UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended:
OR
For the transition period from _____________ to _____________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
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.
| ☒ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
| ☒ | 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 ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Section 12b-2 of the exchange Act)
| Yes | ☐ | No |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Number of shares outstanding of the issuer’s Common Stock as of May
16, 2022:
INDEX
i
PART I–FINANCIAL INFORMATION
Item 1. Financial Statements.
iSign Solutions Inc.
Condensed Consolidated Balance Sheets
(In thousands)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Short-term debt – related party | ||||||||
| Short-term debt other | ||||||||
| Accrued compensation | ||||||||
| Deferred compensation | ||||||||
| Other accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term debt - other | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $ | ||||||||
| Treasury shares, | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to these Condensed Consolidated Financial Statements
1
iSign Solutions Inc.
Condensed Consolidated Statements of Operations
Unaudited
(In thousands, except per share amounts)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue: | ||||||||
| Product | $ | $ | ||||||
| Maintenance | ||||||||
| Total revenue | ||||||||
| Operating costs and expenses: | ||||||||
| Cost of sales: | ||||||||
| Product | ||||||||
| Maintenance | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total operating costs and expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) net | ─ | |||||||
| Interest expense: | ||||||||
| Related party | ( | ) | ( | ) | ||||
| Other | ( | ) | ( | ) | ||||
| Loss before income tax expense | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding, basic and diluted | ||||||||
See accompanying notes to these 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’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance January 1, 2021 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Stock-based compensation | ─ | ─ | $ | |||||||||||||||||||||||||
| Net loss | ─ | ─ | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance January 1, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Stock-based compensation | ─ | ─ | $ | |||||||||||||||||||||||||
| Cashless exercise of warrants | ─ | |||||||||||||||||||||||||||
| Net loss | ─ | ─ | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
See accompanying notes to these Condensed Consolidated Financial Statements
3
iSign Solutions Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued compensation | ||||||||
| Other accrued and long-term liabilities | ||||||||
| Deferred revenue | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from of short term debts related party | ─ | |||||||
| Proceeds from the issuance of short-term debt other | ||||||||
| Payment of short term debts related party | ( | ) | ( | ) | ||||
| Payment of short term debts other | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See accompanying notes to these Condensed Consolidated Financial Statements
4
iSign Solutions Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
Unaudited
(In thousands)
Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Supplementary disclosure of cash flow information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | ─ | $ | |||||
| Accounts receivable advance converted to convertible note | $ | ─ | $ | |||||
See accompanying notes to these Condensed Consolidated Financial Statements
5
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 1. | Nature of Business and Summary of Significant Accounting Policies |
Nature of Business
iSign Solutions Inc. and its subsidiary is a leading supplier of digital transaction management (DTM) software enabling the paperless, secure and cost-effective management and authentication of document-based transactions. iSign’s solutions encompass a wide array of functionality and services, including electronic signatures, simple-to-complex workflow management and various options for biometric authentication. These solutions are available across virtually all enterprise, desktop and mobile environments as a seamlessly integrated platform for both ad-hoc and fully automated transactions. iSign’s platform can be deployed both on premise and as a cloud-based (“SaaS”) service, with the ability to easily transition between deployment models. The Company is headquartered in San Jose, California. The Company’s products include SignatureOne™ Ceremony™ Server, the iSign™ suite of products and services, including iSign™ Enterprise and iSign™ Console™, and Sign-it™ programs.
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China and has since spread to a number of other countries, including the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Since March 11, 2020 states in the U.S., including California, where the Company is headquartered, have begun to open up as the result of the development of vaccines to thwart the spread of the virus. The COVID-19 outbreak has disrupted supply chains and affected production and sales across a wide range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and any further spread of the outbreak, continued impact on our customers, employees and vendors all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may have a continued impact on our financial condition or results of operations is uncertain.
Basis of Presentation
The financial information contained herein should be read in conjunction with the Company’s consolidated audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2021.
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, 2022 the Company’s accumulated deficit was $
6
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 1. | Nature of Business and Summary of Significant Accounting Policies (continued) |
There can be no assurance that the Company will be successful in securing adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms or in amounts required by the Company. If the Company is unable to obtain adequate capital resources to fund operations, it may be required to delay, scale back or eliminate some or all of its operations, which may have a material adverse effect on the Company’s business, results of operations and ability to operate as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Accounting Changes and Recent Accounting Pronouncements
Accounting Standards Updates issued in 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.
| 2. | Concentrations |
The following table summarizes accounts receivable and revenue concentrations:
| Accounts Receivable As of March 31, | Total Revenue As of March 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Customer #1 | % | % | % | % | ||||||||||||
| Customer #2 | % | % | ||||||||||||||
| Customer #3 | % | % | ||||||||||||||
| Total concentration | % | % | % | % | ||||||||||||
| 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 inclusion of shares from the assumed exercise of such options and warrants would be anti-dilutive:
| For the Three Months Ended | ||||||||
| March 31, 2022 | March 31, 2021 | |||||||
| Common stock subject to outstanding options | ||||||||
| Common stock subject to outstanding warrants | ||||||||
| Common stock subject to outstanding convertible debt plus accrued interest | ||||||||
7
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 4. | Debt |
Advances:
On January 19 and February 9, 2022, the
Company repaid $
Notes payable:
In January 2022, the Company received,
from unrelated parties, demand notes aggregating $
During the three months ended March 31,
2022, the Company accrued $
| 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 March 31, 2022 and 2021 was approximately
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, 2022 and 2021. There were no stock options exercised during the three months ended March 31, 2022 and 2021, respectively.
8
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 5. | Stockholders’ Deficit (continued) |
The following table summarizes the allocation of stock-based compensation expense for the three months ended March 31:
| 2022 | 2021 | |||||||
| General and administrative | $ | $ | ||||||
| Director | ||||||||
| Total stock-based compensation | $ | $ | ||||||
A summary of option activity under the Company’s plans for the three months ended March 31, 2022 and 2021 is as follows:
| 2022 | 2021 | |||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | |||||||||||||||||||||||||||||
| Granted | $ | $ | ||||||||||||||||||||||||||||||
| Canceled | $ | $ | ||||||||||||||||||||||||||||||
| Outstanding at March 31 | $ | $ | $ | |||||||||||||||||||||||||||||
| Vested and expected to vest at March 31 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Exercisable at March 31 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2022:
| 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 | $ | $ | ||||||||||||||||||
| $0.51 - $1.00 | $ | $ | ||||||||||||||||||
| $1.01 - $25.00 | $ | $ | ||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||
9
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 5. | Stockholders’ Deficit (continued) |
A summary of the status of the Company’s non-vested shares as of March 31, 2022 is as follows:
| Non-vested Shares | Shares | Weighted Average Grant-Date Fair Value | ||||||
| Non-vested at January 1, 2022 | $ | |||||||
| Vested | ( | ) | $ | |||||
| Non-vested at March 31, 2022 | $ | |||||||
As of March 31, 2022, there was $
Warrants
The Company did not issue any warrants during the three months ended March 31, 2022 and 2021.
A summary of the warrant activity to purchase shares of Common Stock for the three months ended March 31 is as follows:
| 2022 | 2021 | |||||||||||||||
| Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||
| Outstanding at beginning of period | $ | $ | ||||||||||||||
| Issued | $ | $ | ||||||||||||||
| Exercised | ( | ) | $ | $ | ||||||||||||
| Expired | ( | ) | $ | $ | ||||||||||||
| Outstanding at end of period | $ | $ | ||||||||||||||
| Exercisable at end of period | $ | $ | ||||||||||||||
A summary of the status of the warrants outstanding and exercisable to purchase shares of Common Stock as of March 31, 2022 is as follows:
| Number of Shares | Weighted Average Remaining Life | Weighted Average Exercise Price per share | ||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
10
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
| 6. | Subsequent event |
On April 20, 2022, the Company issued
an aggregate of $
Forward Looking Statements
Certain statements contained in this quarterly report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”, “hopes”, “intends”, “expects”, and other words of similar import, constitute “forward looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual events to differ materially from expectations. Such factors include those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, including the following:
| ● | Technological, engineering, manufacturing, quality control or other circumstances that could delay the sale or shipment of products; | |
| ● | Economic, business, market and competitive conditions in the software industry and technological innovations that could affect the Company’s business; | |
| ● | The Company’s inability to protect its trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and | |
| ● | General economic and business conditions and the availability of sufficient financing. |
Except as otherwise required by applicable laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, as a result of new information, future events or otherwise.
11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and notes thereto included in Part 1, Item 1 of this quarterly report on Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Company’s Annual report on Form 10-K for the fiscal year ended December 31, 2020.
Overview
The Company is a leading supplier of digital transaction management (DTM) software enabling the paperless, secure and cost-effective management of document-based transactions. iSign’s solutions encompass a wide array of functionality and services, including electronic signatures, biometric authentication and simple-to-complex workflow management. These solutions are available across virtually all enterprise, desktop and mobile environments as a seamlessly integrated platform for both ad-hoc and fully automated transactions. iSign’s software platform can be deployed both on-premise and as a cloud-based service, with the ability to easily transition between deployment models.
The Company was incorporated in Delaware in October 1986. Except for the year ended December 31, 2004, in each year since its inception the Company has incurred losses. For the two-year period ended December 31, 2021, net losses aggregated approximately $1,014, and, at March 31, 2022, the Company’s accumulated deficit was approximately $135,920.
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China and has since spread to a number of other countries, including the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Since March 11, 2020 states in the U.S., including California, where the Company is headquartered, have begun to open up as the result of the development of vaccines to thwart the spread of the virus. The COVID-19 outbreak has disrupted supply chains and affected production and sales across a wide range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and any further spread of the outbreak, continued impact on our customers, employees and vendors all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may have a continued impact on our financial condition or results of operations is uncertain.
For the three months ended March 31, 2022, total revenue was $255, a decrease of $4, or 2%, compared to total revenue of $259 in the prior year period.
The net loss for the three months ended March 31, 2022 was $231, an increase of $42, or 22%, compared to a net loss of $189 in the prior year period. The increase in net loss is due to the decrease in revenue of $4, or 2%, the increase in overhead expenses of $35 or 10%, offset by the decrease in cash and non-cash expense of $16 or 66% compared to the prior year.
12
Critical Accounting Policies and Estimates
Refer to Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2020 Form 10-K.
Effect of Recent Accounting Pronouncement,
Accounting Standards Updates issued in 2021 are not currently applicable to the Company, therefore implementation would not be expected to have a material impact on the Company’s financial position, results of operations and cash flows.
Results of Operations
Revenue
For the three months ended March 31, 2022, product revenue was $80, a decrease of $2, or 2%, compared to product revenue of $82 in the prior year period. For the three months ended March 31, 2022, maintenance revenue was $175, a decrease of $2, or 1%, compared to maintenance revenue of $177 in the prior year period. The decrease is primarily due to discontinued annual maintenance.
Cost of Sales
For the three months ended March 31, 2022, cost of sales was $20, a decrease of $10, or 33%, compared to cost of sales of $30 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, 2022, research and development expense was $161, an increase of $17, or 12%, compared to research and development expense of $144 in the prior year period. Research and development expenses consist primarily of salaries and related costs, outside engineering, maintenance items, and allocated facilities expenses. The increase in research and development expense was due to an increase in salaries and related expenses of $5, and a decrease in the expense allocation to cost of sales of $10, or 33%.Gross engineering expenses, before allocations to cost of sales, was $185 an increase of $10, or 6%, compared to $175 in the prior year period, due primarily to the increase in and other overhead expenses.
13
Sales and Marketing Expenses
For the three months ended March 31, 2022, sales and marketing expense was $54, an increase of $5, or 11%, compared to $49 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, 2022, general and administrative expense was $160, an increase of $13, or 9%, compared to general and administrative expense of $147 in the prior year period. The increase was due primarily to increase in professional service expenses of $21, offset by decreases of $8 in other overhead expenses, compared to the prior year period.
Other income and expense
Other income, expense was $0 and $1 for the three months ended March 31, 2022 and 2021.
Interest expense for the three months ended March 31, 2021 was $91, an increase of $12, or 15% compared to interest expense of $79 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 $39 and non-related party interest expense was $52 for the three months ended March 31, 2022, compared to $24 associated with related parties and non-related party interest expense of $55 in the prior year period.
Liquidity and Capital Resources
At March 31, 2022, cash and cash equivalents totaled $56, compared to cash and cash equivalents of $40 at December 31, 2021. The increase in cash was due to cash flows from operating activities of $99. The increased amounts were offset by $80 used in financing activities and $3 used in investing activities. At March 31, 2022, total current assets were $165 compared to total current assets of $186 at December 31, 2021. At March 31, 2022, the Company’s principal sources of funds included its cash and cash equivalents aggregating $56.
At March 31, 2022, accounts receivable net, was $94, a decrease of $30, or 24%, compared to accounts receivable, net of $124 at December 31, 2021. The decrease is primarily due to timing of collections of accounts receivable.
At March 31, 2022, prepaid expenses and other current assets were $15, a decrease of $7, or 32%, compared to prepaid expenses and other current assets of $22 at December 31, 2021. The decrease is due primarily to normal amortization of insurance premiums and other prepaid for the current year.
At March 31, 2022, accounts payable were $396, an increase of $18, or 5%, from the December 31, 2021 balance of $378. The increase is due primarily to professional fees for engineering services and accounting fees related to the prior year audit.
At March 31, 2022, accrued compensation was $88, an increase of $19, or 28%, compared to accrued compensation of $69 at December 31, 2021. The increase is due primarily to the accrual of commissions during the quarter ended March 31, 2022.
Other accrued liabilities were $1,556 at March 31, 2022, an increase of $68, or 5%, compared to other accrued liabilities of $1,488 at December 31, 2021, primarily due to the accrual of interest on the Company’s debt and certain franchise taxes.
14
Deferred revenue was $339 at March 31, 2022, an increase of $143, or 73%, compared to deferred revenue of $196 at December 31, 2021. The increase is primarily due to the renewal of maintenance contracts offset by the recognition of maintenance revenues during the quarter ended March 31, 2022.
At March 31, 2022, total current liabilities were $5,542, an increase of $168, or 3%, compared to total current liabilities of $5,374 at December 31, 2021. The increase is primarily due to the factors discussed above.
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 notice starting on March 15, 2022. These note 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.
.
During the three months ended March 31, 2022, the Company accrued $91 of interest expense, $67 associated with the outstanding secured and unsecured convertible promissory notes, of which $30 was to related parties and $37 was to other investors. For the three months ended March 31, 2021, the Company accrued $79 of interest expense, $67 associated with its outstanding notes, of which $24 was to related parties and $43 was to other investors.
The Company had no material commitments as of March 31, 2022.
The Company has experienced recurring losses from operations that raise a substantial doubt about its ability to continue as a going concern. There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to it when needed, or if available, will be available on favorable terms or in amounts required by it. If the Company is unable to obtain adequate capital resources to fund operations, it may be required to delay, scale back or eliminate some or all of its operations, which may have a material adverse effect on the Company’s business, results of operations and ability to operate as a going concern.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Interest Rate Risk
The Company did not enter into any short-term security investments during the three months ended March 31, 2022.
Foreign Currency Risk
From time to time, the Company makes certain capital equipment or other purchases denominated in foreign currencies. As a result, the Company’s cash flows and earnings are exposed to fluctuations in interest rates and foreign currency exchange rates. The Company attempts to limit these exposures through operational strategies and generally has not hedged currency exposures. During the three months ended March 31, 2022 and 2021, 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.
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Management identified the following control deficiencies that constitute material weaknesses that are not fully remediated as of the filing date of this report:
As a small company with limited resources that are mainly focused on the development and sales of software products and services, iSign does not employ a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material misstatement to occur in future periods while it employs the current number of personnel in its finance department.
The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedures are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The Company considered these limitations during the development of its disclosure controls and procedures, and will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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.
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| Item 6. | Exhibits. |
| (a) | Exhibits. |
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| * | Filed herewith. |
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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 |
| May 16, 2022 | /s/ Mike Engmann | |
| Date | Mike Engmann | |
| (Principal Financial Officer and Officer Duly Authorized to Sign on Behalf of the Registrant) |
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