Company Quick10K Filing
iSIGN Solutions
Price0.38 EPS-0
Shares6 P/E-3
MCap2 P/FCF-8
Net Debt-0 EBIT-1
TEV2 TEV/EBIT-3
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-16
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-03-30
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-04-01
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-04-02
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-31
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-04-06
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-31
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-30
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-06-22
8-K 2020-06-19
8-K 2020-05-06
8-K 2020-03-25
8-K 2018-12-27
8-K 2018-08-01

ISGN 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Item 4.Controls and Procedures.
Part II - Other Information
Item 1.Legal Proceedings.
Item 1A. Risk Factors
Item 2.Unregistered Sale of Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits.
EX-31.1 f10q0920ex31-1_isign.htm
EX-31.2 f10q0920ex31-2_isign.htm
EX-32.1 f10q0920ex32-1_isign.htm
EX-32.2 f10q0920ex32-2_isign.htm

iSIGN Solutions Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
3.00.4-2.2-4.8-7.4-10.02012201420172020
Assets, Equity
0.6-0.2-0.9-1.7-2.4-3.22012201420172020
Rev, G Profit, Net Income
1.30.80.4-0.1-0.5-1.02012201420172020
Ops, Inv, Fin

10-Q 1 f10q0920_isignsolutions.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended:  September 30, 2020

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                       to                     

 

Commission File Number: 000-19301

 

iSign Solutions Inc.

(Exact name of registrant as specified in its charter)

 

Delaware  94-2790442
(State or other jurisdiction of  (I.R.S. Employer
incorporation or organization)  Identification No.)

 

2033 Gateway Place, Suite 659, San Jose, CA   95110
(Address of principal executive offices)   (Zip Code)

 

(650) 802-7888

Registrant’s telephone number, including area code

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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.

 

  Yes   No  

 

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).

 

  Yes   No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer  
Non-accelerated filer   Smaller reporting company  
    Emerging growth company  

 

Indicate by check mark whether the registrant is a shell company (as defined in Section 12b-2 of the exchange Act)

 

  Yes   No  

 

Number of shares outstanding of the issuer’s Common Stock as of November 16, 2020: 5,761,980.

 

 

 

 

 

 

INDEX

 

    Page No.
     
PART I. FINANCIAL INFORMATION 1
     
Item 1. Financial Statements  1
     
  Condensed Consolidated Balance Sheets at September 30, 2020 (unaudited) and December 31, 2019  1
     
  Condensed Consolidated Statements of Operations for the Three and Nine-Months Ended September 30, 2020 and 2019 (unaudited)  2
     
  Condensed Consolidated Statements of Stockholders’ Deficit for the Nine-Months Ended September 30, 2020 and 2019 (unaudited)  3
     
  Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2020 and 2019 (unaudited)  5
     
  Notes to Unaudited Condensed Consolidated Financial Statements  6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and  Results of Operations  13
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk  18
     
Item 4. Controls and Procedures  18
     
PART II.  OTHER INFORMATION 19 
     
Item 1.  Legal Proceedings  19
     
Item 1A. Risk Factors  19
     
Item 2.  Unregistered Sale of Securities and Use of Proceeds  19
     
Item 3.  Defaults Upon Senior Securities  19
     
Item 4.  Mine Safety Disclosures  19
     
Item 5.  Other Information  19
     
Item 6.  Exhibits 20
     
  (a) Exhibits  20
     
Signatures  23

 

- i -

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

iSign Solutions Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value amounts)

 

   September 30,   December 31, 
   2020   2019 
Assets  Unaudited     
Current assets:          
Cash and cash equivalents  $25   $25 
Accounts receivable, net of allowance of $0 at September 30, 2020 and $1 at December 31, 2019, respectively   63    61 
Prepaid expenses and other current assets   31    22 
Total current assets   119    108 
Property and equipment, net   6    8 
Other assets   5    5 
Total assets  $130   $121 
           
Liabilities and Stockholders’ Deficit          
Current liabilities:          
Accounts payable  $350   $1,196 
Paycheck Protection Program, current portion   87     
Short-term debt - related party   1,026    841 
Short-term debt – other   1,746    1,405 
Accrued compensation   79    71 
Other accrued liabilities   1,049    814 
Deferred revenue, current portion   344    346 
Total current liabilities   4,681    4,673 
           
Long-term debt - other   90      
Paycheck Protection Program, net of current portion   36      
Deferred revenue, net of current portion        70 
Other long-term liabilities   919    669 
Total liabilities   5,726    5,412 
           
Commitments and contingencies          
           
Stockholders’ deficit:          
Common stock, $0.01 par value; 2,000,000 shares authorized; 5,762 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively   58    58 
Treasury shares, 5 at September 30, 2020 and December 31, 2019, respectively   (325)   (325)
Additional paid-in capital   129,896    129,651 
Accumulated deficit   (135,225)   (134,675)
Total stockholders’ deficit   (5,596)   (5,291)
Total liabilities and stockholders’ deficit  $130   $121 

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

- 1 -

 

 

iSign Solutions Inc.

Condensed Consolidated Statements of Operations

Unaudited

(In thousands, except per share amounts)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 
Revenue:                
Product  $44   $45   $134   $126 
Maintenance   198    168    525    512 
Total revenue   242    213    659    638 
                     
Operating costs and expenses:                    
Cost of sales:                    
Product   2    5    23    8 
Maintenance   27    23    63    56 
Research and development   126    179    446    531 
Sales and marketing   10    10    62    63 
General and administrative   397    194    816    588 
Total operating costs and expenses    562    411    1,410    1,246 
                     
Loss from operations   (320)   (198)   (751)   (608)
                     
Other income (expense), net   373        425    14 
Interest expense:                    
Related party   (30)   (19)   (77)   (46)
Other   (52)   (46)   (144)   (142)
Amortization of debt discount:                    
Related party   (1)   (3)   (1)   (8)
Other       (7)   (1)   (22)
Loss before income tax expense   (30)   (273)   (549)   (812)
Income tax expense   -    -    (1)   (1)
Net loss  $(30)  $(273)  $(550)  $(813)
Basic and diluted net loss per common share  $(0.01)  $(0.05)  $(0.10)  $(0.14)
Weighted average common shares outstanding basic and diluted   5,762    5,762    5,762    5,762 

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

- 2 -

 

 

iSign Solutions Inc.

Condensed Consolidated Statements of Stockholders’ Deficit

Unaudited

(In thousands)

 

   Common Stock   Treasury Stock   Additional
Paid-in
   Accumulated   Total
Stockholders’
Equity
 
   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) 
Balance January 1, 2020   5,762   $58    5   $(325)  $129,651   $(134,675)  $(5,291)
Stock-based compensation    —     —     —     —    22     —    22 
Net loss    —     —     —     —     —    (339)   (339)
Balance, March 31, 2020   5,762   $58    5   $(325)  $129,673   $(135,014)  $(5,608)
Stock-based compensation    —     —     —     —    17     —    17 
Warrant issued for services    —     —     —     —    13     —     — 
Net loss    —     —     —     —     —    (181)   (184)
Balance, June 30, 2020   5,762   $58    5   $(325)   129,703    (135,195)   (5,759)
Stock based compensation    —     —     —     —    30     —    30 
Warrants issued associated with other long-term liabilities    —     —     —     —    160     —    160 
Warrants issued in settlement of debt    —     —     —     —    3     —    3 
Net loss    —     —     —     —     —    (30)   (30)
Balance, September 30, 2020   5,762   $58    5   $(325)  $129,896   $(135,225)  $(5,596)

 

   Common Stock   Treasury Stock   Additional Paid-in   Accumulated   Total
Stockholders’
Equity
 
   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) 
Balance January 1, 2019   5,762   $58    5   $(325)  $129,251   $(133,589)  $(4,605)
Stock-based compensation    —     —     —     —    59     —    59 
Net loss    —     —     —     —     —    (291)   (291)
Balance, March 31, 2019   5,762   $58    5   $(325)  $129,310   $(133,880)  $(4,837)
Stock-based compensation    —     —     —     —    48     —    48 
Net loss    —     —     —     —     —    (249)   (249)
Balance, June 30, 2019   5,762   $58    5   $(325)  $129,358   $(134,129)  $(5,038)
Stock-based compensation    —     —     —     —    37     —    37 
Warrants issued associated with other long-term liabilities    —     —     —     —    212     —    212 
Net loss    —     —     —     —     —    (273)   (273)
Balance, September 30, 2019   5,762   $58    5   $(325)  $129,607   $(134,402)  $(5,062)

 

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

- 3 -

 

 

iSign Solutions Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited

(In thousands)

 

    Nine Months Ended
September 30,
 
    2020     2019  
Cash flows from operating activities:                
Net loss   $ (550 )   $ (813 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     309       49  
Debt discount amortization     2       30  
Warrant issued for services     16       -  
Stock-based compensation     69       144  
Forgiveness of debt related to accounts payable     (425 )     -  
Changes in operating assets and liabilities:                
Accounts receivable, net     (2 )     23  
Prepaid expenses and other current assets     (9 )     10  
Accounts payable     (291 )     (31 )
Accrued compensation     8       (9 )
Other accrued and long-term liabilities     339       332  
Deferred revenue     (72 )     (24 )
Net cash used in operating activities     (606 )     (289 )
                 
Cash flows from investing activities:                
Acquisition of property and equipment     -       (9 )
Net cash used in investing activities     -       (9 )
                 
Cash flows from financing activities:                
Proceeds from the issuance of short-term debt -related party     183       -  
Proceeds from the issuance of short-term debt -other     300       -  
Proceeds from long-term-debt- Paycheck Protection Program     123       -  
Net cash provided by financing activities     606       -  
                 
Net decrease in cash and cash equivalents     -       (298 )
Cash and cash equivalents at beginning of period     25       335  
Cash and cash equivalents at end of period   $ 25     $ 37  

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

- 4 -

 

 

iSign Solutions Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

Unaudited

(In thousands)

 

   Nine Months Ended
September 30,
 
   2020   2019 
Supplementary disclosure of cash flow information:        
Interest paid  $6   $1 
Income tax paid  $1   $1 
           
Non-cash financing and investing transactions:          
Value of warrants issued on other long-term liabilities  $-   $212 
Settlement of accounts payable for issuance of short-term debt and long-term debt, other  $130   $- 

 

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

 

- 5 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

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, and Sign-it® programs.

 

Certain numbers in the prior year statement of operations included in this Form 10-Q have been combined to conform to the current year presentation.

 

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. In addition, several states in the U.S., including California, where the Company is headquartered, have experienced a flattening of new cases of COVID-19. However, it is uncertain if this trend will continue into the winter months, as shown by the recent uptick in reported cases. The COVID-19 outbreak is disrupting supply chains and affecting 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 spread of the outbreak, 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 impact 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, 2019.

 

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 September 30, 2020, the Company’s accumulated deficit was $135,225. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of September 30, 2020, the Company’s cash balance was $25. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

- 6 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

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 Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interaction between Topic 321, Topic 323 and Topic 815. The amended guidance in this update was issued to clarify the interaction of the accounting for equity securities under Topic 321, Investments—Equity Securities; investments accounted for under the equity method of accounting in Topic 323, Investments—Equity Method and Joint Ventures; and the accounting for certain forward contracts and purchased options accounted for under Topic 815, Derivatives and Hedging. The amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

 

The Company will evaluate ASU 2020-01. The Company believes the adoption of ASU 2020-01 will have no impact on the Company’s financial statements.

 

Accounting Standards Update No. 2020-03, Codification Improvements to Financial Instruments. The Board decided to issue a separate update to improve various financial instruments Topics in the Codification to increase stakeholder awareness of the amendments and to clarify and improve the understandability of the guidance of Topics. The amendments are effective immediately.

 

The Company believes the adoption of ASU 2020-03 will have no impact on the Company’s financial statements.

 

Other Accounting Standards Updates issued in 2020 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.

 

2.Concentrations

 

The following table summarizes accounts receivable and revenue concentrations:

 

   Accounts Receivable
As of September 30,
   Total Revenue
for the three months
ended September 30,
   Total Revenue
for the nine months
ended September 30,
 
   2020   2019   2020   2019   2020   2019 
Customer #1   70%   58%   18%   17%   21%   18%
Customer #2   24%   24%   -    -    -    - 
Customer #3   -    16%   10%   16%   11%   11%
Customer #4   -    -    21%   29%   23%   29%
Customer #5   -    -    29%   17%   23%   16%
Total concentration   94%   98%   78%   79%   78%   74%

 

- 7 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

3.Net loss per share

 

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 exercise of such options and warrants would be antidilutive:

 

   For the Three and Nine Months Ended 
   September 30,
2020
   September 30,
2019
 
         
Stock options   1,338    1,077 
Warrants   3,001    2,812 
Convertible debt   5,298    4,498 

 

4.Debt

 

In January and March 2020, the Company received, from affiliates, advances aggregating $75 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. On March 25, 2020, the affiliates converted their advances into unsecured notes. The Company paid the advance fees of $4 in cash, and recorded them as interest expense in the quarter ended March 31, 2020.

 

In August and September 2020, the Company received, from two affiliates, advances aggregating $83 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 has accrued the advance fees of $4 which is included in interest expense in the quarter ended September 30, 2020.

 

Notes payable:

 

On March 25, 2020, the Company issued an aggregate of $150 in unsecured notes to affiliates and other investors. The Company received $75 in cash and $75 in exchange for the advances discussed above. 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, 2020.

 

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 used the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds, for the most part, meet 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.

 

- 8 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

4.Debt (continued)

 

On June 19, 2020, iSign Solutions Inc. (the “Company”) entered into a Note Purchase Agreement (the “Purchase Agreement”) with an investor. Under the terms of the Purchase Agreement, the Company received a cash loan in the aggregate amount of $250,000 (the “Loan”) from the investor in exchange for the Company’s issuance of an unsecured convertible promissory note equal to the amount of such investor’s loan contribution to the Company. The Note bears interest at the rate of 10% per annum, and has a maturity date the earlier of December 31, 2021, or the date on which the Company’s other outstanding unsecured convertible promissory notes are due. The Note may be converted by its terms at the option of the investor into shares of the Company’s common stock.

 

On July 1, 2020 the Company entered into a settlement agreement with one of its vendors whereby the Company paid $135 in cash and issued a promissory note in the amount of $130 in settlement of approximately $537 in outstanding accounts payable. The note bears interest at the rate of 4% per annum and is due in installments of $40, $45 and $45 on or before the anniversary date of the note over the next three years. The settlement agreement discussed above resulted in gain of $272 recorded as other income in the statement of operations.

 

The Company accrued $83 and $221 of interest expense during the three and nine months ended September 30, 2020, $73 and $194, respectively, associated with the outstanding secured and unsecured convertible promissory notes, of which $28 and $76, respectively, was to related parties and $45 and $118, respectively, was to other investors. For the three and nine months ended September 30, 2019, the Company accrued $65 and $188 of interest expense, $55 and $162, respectively, associated with its outstanding notes, of which $19 and $47, respectively, was to related parties and $36 and $115, respectively, was to other investors.

 

The Company recorded $1 and $2 in debt discount amortization for the three and nine months ended September 30, 2020. For the three and nine months ended September 30, 2019 the Company recorded $10 and $30 of debt discount

 

5.Stockholders’ Deficit

 

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 September 30, 2020 and 2019, was approximately 11.2% and 13.4%, respectively, based on historical data.

 

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 using the accrual method over the vesting period of the options.

 

- 9 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

5.Stockholders’ Deficit (continued)

 

The Company granted 290 stock options during the nine months ended September 30, 2020 at a weighted average exercise price of $0.50 per share. The Company granted 40 stock options during the nine months ended September 30, 2019 at a weighted average exercise price of $0.50 per share. There were no stock options exercised during the three and nine months ended September 30, 2020 and 2019. The fair value calculations for the stock options granted are based on the following assumptions:

 

   Nine Months Ended
September 30,
2020
   Nine Months Ended
September 30,
2019
 
Risk free interest rate   0.18%   2.30%
Expected life (years)   6.41    6.13 
Expected volatility   164.00%   191.65%
Expected dividends   None    None 

 

The following table summarizes the allocation of stock-based compensation expense related to stock option grants for the three and nine-month periods ended September 30, 2020 and 2019.

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2020   2019   2020   2019 
Research and development  $1   $6   $7   $24 
General and administrative   21    25    49    98 
Director options   8    6    13    22 
Stock-based compensation expense  $30   $37   $69   $144 

 

A summary of option activity under the Company’s plans as of September 30, 2020 and 2019 is as follows:

 

   2020       2019 
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,   1,077   $1.59            $     -    1,037   $1.65           $     - 
Granted   290   $0.50        $-    40   $0.50        $- 
Forfeited or expired   (29)  $23.63        $-    -   $-        $- 
Outstanding at September 30   1,338   $0.86    4.84   $-    1,077   $1.61    5.22   $- 
Vested and expected to vest at September 30   1,293   $1.40    5.15   $-    1,072   $1.61    5.22   $- 
Exercisable at September 30   868   $1.03    4.18   $-    575   $2.45    4.95   $- 

 

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2020:

 

   Options Outstanding   Options Exercisable 
Range of Exercise Prices  Number Outstanding   Weighted Average Remaining Contractual Life
(in years)
   Weighted Average Exercise Price Per Share   Number Outstanding   Weighted Average Exercise Price Per Share 
$0.01 – $25.00   930    4.89   $0.50    591   $0.50 
$25.01 - $625.00   408    4.86   $0.84    277   $0.84 
Total   1,338    4.84   $0.87    868   $0.87 

 

- 10 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

5.Stockholders’ Deficit (continued)

 

The following table summarizes the Company’s non-vested option shares as of September 30, 2020:

 

Non-vested Option Shares  Shares   Weighted Average
Grant-Date
Fair Value
 
Non-vested at January 1, 2020   660   $0.65 
Granted   290   $0.50 
Vested   (480)  $0.65 
Non-vested at September 30, 2020   470   $0.56 

 

As of September 30, 2020, there was $99 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 1.12 years.

 

Warrants

 

On January 28, 2020, the Company issued 30 warrants to a consultant for services. The warrants are exercisable for three years with an exercise price of $0.50 per share. The Company ascribed a value of $13 to the warrants which is based on the Black-Scholes-Merton valuation model. The warrant cost was charged to general and administrative expense during the period.

 

On July 9, 2020, the Company entered into a settlement agreement with a vendor. In addition to a cash payment the Company issued 10 warrants to purchase 10 shares of common stock in settlement of the outstanding accounts payable balance. The warrants are exercisable for five years with an exercise price of $0.50 per share. The Company ascribed a value of $3 to the warrants which is based on the Black-Scholes-Merton valuation model. The warrant cost was charged to general and administrative expense during the period.

 

On August 11, 2020, the Company issued 425 warrants to purchase 425 shares of common stock to two consultants associated with their unpaid consulting fees. The Company ascribed a value of $160 to the warrants which is booked as stock based compensation in general and administrative expense in the statement of operations. The warrants are only exercisable for deferred consulting fees. Upon exercise, the Company would not receive any cash and would reduce accrued expenses. The above warrants have a three year life from the date of grant and an exercise price of $0.50 per share.

 

On February 2, 2019, the Company issued warrants to purchase 985 shares of common stock to employees and consultants associated with their unpaid salaries and consulting fees. The Company ascribed a value of $212 to the warrants which was booked as a discount to other long-term liabilities in the balance sheet. The remaining $147 value of the warrants was amortized to general and administrative expense in the statement of operations as of September 30, 2020. The warrants are only exercisable for deferred salaries and consulting fees. The above warrants have a three year life from the date of grant and an exercise price of $0.50 per share.

 

For the three and nine months ended September 30, 2020, the Company has charged $275 and $323, respectively, of the warrant value to expense. For the three and nine months ended September 30, 2019 the Company charged $46 of warrant value to expense.

 

- 11 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

5.Stockholders’ Deficit (continued)

 

Warrants

 

A summary of the warrant activity for the nine months ended September 30 is as follows:

 

   September 30, 2020   September 30, 2019 
   Shares   Weighted Average Exercise Price Per Share   Shares   Weighted Average Exercise Price Per Share 
Outstanding at beginning of period   2,536   $1.52    1,828   $2.08 
Issued   465   $0.50    985   $0.50 
Outstanding at end of period   3,001   $1.37    2,813   $1.53 
Exercisable at end of period   3,001   $1.37    2,813   $1.53 

 

A summary of the status of the warrants outstanding and exercisable as of September 30, 2020 is as follows:

 

Number of Shares
Issuable Under
Warrants
   Weighted Average
Remaining Life
(years)
   Weighted Average
Exercise Price
per share
 
          
 1,551    0.64   $2.18 
 985    1.37   $0.50 
 30    2.36   $0.50 
 10    4.84   $0.50 
425   2.90   $0.50 
 3,001    1.23   $1.37 

 

6.Subsequent Event

 

In October, 2020, the Company received, from an affiliate and another party advances aggregating $60 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 funds will be used for working capital purposes.

 

- 12 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

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, 2019, 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, 2019.

 

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, 2019, net losses aggregated $2,113, and, at September 30, 2020, the Company’s accumulated deficit was $134,975.

 

For the three months ended September 30, 2020, total revenue was $242, an increase of $29, or 14%, compared to total revenue of $213 in the prior year period. For the nine months ended September 30, 2020, total revenue was $659, an increase of $21, or 3%, compared to total revenue of $638 in the prior year period. The increases in revenue for the three and nine months ended September 30, 2020 are due primarily to increases in product and maintenance revenue compared to the prior year periods.

 

For the three months ended September 30, 2020, the Company recorded a net loss of $30, a decrease of $243, or 89%, compared to a net loss of $273 in the prior year period. The $30 net loss was primarily due to warrant expense related to long-term liabilities of $323 and an increase in interest expense on the increase in debt. These increased expenses were partially offset by $373 in forgiveness of debt resulting from settlement agreements with vendors for outstanding accounts payable balances during the three months ended September 30, 2020.  For the nine months ended September 30, 2020 the net loss was $550, a decrease of $263, or 32%, compared to a net loss of $813 in the prior year period.

 

- 13 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Critical Accounting Policies and Estimates

 

Refer to Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2019 Form 10-K.

 

Effect of Recent Accounting Pronouncements

 

Accounting Standards Updates issued in 2020 are being evaluated by the Company, however, implementation is not 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 September 30, 2020, product revenue was $44, a decrease of $1, or 2%, compared to product revenue of $45 in the prior year period. The decrease was primarily due to the timing of new product orders received in the quarter. For the three months ended September 30, 2020, maintenance revenue was $198, an increase of $30, or 18%, compared to maintenance revenue of $168 in the prior year period. The increase is primarily due to an increases in the amount of certain maintenance contract renewals and adjustments.

 

For the nine months ended September 30, 2020, product revenue was $134, an increase of $8, or 6%, compared to product revenue of $126 in the prior year period. The increase in product revenue is primarily attributable to an increase in engineering project billings compared to the prior year period. For the nine months ended September 30, 2020, maintenance revenue was $525, an increase of $13, or 3%, compared to maintenance revenue of $512 in the prior year period. The increase in maintenance revenue is primarily due to the factors discussed for the three-month period above.

 

Cost of Sales

 

For the three months ended September 30, 2020, cost of sales was $29, a decrease of $1, or 4%, compared to cost of sales of $28 in the prior year period. The decrease in cost of sales was primarily due to a decrease in direct labor costs associated with billable engineering revenue partially offset by an increase in labor related to maintenance contracts during the three months ended September 30, 2020, compared to the prior year period.

 

For the nine months ended September 30, 2020, cost of sales was $86, an increase of $22, or 34%, compared to cost of sales of $64 in the prior year period. The increase in cost of sales was due to an increase in direct labor related to maintenance contracts and billable engineering revenue compared to the prior year period.

 

Operating expenses

 

Research and Development Expenses

 

For the three months ended September 30, 2020, research and development expense was $126, a decrease of $53, or 30%, compared to research and development expense of $179 in the prior year period. Research and development expenses consist primarily of salaries and related costs, outside engineering, maintenance items, and allocated facilities expenses. Research and development expenses decreased primarily due a decrease in outside engineering costs and an increase in the amount of engineering costs allocated to cost of sales. Total expenses, before allocations for the three months ended September 30, 2020, were $172, a decrease of $39, or 18%, compared to $211 in the prior year period. The decrease was primarily due to the reduced outside engineering expense during the current quarter.

 

- 14 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Research and Development Expenses (continued)

 

For the nine months ended September 30, 2020, research and development expense was $446, a decrease of $85, or 16%, compared to research and development expense of $531 in the prior year period. The most significant factors in the decrease include a decrease in stock option expense and other overhead expense, including outside engineering and allocated engineering expense to cost of sales. Total expenses, before allocations to cost of sales, for the nine months ended September 30, 2020, were $545, a decrease of $59, or 10%, compared to $605 in the prior year period. The decrease in total engineering expense is primarily due to the factors discussed for the three month period above.

 

Sales and Marketing Expense

 

For the three months ended September 30, 2020, sales and marketing expense was $10, compared to sales and marketing expense of $10 in the prior year period. For the nine months ended September 30, 2020, sales and marketing expense was $62, a decrease of $1, or 2%, compared to sales and marketing expense of $63 in the prior year period. These decrease was primarily attributable to a decrease in commissions compared to the prior year period.

 

General and Administrative Expense

 

For the three months ended September 30, 2020, general and administrative expense was $397, an increase of $203 or 105%, compared to general and administrative expense of $194 in the prior year period. The increase was primarily due to $288 in stock based compensation expense partially offset by decreases in other general overhead expenses compared to the prior year period.

 

For the nine months ended September 30, 2020, general and administrative expense was $816, an increase of $228, or 39%, compared to general and administrative expense of $588 in the prior year period. The increase in total general and administrative expense is primarily due to the factors discussed for the three month period above.

 

Other Income and Expense, net

 

For the three and nine months ended September 30, 2020, other income was $373 and $425, respectively, an increase of $373 and $411, respectively, compared to other income of $0 and $14 for the three and nine months ended September 30, 2019. The increase in other income and expense is due primarily to the forgiveness of $373 and $425, respectively, of accounts payable during the three and nine months ended September 30, 2020. Such forgiveness was generated in conjunction with cash payments of approximately $287. Other income for the three and nine months ended June 30 2019 included the collection of $14 of accounts receivable written off in the prior year.

 

For the three months ended September 30, 2020, interest expense was $82, an increase of $17, or 24% compared to interest expense of $65 in the prior year period. For the nine months ended September 30, 2020, interest expense was $221, an increase of $33, or 18%, compared to interest expense of $188 in the prior year period. The increase in interest expense is primarily due to the increase in the amount of debt outstanding for the three and nine months ended September 30, 2020 compared to the prior year period.

 

Amortization of debt discount was $1 and $2 for the three and nine month periods ended September 30, 2020 compared to $10 and $30 in the same periods of the prior year, respectively. The decrease was due to the extension of the maturity date of the Company’s debt to December 31, 2020.

 

Liquidity and Capital Resources

 

At September 30, 2020, cash and cash equivalents totaled $25, compared to cash and cash equivalents of $25 at December 31, 2019. Net cash used in operating activities was $606. The cash used in operations was offset by $606 in proceeds provided by financing activities. At September 30, 2020, total current assets were $119, compared to total current assets of $108 at December 31, 2019. At September 30, 2020, the Company’s principal sources of funds included its aggregated cash and cash equivalents of $25.

 

- 15 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Liquidity and Capital Resources (continued)

 

At September 30, 2020, accounts receivable, net was $63, an increase of $2, or 3%, compared to accounts receivable, net of $61 at December 31, 2019. The increase is due primarily to the timing of billings and collections during the nine months ended September 30, 2020.

 

At September 30, 2020, prepaid expenses and other current assets were $31, an increase of $9, or 41%, compared to prepaid expenses and other current assets of $22 at December 31, 2019. The increase is due primarily to an increase of prepaids associated with engineering activities during the period.

 

At September 30, 2020, accounts payable was $350, a decrease of $846, or 71%, compared to accounts payable of $1,196 at December 31, 2019. The decrease is due primarily to the forgiveness of $425 of accounts payable, related cash payments of approximately $287 and the issuance of a note payable of $130 during the three and nine months ended September 30, 2020. At September 30, 2020, accrued compensation was $79, an increase of $8, or 11%, compared to accrued compensation of $71 at December 31, 2019. The increase is due primarily to an increase in accrued vacation expense. Other accrued liabilities were $1,049, an increase of $235, or 29%, from $814 at December 31, 2019 due primarily to the accrual of interest on the Company’s short –term debt and deferred professional services.

 

At September 30, 2020, deferred revenue was $344, a decrease of $2, or 1%, compared to deferred revenue of $346 at December 31, 2019. Deferred revenue primarily reflects advance payments for maintenance fees from the Company’s licensees that are generally recognized as revenue by the Company when all obligations are met or over the term of the maintenance agreement, whichever is longer. Deferred revenue is recorded when the Company receives advance payment from its customers.

 

At September 30, 2020, total current liabilities were $4,681, an increase of $8, or 0.02%, compared to total current liabilities of $4,673 at December 31, 2019.

 

In January and March 2020, the Company received, from affiliates, advances aggregating $75 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. On March 25, 2020, the affiliates converted their advances into unsecured notes. The Company paid the advance fees of $4 in cash, and recorded them as interest expense in the quarter ended March 31, 2020.

 

In August and September 2020, the Company received, from two affiliates, advances aggregating $83 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 has accrued the advance fees of $4 which is included in interest expense in the quarter ended September 30, 2020.

 

On March 25, 2020, the Company issued an aggregate of $150 in unsecured notes to affiliates and other investors. The Company received $75 in cash and $75 in exchange for the advances discussed above. 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, 2020.

 

- 16 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Liquidity and Capital Resources (continued)

 

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 used the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds, for the most part, 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 June 19, 2020, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with an investor. Under the terms of the Purchase Agreement, the Company received a cash loan in the aggregate amount of $250,000 (the “Loan”) from the investor in exchange for the Company’s issuance of an unsecured convertible promissory note equal to the amount of such investor’s loan contribution to the Company. The Note bears interest at the rate of 10% per annum, and has a maturity date the earlier of December 31, 2021, or the date on which the Company’s other outstanding unsecured convertible promissory notes are due. The Note may be converted by its terms at the option of the investor into shares of the Company’s common stock.

 

On July 1, 2020 the Company entered into a settlement agreement with one of its vendors where by the Company paid $135 in cash and issued a promissory note in the amount of $130 in settlement of approximately $537 in outstanding accounts payable. The note bears interest at the rate of 4% per annum and is due in installments of $40, $45 and $45 on or before the anniversary date of the note over the next three years. The settlement agreement discussed above resulted in gain of $272 recorded as other income in the statement of operations.

 

The Company accrued $83 and $221 of interest expense during the three and nine months ended September 30, 2020, $73 and $194, respectively, associated with the outstanding secured and unsecured convertible promissory notes, of which $28 and $76, respectively, was to related parties and $45 and $118, respectively, was to other investors. For the three and nine months ended September 30, 2019, the Company accrued $65 and $188 of interest expense, $55 and $162, respectively, associated with its outstanding notes, of which $19 and $47, respectively, was to related parties and $36 and $115, respectively, was to other investors.

 

The Company recorded $1 and $2 in debt discount amortization for the three and nine months ended September 30, 2020. For the three and nine months ended September 30, 2019 the Company recorded $10 and $30 of debt discount

 

The Company had no material commitments as of September 30, 2020.

 

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.

 

- 17 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

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 and nine months ended September 30, 2020.

 

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 and nine months ended September 30, 2020 and 2019, 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.

 

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 September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

- 18 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Part II – Other Information

 

Item 1.Legal Proceedings.

 

None.

 

Item 1A.  Risk Factors

 

Not applicable.

 

Item 2.Unregistered Sale of Securities and Use of Proceeds

 

None.

 

Item 3.Defaults upon Senior Securities

 

None.

 

Item 4.Mine Safety Disclosures

 

Not applicable.

 

Item 5.Other Information

 

None.

 

- 19 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Item 6.Exhibits.

 

(a)Exhibits.

 

Exhibit
Number
  Document
3.1   Certificate of Incorporation of the Company, as amended, incorporated herein by reference to Exhibits 3.1, 3.2, 3.3 and 3.4 to the Company’s Registration Statement on Form 10 (File No. 0-19301).
3.2   Certificate of Amendment to the Company’s Certificate of Incorporation (authorizing the reclassification of the Class A Common Stock and Class B Common Stock into one class of Common Stock) as filed with the Delaware Secretary of State’s office on November 1, 1991, incorporated herein by reference to Exhibit 3 to Amendment 1 on Form 8 to the Company’s Form 8-A (File No. 0-19301).
3.3   By-laws of the Company adopted on October 6, 1986, incorporated herein by reference to Exhibit 3.5 to the Company’s Registration Statement on Form 10 (File No. 0-19301).
3.5   Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation dated January 24, 2001, incorporated herein by reference to Exhibit 3.5 to the Company’s Registration Statement on Form S/1, filed December 28, 2007.
3.6   Certificate of Elimination of the Company’s Certificate of Designation of the Series A Preferred Stock dated August 17, 2001, incorporated herein by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S/1, filed December 20, 2007.
3.7   Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State August 17, 2007, incorporated herein by reference to Exhibit 3.7 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.
3.8   Amended and Restated Certificate of Incorporation of the Company filed with the Delaware Secretary of State on May 18, 1995, incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.
3.9   Certificate of Designations, Powers, Preferences and Rights of the Series A Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on June 4, 2008, incorporated herein by reference to Exhibit 4.23 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.
3.10   Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on June 30, 2008, incorporated herein by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.
3.11   Certificate of Designations, Powers, Preferences and Rights of the Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on October 30, 2008, incorporated herein by reference to Exhibit 3.11 to the Company’s Annual Report on Form 10-K filed on March 12, 2009.
3.13   Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on June 30, 2009, incorporated herein by reference to Exhibit 3.13 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.
3.14   Amendment No. 1 to By-laws dated June 17, 2010, incorporated herein by reference to Exhibit 3.14 to the Company’s Quarterly Report on Form 10-Q filed on August 16, 2010.
3.15   Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on August 4, 2010, incorporated herein by reference to Exhibit 3.15 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.
3.16   Amended and Restated Certificate of Designation of Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on August 4, 2010, incorporated herein by reference to Exhibit 3.16 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.
3.17   Certificate of Designation of Series B Participating Convertible Preferred Stock filed with the Delaware Secretary of State on August 4, 2010, incorporated herein by reference to Exhibit 3.17 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.
3.18   Certificate of Amendment to Amended And Restated Certificate of Incorporation filed with the Delaware Secretary of State on December 31, 2010, incorporated herein by reference to Exhibit 3.18 to the Company’s Annual Report on Form 10-K filed on March 30, 2011.
3.19   Second Amended and Restated Certificate of Designation of Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2010, incorporated herein by reference to Exhibit 3.19 to the Company’s Annual Report on Form 10-K filed on March 30, 2011.
3.20   Second Amended and Restated Certificate of Designation of Series B Participating Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2010, incorporated herein by reference to Exhibit 3.20 to the Company’s Annual Report on Form 10-K filed on March 30, 2011.
3.21   Certificate of Designation of Series C Participating Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2010, incorporated herein by reference to Exhibit 3.21 to the Company’s Annual Report on Form 10-K filed on March 30, 2011.
3.22   Amendment to the Amended And Restated Certificate of Designation of the Series B Participating Convertible Preferred Stock, incorporated herein by reference to Exhibit 10.59 to the Company’s Current Report on Form 8-K filed March 31, 2011.

 

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iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Exhibit
Number
  Document
3.23   Amendment to the Amended And Restated Certificate of Designation of the Series C Participating Convertible Preferred Stock, incorporated herein by reference to Exhibit 10.60 to the Company’s Current Report on Form 8-K filed March 31, 2011.
3.24   Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on November 13, 2012, incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement filed on Schedule 14A on October 22, 2012.
3.25   Third Amended and Restated Certificate of Designation of Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on November 13, 2012, incorporated herein by reference to Exhibit 3.25 to the Company’s Form 10-K filed March 31, 2014.
3.26   Second Amended and Restated Certificate of Designation of Series B Participating Convertible Preferred Stock filed with the Delaware Secretary of State on November 13, 2012, incorporated herein by reference to Exhibit 3.26 to the Company’s Form 10-K filed March 31, 2014.
3.27   Amended and Restated Certificate of Designation of Series C Participating Convertible Preferred Stock filed with the Delaware Secretary of State on November 13, incorporated herein by reference to Exhibit 3.27 to the Company’s Form 10-K filed March 31, 2014.
3.28   Certificate of Designation of Series D Convertible Preferred Stock filed with the Delaware Secretary of State on November 13, 2012, incorporated herein by reference to Exhibit 3.28 to the Company’s Form 10-K filed March 31, 2014.
3.29   Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on December 10, 2013, incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement filed on Schedule 14A on November 1, 2013.
3.30   Certificate of Amendment to Certificate of Designation of Series D Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2013, incorporated herein by reference to Exhibit 3.30 to the Company’s Form 10-K filed March 31, 2014.
3.31   Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on December 16, 2014, incorporate herein by reference to Appendix A to the Company’s Definitive Proxy Statement filed on Schedule 14A on October 17, 2014.
3.32   Certificate of Amendment to Certificate of Designation of Series D Convertible Preferred Stock filed with the Delaware Secretary of State on March 24, 2015, incorporated herein by reference to Exhibit 3.32 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2015.
3.33   Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Designation of Series A-1 Cumulative Convertible Preferred Stock filed with Secretary of State of the State of Delaware on May 18, 2016, incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 19, 2016.
3.34   Certificate of Amendment to the Company’s Second Amended and Restated Certificate of Designation of Series B Participating Convertible Preferred Stock filed with Secretary of State of the State of Delaware on May 18, 2016, incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed May 19, 2016.
3.35   Certificate of Amendment to the Company’s Amended and Restated Certificate of Designation of Series C Participating Convertible Preferred Stock filed with Secretary of State of the State of Delaware on May 18, 2016, incorporated herein by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed May 19, 2016.
3.36   Certificate of Amendment to the Company’s Certificate of Designation of Series D Convertible Preferred Stock filed with Secretary of State of the State of Delaware on May 18, 2016, incorporated herein by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed May 19, 2016.
3.37   Certificate of Amendment to the Company’s Certificate of Designation of Series D Convertible Preferred Stock filed with Secretary of State of the State of Delaware on May 18, 2016, incorporated herein by reference to Exhibit 3.5 to the Company’s Current Report on Form 8-K filed May 19, 2016.
10.59   Amendment to the Amended And Restated Certificate of Designation of the Series B Participating Convertible Preferred Stock, incorporated herein by reference to Exhibit 10.59 to the Company’s Current Report on Form 8-K filed March 31, 2011.
10.60   Amendment to the Amended And Restated Certificate of Designation of the Series C Participating Convertible Preferred Stock, incorporated herein by reference to Exhibit 10.60 to the Company’s Current Report on Form 8-K filed March 31, 2011.
10.61   Form Of Subscription Agreement, incorporated herein by reference to Exhibit 10.61 to the Company’s Current Report on Form 8-K filed on April 4, 2011.
10.62   Amendment No. 1 to the Registration Rights Agreement dated March 31, 2011, incorporated herein by reference to Exhibit 10.62 to the Company’s Current Report on Form 8-K filed on April 4, 2011
10.63   Note and Warrant Purchase Agreement dated April 23, 2012, incorporated herein by reference to Exhibit 10.63 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2012.

  

- 21 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

Exhibit
Number
  Document
10.64   Form of Subscription Agreement dated September 14, 2012, incorporated herein by reference to Exhibit 10.64 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2012.
10.65   Form of Unsecured Convertible Promissory Note dated September 14, 2012, incorporated herein by reference to Exhibit 10.65 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2012.
10.66   Form of Subscription Agreement dated May 17, 2013, incorporated herein by reference to Exhibit 10.66 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2013.
10.67   Form of Subscription Agreement dated December 31, 2013, incorporated herein by reference to Exhibit 10.67 to the Company’s Form 10-K filed March 31, 2014.
10.68   Credit Agreement with Venture Champion Asia Limited dated May 6, 2014, incorporated herein by reference to Exhibit 10.68 to the Company’s Form 10-Q filed August 15, 2014.
10.69   Form of Subscription Agreement dated August 5, 2014, incorporated herein by reference to Exhibit 10.69 to the Company’s Form 10-K filed March 31, 2015.
10.70   Form of Subscription Agreement dated March 24, 2015, incorporated herein by reference to Exhibit 10.70 to the Company’s Quarterly Report on Form 10-Q filed May 15, 2015.
10.71   Form of Subscription Agreement dated July 23, 2015, incorporated herein by reference to Exhibit 10.71 to the Company’s Quarterly Report on Form 10-Q filed November 16, 2015.
10.72   Note and Warrant Purchase Agreement dated November 3, 2016, incorporated herein by reference to Exhibit 10.72 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2017.
10.73   Form of Unsecured Convertible Promissory Note dated November 3, 2016, incorporated herein by reference to Exhibit 10.73 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2017.
10.74   Note Purchase Agreement dated May 23, 2017, incorporated herein by reference to Exhibit 10.74 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2017.
10.75   Form of Secured Convertible Promissory Note dated May 23, 2017, incorporated herein by reference to Exhibit 10.75 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2017.
*31.1   Certification of Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2   Certificate of Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1   Certification of Chief Executive Officer pursuant to 18 USC Section 1750, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2   Certification of Chief Financial Officer pursuant to 18 USC Section 1750, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

*Filed herewith

 

- 22 -

 

 

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    iSign Solutions Inc.
    Registrant

 

November 16, 2020   /s/ Andrea Goren
Date   Andrea Goren
    (Principal Financial Officer and Officer Duly Authorized to Sign on Behalf of the Registrant)

 

 

- 23 -