Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Section 12b-2 of the exchange Act)
Number of shares outstanding of the issuer’s Common Stock as
of May 17, 2021: 5,761,980.
PART
I–FINANCIAL INFORMATION
Item 1. Financial Statements.
iSign Solutions Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Assets
|
|
Unaudited
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
250
|
|
|
$
|
26
|
|
Accounts receivable, net of allowance of $0 at March 31, 2021 and December 31, 2020, respectively
|
|
|
69
|
|
|
|
100
|
|
Prepaid expenses and other current assets
|
|
|
12
|
|
|
|
10
|
|
Total current assets
|
|
|
331
|
|
|
|
136
|
|
Property and equipment, net
|
|
|
7
|
|
|
|
5
|
|
Other assets
|
|
|
5
|
|
|
|
5
|
|
Total assets
|
|
$
|
343
|
|
|
$
|
146
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
380
|
|
|
$
|
353
|
|
Short-term debt – related party
|
|
|
1,085
|
|
|
|
1,065
|
|
Short-term debt Other
|
|
|
1,792
|
|
|
|
1,807
|
|
Short-term debt- Paycheck Protection Program
|
|
|
123
|
|
|
|
123
|
|
Accrued compensation
|
|
|
116
|
|
|
|
82
|
|
Deferred compensation
|
|
|
219
|
|
|
|
219
|
|
Other accrued liabilities
|
|
|
1,222
|
|
|
|
1,141
|
|
Deferred revenue
|
|
|
394
|
|
|
|
215
|
|
Total current liabilities
|
|
|
5,331
|
|
|
|
5,005
|
|
Deferred revenue long-term
|
|
|
90
|
|
|
|
90
|
|
Other long-term liabilities
|
|
|
775
|
|
|
|
738
|
|
Total liabilities
|
|
|
6,196
|
|
|
|
5,833
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 2,000,000 shares authorized; 5,762 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
|
|
|
58
|
|
|
|
58
|
|
Treasury shares, 5 at March 31, 2021 and December 31, 2020, respectively
|
|
|
(325
|
)
|
|
|
(325
|
)
|
Additional paid in capital
|
|
|
129,807
|
|
|
|
129,783
|
|
Accumulated deficit
|
|
|
(135,393
|
)
|
|
|
(135,203
|
)
|
Total stockholders’ deficit
|
|
|
(5,853
|
)
|
|
|
(5,687
|
)
|
Total liabilities and stockholders’ deficit
|
|
$
|
343
|
|
|
$
|
146
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of Operations
Unaudited
(In thousands, except per share amounts)
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
Product
|
|
$
|
82
|
|
|
$
|
31
|
|
Maintenance
|
|
|
177
|
|
|
|
159
|
|
Total revenue
|
|
|
259
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
Product
|
|
|
10
|
|
|
|
2
|
|
Maintenance
|
|
|
20
|
|
|
|
9
|
|
Research and development
|
|
|
144
|
|
|
|
176
|
|
Sales and marketing
|
|
|
49
|
|
|
|
27
|
|
General and administrative
|
|
|
147
|
|
|
|
246
|
|
Total operating costs and expenses
|
|
|
370
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(111
|
)
|
|
|
(270
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense) net
|
|
|
1
|
|
|
|
1
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Related party
|
|
|
(24
|
)
|
|
|
(24
|
)
|
Other
|
|
|
(55
|
)
|
|
|
(45
|
)
|
Loss before income tax expense
|
|
|
(189
|
)
|
|
|
(338
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Net loss
|
|
$
|
(190
|
)
|
|
$
|
(339
|
)
|
Basic and diluted net loss per common share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
Weighted average common shares outstanding, basic and diluted
|
|
|
5,762
|
|
|
|
5,762
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements
of Stockholders’ Deficit
Unaudited
(In thousands)
|
|
Common
Stock
|
|
|
Treasury
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance January 1, 2021
|
|
|
5,762
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,783
|
|
|
$
|
(135,203
|
)
|
|
$
|
(5,687
|
)
|
Stock-based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
24
|
|
|
|
–
|
|
|
|
24
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(190
|
)
|
|
|
(190
|
)
|
Balance, March 31, 2021
|
|
|
5,762
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,807
|
|
|
$
|
(135,393
|
)
|
|
$
|
(5,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Treasury
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Capital
|
|
|
|
Deficit
|
|
|
|
Deficit
|
|
Balance January 1, 2020
|
|
|
5,762
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,651
|
|
|
$
|
(134,675
|
)
|
|
$
|
(5,291
|
)
|
Stock-based compensatio0n
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
22
|
|
|
|
–
|
|
|
|
22
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(339
|
)
|
|
|
(339
|
)
|
Balance, March 31, 2020
|
|
|
5,762
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,673
|
|
|
$
|
(135,014
|
)
|
|
$
|
(5,608
|
)
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited
(In thousands)
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(190
|
)
|
|
$
|
(339
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1
|
|
|
|
1
|
|
Amortization of warrants
|
|
|
–
|
|
|
|
19
|
|
Stock-based compensation
|
|
|
24
|
|
|
|
22
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
31
|
|
|
|
22
|
|
Prepaid expenses and other assets
|
|
|
(2
|
)
|
|
|
(1
|
)
|
Accounts payable
|
|
|
27
|
|
|
|
34
|
|
Accrued compensation
|
|
|
34
|
|
|
|
14
|
|
Other accrued and long-term liabilities
|
|
|
118
|
|
|
|
104
|
|
Deferred revenue
|
|
|
179
|
|
|
|
37
|
|
Net cash provided by (used in) operating activities
|
|
|
222
|
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(3
|
)
|
|
|
–
|
|
Net cash used in investing activities
|
|
|
(3
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from of short term debts related party
|
|
|
40
|
|
|
|
150
|
|
Proceeds from the issuance of short-term debt other
|
|
|
45
|
|
|
|
–
|
|
Payment of short term debts related party
|
|
|
(20
|
)
|
|
|
–
|
|
Payment of short term debts other
|
|
|
(60
|
)
|
|
|
–
|
|
Net cash provided by financing activities
|
|
|
5
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
224
|
|
|
|
63
|
|
Cash and cash equivalents at beginning of period
|
|
|
26
|
|
|
|
25
|
|
Cash and cash equivalents at end of period
|
|
$
|
250
|
|
|
$
|
88
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
Unaudited
(In thousands)
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Supplementary disclosure of cash flow information
|
|
|
|
|
|
|
Interest paid
|
|
$
|
5
|
|
|
$
|
4
|
|
Income taxes paid
|
|
$
|
1
|
|
|
$
|
1
|
|
Accounts receivable advance converted to convertible note
|
|
$
|
15
|
|
|
$
|
–
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
|
1.
|
Nature of Business and Summary of Significant Accounting Policies
|
Nature of Business
iSign Solutions Inc. and its
subsidiary is a leading supplier of digital transaction management (DTM) software enabling the paperless, secure and cost-effective
management and authentication of document-based transactions. iSign’s solutions encompass a wide array of functionality and
services, including electronic signatures, simple-to-complex workflow management and various options for biometric authentication.
These solutions are available across virtually all enterprise, desktop and mobile environments as a seamlessly integrated platform
for both ad-hoc and fully automated transactions. iSign’s platform can be deployed both on premise and as a cloud-based (“SaaS”)
service, with the ability to easily transition between deployment models. The Company is headquartered in San Jose, California.
The Company’s products include SignatureOne™ Ceremony™ Server, the iSign™ suite of products and services,
including iSign™ Enterprise and iSign™ Console™, and Sign-it™ programs.
In December 2019, an outbreak
of a novel strain of coronavirus (COVID-19) originated in Wuhan, China and has since spread to a number of other countries, including
the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Since March 11, 2020 states in
the U.S., including California, where the Company is headquartered, have begun to open up as the result of the development of vaccines
to thwart the spread of the virus. The COVID-19 outbreak has disrupted supply chains and affected production and sales across a
wide range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain
developments, including the duration and any further spread of the outbreak, continued impact on our customers, employees and vendors
all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may have a continued impact on
our financial condition or results of operations is uncertain.
Basis of Presentation
The financial information contained
herein should be read in conjunction with the Company’s consolidated audited financial statements and notes thereto included in
its Annual Report on Form 10-K for the year ended December 31, 2020.
The accompanying unaudited
condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements. In the
opinion of management, the unaudited condensed consolidated financial statements included in this quarterly report reflect all
adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of its
financial position at the dates presented and the Company’s results of operations and cash flows for the periods presented.
The Company’s interim results are not necessarily indicative of the results to be expected for the entire year.
Going Concern
The accompanying unaudited
condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The
Company has incurred significant cumulative losses since its inception and, at March 31, 2021 the Company’s accumulated deficit
was $135,393. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of March
31, 2021, the Company’s cash balance was $250. These factors raise substantial doubt about the Company’s ability to
continue as a going concern.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
|
1.
|
Nature of Business and Summary of Significant Accounting Policies (continued)
|
There can be no assurance that
the Company will be successful in securing adequate capital resources to fund planned operations or that any additional funds will
be available to the Company when needed, or if available, will be available on favorable terms or in amounts required by the Company.
If the Company is unable to obtain adequate capital resources to fund operations, it may be required to delay, scale back or eliminate
some or all of its operations, which may have a material adverse effect on the Company’s business, results of operations and ability
to operate as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Accounting Changes and Recent
Accounting Pronouncements
Accounting Standards Updates
issued in 2021 are not currently applicable to the Company, therefore implementation would not be expected to have a material impact
on the Company’s financial position, results of operations and cash flows.
The following table summarizes
accounts receivable and revenue concentrations:
|
|
Accounts Receivable
As of March 31,
|
|
|
Total Revenue
As of March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Customer #1
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12
|
%
|
Customer #2
|
|
|
92
|
%
|
|
|
85
|
%
|
|
|
25
|
%
|
|
|
18
|
%
|
Customer #3
|
|
|
–
|
|
|
|
–
|
|
|
|
27
|
%
|
|
|
18
|
%
|
Customer #4
|
|
|
–
|
|
|
|
–
|
|
|
|
28
|
%
|
|
|
26
|
%
|
Customer #5
|
|
|
–
|
|
|
|
13
|
%
|
|
|
–
|
|
|
|
–
|
|
Total concentration
|
|
|
92
|
%
|
|
|
98
|
%
|
|
|
80
|
%
|
|
|
74
|
%
|
The Company calculates basic net
loss per share based on the weighted average number of shares outstanding, and when applicable, diluted net income per share, which
is based on the weighted average number of shares and potential dilutive shares outstanding.
The following table lists shares
and warrants that were excluded from the calculation of diluted earnings per share as the inclusion of shares from the assumed
exercise of such options and warrants would be anti-dilutive:
|
|
For the Three Months Ended
|
|
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
|
|
|
|
|
|
|
Common stock subject to outstanding options
|
|
|
1,338
|
|
|
|
1,067
|
|
Common stock subject to outstanding warrants
|
|
|
3,001
|
|
|
|
2,536
|
|
Common stock subject to outstanding convertible debt plus accrued interest
|
|
|
7,025
|
|
|
|
5,852
|
|
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Advances:
On February 17 and February 22,
2021, the Company repaid $30 and $30, respectively, of accounts receivable advances from unrelated parties along with $4 of
accrued but unpaid advance fees. In addition, on March 31, 2021, the Company repaid $20 in accounts receivable advances to a related
party. The advance fee of $1 was repaid on April 1, 2021.
In March 2021, the Company received,
from related parties, advances aggregating $25 in cash against certain accounts receivable of the Company. Upon collection of an
invoice, the Company agreed to repay the advance to the lenders on a pro rata basis together with a 5% advance fee. The Company
accrued $1 in advance fees recorded as interest expense on the Statement of Operations.
Notes payable:
On May 6, 2020, the Company received
loan proceeds in the amount of approximately $123 under the Paycheck Protection Program (“PPP”). The PPP, established
as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses
for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The Company may apply for the loans
and accrued interest forgiven after a period of either eight or twenty-four weeks, as long as the borrower uses the loan proceeds
for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness
will be reduced if the borrower terminates employees or reduces salaries during the period in question. Under the terms of the
related promissory note, the unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral
of payments for the first six months. The Company has applied for full loan and interest forgiveness. While the Company
currently believes that its use of the loan proceeds, meets the conditions for forgiveness of the loan, we cannot
assure you that we did not take actions that caused the Company to be ineligible for forgiveness of the loan, in whole or in part.
On
February 28, 2021, the Company issued an aggregate of $75 in unsecured notes, $30 to related parties and $45 to other investors. The
Company received $15 in cash and $15 in exchange for an account receivable advance, received in the prior
year, from related parties, and $45 in cash from other investors. The unsecured notes are convertible by the holder into common stock at any time at
a price per share of $0.50. Upon closing a new financing of at least $1,000 in aggregate proceeds, the Company can force conversion
at a price equal to the lesser of $0.50 per share or the price per share of the new financing. The
notes bear interest at the rate of 10% per annum and are due December 31, 2021.
During the three months ended
March 31, 2021, the Company accrued $79 of interest expense, $67 associated with the outstanding secured and unsecured convertible
promissory notes, of which $24 was to related parties and $43 was to other investors. For the three months ended March 31, 2020,
the Company accrued $69 of interest expense, $60 associated with its outstanding notes, of which $24 was to related parties and
$36 was to other investors.
Stock-based compensation expense
is based on the estimated grant date fair value of the portion of stock-based payment awards that are ultimately expected to vest
during the period. The grant date fair value of stock-based awards to employees and directors is calculated using the Black-Scholes-Merton
valuation model.
Forfeitures of stock-based payment
awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates. The estimated average forfeiture rate for the three months ended March 31, 2021 and 2020 was approximately 4.78% and
6.43%, respectively, based on historical data.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
|
5.
|
Stockholders’ Deficit (continued)
|
Valuation and Expense Information:
The weighted-average fair value
of stock-based compensation is based on the Black-Scholes-Merton valuation model. Forfeitures are estimated and it is assumed
no dividends will be declared. The estimated fair value of stock-based compensation awards to employees is amortized over the
vesting period of the options. No options were granted during the three months ended March 31, 2021 and 2020. There were no stock
options exercised during the three months ended March 31, 2021 and 2020, respectively.
The following table summarizes
the allocation of stock-based compensation expense for the three months ended March 31:
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
–
|
|
|
$
|
3
|
|
General and administrative
|
|
|
17
|
|
|
|
16
|
|
Director
|
|
|
7
|
|
|
|
3
|
|
Total stock-based compensation
|
|
$
|
24
|
|
|
$
|
22
|
|
A summary of option activity under
the Company’s plans for the three months ended March 31, 2021 and 2020 is as follows:
|
|
2021
|
|
|
2020
|
|
Options
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price per
share
|
|
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price per
share
|
|
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at January 1
|
|
|
1,338
|
|
|
$
|
0.87
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
1,077
|
|
|
$
|
1.59
|
|
|
|
–
|
|
|
|
–
|
|
Granted
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Canceled
|
|
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
$
|
56.10
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31
|
|
|
1,338
|
|
|
$
|
0.87
|
|
|
|
4.35
|
|
|
$
|
–
|
|
|
|
1,067
|
|
|
$
|
1.07
|
|
|
|
4.76
|
|
|
|
–
|
|
Vested and expected to vest at March 31
|
|
|
1,320
|
|
|
$
|
0.88
|
|
|
|
3.99
|
|
|
$
|
–
|
|
|
|
1,062
|
|
|
$
|
1.59
|
|
|
|
4.92
|
|
|
$
|
–
|
|
Exercisable at March 31
|
|
|
1,018
|
|
|
$
|
0.97
|
|
|
|
3.86
|
|
|
$
|
–
|
|
|
|
736
|
|
|
$
|
1.25
|
|
|
|
4.60
|
|
|
$
|
–
|
|
The following table summarizes
significant ranges of outstanding and exercisable options as of March 31, 2021:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Term
(in years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Exercise
Price
|
|
$0.01 - $0.50
|
|
|
930
|
|
|
|
4.39
|
|
|
$
|
0.50
|
|
|
|
675
|
|
|
$
|
0.50
|
|
$0.51 - $1.00
|
|
|
393
|
|
|
|
4.36
|
|
|
$
|
0.78
|
|
|
|
328
|
|
|
$
|
0.78
|
|
$1.01 - $25.00
|
|
|
2
|
|
|
|
1.33
|
|
|
$
|
15.94
|
|
|
|
2
|
|
|
$
|
15.94
|
|
$25.01 – $625.00
|
|
|
13
|
|
|
|
0.77
|
|
|
$
|
28.12
|
|
|
|
13
|
|
|
$
|
28.12
|
|
Total
|
|
|
1,338
|
|
|
|
4.34
|
|
|
$
|
0.87
|
|
|
|
1,018
|
|
|
$
|
0.97
|
|
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
|
5.
|
Stockholders’ Deficit (continued)
|
A summary of the status of the
Company’s non-vested shares as of March 31, 2021 is as follows:
Non-vested Shares
|
|
Shares
|
|
|
Weighted
Average
Grant-Date
Fair
Value
|
|
Non-vested at January 1, 2021
|
|
|
381
|
|
|
$
|
0.57
|
|
Vested
|
|
|
(60
|
)
|
|
$
|
0.57
|
|
Non-vested at March 31, 2020
|
|
|
321
|
|
|
$
|
0.56
|
|
As of March 31, 2021, there was $63 of total unrecognized
compensation expense related to non-vested stock-based compensation arrangements granted under the plans. The unrecognized compensation
expense is expected to be realized over a weighted average period of 1.65 years.
Warrants
The Company did not issue any
warrants during the three months ended March 31, 2021 and 2020.
A summary of the warrant activity to purchase shares
of Common Stock for the three months ended March 31 is as follows:
|
|
2021
|
|
|
2020
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at beginning of period
|
|
|
3,001
|
|
|
$
|
1.37
|
|
|
|
2536
|
|
|
$
|
1.52
|
|
Issued
|
|
|
–
|
|
|
|
$
|
|
|
|
30
|
|
|
$
|
0.50
|
|
Outstanding at end of period
|
|
|
3,001
|
|
|
$
|
1.37
|
|
|
|
2,566
|
|
|
$
|
1.51
|
|
Exercisable at end of period
|
|
|
3,001
|
|
|
$
|
1.37
|
|
|
|
2,566
|
|
|
$
|
1.51
|
|
A summary of the status of the warrants outstanding
and exercisable to purchase shares of Common Stock as of March 31, 2021 is as follows:
Number
of Shares
|
|
|
Weighted
Average
Remaining Life
|
|
|
Weighted
Average
Exercise Price per
share
|
|
|
|
|
|
|
|
|
|
|
1,551
|
|
|
|
0.13
|
|
|
$
|
2.18
|
|
|
1,450
|
|
|
|
1.36
|
|
|
$
|
0.50
|
|
|
3,001
|
|
|
|
0.73
|
|
|
$
|
1.37
|
|
On April 1, 2021 the company repaid $128 in accounts
receivable advances to two related parties. In addition the Company paid $10 in accrued but unpaid advance fees to the two related
parties.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Forward Looking Statements
Certain statements contained
in this quarterly report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”,
“hopes”, “intends”, “expects”, and other words of similar import, constitute “forward looking”
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks,
uncertainties and other factors which may cause actual events to differ materially from expectations. Such factors include those set
forth in the Company’s Annual Report on Form 10-K for the year ended December
31, 2020, including the following:
|
●
|
Technological,
engineering, manufacturing, quality control or other circumstances that could delay the sale
or shipment of products;
|
|
●
|
Economic,
business, market and competitive conditions in the software industry and technological innovations
that could affect the Company’s business;
|
|
●
|
The
Company’s inability to protect its trade secrets or other proprietary rights, operate
without infringing upon the proprietary rights of others and prevent others from infringing
on the proprietary rights of the Company; and
|
|
●
|
General
economic and business conditions and the availability of sufficient financing.
|
Except as otherwise
required by applicable laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements,
as a result of new information, future events or otherwise.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
The following discussion
and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and notes
thereto included in Part 1, Item 1 of this quarterly report on Form 10-Q and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” set forth in the Company’s Annual report on Form 10-K for the fiscal
year ended December 31, 2020.
Overview
The Company is a leading
supplier of digital transaction management (DTM) software enabling the paperless, secure and cost-effective management of document-based
transactions. iSign’s solutions encompass a wide array of functionality and services, including electronic signatures, biometric
authentication and simple-to-complex workflow management. These solutions are available across virtually all enterprise, desktop
and mobile environments as a seamlessly integrated platform for both ad-hoc and fully automated transactions. iSign’s software
platform can be deployed both on-premise and as a cloud-based service, with the ability to easily transition between deployment
models.
The Company was incorporated
in Delaware in October 1986. Except for the year ended December 31, 2004, in each year since its inception the Company has incurred
losses. For the two-year period ended December 31, 2020, net losses aggregated approximately $1,614, and, at March 31, 2021, the
Company’s accumulated deficit was approximately $135,393.
In December 2019,
an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China and has since spread to a number of other countries,
including the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Since March 11, 2020
states in the U.S., including California, where the Company is headquartered, have begun to open up as the result of the development
of vaccines to thwart the spread of the virus. The COVID-19 outbreak has disrupted supply chains and affected production and sales
across a wide range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend
on certain developments, including the duration and any further spread of the outbreak, continued impact on our customers, employees
and vendors all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may have a continued
impact on our financial condition or results of operations is uncertain.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
For the three months
ended March 31, 2021, total revenue was $259, an increase of $69, or 36%, compared to total revenue of $190 in the prior year period.
The increase in revenue is primarily attributable to an increase of $51, or 165% in the Company’s engineering service and
transactional product revenues and an $18, or 11% increase in maintenance revenue compared to the prior year period.
The net loss for the
three months ended March 31, 2021 was $190, a decrease of $149, or 44%, compared to a net loss of $339 in the prior year period.
The decrease in net loss is due to the increase in revenue of $69, or 36%, the decrease in overhead expenses of $90 or 20%, offset
by the increase in cash and non-cash interest expense of $10 or 14% compared to the prior year.
Critical Accounting Policies
and Estimates
Refer to Item 7, “Management
Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2020 Form 10-K.
Effect of Recent Accounting Pronouncement,
Accounting Standards
Updates issued in 2021 are not currently applicable to the Company, therefore implementation would not be expected to have a material
impact on the Company’s financial position, results of operations and cash flows.
Results of Operations
Revenue
For the three months
ended March 31, 2021, product revenue was $82, an increase of $51, or 165%, compared to product revenue of $31 in the prior year
period. The increase in product revenue is primarily due to an increase in transaction volume and engineering service revenues
compared to the prior year period. For the three months ended March 31, 2021, maintenance revenue was $177, an increase of $18,
or 11%, compared to maintenance revenue of $159 in the prior year period. The increase is primarily due to the conversion of discounted
long-term maintenance contracts to a non-discounted annual maintenance term.
Cost of Sales
For the three months
ended March 31, 2021, cost of sales was $30, an increase of $19, or 173%, compared to cost of sales of $11 in the prior year. The
increase was primarily due to an increase in direct engineering costs associated with engineering service, software product and
maintenance contracts and revenue compared to the prior year.
Operating Expenses
Research and Development Expenses
For the three months
ended March 31, 2021, research and development expense was $144, a decrease of $32, or 18%, compared to research and development
expense of $176 in the prior year period. Research and development expenses consist primarily of salaries and related costs, outside
engineering, maintenance items, and allocated facilities expenses. The decrease in research and development expense was due to
a decrease in salaries and related expenses of $3, a decrease of $10 in professional services and other overhead expenses and a
$19 increase in direct engineering costs transferred to cost of sales. Gross engineering expenses, before allocations to cost of
sales, was $175 a decrease of $13, or 7%, compared to $187 in the prior year period, due primarily to the decrease in professional
services and other overhead expenses.
Sales and Marketing Expenses
For the three months
ended March 31, 2021, sales and marketing expense was $49, an increase of $22, or 81%, compared to $27 in the prior year period.
The increase was primarily attributable to an increase in commissions and professional services.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
General and Administrative Expenses
For the three months
ended March 31, 2021, general and administrative expense was $147, a decrease of $99, or 40%, compared to general and administrative
expense of $246 in the prior year period. The decrease was due primarily to decreases in warrant and professional service expenses
of $101, offset by increases of $2 in other overhead expense, compared to the prior year period.
Other income and expense
Other income, expense was $1 and $1 for
the three months ended March 31, 2020.
Interest expense for
the three months ended March 31, 2020 was $79, an increase of $10, or 14% compared to interest expense of $69 in the prior year
period. The increase is due to an increase in short-term debt and other unpaid interest-bearing liabilities. Interest expense on
short-term debt associated with related parties was $24 and non-related party interest expense was $55 for the three months ended
March 31, 2021, compared to $24 associated with related parties and non-related party interest expense of $45 in the prior year
period.
Liquidity and Capital Resources
At March 31, 2021,
cash and cash equivalents totaled $250, compared to cash and cash equivalents of $26 at December 31, 2020. The increase in cash
was due to cash flows from operating activities of $222 and $5 from financing activities. The increased amounts were offset by
$3 used in investing activities. At March 31, 2021, total current assets were $331 compared to total current assets of $136 at
December 31, 2020. At March 31, 2021, the Company’s principal sources of funds included its cash and cash equivalents aggregating
$250.
At March 31, 2021,
accounts receivable net, was $69, a decrease of $31, or 31%, compared to accounts receivable, net of $100 at December 31, 2020.
The decrease is due primarily due to faster collection times for accounts receivable.
At March 31, 2021,
prepaid expenses and other current assets were $12, an increase of $2, or 20%, compared to prepaid expenses and other current assets
of $10 at December 31, 2020. The increase is due primarily to prepayments of insurance premiums for the current year.
At March 31, 2021,
accounts payable were $380, an increase of $27, or 8%, from the December 31, 2020 balance of $353. The increase is due primarily
to professional fees for engineering services and accounting fees related to the prior year audit.
At March 31, 2021,
accrued compensation was $116, an increase of $34, or 41%, compared to accrued compensation of $82 at December 31, 2020. The increase
is due primarily to the accrual of commissions during the quarter ended March 31, 2021.
Other accrued liabilities
were $1,222 at March 31, 2021, an increase of $81, or 7%, compared to other accrued liabilities of $1,141 at December 31, 2020,
primarily due to the accrual of interest on the Company’s debt and certain franchise taxes.
Deferred revenue was
$394 at March 31, 2021, an increase of $179, or 83%, compared to deferred revenue of $215 at December 31, 2020. The increase is
primarily due to the renewal of maintenance contracts offset by the recognition of maintenance revenues during the quarter ended
March 31, 2021.
At March 31, 2021,
total current liabilities were $5,331, an increase of $326, or 7%, compared to total current liabilities of $5,005 at December
31, 2020.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
On February 28, 2021,
the Company issued an aggregate of $75 in unsecured notes to affiliates and other investors. The Company received $60 in cash and
$15 in exchange for advances received in the prior year. The unsecured notes are convertible by the holder into common stock at
any time at a price per share of $0.50. Upon closing a new financing of at least $1,000 in aggregate proceeds, the Company can
force conversion at a price equal to the lesser of $0.50 per share or the price per share of the new financing. The notes bear
interest at the rate of 10% per annum and are due December 31, 2021.
In March 2021, the
Company received, from related parties, advances aggregating $25 in cash against certain accounts receivable of the Company. Upon
collection of an invoice, the Company agreed to repay the advance to the lenders on a pro rata basis together with a 5% advance
fee. The Company accrued $1 in advance fees recorded as interest expense on the Statement of Operations.
During the three months
ended March 31, 2021, the Company accrued $79 of interest expense, $67 associated with the outstanding secured and unsecured convertible
promissory notes, of which $24 was to related parties and $43 was to other investors. For the three months ended March 31, 2020,
the Company accrued $69 of interest expense, $60 associated with its outstanding notes, of which $24 was to related parties and
$36 was to other investors.
The Company had no
material commitments as of March 31, 2021.
The Company has experienced
recurring losses from operations that raise a substantial doubt about its ability to continue as a going concern. There can be
no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will
be available to it when needed, or if available, will be available on favorable terms or in amounts required by it. If the Company
is unable to obtain adequate capital resources to fund operations, it may be required to delay, scale back or eliminate some or
all of its operations, which may have a material adverse effect on the Company’s business, results of operations and ability to
operate as a going concern.
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Interest Rate Risk
The Company did not
enter into any short-term security investments during the three months ended March 31, 2021.
Foreign Currency Risk
From time to time,
the Company makes certain capital equipment or other purchases denominated in foreign currencies. As a result, the Company’s
cash flows and earnings are exposed to fluctuations in interest rates and foreign currency exchange rates. The Company attempts
to limit these exposures through operational strategies and generally has not hedged currency exposures. During the three months
ended March 31, 2021 and 2020, foreign currency translation gains and losses were insignificant.
Item 4.
|
Controls and Procedures.
|
Disclosure Controls and Procedures
The Company carried
out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures
pursuant to paragraph (b) of Rule 13a-15 and 15d-15 under the Exchange Act of 1934 (the “Exchange Act”). Based on that
evaluation and because of the material weaknesses in our internal control over financial reporting described below, the Chief Executive
Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure
that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act (1) is recorded,
processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosures.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Management identified
the following control deficiencies that constitute material weaknesses that are not fully remediated as of the filing date of this
report:
As a small company
with limited resources that are mainly focused on the development and sales of software products and services, iSign does not employ
a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels
of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material
misstatement to occur in future periods while it employs the current number of personnel in its finance department.
The Company does not
expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedures are
met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override
of the control. The Company considered these limitations during the development of its disclosure controls and procedures, and
will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.
Changes in Internal Control over Financial
Reporting
There has been no
change in our internal control over financial reporting during the quarter ended March 31, 2021 that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.