Item 1. Financial Statements
iSign Solutions Inc.
Condensed Consolidated Balance Sheets
(In
thousands,
except par value amounts
)
|
|
|
June
30,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Unaudited
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
278
|
|
|
$
|
335
|
|
|
Accounts
receivable, net of allowance of $0 at June 30, 2019 and $1 at December 31, 2018, respectively
|
|
|
47
|
|
|
|
84
|
|
|
Prepaid
expenses and other current assets
|
|
|
33
|
|
|
|
46
|
|
|
Total
current assets
|
|
|
358
|
|
|
|
465
|
|
|
Property
and equipment, net
|
|
|
3
|
|
|
|
2
|
|
|
Other
assets
|
|
|
5
|
|
|
|
5
|
|
|
Total
assets
|
|
$
|
366
|
|
|
$
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,267
|
|
|
$
|
1,280
|
|
|
Short-term
debt
|
|
|
2,230
|
|
|
|
2,210
|
|
|
Accrued
compensation
|
|
|
75
|
|
|
|
81
|
|
|
Other
accrued liabilities
|
|
|
665
|
|
|
|
524
|
|
|
Deferred
revenue
|
|
|
426
|
|
|
|
281
|
|
|
Total
current liabilities
|
|
|
4,663
|
|
|
|
4,376
|
|
|
Deferred
revenue long-term
|
|
|
−
|
|
|
|
36
|
|
|
Other
long-term liabilities
|
|
|
741
|
|
|
|
665
|
|
|
Total
liabilities
|
|
|
5,404
|
|
|
|
5,077
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit):
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.01 par value; 2,000,000 shares authorized; 5,760 shares issued and outstanding at June 30, 2019 and December 31,
2018, respectively
|
|
|
58
|
|
|
|
58
|
|
|
Treasury
shares, 5 at June 30, 2019 and December 31, 2018, respectively
|
|
|
(325
|
)
|
|
|
(325
|
)
|
|
Additional
paid-in capital
|
|
|
129,358
|
|
|
|
129,251
|
|
|
Accumulated
deficit
|
|
|
(134,129
|
)
|
|
|
(133,589
|
)
|
|
Total
stockholders’ deficit
|
|
|
(5,038
|
)
|
|
|
(4,605
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
366
|
|
|
$
|
472
|
|
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
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
41
|
|
|
$
|
34
|
|
|
$
|
81
|
|
|
$
|
73
|
|
|
Maintenance
|
|
|
186
|
|
|
|
192
|
|
|
|
344
|
|
|
|
367
|
|
|
Total revenue
|
|
|
227
|
|
|
|
226
|
|
|
|
425
|
|
|
|
440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
|
Maintenance
|
|
|
17
|
|
|
|
11
|
|
|
|
33
|
|
|
|
19
|
|
|
Research and development
|
|
|
181
|
|
|
|
238
|
|
|
|
352
|
|
|
|
466
|
|
|
Sales and marketing
|
|
|
27
|
|
|
|
42
|
|
|
|
53
|
|
|
|
61
|
|
|
General and administrative
|
|
|
190
|
|
|
|
153
|
|
|
|
395
|
|
|
|
328
|
|
|
Total operating costs and expenses
|
|
|
416
|
|
|
|
446
|
|
|
|
835
|
|
|
|
879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(189
|
)
|
|
|
(220
|
)
|
|
|
(410
|
)
|
|
|
(439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
15
|
|
|
|
(44
|
)
|
|
|
14
|
|
|
|
(44
|
)
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party
|
|
|
(14
|
)
|
|
|
(8
|
)
|
|
|
(27
|
)
|
|
|
(16
|
)
|
|
Other
|
|
|
(49
|
)
|
|
|
(34
|
)
|
|
|
(96
|
)
|
|
|
(64
|
)
|
|
Amortization of debt discount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party
|
|
|
(3
|
)
|
|
|
(8
|
)
|
|
|
(6
|
)
|
|
|
(14
|
)
|
|
Other
|
|
|
(7
|
)
|
|
|
(20
|
)
|
|
|
(14
|
)
|
|
|
(38
|
)
|
|
Loss before income tax expense
|
|
|
(247
|
)
|
|
|
(334
|
)
|
|
|
(539
|
)
|
|
|
(615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(1
|
)
|
|
|
−
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
Net loss
|
|
$
|
(248
|
)
|
|
$
|
(334
|
)
|
|
$
|
(540
|
)
|
|
$
|
(617
|
)
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.11
|
)
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
5,762
|
|
|
|
5,762
|
|
|
|
5,762
|
|
|
|
5,762
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of
Stockholders’ Equity
(Unaudited)
(In thousands)
|
|
|
Common Stock
|
|
|
Treasury Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance January 1, 2019
|
|
|
5,760
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,251
|
|
|
$
|
(133,589
|
)
|
|
$
|
(4,605
|
)
|
|
Stock-based compensation
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
107
|
|
|
|
─
|
|
|
|
107
|
|
|
Net loss
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
(540
|
)
|
|
|
(540
|
)
|
|
Balance, June 30, 2019
|
|
|
5,760
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,358
|
|
|
$
|
(134,129
|
)
|
|
$
|
(5,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Treasury Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance January 1, 2018
|
|
|
5,760
|
|
|
$
|
58
|
|
|
|
5
|
|
|
$
|
(325
|
)
|
|
$
|
129,027
|
|
|
$
|
(132,562
|
)
|
|
$
|
(3,802
|
)
|
|
Stock-based compensation
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
75
|
|
|
|
─
|
|
|
|
75
|
|
|
Net loss
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
─
|
|
|
|
(617
|
)
|
|
|
(617
|
)
|
|
Balance, June 30, 2018
|
|
|
5,760
|
|
|
$
|
58
|
|
|
|
5
|
|
|
|
(325
|
)
|
|
$
|
129,102
|
|
|
$
|
(133,179
|
)
|
|
$
|
(4,344
|
)
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
|
|
|
Six
Months Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(540
|
)
|
|
$
|
(617
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2
|
|
|
|
4
|
|
|
Debt discount amortization
|
|
|
20
|
|
|
|
52
|
|
|
Loss on disposal of fixed assets
|
|
|
-
|
|
|
|
7
|
|
|
Stock-based compensation
|
|
|
107
|
|
|
|
75
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
37
|
|
|
|
(17
|
)
|
|
Prepaid expenses and other assets
|
|
|
13
|
|
|
|
22
|
|
|
Accounts payable
|
|
|
(13
|
)
|
|
|
11
|
|
|
Accrued compensation
|
|
|
(6
|
)
|
|
|
(53
|
)
|
|
Other accrued and long-term liabilities
|
|
|
217
|
|
|
|
220
|
|
|
Deferred revenue
|
|
|
109
|
|
|
|
46
|
|
|
Net cash used in operating activities
|
|
|
(54
|
)
|
|
|
(250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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 the issuance of short-term debt
|
|
|
−
|
|
|
|
115
|
|
|
Payments on short-term debt
|
|
|
−
|
|
|
|
(40
|
)
|
|
Net cash provided by financing activities
|
|
|
−
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(57
|
)
|
|
|
(175
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
335
|
|
|
|
285
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
278
|
|
|
$
|
110
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of
Cash Flows (Continued)
(Unaudited)
(In thousands)
|
|
|
Six
Months Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Supplementary disclosure of cash flow information
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
−
|
|
|
$
|
2
|
|
|
Income taxes paid
|
|
$
|
1
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing and investing transactions:
|
|
|
|
|
|
|
|
|
|
Original issue discount on secured convertible promissory notes
|
|
$
|
−
|
|
|
$
|
8
|
|
See accompanying notes to these Condensed
Consolidated Financial Statements
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(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, iSign® Console™, and Sign-it® programs.
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, 2018.
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 June 30, 2019, the Company’s accumulated deficit
was $134,129. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of June
30, 2019, the Company’s cash balance was $278. These factors raise substantial doubt about the Company’s ability to
continue as a going concern.
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.
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
|
|
1.
|
Nature of Business and Summary of Significant Accounting
Policies (continued)
|
Accounting Changes and Recent
Accounting Pronouncements (continued)
Accounting Standards Update
No. 2019-01, Leases (Topic 842), Codification Improvements. The amendments in this Update include the following items: (1) determining
the fair value of the underlying asset by lessors that are not manufacturers or dealers; (2) presentation on the statement of cash
flows—sales-type and direct financing leases; and (3) transition disclosures related to Topic 250, Accounting Changes and
Error Corrections. The amendments in ASU 2019-01 for Issue 1 affect all lessors that are not manufacturers or dealers (generally
financial institutions and captive finance companies); for Issue 2, all lessors that are depository and lending entities within
the scope of Topic 942; for Issue 3, all entities that are lessees or lessors. The effective date of the amendments in ASU 2019-01
are for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.
The Company adopted ASU 2019-01
effective January 1, 2019. The adoption of ASU 2019-01 had no impact on the Company’s financial statements.
Other Accounting Standards Updates
issued in 2019 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 June 30,
|
|
|
Total Revenue
for the three months ended
June 30,
|
|
|
Total Revenue
for the six months ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Customer #1
|
|
|
70
|
%
|
|
|
77
|
%
|
|
|
17
|
%
|
|
|
11
|
%
|
|
|
16
|
%
|
|
|
11
|
%
|
|
Customer #2
|
|
|
−
|
|
|
|
−
|
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
11
|
%
|
|
|
12
|
%
|
|
Customer #3
|
|
|
−
|
|
|
|
−
|
|
|
|
33
|
%
|
|
|
25
|
%
|
|
|
29
|
%
|
|
|
23
|
%
|
|
Customer #4
|
|
|
−
|
|
|
|
−
|
|
|
|
15
|
%
|
|
|
16
|
%
|
|
|
16
|
%
|
|
|
16
|
%
|
|
Customer #5
|
|
|
21
|
%
|
|
|
15
|
%
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
Customer #6
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
10
|
%
|
|
Total concentration
|
|
|
91
|
%
|
|
|
92
|
%
|
|
|
75
|
%
|
|
|
62
|
%
|
|
|
72
|
%
|
|
|
72
|
%
|
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
|
|
|
For the Six Months Ended
|
|
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,077
|
|
|
|
726
|
|
|
|
1,077
|
|
|
|
726
|
|
|
Warrants
|
|
|
2,812
|
|
|
|
1,839
|
|
|
|
2,812
|
|
|
|
1,839
|
|
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
Advances:
In April, May, and June 2018,
the Company received, from investors, advances aggregating $115 in cash against certain accounts receivable of the Company. Upon
collection of an invoice, the Company would repay the advance to the lenders on a pro rata basis together with a 5% advance fee.
The receivables were collected and $40 of the advances were repaid in May 2018, along with $2 in advance fees per the agreement.
The advance fees were recorded as interest expense in the quarter ended June 30, 2018. The remaining $75 advances were converted
into secured convertible notes in August 2018.
Notes payable:
In August 2018, the Company issued
secured convertible promissory notes to investors and affiliates of the Company aggregating $341, of which $205 was paid in cash,
$75 was exchanged for the remaining advances described above and $61 was in the form of an Original Issue Discount (“OID”)
on these amounts. The secured notes are mandatorily convertible into Common Stock at a conversion rate of the lesser of $0.50 per
share or the price per share of Common Stock upon closing a new financing of at least $1,000 in aggregate proceeds. The secured
notes bear interest at the rate of 10% per annum, are due December 31, 2019 and are secured by an interest in all the Company’s
rights, title and interest in, to and under its intellectual property. Should the secured notes remain outstanding following the
maturity date an additional 30% of the note’s principal amount shall become due and payable.
In December 2018, the Company
issued short-term unsecured convertible promissory notes to investors and affiliates of the Company aggregating $346 in cash. The
short-term notes are mandatorily convertible into Common Stock at a conversion rate of the lesser of $0.50 per share or the price
per share of Common Stock, upon closing a new debt and/or equity financing of at least $1,000 in aggregate proceeds. The notes
bear interest at the rate of 10% per annum and are due December 31, 2019.
The Company used the funds received
from the above financing for working capital and general corporate purposes.
In June 2019, one noteholder sold
its unsecured note in the amount of $400 plus accrued interest of $72 to six current investors, one of which is a related party.
The new notes bear interest at the rate of 10% per annum and are due December 31, 2019.
During the three and six months
ended June 30, 2019, the Company accrued $63 and $123 of interest expense, $54 and $107, respectfully, was associated with the
notes, of which $14 and $27 was to related parties and $49 and $96 was to other investors. For the three and six months ended June
30, 2018, the Company accrued $42 and $80 of interest expense, $34 and $66 associated with the notes, of which $8 and $16, respectfully,
was to related parties and $34 and $64 was to other investors.
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
For the three and six months ended
June 30, 2019, the Company recorded $10 and $20 in debt discount amortization, respectively. For the three and six months ended
June 30, 2018, the Company recorded $28 and $52 in debt discount amortization, respectively.
|
|
5.
|
Stockholders’ Equity (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 June 30, 2019 and 2018, was approximately 13.4% and
5.91%, 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.
There were 40 stock options granted,
and no stock options exercised during the three and six months ended June 30, 2019.
The following table summarizes
the allocation of stock-based compensation expense related to stock option grants for the three and six months ended June 30:
|
|
|
Three Months Ended
June
30,
|
|
|
Six Months Ended
June
30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Research and development
|
|
$
|
8
|
|
|
$
|
23
|
|
|
$
|
17
|
|
|
$
|
54
|
|
|
General and administrative
|
|
$
|
32
|
|
|
$
|
1
|
|
|
$
|
73
|
|
|
$
|
14
|
|
|
Director and consultant options
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
17
|
|
|
$
|
7
|
|
|
Total stock-based compensation expense
|
|
$
|
48
|
|
|
$
|
26
|
|
|
$
|
107
|
|
|
$
|
75
|
|
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
|
|
6.
|
Stockholders’ Equity (Deficit) (continued)
|
A summary of option activity under
the Company’s plans for the six months ended June 30, 2019 and 2018 is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
Options
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Outstanding at January 1,
|
|
|
1,037
|
|
|
$
|
1.65
|
|
|
|
−
|
|
|
$
|
−
|
|
|
|
736
|
|
|
$
|
3.65
|
|
|
|
|
|
|
$
|
−
|
|
|
Granted
|
|
|
40
|
|
|
$
|
0.50
|
|
|
|
−
|
|
|
$
|
−
|
|
|
|
−
|
|
|
$
|
−
|
|
|
|
|
|
|
$
|
−
|
|
|
Forfeited or expired
|
|
|
−
|
|
|
$
|
−
|
|
|
|
−
|
|
|
$
|
−
|
|
|
|
(10
|
)
|
|
$
|
79.80
|
|
|
|
|
|
|
$
|
−
|
|
|
Outstanding at June 30
|
|
|
1,077
|
|
|
$
|
1.61
|
|
|
|
5.50
|
|
|
$
|
−
|
|
|
|
726
|
|
|
$
|
2.56
|
|
|
|
5.94
|
|
|
$
|
−
|
|
|
Vested and expected to vest at June 30
|
|
|
1,070
|
|
|
$
|
1.61
|
|
|
|
5.50
|
|
|
$
|
−
|
|
|
|
696
|
|
|
$
|
2.69
|
|
|
|
5.93
|
|
|
$
|
−
|
|
|
Exercisable at June 30
|
|
|
489
|
|
|
$
|
2.77
|
|
|
|
5.16
|
|
|
$
|
−
|
|
|
|
213
|
|
|
$
|
7.50
|
|
|
|
5.32
|
|
|
$
|
−
|
|
The following table summarizes
significant ranges of outstanding and exercisable options as of June 30, 2019:
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
|
Weighted
Average
Remaining Contractual Term
(in years)
|
|
|
Weighted
Average
Exercise Price
per share
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Exercise Price
per Share
|
|
|
$0.01 – $0.50
|
|
|
655
|
|
|
|
5.27
|
|
|
$
|
0.50
|
|
|
|
361
|
|
|
$
|
0.50
|
|
|
$0.51 – $625.00
|
|
|
422
|
|
|
|
5.85
|
|
|
$
|
3.33
|
|
|
|
128
|
|
|
$
|
9.20
|
|
|
Total
|
|
|
1,077
|
|
|
|
5.50
|
|
|
$
|
1.61
|
|
|
|
489
|
|
|
$
|
2.77
|
|
A summary of the status of the
Company’s non-vested shares as of June 30, 2019 is as follows:
|
Non-vested Shares
|
|
Shares
|
|
|
Weighted Average
Grant-Date
Fair Value
per share
|
|
|
Non-vested at January 1, 2019
|
|
|
718
|
|
|
$
|
0.54
|
|
|
Granted
|
|
|
40
|
|
|
$
|
0.50
|
|
|
Vested
|
|
|
(170
|
)
|
|
$
|
0.63
|
|
|
Non-vested at June 30, 2019
|
|
|
588
|
|
|
$
|
0.64
|
|
As of June 30, 2019, there was
a total of $149 of 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 2.12 years.
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
|
|
6.
|
Stockholders’ Equity (Deficit) (continued)
|
Warrants
A summary of the warrant activity for the six months
ended June 30 is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
Outstanding at beginning of period
|
|
|
1,828
|
|
|
$
|
2.08
|
|
|
|
1,878
|
|
|
$
|
2.46
|
|
|
Issued
|
|
|
985
|
|
|
$
|
0.50
|
|
|
|
−
|
|
|
$
|
−
|
|
|
Expired
|
|
|
−
|
|
|
$
|
−
|
|
|
|
(39
|
)
|
|
$
|
15.63
|
|
|
Outstanding at end of period
|
|
|
2,813
|
|
|
$
|
1.53
|
|
|
|
1,839
|
|
|
$
|
1.58
|
|
|
Exercisable at end of period
|
|
|
2,813
|
|
|
$
|
1.53
|
|
|
|
1,839
|
|
|
$
|
1.58
|
|
A summary of the status of the warrants outstanding
and exercisable as of June 30, 2019 is as follows:
|
Number of Warrants
|
|
Weighted
Average
Remaining
Life (years)
|
|
|
Weighted
Average
Exercise Price
per share
|
|
|
|
|
|
|
|
|
|
|
1,550
|
|
|
1.91
|
|
|
$
|
2.18
|
|
|
278
|
|
|
0.26
|
|
|
$
|
1.63
|
|
|
985
|
|
|
2.64
|
|
|
$
|
0.50
|
|
|
2,813
|
|
|
2.00
|
|
|
$
|
1.53
|
|
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, 2018, 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, 2018.
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, 2018, net losses aggregated approximately $2,974, and, at June 30, 2018, the
Company’s accumulated deficit was approximately $134,129.
For the three months
ended June 30, 2019, total revenue was $227, an increase of $1, or 0.4%, compared to total revenue of $226 in the prior year period.
For the six months ended June 30, 2019, total revenue was $425, a decrease of $15, or 3%, compared to total revenue of $440 in
the prior year period. The change in revenue for the six months ended June 30, 2019 is due primarily to a decrease in maintenance
revenue of $23, or 6%, compared to the prior year period, offset by an increase of $8, or 11%, in product sales.
The net loss for the
three months ended June 30, 2019 was $248, a decrease of $86, or 26%, compared to a net loss of $334 in the prior year period.
The three month loss from operations decreased $31, or 14%, to $189 compared to $220 in the prior year period. The decrease was
due to a net decrease in overhead expenses. For the six months ended June 30, 2019 the net loss was $540, a decrease of $77, or
12%, compared to a net loss of $617 in the prior year period. The six month loss from operations decreased $29, or 7%, to $410
compared to $439 in the prior year period. These decreases were due to the same factor discussed for the three month period above.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
In June 2019, one noteholder
sold its unsecured note in the amount of $400 plus accrued interest of $72 to six current investors, one of which is a related
party. The new notes bear interest at the rate of 10% per annum and are due December 31, 2019.
Critical Accounting Policies and Estimates
Refer to Item 7, “Management
Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2018 Form 10-K.
Effect of Recent Accounting Pronouncements
Accounting Standards
Updates issued in 2019 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 June 30, 2019, product revenue was $41, an increase of $7, or 21%, compared to product revenue of $34 in the prior year period.
The increase in revenue is primarily attributable to increases in transactional revenue compared to the prior year period. For
the three months ended June 30, 2019, maintenance revenue was $186, a decrease of $6, or 3%, compared to maintenance revenue of
$192 in the prior year period. The decrease is primarily due to a decrease in net maintenance fee renewals in the first calendar
quarter of 2019.
For the six months ended
June 30, 2019, product revenue was $81, an increase of $8, or 11%, compared to product revenue of $73 in the prior year period.
The increase in product revenue is primarily due to the same factors for the three-month period discussed above. For the six months
ended June 30, 2019, maintenance revenue was $344, a decrease of $23, or 6%, compared to maintenance revenue of $367 in the prior
year period. The decrease in maintenance revenue is primarily due to the factors discussed for the three-month period above.
Cost of Sales
For the three months
ended June 30, 2019, cost of sales was $18, an increase of $5, or 38%, compared to cost of sales of $13 in the prior year period.
The increase in cost of sales was due to an increase in direct labor related to transactional and maintenance revenue generating
contracts during the three months ended June 30, 2019, compared to the prior year period.
For the six months ended
June 30, 2019, cost of sales was $35, an increase of $11, or 46%, compared to cost of sales of $24 in the prior year period. The
increase in cost of sales was due to an increase in direct labor related to transactional and maintenance revenue generating contracts,
compared to the prior year period.
Operating expenses
Research and Development Expenses
For the three months
ended June 30, 2019, research and development expense was $181, a decrease of $57, or 24%, compared to research and development
expense of $238 in the prior year period. Research and development expenses consist primarily of salaries and related costs, outside
engineering, maintenance items, and allocated facilities expenses. Total salaries and related costs decreased $15, or 9%, due to
the reduction of one engineer in the fourth quarter of 2018. Other general expenses decreased $37, or 37%, due to reductions in
professional services and facilities costs compared to the prior year. The reductions in salary and overhead expenses were enhanced
by an increase of $5 in allocated labor costs. Total expenses, before allocations for the three months ended June 30, 2019, were
$202, a decrease of $52, or 20%, compared to $254 in the prior year period. The decrease in gross expenses is primarily due to
the factors discussed above and planned cost reductions put in place during the prior year.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
For the six months ended
June 30, 2019, research and development expense was $352, a decrease of $114, or 24%, compared to research and development expense
of $466 in the prior year period. Total expenses, before allocations to cost of sales, for the six months ended June 30, 2019,
were $394, a decrease of $107, or 21%, compared to $501 in the prior year period. The reasons for these decreases during the six-month
period ended June 30, 2019 are the same as for the three-month period discussed above.
Sales and Marketing Expense
For the three months
ended June 30, 2019, sales and marketing expense was $27, a decrease of $15, or 36%, compared to sales and marketing expense of
$42 in the prior year period. For the six months ended June 30, 2019, sales and marketing expense was $53, a decrease of $8, or
13%, compared to sales and marketing expense of $61 in the prior year period. These decreases were primarily attributable to reductions
in professional services and allocated expenses.
General and Administrative Expense
For the three months
ended June 30, 2019, general and administrative expense was $190, an increase of $37, or 24%, compared to general and administrative
expense of $153 in the prior year period. The increase was primarily due to an increase in stock option compensation of $31 or
3067%. Other general administrative expenses increased $6, or 4%, compared to the prior year period.
For the six months ended
June 30, 2019, general and administrative expense was $395, an increase of $67, or 20%, compared to general and administrative
expense of $328 in the prior year period. The increase was primarily due to the same factors discussed for the three-month period
ended June 30, 2018.
Other Income and Expense
For the three and six
months ended June 30, 2019, other income was $15 and $14, respectively, an increase of $59 and $58, respectively, compared to other
expense of $44 for the three and six months ended June 30, 2018. The change in other income and expense is due primarily to the
collection in 2019 of $13 of accounts receivable written off in the prior year, and other expenses in the prior year related to
a $37 termination fee for the early cancelation of an office lease and $7 disposal of certain fixed assets.
For the three months
ended June 30, 2019, interest expense was $63, an increase of $21, or 50% compared to interest expense of $42 in the prior year
period. For the six months ended June 30, 2019, interest expense was $123, an increase of $43, or 54%, compared to interest expense
of $80 in the prior year period. The increase in interest expense is primarily due to the increase in the amount of debt outstanding
for the six months ended June 30, 2019 compared to the prior year period.
Amortization of debt
discount was $10 and $20 for the three and six month periods ended June 30, 2019 compared to $28 and $52 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, 2019.
Liquidity and Capital Resources
At June 30, 2019, cash
and cash equivalents totaled $278, compared to cash and cash equivalents of $335 at December 31, 2018. The decrease in cash was
due to net cash used in operating activities of $54 and cash used in investing activities of $3 for the six month period ended
June 30, 2019. At June 30, 2019, total current assets were $358, compared to total current assets of $465 at December 31, 2018.
At June 30, 2019, the Company’s principal sources of funds included its aggregated cash and cash equivalents of $278.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
At June 30, 2019, accounts
receivable net, was $47, a decrease of $37, or 44%, compared to accounts receivable net of $84 at December 31, 2018. The decrease
is due primarily to faster collections and the timing of billings during the six months ended June 30, 2019.
At June 30, 2019, prepaid
expenses and other current assets were $33, a decrease of $13, or 28%, compared to prepaid expenses and other current assets of
$46 at December 31, 2018. The decrease is due primarily to the expensing of prepaid insurance premiums and minimizing the dollar
amount of new prepaid expenses incurred during the six-month period. At June 30, 2019, total current liabilities were $4,663, an
increase of $287, or 7%, compared to total current liabilities of $4,376 at December 31, 2018. At June 30, 2019, accounts payable
was $1,267, a decrease of $13, or 1%, compared to accounts payable of $1,280 at December 31, 2018. At June 30, 2019, accrued compensation
was $75, a decrease of $6, or 7%, compared to accrued compensation of $81 at December 31, 2018. The decreases are due primarily
to cost saving measures put in place by the Company. Other accrued liabilities were $665, an increase of $141, or 27%, from $524
at December 31, 2018 primarily due to the accrual of additional interest expense on the Company’s debt and certain franchise
taxes.
At June 30, 2019, current
deferred revenue was $426, an increase of $145, or 52%, compared to current deferred revenue of $281 at December 31, 2018. 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.
In June 2019, one noteholder
sold its unsecured note in the amount of $400 plus accrued interest of $72 to six current investors, one of which is a related
party. The new notes bear interest at the rate of 10% per annum and are due December 31, 2019.
The Company recorded
$10 and $28 in debt discount amortization for the three and six months ended June 30, 2019, respectively, related to the 2016 debt
financings.
The Company
incurred $63 and $123, respectively, of interest expense for the three and six months ended June 30, 2019, none of which was paid
in cash.
The Company had no material
commitments as of June 30, 2019.
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.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)