Fissara Limited Investment Review - Q3 2017

Status Update

• Overview: revenue is significantly behind plan for the six months to end June 2017, but stringent cost control has kept cash burn to manageable levels.
• Development of the core product is now largely complete and feedback from current and prospective customers is positive. However, the sales cycle is proving to be longer than originally expected, largely because implementation requires significant change to clients’ processes.
• In the last six months the Company has, though, announced the formal signing of the O2 and AMCO contracts, and is currently in pilot phase with a number of others.
• In addition to the core product for distributed workforces, the Company has developed two sector specific spin offs: Care, which introduces paperless working to care and residential homes; and Rectify, which enables tenants to communicate with landlords, particularly regarding fault rectification. Both of these are in pilot phase with multiple prospective clients.
• To address the sales cycle issue, the founders are devoting more time to consultative selling, less to product development, focussing on prospective clients in utilities and renewable energy.
• The adoption of a more consultative approach appears to be having a positive effect on customer engagement. During June and July, Hydroplan, Applecross and Adroit Utilities have signed contracts to use Fissara so that the pipeline continues to grow and solidify.
• In April 2017, Thomas O’Brian stepped down as Chairman. Other commitments had unexpectedly increased, and he felt it fair to the Company and shareholders, that they had someone able to be more active. David Harding (ex-CEO of William Hill), Growthdeck’s Board Observer, is temporarily acting in the role.

Trading Performance

Cash Update

• Given the continued delay in revenue generation, the management team has continued its careful management of cash, with expenses remaining below budget as noted.
• Further investment of up to £400,000 in two possible tranches of £200,000 has been arranged by Growthdeck. This will not involve any dilution of shareholders as the investment offers are for subordinated debt (4%). Both offers have been made from unrelated Chinese nationals, both with advanced software skills, under the Entrepreneur Investor Visa Scheme. Both are contingent on successful visa applications but their advisors are confident these can be achieved.
• The directors believe that this additional investment should be sufficient, with the initiatives currently underway, to take the business through to cash-flow breakeven.

Exit Planning

• There are no formal updates to report in terms of exit planning - it is still Management’s plan that a trade sale to major software vendors or IT providers in a 2019/20 timeframe is the most likely liquidity event. Given delays to sales plans we would introduce caution as to timing.

Summary

• As we have previously reported, performance since investment has been variable. Good cost control has conserved cash and kept losses close to those budgeted for.
• Despite further product progress, this has yet to translate to material commercial sales. Product trials and pilots - with high quality names - have been slower to convert than the team envisaged.
• Fissara continues the process of deepening engagements and building credibility with a number of large corporates that the management team hopes will establish the basis for long term success.
• In order to have the possibility of realising that success, the team needs greater runway in terms of cash resources. The two potential funding lines will be critical in delivering that.