Item
1. Financial Statements.
iSign
Solutions Inc.
Condensed
Consolidated Balance Sheets
(In
thousands)
| |
March 31, | | |
December 31, | |
| |
2023 | | |
2022 | |
Assets | |
Unaudited | | |
| |
Current assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 28 | | |
$ | 68 | |
Accounts receivable, net of allowance of $1 at March 31, 2023, and $0 at December 31, 2022. | |
| 90 | | |
| 108 | |
Prepaid expenses and other current assets | |
| - | | |
| 19 | |
Total current assets | |
| 118 | | |
| 195 | |
Property and equipment, net | |
| 4 | | |
| 4 | |
Other assets | |
| 3 | | |
| 4 | |
Total assets | |
$ | 125 | | |
$ | 203 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Deficit | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 374 | | |
$ | 371 | |
Short-term debt – related party | |
| 1,599 | | |
| 1,547 | |
Short-term debt other | |
| 1,725 | | |
| 1,725 | |
Accrued compensation | |
| 163 | | |
| 69 | |
Deferred compensation | |
| 219 | | |
| 219 | |
Other accrued liabilities | |
| 1,954 | | |
| 1,850 | |
Deferred revenue | |
| 64 | | |
| 185 | |
Total current liabilities | |
| 6,098 | | |
| 5,966 | |
Other long-term liabilities | |
| 795 | | |
| 758 | |
Total liabilities | |
| 6,893 | | |
| 6,724 | |
Commitments and contingencies | |
| | | |
| | |
Stockholders’ deficit: | |
| | | |
| | |
Common stock, $0.01 par value; 2,000,000 shares authorized; 6,333 shares issued and outstanding at March 31, 2023, and 6,333 at December 31, 2022, respectively | |
| 63 | | |
| 63 | |
Treasury shares, 5 at March 31, 2023, and December 31, 2022, respectively | |
| (325 | ) | |
| (325 | ) |
Additional paid in capital | |
| 130,145 | | |
| 130,141 | |
Accumulated deficit | |
| (136,651 | ) | |
| (136,400 | ) |
Total stockholders’ deficit | |
| (6,768 | ) | |
| (6,521 | ) |
Total liabilities and stockholders’ deficit | |
$ | 125 | | |
$ | 203 | |
See
accompanying notes to these Unaudited Condensed Consolidated Financial Statements
iSign
Solutions Inc.
Condensed
Consolidated Statements of Operations
Unaudited
(In
thousands, except per share amounts)
| |
Three Months Ended | |
| |
March 31, | |
| |
2023 | | |
2022 | |
Revenue: | |
| | | |
| | |
Product | |
$ | 70 | | |
$ | 80 | |
Maintenance | |
| 157 | | |
| 175 | |
Total revenue | |
| 227 | | |
| 255 | |
| |
| | | |
| | |
Operating costs and expenses: | |
| | | |
| | |
Cost of sales: | |
| | | |
| | |
Product | |
| 2 | | |
| 2 | |
Maintenance | |
| 8 | | |
| 18 | |
Research and development | |
| 167 | | |
| 161 | |
Sales and marketing | |
| 85 | | |
| 54 | |
General and administrative | |
| 128 | | |
| 160 | |
Total operating costs and expenses | |
| 390 | | |
| 395 | |
| |
| | | |
| | |
Loss from operations | |
| (163 | ) | |
| (140 | ) |
| |
| | | |
| | |
Other income (expense) net | |
| 10 | | |
| ─ | |
Interest expense: | |
| | | |
| | |
Related party | |
| (43 | ) | |
| (39 | ) |
Other | |
| (55 | ) | |
| (52 | ) |
Loss before income tax expense | |
| (251 | ) | |
| (231 | ) |
| |
| | | |
| | |
Income tax expense | |
| ─ | | |
| ─ | |
Net loss | |
$ | (251 | ) | |
$ | (231 | ) |
Basic and diluted net loss per common share | |
$ | (0.04 | ) | |
$ | (0.04 | ) |
Weighted average common shares outstanding, basic and diluted | |
| 6,333 | | |
| 6,332 | |
See
accompanying notes to these Unaudited Condensed Consolidated Financial Statements
iSign Solutions Inc.
Condensed
Consolidated Statements of Stockholders’ Deficit
Unaudited
(In
thousands)
| |
Common Stock | | |
Treasury Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance January 1, 2022 | |
| 6,322 | | |
$ | 63 | | |
| 5 | | |
$ | (325 | ) | |
$ | 130,120 | | |
$ | (135,689 | ) | |
$ | (5,831 | ) |
Stock-based compensatio0n | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
$ | 7 | | |
| ─ | | |
| 7 | |
Cashless exercise of warrants | |
| 10 | | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | |
Net loss | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
| (231 | ) | |
| (231 | ) |
Balance, March 31, 2022 | |
| 6,332 | | |
$ | 63 | | |
| 5 | | |
$ | (325 | ) | |
$ | 130,127 | | |
$ | (135,920 | ) | |
$ | (6,055 | ) |
| |
Common Stock | | |
Treasury Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance January 1, 2023 | |
| 6,333 | | |
$ | 63 | | |
| 5 | | |
$ | (325 | ) | |
$ | 130,141 | | |
$ | (136,400 | ) | |
$ | (6,521 | ) |
Stock-based compensation | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
$ | 4 | | |
| ─ | | |
| 4 | |
Net loss | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
| ─ | | |
| (251 | ) | |
| (251 | ) |
Balance, March 31, 2023 | |
| 6,333 | | |
$ | 63 | | |
| 5 | | |
$ | (325 | ) | |
$ | 130,145 | | |
$ | (136,651 | ) | |
$ | (6,768 | ) |
See
accompanying notes to these Unaudited Condensed Consolidated Financial Statements
iSign
Solutions Inc.
Condensed
Consolidated Statements of Cash Flows
Unaudited
(In
thousands)
| |
Three
Months Ended
March 31, | |
| |
2023 | | |
2022 | |
Cash flows from operating activities: | |
| | |
| |
Net loss | |
$ | (251 | ) | |
$ | (231 | ) |
Adjustments to reconcile net loss to net cash provided by (Used in) operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| - | | |
| 1 | |
Stock-based compensation | |
| 4 | | |
| 7 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable, net | |
| 18 | | |
| 30 | |
Prepaid expenses and other assets | |
| 19 | | |
| 7 | |
Gain on Settlement of account payable | |
| 10 | | |
| - | |
Accounts payable | |
| (7 | ) | |
| 18 | |
Accrued compensation | |
| 94 | | |
| 19 | |
Other accrued and long-term liabilities | |
| 142 | | |
| 105 | |
Deferred revenue | |
| (121 | ) | |
| 143 | |
Net cash provided by operating activities | |
| (92 | ) | |
| 99 | |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Acquisition of property and equipment | |
| - | | |
| (3 | ) |
Net cash used in investing activities | |
| - | | |
| (3 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from of short-term debts related party | |
| - | | |
| - | |
Proceeds from the issuance of short-term debt other | |
| - | | |
| 50 | |
Payment of short-term debts related party | |
| 52 | | |
| (30 | ) |
Payment of short-term debts other | |
| - | | |
| (100 | ) |
Net cash provided by (used in) financing activities | |
| 52 | | |
| (80 | ) |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| (40 | ) | |
| 16 | |
Cash and cash equivalents at beginning of period | |
| 68 | | |
| 40 | |
Cash and cash equivalents at end of period | |
$ | 28 | | |
$ | 56 | |
See
accompanying notes to these Unaudited Condensed Consolidated Financial Statements
iSign
Solutions Inc.
Condensed
Consolidated Statements of Cash Flows (Continued)
Unaudited
(In
thousands)
| |
Three
Months Ended
March 31, | |
| |
2023 | | |
2022 | |
Supplementary disclosure of cash flow information | |
| | |
| |
Interest paid | |
$ | - | | |
$ | 28 | |
Income taxes paid | |
$ | - | | |
$ | - | |
Accounts receivable advance converted to convertible note | |
$ | - | | |
$ | - | |
See
accompanying notes to these Unaudited Condensed Consolidated Financial Statements
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 1. | Nature
of Business and Summary of Significant Accounting Policies |
Nature
of Business
iSign
Solutions Inc. and its subsidiary is a leading supplier of digital transaction management (DTM) software enabling the paperless, secure,
and cost-effective management and authentication of document-based transactions. iSign’s solutions encompass a wide array of functionality
and services, including electronic signatures, simple-to-complex workflow management and various options for biometric authentication.
These solutions are available across virtually all enterprise, desktop and mobile environments as a seamlessly integrated platform for
both ad-hoc and fully automated transactions. iSign’s platform can be deployed both on premise and as a cloud-based (“SaaS”)
service, with the ability to easily transition between deployment models. The Company is headquartered in San Jose, California.
The Company’s products include SignatureOne™ Ceremony™ Server, the iSign™ suite of products and services, including
iSign™ Enterprise and iSign™ Console™, and Sign-it™ programs.
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, 2022.
The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements. In
the opinion of management, the unaudited condensed consolidated financial statements included in this quarterly report reflect all adjustments
(consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of its financial position
at the dates presented and the Company’s results of operations and cash flows for the periods presented. The Company’s interim
results are not necessarily indicative of the results to be expected for the entire year.
Going
Concern
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. The Company has incurred significant cumulative losses since its inception and, at March 31, 2023, the Company’s accumulated
deficit was $136,651. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of March
31, 2023, the Company’s cash balance was $28. 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.
FORM 10-Q
(In thousands, except per share amounts)
Accounting
Changes and Recent Accounting Pronouncements
In
August 2020, the FASB issued ASU2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
Under ASU 2020-06,the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion
features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in
substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single
liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Similarly,
equity-classified convertible preferred stock instruments will be accounted for as single units of account in equity unless the conversion
feature needs to be bifurcated under Topic 815. The new guidance also made amendments to the earnings per share guidance in Topic 260,
Earnings Per Share, for convertible instruments, the most significant impact of which is requiring the use of the if-converted method
for diluted earnings per share calculation. Further, ASU 2020-06 made revisions to Subtopic 815-40, which provides guidance on how an
entity must determine whether a contract qualifies for a scope exception from derivative accounting. ASU 2020-06 is effective for fiscal
years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective
or a full retrospective approach. Effective January 1, 2022, the Company early adopted ASU 2020-06 using the modified retrospective approach.
Adoption of the new standard did not have a material impact on the Company’s financial statements or disclosures.
Reclassification
of Prior Year Presentation
The
Company is reclassifying its consolidated financial statements for the year ended December 31, 2022 (the “2022 Consolidated Financial
Statements”). The unaudited condensed financial statements represent a reclassification of certain prior year footnotes.
The
following table summarizes accounts receivable and revenue concentrations:
| |
Accounts Receivable
As of March 31, | | |
Total Revenue
As of March 31, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Customer #1 | |
| 94 | % | |
| 91 | % | |
| 36 | % | |
| 35 | % |
Customer #2 | |
| - | | |
| - | | |
| 30 | % | |
| 25 | % |
Customer #3 | |
| - | | |
| - | | |
| 22 | % | |
| 20 | % |
Total concentration | |
| 94 | % | |
| 91 | % | |
| 88 | % | |
| 80 | % |
The
following table summarizes sales concentrations:
| |
March 31,
2023 | | |
March 31,
2022 | |
Sales within the United States | |
| 36 | % | |
| 35 | % |
Sales outside of the United States | |
| 64 | % | |
| 65 | % |
Total | |
| 100 | % | |
| 100 | % |
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 3. | Property
and equipment: |
Property
and equipment net consists of the following at:
| |
March 31,
2023 | | |
December 31,
2022 | |
Computer equipment and software | |
$ | 32 | | |
$ | 32 | |
Less accumulated depreciation and amortization | |
| (28 | ) | |
| (28 | ) |
| |
$ | 4 | | |
$ | 4 | |
| 4. | Other
accrued liabilities: |
The
Company records other liabilities based on reasonable estimates for expenses, or payables that are known or estimated including deposits,
taxes, rents, and services.
The
Company had the following other accrued liabilities at:
| |
March 31,
2023 | | |
December 31,
2022 | |
Accrued interest | |
$ | 1,604 | | |
$ | 1,507 | |
Delaware Franchise tax | |
| 296 | | |
| 289 | |
Other | |
| 54 | | |
| 54 | |
Total | |
$ | 1,954 | | |
$ | 1,850 | |
The
Company had the following other long-term accrued liabilities at:
| |
March 31,
2023 | | |
December 31,
2022 | |
Management fees | |
$ | 795 | | |
$ | 758 | |
Total | |
$ | 795 | | |
$ | 758 | |
The
table below break down the Company’s debt into its related components at:
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
Advances | | |
Note Payable | | |
Total | | |
Advances | | |
Note Payable | | |
Total | |
Short-term debt related party | |
$ | 232 | | |
$ | 1,367 | | |
$ | 1,599 | | |
$ | 180 | | |
$ | 1,367 | | |
$ | 1,547 | |
Short-term debt other | |
$ | - | | |
$ | 1,725 | | |
$ | 1,725 | | |
$ | - | | |
$ | 1,725 | | |
$ | 1,725 | |
Advances:
In
January 2022, the Company received, from unrelated parties, demand notes aggregating $50 in cash. The notes bear interest at the rate
of 20% per annum. Principal and interest due shall be paid in full on demand, following ten (10) calendar day prior written notices starting
on March 15, 2022. These notes may be prepaid in whole or in part at any time without penalty, premium or other consideration by giving
at least five (5) business day prior written notice to the Holder.
On
January 19 and February 9, 2022, the Company repaid $15 and $15, respectively, of accounts receivable advances from related parties along
with $2 of accrued advance fees. In addition, during February 2022, the Company repaid $100 of demand notes to an unrelated party along
with 20% of accrued fees.
In
October 2022, the Company received, from related parties, advances aggregating $6 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 3%
advance fee.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
In
February and March 2023, the Company received, from related party, advances aggregating $52 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 2% advance fee.
Notes
payable:
In
January 2022, the Company received, from unrelated parties, demand notes aggregating $50 in cash. The notes bear interest at the rate
of 20% per annum. Principal and interest due shall be paid in full on demand, following ten (10) calendar day prior written notices starting
on March 15, 2022. These notes may be prepaid in whole or in part at any time without penalty, premium or other consideration by giving
at least five (5) business day prior written notice to the Holder. The notes were repaid in full plus $1 of accrued interest in February
2022.
In
June 2022, the Company paid the second installment in the amount of $45 plus accrued interest of $4 of a note entered into associated
with a settlement agreement dated July 1, 2020, with one of its vendors. The remaining $45 plus interest at the rate of 4% per annum
is due in June of 2023.
On
April 20, 2022, the Company issued an aggregate of $125 in unsecured convertible notes, $70 to related parties and $55 to other investors.
The unsecured notes are convertible by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2022.
On
August 2022, the Company issued an aggregate of $50 in unsecured convertible notes to other investors. The unsecured notes are convertible
by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2022.
On
November 2022, the Company issued an aggregate of $75 in unsecured convertible notes, $35 to related parties and $40 to other investors.
The unsecured notes are convertible by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2022.
On
December 2022, the Company issued an aggregate of $72 in unsecured convertible notes, $25 to related parties and $47 to other investors.
The unsecured notes are convertible by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2022.
During
the three months ended March 31, 2023, the Company accrued a total of $98 in interest expense, $75 on notes only, of which $34 was to
the related parties and $41 was to other investors in the three months ended 2023.
During
the three months ended March 31, 2022, the Company accrued a total of $91 in interest expense, $67 on notes only, of which $30 was to
the related parties and $37 was to other investors in the three months ended 2022.
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.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Forfeitures
of stock-based payment awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. The estimated average forfeiture rate for the three months ended March 31, 2023, and 2022 was approximately
4.78% and 4.78%, 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
over the vesting period of the options. No options were granted during the three months ended March 31, 2023, and 2022. There were no
stock options exercised during the three months ended March 31, 2023, and 2022, respectively.
The
following table summarizes the allocation of stock-based compensation expense for the three months ended March 31:
| |
2023 | | |
2022 | |
General and administrative | |
$ | 3 | | |
$ | 5 | |
Director | |
| 1 | | |
| 2 | |
Total stock-based compensation | |
$ | 4 | | |
$ | 7 | |
A
summary of option activity under the Company’s plans for the three months ended March 31, 2023, and 2022 is as follows:
| |
2023 | | |
2022 | |
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 | |
| 1,297 | | |
$ | 0.59 | | |
| - | | |
$ | - | | |
| 1,338 | | |
$ | 0.84 | | |
| - | | |
| 800 | |
Granted | |
| - | | |
$ | | | |
| - | | |
| | | |
| - | | |
$ | - | | |
| - | | |
| - | |
Canceled | |
| - | | |
$ | - | | |
| - | | |
| - | | |
| 16 | | |
$ | 28.12 | | |
| 24.57 | | |
| | |
Outstanding at March 31 | |
| 1,297 | | |
$ | 0.59 | | |
| 0.59 | | |
$ | - | | |
| 1,322 | | |
$ | 0.60 | | |
| 0.50 | | |
| 1,100 | |
Vested and expected to vest at March 31 | |
| 1,297 | | |
$ | 0.59 | | |
| 1.36 | | |
$ | - | | |
| 1,322 | | |
$ | 0.84 | | |
| 3.17 | | |
$ | 1,100 | |
Exercisable at March 31 | |
| 1,250 | | |
$ | 0.59 | | |
| 2.30 | | |
$ | - | | |
| 1,182 | | |
$ | 0.61 | | |
| 3.14 | | |
$ | 967 | |
The
following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2023:
| |
Options Outstanding | | |
Options Exercisable | |
Range of Exercise Prices | |
Number Outstanding | | |
Weighted Average Remaining Contractual Term (in years) | | |
Weighted Average Exercise Price | | |
Number Outstanding | | |
Weighted Average Exercise Price | |
$0.01 - $0.50 | |
| 910 | | |
| 0.50 | | |
$ | 2.39 | | |
| 863 | | |
$ | 0.50 | |
$0.51 - $1.00 | |
| 386 | | |
| 0.78 | | |
$ | 2.36 | | |
| 386 | | |
$ | 0.78 | |
$1.01 - $25.00 | |
| 1 | | |
| 10.00 | | |
$ | 0.00 | | |
| 1 | | |
$ | 10.00 | |
Total | |
| 1,297 | | |
| 0.59 | | |
$ | 2.38 | | |
| 1,250 | | |
$ | 0.59 | |
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
A
summary of the status of the Company’s non-vested shares as of March 31, 2023, is as follows:
Non-vested Shares | |
Shares | | |
Weighted Average Grant-Date Fair Value | |
Non-vested at January 1, 2022 | |
| 70 | | |
$ | 0.50 | |
Vested | |
| (23 | ) | |
$ | 0.50 | |
Non-vested at March 31, 2023 | |
| 47 | | |
$ | 0.50 | |
As
of March 31, 2023, there was $4 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 one year.
Warrants
The
Company did not issue any warrants during the three months ended March 31, 2023, and 2022.
A
summary of the warrant activity to purchase shares of Common Stock for the three months ended March 31 is as follows:
| |
2023 | | |
2022 | |
| |
Shares | | |
Weighted
Average
Exercise Price | | |
Shares | | |
Weighted
Average
Exercise Price | |
Outstanding at beginning of period | |
| 450 | | |
$ | 1.52 | | |
| 1,450 | | |
$ | 1.52 | |
Issued | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
Exercised | |
| - | | |
$ | - | | |
| (15 | ) | |
$ | 0.50 | |
Expired | |
| (15 | ) | |
$ | 0.50 | | |
| (985 | ) | |
$ | 0.50 | |
Outstanding at end of period | |
| 435 | | |
$ | 0.50 | | |
| 450 | | |
$ | 0.50 | |
Exercisable at end of period | |
| 435 | | |
$ | 0.50 | | |
| 450 | | |
$ | 0.50 | |
A
summary of the status of the warrants outstanding and exercisable to purchase shares of Common Stock as of March 31, 2023, is as follows:
Number of Shares | |
Weighted Average Remaining Life | | |
Weighted Average Exercise Price per share | |
15 | |
| 0.84 | | |
$ | 0.50 | |
10 | |
| 3.32 | | |
$ | 0.50 | |
425 | |
| 1.38 | | |
$ | 0.50 | |
450 | |
| 1.41 | | |
$ | 0.50 | |
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Phoenix
is the beneficial owner of approximately 16.9% of the Common Stock of the Company when calculated in accordance with Rule 13d-3.
On
April 20, 2022, the Company issued an aggregate of $70 in unsecured convertible notes to related parties. The unsecured notes are convertible
by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2022.
On
November 2022, the Company issued an aggregate of $35 in unsecured convertible notes to related parties. The unsecured notes are convertible
by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2023.
On
December 2022, the Company issued an aggregate of $35 in unsecured convertible notes to related parties. and $37 to other investors.
The unsecured notes are convertible by the holder into common stock at any time at a price per share of $1.00. 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 $1.00 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, 2023.
There
were no stock option grants to affiliates of the Company during the three months ended March 31, 2023, and 2022.
| 8. | Commitment
and Contingencies: |
Lease
commitments
The
Company maintains no leases. The Company rents approximately 120 square feet of office space in San Jose California. The office space
is on a month-to-month rental basis and can be surrendered at any time without penalty. Office rent expenses were approximately $7 and
$10 in the three months ended March 2023 and 2022, respectively.
Legal
Contingencies
There
are no material pending legal proceedings to which we are a party or to which any of our property is subject, nor are there any such
proceedings known to be contemplated by governmental authorities. None of our directors, officers or affiliates is involved in a proceeding
adverse to our business or has a material interest adverse to our business.
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.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
The
following table lists shares and warrants that were excluded from the calculation of diluted earnings per share as the inclusion of shares
from the assumed exercise of such options and warrants would be anti-dilutive:
| |
For the Three Months Ended | |
| |
March
31,
2023 | | |
March
31,
2022 | |
| |
| | |
| |
Common stock subject to outstanding options | |
| 1,297 | | |
| 1,322 | |
Common stock subject to outstanding warrants | |
| 435 | | |
| 450 | |
Common stock subject to outstanding convertible debt plus accrued interest | |
| 8,766 | | |
| 7,556 | |
In
April 2023, the Company repaid advances aggregating $59 of accounts receivable advances from related parties along with $1 of accrued
advance fees.
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, 2022, 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.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 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, 2022.
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, 2022, net losses aggregated approximately $1,197, and, at March
31, 2023, the Company’s accumulated deficit was approximately $135,651.
For
the three months ended March 31, 2023, total revenue was $227, a decrease of $28, or 11%, compared to total revenue of $255 in the prior
year period.
The
net loss for the three months ended March 31, 2023, was $251, an increase of $20, or 9%, compared to a net loss of $231 in the prior
year period. The increase in net loss is due to the decrease in revenue of $28, or 11%, and an increase in non-cash expenses of $7 or
8%, offset by the decrease in overhead expenses of $5 or 1% compared to the prior year.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Critical
Accounting Policies and Estimates
Refer
to Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2020
Form 10-K.
Effect
of Recent Accounting Pronouncement,
Accounting
Standards Updates issued in 2022 are not currently applicable to the Company, therefore implementation would not be expected to have
a material impact on the Company’s financial position, results of operations and cash flows.
Results
of Operations
Revenue
For
the three months ended March 31, 2023, product revenue was $70, a decrease of $10, or 13%, compared to product revenue of $80 in the
prior year period. For the three months ended March 31, 2023, maintenance revenue was $157, a decrease of $18, or 10%, compared to maintenance
revenue of $175 in the prior year period. The decrease is primarily due to discontinued annual maintenance.
Cost
of Sales
For
the three months ended March 31, 2023, cost of sales was $10, a decrease of $10, or 50%, compared to cost of sales of $20 in the prior
year. The decrease was primarily due to a decrease in direct engineering costs associated with engineering service revenue, compared
to the prior year.
Operating
Expenses
Research
and Development Expenses
For
the three months ended March 31, 2023, research and development expenses were $167, an increase of $6, or 4%, compared to research and
development expense of $161 in the prior year period.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Sales
and Marketing Expenses
For
the three months ended March 31, 2023, sales and marketing expenses were $85, an increase of $31, or 57%, compared to $54 in the prior
year period. The increase was primarily attributable to an increase in commissions.
General
and Administrative Expenses
For the three months ended March
31, 2023, general and administrative expenses were $128, a decrease of $32, or 20%, compared to general and administrative expenses of
$160 in the prior year period. The decrease was due primarily to lower professional services and Accounting & Audit fee in this period
compared to the prior year period.
Other
income and expense
Other income, expenses were $10 and $0 for the three
months ended March 31, 2023, and 2022.
Interest
expense for the three months ended March 31, 2023, was $98, an increase of $7, or 8% compared to interest expense of $91 in the prior
year period. The increase is due to an increase in short-term debt and other unpaid interest-bearing liabilities. Interest expense on
short-term debt associated with related parties was $43 and non-related party interest expense was $55 for the three months ended March
31, 2023, compared to $39 associated with related parties and non-related party interest expense of $52 in the prior year period.
Liquidity
and Capital Resources
At
March 31, 2023, cash and cash equivalents totaled $28, compared to cash and cash equivalents of $68 at December 31, 2022. At March 31,
2023, total current assets were $118 compared to total current assets of $195 at December 31, 2022. At March 31, 2023, the Company’s
principal sources of funds included its cash and cash equivalents aggregating $28.
At
March 31, 2023, accounts receivable net was $90, a decrease of $18, or 17%, compared to accounts receivable, net of $108 at December
31, 2022. The decrease is primarily due to the timing of collections of accounts receivable.
At
March 31, 2023, prepaid expenses and other current assets were $0, a decrease of $19, or 100%, compared to prepaid expenses and other
current assets of $19 at December 31, 2022. The decrease is due primarily to normal amortization of insurance premiums and other prepaid
for the current year.
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
At
March 31, 2023, accounts payable were $374, an increase of $3, or 1%, from the December 31, 2022, balance of $371.
At
March 31, 2023, accrued compensation was $163, an increase of $94, or 136%, compared to accrued compensation of $69 at December 31, 2022.
The increase is due primarily to the accrual of commissions during the quarter ended March 31, 2023.
Other
accrued liabilities were $1,954 at March 31, 2023, an increase of $104, or 6%, compared to other accrued liabilities of $1,850 at December
31, 2022, primarily due to the accrual of interest on the Company’s debt and certain franchise taxes.
Deferred
revenue was $64 at March 31, 2023, a decrease of $121, or 65%, compared to deferred revenue of $185 at December 31, 2022. The decrease
is primarily due to the late renewal of maintenance contracts offset by the recognition of maintenance revenues during the quarter ended
March 31, 2023.
At
March 31, 2023, total current liabilities were $6,098 an increase of $132, or 2%, compared to total current liabilities of $5,966 at
December 31, 2022. The increase is primarily due to the factors discussed above.
During
the three months ended March 31, 2023, the Company accrued a total of $98 in interest expense, $75 on notes only, of which $34 was to
the related parties and $41 was to other investors in the three months ended 2023.
During
the three months ended March 31, 2022, the Company accrued a total of $91 in interest expense, $67 on notes only, of which $30 was to
the related parties and $37 was to other investors in the three months ended 2022.
The
Company had no material commitments as of March 31, 2023.
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.