when it merged with Fision Holdings, Inc., a Minnesota operating business based in Minneapolis, Minnesota. As a result of the merger, Fision Holdings, Inc. became a wholly-owned subsidiary of the Company. Fision Holdings, Inc. was incorporated under the laws of the State of Minnesota in 2010, and has developed and successfully commercialized a proprietary cloud-based software platform which automates and integrates digital marketing assets and marketing communications to bridge the gap between marketing and sales of any enterprise. The Company generates its revenues primarily from software licensing contracts typically having terms of from one to three years and requiring monthly subscription fees based on the customers number of users and the locations where used. The Companys business model provides it with a high percentage of recurring revenues. The terms Fision, we, us, and our, refer to FISION Corporation, a Delaware corporation and its wholly-owned operating subsidiary Fision Holdings, Inc., a Minnesota corporation. Basis of Presentation The accompanying consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the SEC. Certain information and note disclosures which are included in annual financial statements have been omitted pursuant to these rules and regulations. We believe the disclosures made in these interim unaudited financial statements are adequate to make the information not misleading. Although these interim financial statements as and for the three-month and nine-month periods ended September 30, 2016 and 2015 are unaudited, in the opinion of our management, such statements include all adjustments (consisting of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows for the periods presented. The results for these interim periods are not necessarily indicative of the results to be expected for the year ended December 31, 2016 or for any future period. These unaudited interim financial statements should be read and considered in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2015, included in our annual report on Form 10-K filed with the SEC on April 15, 2016. Principles of Consolidation These consolidated interim financial statements include the accounts of Fision Corporation, a Delaware corporation, and its wholly-owned Minnesota subsidiary, and all material intercompany transactions and balances have been eliminated in consolidation. Use of Estimates GAAP accounting principles require our management to make estimates and assumptions in the preparation of these interim financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates and assumptions. The most significant areas requiring management judgment and which are susceptible to possible later change include our revenue recognition, cost of revenue, allowance for doubtful accounts, valuations of property and equipment and intangible assets, stock-based compensation, fair value of financial instruments, derivative securities, research and development, impairment of long-lived assets, and income taxes. Certain accounting policies for these areas are discussed following these Notes in the Item 2 section of this quarterly report entitled Managements Discussion and Analysis of Financial Condition and Results of Operations. 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, 2016 we had no cash equivalents. Concentration of Credit Risk and Customers Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. During the quarter ended September 30, 2016, 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, 2016, only two customers exceeded 10% of our revenues, with revenue from the largest one, a new customer, including in large part one-time implementation and set-up fees. We do not believe that currently we face any material customer concentration risks, although a significant reduction for any reason in the use of our software solutions by one or more of our major customers could harm our business materially. Loss Per Common Share Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding and potential common shares under the treasury stock method. Diluted net loss per common share is not shown, since the assumed exercise of stock options and warrants using the treasury stock method are anti-dilutive. Property and Equipment Furniture and fixtures 5 years Computer and office equipment 5 years Stock-Based Compensation | Fision Holdings, Inc. (the "Company") was incorporated under the laws of the state of Minnesota and is in the business of unique automated marketing software which is "cloud" based. The Company has developed and successfully commercialized a unique cloud-based software platform which automates and integrates digital marketing assets and marketing communications, and accordingly "bridges the gap" between marketing and sales of an enterprise. The Company generates its revenues primarily from software licensing contracts typically having terms of one to three years and requiring monthly subscription fees based on the customer's number of users and locations where used. The Company's business model provides a predictable and recurring revenue stream for its licensed software allowing for recurring revenue of 83%. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Accordingly, actual results could differ from those estimates. Such estimates include management's assessments of the carrying value of certain assets, useful lives of assets, and related depreciation and amortization methods applied. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. During the year ended December 31, 2015, the Company may have had cash deposits that exceeded Federal Deposit Insurance Corporation ("FDIC") insurance limits. The Company maintains its cash balances at high quality financial institutions to mitigate this risk. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Cash equivalents The Company considers all highly liquid investments with an original maturity of six months or less when purchased to be cash equivalents. At December 31, 2015, the Company had no cash equivalents. Fair value of financial instruments The Company adopted the provisions of FASB ASC 820 (the "Fair Value Topic") which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. The Fair Value Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. It also establishes a fair value hierarchy, which prioritizes the valuation inputs into six broad levels. The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: A) Market approachUses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources; B) Cost approachBased on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and C) Income approachUses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques, and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate. Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. An active market for an asset or liability is a market in which transactions for the asset or liability occur with significant frequency and volume to provide pricing information on an ongoing basis. Level 2: Observable inputs other than Level 1 inputs. Example of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3: Unobservable inputs based on the Company's assessment of the assumptions that are market participants would use in pricing the asset or liability. The carrying amount of the Company's financial assets and liabilities, such as cash, accounts receivable, accounts payable, accrued expenses, and notes payable approximate their fair value because of the short maturity of those instruments. The Company had no assets and/or liabilities measured at fair value on a recurring basis at December 31, 2015. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable related to the products and services sold are recorded at the time revenue is recognized, and are presented on the balance sheet net of allowance for doubtful accounts. The ultimate collection of the receivable may not be known for several months after services have been provided and billed. The Company has established an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, analyses of current and historical cash collections, and the aging of receivables. Delinquent accounts are written-off when the likelihood for collection is remote and/or when the Company believes collection efforts have been fully exhausted and the Company does not intend to devote any additional efforts in an attempt to collect the receivable. The Company adjusts their allowance for doubtful accounts balance on a quarterly basis. Property and Equipment Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life of six (3) years for equipment, (5) years for automobile, and (7) years for furniture and fixtures. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations. Impairment of long-lived assets The Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company's long-lived assets are required to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that there were no impairments of long-lived assets as of December 31, 2015. Revenue recognition The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Revenue is recognized in the period the services are provided over the contract period, normally one (1) to three (3) years. The Company invoices one-time startup costs, such as consolidating and uploading digital assets upon completion of those services. Monthly services, such as internet access to software as a service (SaaS), hosting and weekly backups are invoices monthly. Income taxes The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company adopted section 740-10-25 of the FASB Accounting Standards Codification ("Section 740-10-25") with regards to uncertainty in income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its assets and/or liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25. Stock-Based Compensation In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation Stock Compensation Equity instruments ("instruments") issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees Net income (loss) per share The Company computes basic and diluted earnings per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic earnings per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity. For the years ended December 31, 2014 and 2015, there were 5,142,729 and 1,922,853 respectively, potentially dilutive securities not included in the calculation of weighted-average common shares outstanding since they would be anti-dilutive. Research and Development The company expenses all our research and development operations and activities as they occur. During the fiscal year ended December 31, 2015 we incurred total expenses of $211,495 for research and development, including $179,135 for internal development by our technology personnel and $32,360 for outsourced work by independent software developers. In comparison, during the fiscal year ended December 31, 2014 we incurred total expenses of $198,913 for research and development, including $183,750 for internal development and $15,163 for outsourced development. Development expenses were similar in 2015 compared to 2014 as we completed development of our Fision software platform during 2014. Recently issued accounting pronouncements Company management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
GOING CONCERN
GOING CONCERN | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 3 - GOING CONCERN | These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Companys ability to continue as a going concern is contingent upon its future ability to achieve and maintain profitable operations, and to raise substantial additional capital as required until it attains profitable operations. At September 30, 2016 the Company had a working capital deficiency of approximately $1.45 million and an accumulated deficit of approximately $13.4 million. These conditions raise substantial doubt about the Companys ability to continue as a going concern. These unaudited interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We are in the process of raising funds, increasing our marketing activities to obtain materially increased revenues, and otherwise addressing our ability to continue as a going concern, and our management believes that our actions being taken to raise needed capital and implement our business plan for increased revenues will enable us to continue as a going concern. | These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company's ability to continue as a going concern is contingent upon its ability to achieve and maintain profitable operations, and the Company's ability to raise additional capital as required. At December 31, 2015 the Company had a working capital deficiency of approximately $10.8 million and an accumulated deficit of approximately $10.6 million. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These 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. Management intends to raise additional funds thru a private placement or thru the public process. Management believes that the actions presently being taken to further implement its business plan will enable the Company to continue as a going concern. While the Company believes in the viability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate funds. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 4 - ACCOUNTS RECEIVABLE | Accounts receivable at December 31, 2014 and December 31, 2015 consisted of the following: December 31, 2014 December 31, 2015 Accounts receivable $ 65,929 $ 32,134 Less: Allowance for doubtful accounts (10,000 ) 0 $ 55,929 $ 32,134 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 5 - PROPERTY AND EQUIPMENT | Fixed assets, stated at cost, less accumulated depreciation, consists of the following at December 31, 2014 and December 31, 2015: December 31, 2014 December 31, 2015 Equipment $ 89,410 $ 92,701 Furniture & Fixtures 28,946 28,946 Less: Accumulated Depreciation (96,726 ) (115,318 ) Net Fixed Assets $ 21,630 $ 7,754 Depreciation expense Depreciation expense for the years ended December 31, 2014 and 2015 was $23,671 and $23,655, respectively. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 6 - NOTES PAYABLE | In July 2016, a total of $616,166 of our past due Notes and other debt were acquired by Brajoscal, LLC and Finquest Capital Inc. in a private transaction with each purchaser acquiring an equal amount of this debt. Brajoscal and Finquest are owned by two significant stockholders of the Company. On September 30, 2016, Brajoscal and Finquest entered into a debt conversion agreement with the Company resulting in their conversion in equal amounts of a total of $566,166 of this debt acquired by them in July 2016 into common stock of the Company on the conversion basis of $.30 per share, for which the Company issued 943,611 common shares to each of Brajoscal and Finquest. Regarding the $50,000 of this debt which was not converted, each of Brajoscal and Finquest retained $25,000 principal of this debt, which is still outstanding, secured by assets of the Company, and bears interest of 15%-18% per annum. At September 30, 2016 the Company was indebted under various Notes Payable in the total amount of $922,008 including accrued interest, the majority amount of which was past due or due on demand. Following is a summary of our outstanding Notes Payable indebtedness as of September 30, 2016: Summary Description of Notes Payable Amount Owed* Decathlon LLC - Senior Secured Note, due 12/31/16, interest at 15% $ 161,133 Finquest Capital Inc.- Secured Note, due 12/31/16, interest at 15% 25,000 Brajoscal, LLC Secured Note, due 12/31/16, interest at 18% 25,000 Nottingham Securities Inc., past due, interest at 10% 130,979 Note payable to individual investor, due 12/31/16, interest at 24% 61,211 Note payable to individual investor, due 12/31/16, interest at 12% 25,250 Notes payable to two individual investors, past due, interest at 12% 40,961 Note payable to individual investor, past due, interest at 10% 53,135 Note payable to individual investor, monthly settlement payments 48,000 Note payable to individual investor, past due, interest at 6% 1,482 Notes payable to two principal officers, due on demand, interest at 6% 349,857 Total $ 922,008 __________________ * Includes accrued interest | At December 31, 2015, the Company has total of 11 notes agreements totaling $986,082 with interest rates up to 21%. At December 31, 2014, $1,652,420 of these notes were in default. These notes consist of the following: · The Company has entered into one (1) convertible notes payable totaling $50,000 and bear interest at 10%. The Company has an option to convert this note at $0.50 per share. This note is in default at December 31, 2015. · The Company has entered into three (3) convertible notes payable totaling $321,458 and bear interest at 15% to 21%. These notes include warrants to purchase the Company's common stock at $0.265 per share for five (5) years. The maximum number of warrants issued under the agreements total 240,000. These notes are in default at December 31, 2015. · The Company has entered into one (1) secured note payable totaling $150,000 with interest at 14% with a maturity date of June 30, 2016. · The Company has entered into seven (7) note agreements with interest rates from 6% to 12% totaling $464,624. Of these notes $78,249 were in default at December 31, 2015. |
COMMITMENTS & CONTINGENCIES
COMMITMENTS & CONTINGENCIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 7 - COMMITMENTS & CONTINGENCIES | Operating Lease We lease 4,427 square feet of office, development and operational spaces in Minneapolis, Minnesota on a month-to-month basis for $7,142 per month including utilities, maintenance and cleaning. Rent paid for the nine-month periods ended September 30, 2016 and 2015 were respectively $64,278 and $64,278. Employment Agreements We have three written employment agreements in effect with three principal executive officers, including provisions for base salary, discretionary bonuses, severance provisions and other employee benefits. The salary terms of these agreements include aggregate monthly salaries of $49,167 per month. Litigation In May 2016 we settled a material legal action involving a former employee who alleged a breach of his former employment agreement as well as other allegations of damages, in total in excess of $200,000. We settled this litigation for $145,000 in cash plus issuance to the plaintiff of 135,000 shares of our common stock. We have issued the 135,000 shares and paid in cash all but $10,000 of this settlement, which is due in November 2016. Upon full payment by us of the $145,000, the plaintiff will release us from any and all claims or obligations to him. From time to time, we become 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, nor are we aware of any other pending or threatened litigation that would have a material effect on our business, operating results or financial condition should such litigation be resolved unfavorably against our Company. | Lease The Company currently occupies 4,427 square feet of office space in downtown Minneapolis Minnesota. Terms are on a month to month basis for $7,142 per month including utilities maintenance and cleaning. The Company. Total rent expense under this agreement was $65,623 and $78,565 for the years ended December 31, 2014 and 2015, respectively. From time to time, we become subject to legal proceedings, claims and litigation arising in the ordinary course of business. Except for the following legal action involving a former employee, we currently are not a party to any material legal proceedings, nor are we aware of any other pending or threatened litigation that would have a material adverse effect on our business, operating results or financial condition should such litigation be resolved unfavorably against us. We are the defendant in a lawsuit brought by a former employee against us and our two principal executive officers in the United States District Court of Minnesota alleging (i) breach of an employment contract by us relating to employment from late 2012 through March 2014, (ii) various violations by us of certain federal and state employment laws, and (iii) our default on a $50,000 loan to us which was alleged to be assigned from a third party to this former employee. Our former employee alleges he is entitled to recover legal and equitable damages and relief in the amount of at least $200,000 along with certain statutory penalties and attorney's fees and costs. We believe and consider this lawsuit is unwarranted and without merit except for approximately $30,000 which is owed to our former employee pursuant to a written termination of his employment accepted and agreed to by him in 2014. We have answered this lawsuit and denied these unwarranted claims, and we intend to vigorously defend the lawsuit or settle it to our satisfaction. |
2016 PLAN AND STOCK PAYMENT AWA
2016 PLAN AND STOCK PAYMENT AWARDS | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 5 - 2016 PLAN AND STOCK PAYMENT AWARDS | In March 2016, the Board of Directors of the Company adopted our 2016 Equity Incentive Plan (2016 Plan) which was registered with the SEC pursuant to a Registration Statement on Form S-8 effective on March 30, 2016. This 2016 Plan reserved 2,500,000 shares of our common stock for grants of incentive awards from time to time to eligible participants, including option awards, restricted stock awards, or stock payment awards. Eligible participants under the 2016 Plan include employees, directors and certain consultants or advisors of the Company. During the first and second quarters of 2016, our Board of Directors granted stock payment awards under the 2016 Plan for the issuance of an aggregate of 1,330,000 common shares. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 8 - INCOME TAXES | At December 31, 2014 and 2015, the Company had available Federal and state net operating loss carryforwards to reduce future taxable income. The amounts available were approximately $4,880,000 and $6,706,000 for Federal and state purposes, respectively. The Federal carryforward expires in 2034 and the state carryforward expires in 2019. Given the Company's history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit. Effective January 1, 2007, the Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of December 31, 2014 and 2015, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption. The Company's policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2014 and 2015, the Company has not accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2011 through 2013 remain open to examination by the major taxing jurisdictions to which the Company is subject. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize a deferred tax asset at that time. The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are as follows: 2014 2015 Income tax at federal s statutory rate 34.0 % 34.0 % Effects of permanate differences (12.7 )% (11.7 )% Effect of state taxes (net of federal taxes) 4.0 % 4.2 % Change in valuation allowance (25.3 )% (26.5 )% 0.0 % 0.0 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2014 and 2015, the Company's only significant deferred income tax asset was a cumulative estimated net tax operating loss of $4,880,000 and $6,706,000, respectively. Management has considered the Company's operating losses incurred to date and believes that a full valuation allowance against the deferred tax assets is required as of December 31, 2014 and 2015. Utilization of the Company's net operating losses may be subject to substantial limitations if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 9 - RELATED PARTY TRANSACTIONS | Our Notes Payable as of September 30, 2016 include $349,857 owed to our CEO and CFO incident to their conversion of unpaid past salary compensation into Notes payable on demand having an interest rate of 6% per annum. The Stock Payment Awards granted by us in March 2016 under our 2016 Equity Incentive Plan included executive bonus awards of 375,000 common shares to our CEO valued at $0.65 per share and 225,000 common shares to our CFO valued at $0.65 per share. In April 2016, we granted our Chief Technology Officer the stock option for 1,600,000 common shares described in the foregoing Note 6. The stock options granted by us to employees in August 2016 pursuant to our 2011 Plan included a four-year option for our Senior Vice President of Sales and Marketing to purchase 250,000 common shares exercisable at $.50 per share, and vesting ratably on a quarterly basis. At the same time, we granted him a four-year warrant, fully vested, to purchase 250,000 common shares exercisable at $.30 per share. | Employment Agreements The Company has two employment agreements in effect with their chief executive officer and executive vice president. The terms of the agreements include a base salaries of $25,000 per month in 2014 increasing to $32,500 per month January 1, 2015. Loans Included in notes payable are amounts due to officers and directors for advances. At December 31, 2014 and 2015, the amounts due related parities was $702,700 and $174,125, respectively. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 10 - STOCKHOLDERS' EQUITY | The Company is authorized to issue 500,000,000 shares of common stock and 20,000,000 shares of preferred stock, both having $.0001 par value per share. At September 30, 2016 there were 34,186,572 outstanding shares of common stock and no outstanding shares of preferred stock. Common Shares Issued As stated in the foregoing Note 5, the Company issued a total of 1,330,000 common shares as stock payment awards under its 2016 Plan valued in total at $864,500. These stock payment awards were issued for management bonuses, development and support services, marketing services, and professional services based on a valuation of $.65 per share. The valuation was based on the most recent sale of our common stock in a private placement. During the first nine months of 2016, the Company sold and issued a total of 1,767,948 unregistered common shares in private placement transactions to raise working capital, and incident thereto raised net proceeds of $745,000 at an average price of approximately $.42 per share. These private sales were all made to accredited investors having pre-existing relationships with the Company, and were made in reliance upon an exemption from securities registration pursuant to Section 4(a)(2) of the Securities Act of 1933. In February 2016, the Company issued 25,000 unregistered common shares for marketing services valued at $10,000 ($0.40 per share); in March 2016, the Company issued 275,000 unregistered common shares for financial services valued at $100,000 ($0.40 per share); and in June 2016 the Company issued 115,000 unregistered common shares for financial services valued at $46,000 ($0.40 per share). In June 2016, the Company issued 135,000 unregistered common shares, valued at $.65 per share, to a former employee incident to settlement of a lawsuit. In June 2016, the Company satisfied and converted $75,000 of an outstanding Note through the issuance of 187,500 unregistered common shares to the Noteholder ($0.40 per share). During the quarter ended September 30, 2016, the Company sold 208,333 unregistered shares for approximately $75,000. In August 2016, the Company awarded as a bonus and issued 25,000 unregistered common shares to each of two officers (a total of 50,000 shares) valued at $.40 per share. On September 30, 2016 the Company completed the following transactions: (i) An issuance of 79,330 unregistered common shares to the owner of our office premises, an accredited investor, for past due rental in the amount of $37,659. (ii) An issuance of a total of 1,887,222 unregistered common shares to two persons to convert a total of $566,166 of Notes and other debt into equity on the basis of $.30 per share, which transaction is described in the foregoing Note 3 of these interim financial statements. (iii) An issuance of 83,333 unregistered common shares to each of our CEO and CFO (a total of 166,666 shares) in consideration for each of them converting $25,000 of their outstanding Notes based on $.30 per share. (iv) An issuance of a total of 370,000 unregistered common shares to four accredited persons, valued at $.30 per share, in consideration for past financial services provided by them. Stock Options Granted In April 2016, the Company granted stock options under its 2011 Plan to our newly hired Chief Technology Officer for the purchase of up to 1,600,000 common shares vesting quarterly and ratably over a 4-year period and exercisable (including cashless exercise) at $0.35 per share. This stock option grant was valued at $208,000 pursuant to our Black Scholes valuation model. In August-September, 2016 the Company granted four-year stock options under its 2011 Plan to employees for the aggregate purchase of 1,075,000 common shares, vesting ratably on a quarterly basis, and including 575,000 shares exercisable at $.50 per share and 500,000 shares exercisable at $.65 per share. These stock option grants were valued at a total of $83,917 pursuant to our Black Scholes valuation model. Warrants Issued In March 2016, pursuant to a one-year marketing agreement, the Company issued a five-year Warrant for marketing services to purchase 120,000 common shares exercisable at $.50 per share anytime in whole or in part until expiration of the Warrant, and which Warrant was valued at $30,000 pursuant to our Black Scholes valuation model. In June 2016, the Company issued a five-year Warrant for financial services to purchase up to 25,000 common shares exercisable at $.40 per share anytime until expiration, and also issued a five-year Warrant for operational services to purchase 75,000 common shares exercisable at $.50 per share anytime until expiration. These two Warrants were valued at $30,000 pursuant to our Black Scholes valuation model. In August 2016, the Company granted and issued a four-year warrant bonus to a key executive officer to purchase 250,000 common shares at $.30 per share, fully vested. This warrant was valued at $48,750 pursuant to our Black Scholes valuation model. Recent Exercise of Scenic City Stock Option In October 2016, Scenic City exercised this stock option in full, after which the Company issued 1,217,981 common shares to Scenic City, with the related stock certificate bearing a restrictive legend prohibiting further sale or transfer of these shares unless registered under applicable securities laws or exempt from such registration. | The Company is authorized the issuance of 500,000,000 shares of common stock and 20,000,000 shares of preferred stock, both $0.0001 par values per share. At December 31, 2014 and 2015, there were 19,662,809 and 27,797,950 outstanding shares of common stock and no outstanding shares of Preferred stock, respectively. Common shares issued During the year ended December 31, 2015, the Company issued 8,135,141 common shares. Of this amount 1,930,188 shares were issued for cash of $730,000, 4,190,522 shares were issued for a debt reduction of $2,640,243 and 1,714,431 shares were issued for services which were valued at approximately $616,888. The market price of the stock for services was determined to be the last amount the company raised money for which averaged $0.36 per share. During the year ended December 31, 2014, the Company issued 4,312,500 shares of common stock. Of this amount 377,359 shares were issued for cash of $100,000 with 3,935,141 shares issued for services equaling $1,042,812. The price per shares in 2014 was determined to be $0.265. Equity Compensation Plan In 2011 the Board of Directors and shareholders of our Minnesota Fision subsidiary adopted and approved our 2011 Stock Option and Compensation Plan, as amended on July 18, 2013 and on December 30, 2014 (the "Plan"), which is our only equity compensation plan which was approved by stockholders. The purpose of the Plan is to advance the interests of the Company and our stockholders by attracting, retaining and rewarding our employees and key consultants performing services for us, and to motivate them to contribute to our growth and profitability. Issuance of Awards. Term and Vesting of Options. Exercise Price and Manner of Exercise. Transferability of Awards. Immediate Acceleration. The 2011 Stock Option and Compensation Plan of our Minnesota Fision subsidiary was assumed by the Company under the same terms as existed prior to the Merger. Warrants The Company has the following outstanding warrants to purchase the Company's common stock at December 31, Weighted Average Average Grant Date Number of Shares Exercise Price Exercise price Fair value Balance at December 31, 2013 1,517,721 0.25-1.00 0.41 0.18 Granted 158,250 0.22-.078 0.36 0.09 Forfeited or cancelled (43,500 ) 0.68-0.78 (0.75 ) (0.17 ) Balance December 31, 2014 1,632,471 0.25-1.00 Granted 2,133,973 0.20-1.00 0.51 0.17 Forfeited or cancelled - - Balance December 31, 2015 3,766,444 Exercisable 16,000 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Notes to Financial Statements | ||
Note 11 - SUBSEQUENT EVENTS | In October 2016, the Company issued 1,217,981 unregistered common shares to Scenic City F-10 VIII, Inc. incident to its exercise of an option described in the foregoing Note 6. On October 26, 2016 the Company sold and issued a total of 100,000 unregistered common shares to two accredited investors at $.30 per share. On November 16, 2016 the Company sold and issued a total of 666,667 unregistered common shares to an accredited investor at $.30 per share. | The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company plans to evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an eventual SEC filer, considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. Subsequent to December 31, 2015, through April 15, 2016, the Company sold shares of its common stock resulting in proceeds of $620,000 used for general working capital purposes. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 12 - CONCENTRATIONS | For the year ended December 31, 2015 four customers and for the year ended December 31, 2014 five customers each accounted for more than 10% of our revenues. Combined these customers represented slightly over 50% of the Company's revenue during each of 2014 and 2015. A significant reduction for any reason in the use of our software solutions by one or more of our major customers could harm our business materially. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | ||
Basis of Presentation | The accompanying consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and pursuant to the rules and regulations of the SEC. Certain information and note disclosures which are included in annual financial statements have been omitted pursuant to these rules and regulations. We believe the disclosures made in these interim unaudited financial statements are adequate to make the information not misleading. Although these interim financial statements as and for the three-month and nine-month periods ended September 30, 2016 and 2015 are unaudited, in the opinion of our management, such statements include all adjustments necessary to present fairly our financial position, results of operations and cash flows for the periods presented. The results for these interim periods are not necessarily indicative of the results to be expected for the year ended December 31, 2016 or for any future period. These unaudited interim financial statements should be read and considered in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2015, included in our annual report on Form 10-K filed with the SEC on April 15, 2016. | |
Principles of Consolidation | These consolidated interim financial statements include the accounts of Fision Corporation, a Delaware corporation, and its wholly-owned Minnesota subsidiary, and all material intercompany transactions and balances have been eliminated in consolidation. | |
Use of estimates | GAAP accounting principles require our management to make estimates and assumptions in the preparation of these interim financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates and assumptions. The most significant areas requiring management judgment and which are susceptible to possible later change include our revenue recognition, cost of revenue, allowance for doubtful accounts, valuations of property and equipment and intangible assets, stock-based compensation, fair value of financial instruments, derivative securities, research and development, impairment of long-lived assets, and income taxes. Certain accounting policies for these areas are discussed following these Notes in the Item 2 section of this quarterly report entitled Managements Discussion and Analysis of Financial Condition and Results of Operations. | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Accordingly, actual results could differ from those estimates. Such estimates include management's assessments of the carrying value of certain assets, useful lives of assets, and related depreciation and amortization methods applied. |
Concentration of Credit Risk | Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. During the quarter ended September 30, 2016, 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, 2016, only two customers exceeded 10% of our revenues, with revenue from the largest one, a new customer, including in large part one-time implementation and set-up fees. We do not believe that currently we face any material customer concentration risks, although a significant reduction for any reason in the use of our software solutions by one or more of our major customers could harm our business materially. | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. During the year ended December 31, 2015, the Company may have had cash deposits that exceeded Federal Deposit Insurance Corporation ("FDIC") insurance limits. The Company maintains its cash balances at high quality financial institutions to mitigate this risk. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. |
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, 2016 we had no cash equivalents. | The Company considers all highly liquid investments with an original maturity of six months or less when purchased to be cash equivalents. At December 31, 2015, the Company had no cash equivalents. |
Loss Per Common Share | Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding and potential common shares under the treasury stock method. Diluted net loss per common share is not shown, since the assumed exercise of stock options and warrants using the treasury stock method are anti-dilutive. | |
Fair value of financial instruments | The Company adopted the provisions of FASB ASC 820 (the "Fair Value Topic") which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. The Fair Value Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. It also establishes a fair value hierarchy, which prioritizes the valuation inputs into six broad levels. The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: A) Market approachUses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources; B) Cost approachBased on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and C) Income approachUses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques, and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate. Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. An active market for an asset or liability is a market in which transactions for the asset or liability occur with significant frequency and volume to provide pricing information on an ongoing basis. Level 2: Observable inputs other than Level 1 inputs. Example of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3: Unobservable inputs based on the Company's assessment of the assumptions that are market participants would use in pricing the asset or liability. The carrying amount of the Company's financial assets and liabilities, such as cash, accounts receivable, accounts payable, accrued expenses, and notes payable approximate their fair value because of the short maturity of those instruments. The Company had no assets and/or liabilities measured at fair value on a recurring basis at December 31, 2015. | |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable related to the products and services sold are recorded at the time revenue is recognized, and are presented on the balance sheet net of allowance for doubtful accounts. The ultimate collection of the receivable may not be known for several months after services have been provided and billed. The Company has established an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, analyses of current and historical cash collections, and the aging of receivables. Delinquent accounts are written-off when the likelihood for collection is remote and/or when the Company believes collection efforts have been fully exhausted and the Company does not intend to devote any additional efforts in an attempt to collect the receivable. The Company adjusts their allowance for doubtful accounts balance on a quarterly basis. | |
Property and Equipment | Furniture and fixtures 5 years Computer and office equipment 5 years | Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life of six (3) years for equipment, (5) years for automobile, and (7) years for furniture and fixtures. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations. |
Impairment of long-lived assets | The Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company's long-lived assets are required to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that there were no impairments of long-lived assets as of December 31, 2015. | |
Revenue recognition | The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Revenue is recognized in the period the services are provided over the contract period, normally one (1) to three (3) years. The Company invoices one-time startup costs, such as consolidating and uploading digital assets upon completion of those services. Monthly services, such as internet access to software as a service (SaaS), hosting and weekly backups are invoices monthly. | |
Income taxes | The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company adopted section 740-10-25 of the FASB Accounting Standards Codification ("Section 740-10-25") with regards to uncertainty in income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its assets and/or liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25. | |
Stock-Based Compensation | In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation Stock Compensation Equity instruments ("instruments") issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees | |
Net income (loss) per share | The Company computes basic and diluted earnings per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic earnings per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity. For the years ended December 31, 2014 and 2015, there were 5,142,729 and 1,922,853 respectively, potentially dilutive securities not included in the calculation of weighted-average common shares outstanding since they would be anti-dilutive. | |
Research and Development | The company expenses all our research and development operations and activities as they occur. During the fiscal year ended December 31, 2015 we incurred total expenses of $211,495 for research and development, including $179,135 for internal development by our technology personnel and $32,360 for outsourced work by independent software developers. In comparison, during the fiscal year ended December 31, 2014 we incurred total expenses of $198,913 for research and development, including $183,750 for internal development and $15,163 for outsourced development. Development expenses were similar in 2015 compared to 2014 as we completed development of our Fision software platform during 2014. | |
Recently issued accounting pronouncements | Company management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
ORGANIZATION AND SIGNIFICANT AC
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Organization And Significant Accounting Policies Tables | |
Schedule of Property and Equipment | Furniture and fixtures 5 years Computer and office equipment 5 years |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Notes Payable Tables | |
Notes Payable | Summary Description of Notes Payable Amount Owed* Decathlon LLC - Senior Secured Note, due 12/31/16, interest at 15% $ 161,133 Finquest Capital Inc.- Secured Note, due 12/31/16, interest at 15% 25,000 Brajoscal, LLC Secured Note, due 12/31/16, interest at 18% 25,000 Nottingham Securities Inc., past due, interest at 10% 130,979 Note payable to individual investor, due 12/31/16, interest at 24% 61,211 Note payable to individual investor, due 12/31/16, interest at 12% 25,250 Notes payable to two individual investors, past due, interest at 12% 40,961 Note payable to individual investor, past due, interest at 10% 53,135 Note payable to individual investor, monthly settlement payments 48,000 Note payable to individual investor, past due, interest at 6% 1,482 Notes payable to two principal officers, due on demand, interest at 6% 349,857 Total $ 922,008 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accounts Receivable Tables | |
Accounts receivable | December 31, 2014 December 31, 2015 Accounts receivable $ 65,929 $ 32,134 Less: Allowance for doubtful accounts (10,000 ) 0 $ 55,929 $ 32,134 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property And Equipment Tables | |
Fixed assets | December 31, 2014 December 31, 2015 Equipment $ 89,410 $ 92,701 Furniture & Fixtures 28,946 28,946 Less: Accumulated Depreciation (96,726 ) (115,318 ) Net Fixed Assets $ 21,630 $ 7,754 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes Tables | |
Provision for income taxes | 2014 2015 Income tax at federal s statutory rate 34.0 % 34.0 % Effects of permanate differences (12.7 )% (11.7 )% Effect of state taxes (net of federal taxes) 4.0 % 4.2 % Change in valuation allowance (25.3 )% (26.5 )% 0.0 % 0.0 % |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders Equity Tables | |
Warrants | Weighted Average Average Grant Date Number of Shares Exercise Price Exercise price Fair value Balance at December 31, 2013 1,517,721 0.25-1.00 0.41 0.18 Granted 158,250 0.22-.078 0.36 0.09 Forfeited or cancelled (43,500 ) 0.68-0.78 (0.75 ) (0.17 ) Balance December 31, 2014 1,632,471 0.25-1.00 Granted 2,133,973 0.20-1.00 0.51 0.17 Forfeited or cancelled - - Balance December 31, 2015 3,766,444 Exercisable 16,000 |
ORGANIZATION AND SIGNIFICANT 27
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Furniture and Fixtures [Member] | |
Property and equipment | 5 years |
Computer and Office Equipment [Member] | |
Property and equipment | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN28
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016Unit | Dec. 31, 2015USD ($)shares | Dec. 31, 2014USD ($)shares | |
Summary Of Significant Accounting Policies Details Narrative | |||
Potentially dilutive securities anti-dilutive | shares | 5,142,729 | 1,922,853 | |
Research and development expenses | $ 211,495 | $ 198,913 | |
Internal development expenses | 179,135 | 183,750 | |
Software development expenses | $ 32,360 | $ 15,163 | |
Customers exceeded revenues | 10.00% | ||
No. of customers | Unit | 2 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Going Concern Details Narrative | |||
Accumulated deficit | $ (13,384,076) | $ (10,620,764) | $ (8,361,532) |
Working capital deficiency | $ (1,450,000) | $ (10,800,000) |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Accounts Receivable Details | |||
Accounts receivable | $ 32,134 | $ 65,929 | |
Less: Allowance for doubtful accounts | 0 | (10,000) | |
Accounts receivable, net | $ 12,488 | $ 32,134 | $ 55,929 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Property And Equipment Details | |||
Equipment | $ 92,701 | $ 89,410 | |
Furniture & Fixtures | 28,946 | 28,946 | |
Less: Accumulated Depreciation | (115,318) | (96,726) | |
Net Fixed Assets | $ 9,936 | $ 7,754 | $ 21,630 |
PROPERTY AND EQUIPMENT (Detai32
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 23,655 | $ 23,671 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) | Sep. 30, 2016USD ($) |
Notes payable | $ 922,008 |
Decathlon [Member] | |
Notes payable | 161,133 |
Finquest Capital [Member] | |
Notes payable | 25,000 |
Brajoscal [Member] | |
Notes payable | 25,000 |
Nottingham Securities [Member] | |
Notes payable | 130,979 |
Individual Investor [Member] | |
Notes payable | 61,211 |
Individual Investor 1 [Member] | |
Notes payable | 25,250 |
Individual Investor 2 [Member] | |
Notes payable | 40,961 |
Individual Investor 3 [Member] | |
Notes payable | 53,135 |
Individual Investor 4 [Member] | |
Notes payable | 48,000 |
Individual Investor 5 [Member] | |
Notes payable | 1,482 |
Principal Officers [Member] | |
Notes payable | $ 349,857 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2015USD ($)Unit | Sep. 30, 2016USD ($) | Dec. 31, 2014USD ($) | |
Notes Payable Details Narrative | |||
Notes payable | $ 986,082 | $ 506,550 | $ 1,707,420 |
Amount of notes in default | $ 1,652,420 | ||
No. of notes agreements | Unit | 11 | ||
Interest rates | 21.00% | ||
Notes payable default amount | $ 78,249 |
COMMITMENTS & CONTINGENCIES (De
COMMITMENTS & CONTINGENCIES (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Commitments Contingencies Details Narrative | ||||
Rent expense | $ 64,278 | $ 64,278 | $ 78,565 | $ 65,623 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details | ||
Income tax at federal s statutory rate | 34.00% | 34.00% |
Effects of permanate differences | (12.70%) | (11.70%) |
Effect of state taxes (net of federal taxes) | 4.00% | 4.20% |
Change in valuation allowance | (25.30%) | (26.50%) |
Total | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details Narrative | ||
Federal net operating loss carryforwards | $ 4,880,000 | |
State net operating loss carryforwards | $ 6,706,000 | |
Federal carryforward expires | 2,034 | |
State carryforward expires | 2,019 | |
Estimated net tax operating loss | $ 6,706,000 | $ 4,880,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Related Party Transactions Details Narrative | |||
Due to related parities | $ 174,125 | $ 702,700 | |
Note payable related party | $ 349,857 | ||
Interest rate on related party | 6.00% |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Shares | ||
Beginning Balance | 1,632,471 | 1,517,721 |
Granted | 2,133,973 | 158,250 |
Forfeited or cancelled | (43,500) | |
Ending Balance | 3,766,444 | 1,632,471 |
Exercisable | 16,000 | |
Weighted Average Exercise price | ||
Beginning Balance | $ 0.41 | |
Granted | 0.51 | 0.36 |
Forfeited or cancelled | (0.75) | |
Ending Balance | ||
Average Grant Date Fair value | ||
Beginning Balance | 0.18 | |
Granted | 0.17 | 0.09 |
Forfeited or cancelled | (0.17) | |
Ending Balance | ||
Minimum [Member] | ||
Exercise Price | ||
Beginning Balance | 0.25 | 0.25 |
Granted | 0.20 | 0.22 |
Forfeited or cancelled | 0.68 | |
Ending Balance | 0.25 | |
Maximum [Member] | ||
Exercise Price | ||
Beginning Balance | 1 | 1 |
Granted | $ 1 | 0.78 |
Forfeited or cancelled | 0.78 | |
Ending Balance | $ 1 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Stockholders Equity Details Narrative | |||
Common shares issued | 745,000 | 8,135,141 | 4,312,500 |
Common shares issued for cash, shares | 1,767,948 | 1,930,188 | 377,359 |
Common shares issued for cash, amount | $ 730,000 | $ 100,000 | |
Common shares issued for a debt reduction, shares | 4,190,522 | ||
Common shares issued for a debt reduction, amount | $ 2,640,243 | ||
Common shares issued for services, shares | 1,714,431 | 3,935,141 | |
Common shares issued for services, amount | $ 616,888 | $ 1,042,812 | |
Stock option awards outstanding | 97,500 | ||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | 20,000,000 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 | 0 |
Common stock, shares authorized | 500,000,000 | 500,000,000 | 500,000,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Common stock, shares issued | 34,186,572 | 19,662,809 | 27,797,950 |
Common stock, shares outstanding | 34,186,572 | 19,662,809 | 27,797,950 |
Unregistered shares | 208,333 | ||
Unregistered shares, Amount | $ 75,000 |
CONCENTRATIONS (Details Narrati
CONCENTRATIONS (Details Narrative) - Unit | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Concentrations Details Narrative | ||
No. of customers | 4 | 5 |
Revenues rate | 10.00% | 10.00% |
Combined revenues rate | 50.00% | 50.00% |