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FUSZ: THE FINANCIALS AND THE METRICS

Submitted to Transparent Traders by a very Valued Group Member.

FUSZ Inc. is a recognised corporation in the information technology sector. It is a digital technology company specialising in business-focused interactive video specifically in the fast-growing Software-as-a-Service (SaaS) niche. The company’s next-generation interactive video technology paved the way for the development of its flagship product, notifiCRM, a customer relationship management, sales generation, and social engagement platform which can help anyone become a digital marketing expert with its straightforward analytics. It enables its users to keep track of who watched their videos, the number of times and the duration they were watched, and the calls to action that were clicked in the course of watching them.

The company is based in Los Angeles, California, United States. It was founded on November 27, 2012, by Rory J. Cutaia. Rory first had a career as an attorney before venturing into the telecommunication industry with the startup, Telx, which became an internationally recognised company in the sector and was later sold for more than $200 million. Before founding FUSZ, he also had a stint as a partner and an ‘Entrepreneur-in-Residence’ in a New York-based private equity fund. With FUSZ, Rory had since transformed customer and prospect communications, and despite his many busy charitable endeavours, had seen to the assembly of a seasoned and professional management team. Nick Cannon is the Global Ambassador of the brand.  

FUSZ has the mission of bringing the best out of customer relationship management, and in the modern, fast-paced business world, deploying it as a viable customised marketing strategy. In this regard, the company has been using enhanced video engagement to deliver on its corporate goals: sales conversion is indeed higher for customers! Besides notifiCRM, the flagship product of the company and the industry’s first interactive Customer Relationship Management (CRM), there are other products offered such as notifiAIR, notifiLinks, notifiWeb, notifiTV, and notifiLive. With these products services ranging from interactive videos distribution, and sales video creation and display to live streaming and online advertisement placements are provided.

A noteworthy edge of nFusz within its intensely competitive industry which consists of large, well-established competitors --from Salesforce.com, Inc., to Microsoft Corporation, from Oracle Corporation and SAP SE to Adobe Inc., which currently collectively account for approximately 40% of industry sales —is its bold, innovative drive. nFusz’ products are cloud-based and accessible on all mobile and desktop devices. It creates outstanding products tailored to the needs of different industries. The company’s newest products, for instance, include notifiMED designed for the healthcare industry, notifiEDU which is intended for the education industry, and notifiNPO for non-profit organisations. Its determined innovative efforts, if successful, can enhance its strength within the sector and also contribute to long-term relevance.

Moreover, nFusz offers concepts that are based on the unique requirements of each client. Its software package can house promotions of any size and is scalable enough to meet expanding needs of any global organisation. Visual content has rapidly gained wide acceptance in online marketing campaigns, leveraging on the fact that 90% of information transmitted to the brain is visual. Videos are an integral component of this visual content culture and are largely responsible for its growth. With a series of strategic buttons such as the buy and calendar buttons, the software platform leads customers on the desired actions to take.

The OTC (over-the-counter) market, according to investopedia.com, is a decentralised market where securities not listed on major exchanges are traded directly by a network of dealers who carry inventories of securities to facilitate buy and sell orders.  nFusz is a penny stock that currently trades under the ticker symbol, FUSZ, on the OTCQB (called the venture market), the middle tier of the over-the-counter market which consists of developing companies that are not yet able to qualify for the top level, the OTCQX. Nfusz was initially called Cutaia Media Group, but through multiple mergers, it acquired its current name in 2017.

The latest of the mergers was executed in November 2018. The company acquired Sound Concepts, which boasted of at least seventy-five of the top direct sales organisations with more than 490,000 paying users in about 50 countries, as a representation of its dedication to getting uplisted to NASDAQ. Rory Cutaia, the CEO, said of the merger, ‘’The nFusz and Sound Concepts businesses are highly complementary.’’ He continued, “We believe the combination of our technology, customers, and human capital will result in growth for the combined companies. We could not be more excited to join the two teams to deliver innovative solutions to the market.” The company was also able to obtain shareholder approval for a stock split to be employed toward the achievement of the same object.

Also, in the same month, in a report by Globe Newswire, nFusz agreed with ICON Aircraft, the transformative light sports aircraft manufacturing company whose mission is to make traditional personal flying more accessible, allowing for the use of its notifiCRM interactive video CRM to assist ICON with its lead generation and marketing campaigns. Mike Farley, the VP of Global Sales and Marketing for ICON Aircraft, said of the partnership, “notifiCRM is a cutting-edge tool that is going to help us accelerate our lead capture-to-conversion process. This technology provides a level of sophistication and innovation that our customers have come to expect from everything we do.”

In September, according to Globe Newswire, nFusz, made an announcement of its strategic partnership with the Belgian software giant, Odoo, to incorporate the nFusz notifiCRM application into Odoo’s global business applications platform. “We disrupted the management software business by giving millions of companies easy access to the software they need to run and expand their business,” stated Fabien Pinckaers, the CEO of Odoo. “We are now excited to welcome nFusz, another disruptor, to the Odoo ecosystem. With notifiCRM, nFusz’ interactive video-based sales tool, nFusz will make augmented sales intelligence capabilities available to our almost 4 million users who rely on us to provide true, next-generation solutions to help them meet and exceed their sales objectives and grow their businesses.”

Moreover, as reported on Form 8-K filed on January 3, 2018, nFusz had, on the previous day, initiated an agreement with Oracle America. In pursuant to this agreement, nFusz would develop an application that would facilitate the integration of its notifiCRM interactive video messaging technology into the NetSuite Software-as-a-Service platform developed by Oracle (the “Oracle Service’), and ensure the interoperability of its notifiCRM technology with the Oracle Service. The agreement stipulated that the development of the application would be completed within a year. With this agreement, Oracle gets 10% for every nFusz that it sells.
Before the merger with Sound Concepts and the agreement with ICON in November 2018, the partnership with Odoo in September, and the agreement with Oracle in January same year, the company, in December 2017, had also entered into a strategic partnership with WFN1 News Corps. The deal was a cross-promotional, advertising, and revenue share one in which WFN1 was given the perks of access to nFusz’s proprietary notifiCRM interactive video marketing technology for its increased promotion and sponsorship while nFusz would gain enhanced visibility and media coverage through radio spots and online ads. Mr Rory Cutaia said of the partnership, “It will enhance our bottom line by increasing our exposure to WFNI’s listener base and impressive client/investor network.’’

However, the company itself has declared the limitations of its strategic partnership efforts. In its Form S-1 filed with the SEC, it was confirmed that the company might not be able to significantly increase the number of its partners or grow the revenues from its current partnership relationships. This possible effect may be further magnified because the company's flagship and the most significant product, the notifiCRM, is not a stand-alone SaaS cloud CRM platform.
With a stock of outstanding shares of 180.83 million and a market capitalisation of roughly $60 million, majority of the company’s shares are held by insider who owns 38.49% of the stake while institutions hold less than 1%. The company made some critical appointments into its advisory board and subsequently experienced a surge. Jim DuBois, a former Chief Information Officer (CIO) at Microsoft, Lewis Jaffe, former Chief Executive Officer of Oxford Media Inc., and Mory Watkins, an award-winning professor at Loyola Marymount University, were added to the board.

Being a development stage company that just started offering its services to the public, nFusz had no sales in the first quarter of 2017. For the fourth quarter, and for the whole of 2017, the company had sales revenue of $5,900 which later increased to $8,003 in the first quarter of 2018, a 60% per cent increase. However, as of the first quarter of 2018, the Sales, General, and Administrative (SG&A) expenses have been having a 750% year-over-year increase, and accumulated shareholder deficit has also grown to more than $37,000,000.

In spite of the innovative drive of nFusz which resulted in the creation of the many novel products earlier discussed and its many strategic partnerships, it should be recognised that there are some limitations. NotifiCRM, for example, is not a CRM in and of itself, and so does not in any way replace NetSuite, and is not a direct competitor of Salesforce. Moreover, the product is not self-producing artificially intelligent. It is only as good as its user, and may not be able to replace other products like Alexa, Cornata, and Siri. This translates that even though nFuz is really disruptive, it is not as disruptive as you would have imagined, and this may not be too good for its prospect. 

Thus, it might be that the urgent steps needed to propel this company to profitability are smoothening of the balance sheet and listing on a national exchange. However, nFusz does not meet the minimum $4 per share requirement to be up-listed to the New York Stock Exchange (NYSE) but does reach the minimum number of shares outstanding of 1.1 million shares, and market value more than $40 million. Also, the average daily trading volume has been almost 2 million shares which is well above the required market standard for NYSE.  Therefore, currently, the company cannot be up-listed to the NYSE. Despite the freer financial criteria for listing on NYSE American (AMEX), nFusz still cannot get listed on it as it does not meet up any of the equity, assets and revenue or net income minimum standards for listing.

Furthermore, even if the company eventually meets up to the requirements for up-listing to a national exchange, admission cannot be guaranteed and is strictly at the discretion of the exchange. The exchange will have to look at some critical fundamental aspects of the business such as its products, its potential customers, its history of financial regulation adherence, its historical record and prospect of future growth, and its corporate governance activities. If however the company can couple the reverse stock split it initiated in November 2018 with tremendous organic growth to enhance its earnings; the prospect to get up-listed anytime soon becomes bright. 

Otherwise, a possible but unlikely bankruptcy scenario can be described thus. Since the management of nFusz has driven the operations of the company through equity financing for the most part, there has been a skyrocket in the number of outstanding shares.  As a result, the company will most likely continue to finance its operations with mostly unrated, high yield debt. If the company chose to continue funding its operations with this kind of debt, and continue defaulting on existing current liabilities, the company could become insolvent and eventually have debt holders in its sole control. The restructuring that will follow could lead to the cleaning-out of the already liabilities-laden balance sheet, and facilitate an up-listing to one of the exchanges.  

Results of Operations

Nine Months Ended Nine Months Ended Year Ended Year Ended
September 30, 2018 September 30, 2017 December 31, 2017 December 31, 2016
(Unaudited) (Unaudited)
Revenue, net $9,314,000 $9,377,000 $11,546,000 $12,680,000
Cost of revenue 5,046,000 5,365,000 6,293,000 8,613,000
Gross margin 4,268,000 4,012,000 5,253,000 4,067,000
Operating expenses:
Research and development 1,567,000 1,090,000 1,731,000 1,390,000
General and administrative 2,077,000 2,579,000 3,530,000 3,419,000
Total operating expenses 3,644,000 3,669,000 5,261,000 4,809,000
Income (loss) from operations 624,000 343,000 (8,000) (742,000)

Other income (expense) (12,000) (1,000) (7,000) (3,000)

Net income (loss) $612,000 $342,000 $(15,000) $(745,000)

Nine Months Ended September 30, 2018, as compared to the Nine Months Ended September 30, 2017(Source: United States Securities and Exchange Commission Form S-1)

At the end of Friday, 28th of December 2018, nFusz’ closing price was $0.31, a price 5.17% higher than for the previous trading day. Thirty-day high of the stock price was $0.40, and the low was $0.23. Also, the ninety-day top was $0.53 while the low during the same time frame was $0.15. Moreover, the 52-week range hovered between $3.04 at its peak and $0.08 at its low.  Also, nFusz, Inc lied in the upper part of a broad and falling trend in the short-term. This poses an excellent selling opportunity for the short-term trader. A break up at the top trend line above $0.35 would have most likely indicated a falling rate, and the first sign of a shift in the trend and its very low trading volume, increased risk.

In conclusion, nFusz’ shares are highly speculative and ill-suited for rational investors. The shareholders are in a high-risk situation with their holdings, and it is only because of the hype and exuberance that came with the stock that the bullish run has been sustained. However, Rory Cutaia is the largest shareholder himself. We believe this should make him want to protect the interest of the shareholders as best as he can, and may also reinforce the positive investors’ sentiments about the stock. Hence, the stock price may continue rising if the positive investors’ sentiments persist despite even the high risk associated with it. 

1 comment:

  1. Just saw a commercial for Intermountain Connect Care. It’s works for having an evaluation by your health care specialist via the internet by phone or desktop etc. It looked easy, and was completely comfortable for both parties. Visual examinations, prescriptions, symptom descriptions etc.

    Our NotifiMed is going to have many applications and a form of this technology has already been tested and is in use. The Health Care industry is a Trillion Dollar business in our United States, alone. Always room for a “better mousetrap”.

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