Item 1. Financial Statements
iSign Solutions Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
164
|
|
|
$
|
389
|
|
Accounts receivable, net of allowance of $0 at September 30, 2017 and $63 at
December 31, 2016, respectively
|
|
|
83
|
|
|
|
137
|
|
Prepaid expenses and other current assets
|
|
|
30
|
|
|
|
56
|
|
Total current assets
|
|
|
277
|
|
|
|
582
|
|
Property and equipment, net
|
|
|
12
|
|
|
|
20
|
|
Intangible assets, net
|
|
|
27
|
|
|
|
269
|
|
Other assets
|
|
|
17
|
|
|
|
17
|
|
Total assets
|
|
$
|
333
|
|
|
$
|
888
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Deficit
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,295
|
|
|
$
|
1,368
|
|
Accrued compensation
|
|
|
200
|
|
|
|
257
|
|
Other accrued liabilities
|
|
|
622
|
|
|
|
505
|
|
Deferred revenue
|
|
|
377
|
|
|
|
258
|
|
Short-term capital lease
|
|
|
4
|
|
|
|
4
|
|
Total current liabilities
|
|
|
2,498
|
|
|
|
2,392
|
|
Long-term debt, net
|
|
|
1,284
|
|
|
|
707
|
|
Deferred revenue long-term
|
|
|
210
|
|
|
|
315
|
|
Long-term capital lease
|
|
|
7
|
|
|
|
9
|
|
Other long-term liabilities
|
|
|
7
|
|
|
|
13
|
|
Total liabilities
|
|
|
4,006
|
|
|
|
3,436
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Deficit:
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 20,000 shares authorized; 5,762 shares issued and outstanding at September 30, 2017 and December 31, 2016
|
|
|
58
|
|
|
|
58
|
|
Treasury shares, 5 at September 30, 2017 and December 31, 2016
|
|
|
(325
|
)
|
|
|
(325
|
)
|
Additional paid-in capital
|
|
|
128,983
|
|
|
|
128,884
|
|
Accumulated deficit
|
|
|
(131,839
|
)
|
|
|
(130,615
|
)
|
Accumulated other comprehensive loss
|
|
|
(14
|
)
|
|
|
(14
|
)
|
Total iSign stockholders' deficit
|
|
|
(3,137
|
)
|
|
|
(2,012
|
)
|
Non-controlling interest
|
|
|
(536
|
)
|
|
|
(536
|
)
|
Total deficit
|
|
|
(3,673
|
)
|
|
|
(2,548
|
)
|
Total liabilities and deficit
|
|
$
|
333
|
|
|
$
|
888
|
|
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
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
65
|
|
|
$
|
50
|
|
|
$
|
157
|
|
|
$
|
273
|
|
Maintenance
|
|
|
165
|
|
|
|
171
|
|
|
|
498
|
|
|
|
580
|
|
Total revenue
|
|
|
230
|
|
|
|
221
|
|
|
|
655
|
|
|
|
853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
4
|
|
|
|
12
|
|
|
|
11
|
|
|
|
66
|
|
Maintenance
|
|
|
23
|
|
|
|
77
|
|
|
|
92
|
|
|
|
294
|
|
Research and development
|
|
|
299
|
|
|
|
282
|
|
|
|
884
|
|
|
|
968
|
|
Sales and marketing
|
|
|
28
|
|
|
|
52
|
|
|
|
136
|
|
|
|
381
|
|
General and administrative
|
|
|
241
|
|
|
|
368
|
|
|
|
920
|
|
|
|
1,709
|
|
Total operating costs and expenses
|
|
|
595
|
|
|
|
791
|
|
|
|
2,043
|
|
|
|
3,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(365
|
)
|
|
|
(570
|
)
|
|
|
(1,388
|
)
|
|
|
(2,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
68
|
|
|
|
(11
|
)
|
Gain on sale of intangible asset
|
|
|
-
|
|
|
|
-
|
|
|
|
239
|
|
|
|
-
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party
|
|
|
(6
|
)
|
|
|
(10
|
)
|
|
|
(18
|
)
|
|
|
(91
|
)
|
Other
|
|
|
(23
|
)
|
|
|
(9
|
)
|
|
|
(53
|
)
|
|
|
(107
|
)
|
Amortization of debt discount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
(20
|
)
|
|
|
(58
|
)
|
Other
|
|
|
(18
|
)
|
|
|
(15
|
)
|
|
|
(52
|
)
|
|
|
(225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on derivative liability
|
|
|
-
|
|
|
|
156
|
|
|
|
-
|
|
|
|
330
|
|
Net loss
|
|
|
(423
|
)
|
|
|
(449
|
)
|
|
|
(1,224
|
)
|
|
|
(2,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of beneficial conversion feature: Preferred Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(115
|
)
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(646
|
)
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(667
|
)
|
Net loss attributable to common stockholders
|
|
$
|
(423
|
)
|
|
$
|
(449
|
)
|
|
$
|
(1,224
|
)
|
|
$
|
(4,285
|
)
|
Basic and diluted net loss per common share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(1.53
|
)
|
Weighted average common shares outstanding,basic and diluted
|
|
|
5,762
|
|
|
|
5,498
|
|
|
|
5,762
|
|
|
|
2,794
|
|
See accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of
Cash Flows
Unaudited
(In thousands)
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,224
|
)
|
|
$
|
(2,727
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
252
|
|
|
|
276
|
|
Debt discount amortization
|
|
|
72
|
|
|
|
283
|
|
Stock-based compensation
|
|
|
99
|
|
|
|
139
|
|
Gain on sale of intangible asset
|
|
|
(239
|
)
|
|
|
-
|
|
Gain on derivative liability
|
|
|
-
|
|
|
|
(330
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
54
|
|
|
|
(75
|
)
|
Prepaid expenses and other assets
|
|
|
26
|
|
|
|
307
|
|
Accounts payable
|
|
|
(73
|
)
|
|
|
602
|
|
Accrued compensation
|
|
|
(57
|
)
|
|
|
1
|
|
Other accrued and long-term liabilities
|
|
|
109
|
|
|
|
369
|
|
Deferred revenue
|
|
|
14
|
|
|
|
(115
|
)
|
Net cash used in operating activities
|
|
|
(967
|
)
|
|
|
(1,270
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(2
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of short-term notes payable
|
|
|
-
|
|
|
|
100
|
|
Proceeds from issuance of long-term notes
|
|
|
505
|
|
|
|
240
|
|
Proceeds from the sale of intangible assets
|
|
|
239
|
|
|
|
-
|
|
Proceeds from issuance of common stock and warrants, net of issuance costs of $780
|
|
|
-
|
|
|
|
424
|
|
Payment of short-term debt
|
|
|
-
|
|
|
|
(200
|
)
|
Net cash provided by financing activities
|
|
|
744
|
|
|
|
564
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(225
|
)
|
|
|
(706
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
389
|
|
|
|
846
|
|
Cash and cash equivalents at end of period
|
|
$
|
164
|
|
|
$
|
140
|
|
See accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
iSign Solutions Inc.
Condensed Consolidated Statements of
Cash Flows (Continued)
Unaudited
(In thousands)
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Supplementary disclosure of cash flow information
|
|
|
|
|
|
|
Interest paid
|
|
$
|
9
|
|
|
$
|
40
|
|
Income tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing and investing transactions
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment through capital lease
|
|
$
|
|
|
|
$
|
15
|
|
Discount on long term notes payable
|
|
$
|
|
|
|
$
|
103
|
|
Conversion of convertible notes plus accrued interest into 683 shares of Common Stock
|
|
$
|
|
|
|
$
|
1,188
|
|
Conversion of deferred
compensation plus accrued interest into 286 shares of Common Stock
|
|
$
|
|
|
|
$
|
498
|
|
Exchange of long-term
unsecured convertible promissory notes for long-term unsecured convertible promissory notes
|
|
$
|
200
|
|
|
$
|
-
|
|
Exchange of long-term
unsecured convertible promissory notes for long-term secured convertible promissory notes
|
|
$
|
250
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Dividends on Preferred Stock
|
|
$
|
|
|
|
$
|
1,313
|
|
Accretion of beneficial conversion feature on issuance of Preferred Stock
|
|
$
|
|
|
|
$
|
-
|
|
Accretion of beneficial conversion feature on issuance of Preferred Stock dividends
|
|
$
|
|
|
|
$
|
245
|
|
See accompanying notes to these Unaudited
Condensed Consolidated Financial Statements
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
FORM 10-Q
|
1.
|
Nature of business and summary of significant accounting policies
|
Nature of Business
iSign Solutions Inc. and its
subsidiary is a leading supplier of digital transaction management (DTM) software enabling the paperless, secure and cost-effective
management and authentication of document-based transactions. iSign’s solutions encompass a wide array of functionality and
services, including electronic signatures, simple-to-complex workflow management and various options for biometric authentication.
These solutions are available across virtually all enterprise, desktop and mobile environments as a seamlessly integrated platform
for both ad-hoc and fully automated transactions. iSign’s platform can be deployed both on premise and as a cloud-based 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, 2016.
The accompanying unaudited
condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements. In the
opinion of management, the unaudited condensed consolidated financial statements included in this quarterly report reflect all
adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of its
financial position at the dates presented and the Company’s results of operations and cash flows for the periods presented.
The Company’s interim results are not necessarily indicative of the results to be expected for the entire year.
Going Concern
The accompanying unaudited
condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The
Company has incurred significant cumulative losses since its inception and, at September 30, 2017, the Company’s accumulated
deficit was $131,839. The Company has primarily met its working capital needs through the sale of debt and equity securities. As
of September 30, 2017, the Company’s cash balance was $164. 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)
FORM 10-Q
The following table summarizes
accounts receivable and revenue concentrations:
|
|
|
Accounts Receivable
As of
September 30,
|
|
|
Total Revenue
for the three
months ended
September 30,
|
|
|
Total Revenue
for the nine
months
ended
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Customer #1
|
|
|
53
|
%
|
|
|
13
|
%
|
|
|
10
|
%
|
|
|
-
|
|
|
|
10
|
%
|
|
|
-
|
|
|
Customer #2
|
|
|
18
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Customer #3
|
|
|
-
|
|
|
|
-
|
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
12
|
%
|
|
Customer #4
|
|
|
-
|
|
|
|
56
|
%
|
|
|
15
|
%
|
|
|
16
|
%
|
|
|
16
|
%
|
|
|
24
|
%
|
|
Customer #5
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
%
|
|
|
16
|
%
|
|
|
16
|
%
|
|
|
12
|
%
|
|
Customer #6
|
|
|
-
|
|
|
|
17
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Customer #7
|
|
|
25
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total concentration
|
|
|
96
|
%
|
|
|
86
|
%
|
|
|
54
|
%
|
|
|
46
|
%
|
|
|
56
|
%
|
|
|
48
|
%
|
The Company
performs an intangible asset impairment analysis at least annually or whenever circumstances or events indicate such assets might
be impaired. The Company would recognize an impairment charge in the event the net book value of such assets exceeded the future
undiscounted cash flows attributable to such assets.
Management completed an analysis
of the Company’s intangible assets as of December 31, 2016. Based on that analysis, the Company concluded that no impairment
of the carrying value of the intangible assets existed. The Company believes that no events or circumstances changed during the
three and nine months ended September 30, 2017 that would impact this conclusion.
Amortization of intangible
asset costs was $81 and $242 for the three and nine-month periods ended September 30, 2017 and $81 and $242 for the three and nine-month
periods ended September 30, 2016.
The following table summarizes the intangible
assets:
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Net Value
|
|
|
Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Net Value
|
|
|
Amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
$
|
6,745
|
|
|
$
|
(6,718
|
)
|
|
$
|
27
|
|
|
$
|
6,745
|
|
|
$
|
(6,476
|
)
|
|
$
|
269
|
|
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.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
FORM 10-Q
|
4.
|
Net loss per share (continued)
|
The following table lists shares
and warrants that were excluded from the calculation of diluted earnings per share as the exercise of such options and warrants
would be antidilutive:
|
|
|
For the Three and Nine Months Ended
|
|
|
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
566
|
|
|
|
71
|
|
|
Warrants
|
|
|
1,878
|
|
|
|
1,756
|
|
Advances:
In February 2017, the Company
received, from investors and affiliates of the Company, advances aggregating $120 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 the advances were repaid in March 2017, along with $6 in advance fees per
the agreement. The advance fees were recorded as interest expense in the quarter ended March 31, 2017.
Notes payable:
In November 2016, the Company
issued long-term unsecured convertible promissory notes to investors and affiliates of the Company aggregating $700 in cash. The
Company also issued the same long-term notes to affiliates in exchange for an aggregate of $200 in demand notes that had been issued
earlier in September and October of 2016. The long-term notes are mandatorily convertible into Common Stock at a conversion rate
of the lesser of $1.30 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 6% per annum and are due December 31, 2018. The Company
issued warrants to purchase 277 shares of Common Stock in connection with these long-term notes. The Company ascribed a value of
$204 to the 277 warrants and recorded a discount to the long-term notes and a corresponding amount to additional paid-in capital.
The discount is being amortized using the effective interest method over the term of the notes.
In May 2017, the Company issued
long-term secured convertible promissory notes to investors and affiliates of the Company aggregating $505 in cash. In addition,
certain investors and affiliates of the Company that had taken part in the November 2016 financing discussed above and that also
participated in the May 2017 financing, exchanged $250 of unsecured convertible promissory notes received in the November 2016
financing for the same secured notes issued in the May 2017 financing. 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, 2018
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.
The Company used the funds received
from the above financing for working capital and general corporate purposes.
The Company recorded $24 and $72
in debt discount amortization for the three and nine months ended September 30, 2017, respectively, related to the above 2016 debt
financings.
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
FORM 10-Q
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.
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.
The Company granted 502 stock
options during the nine months ended September 30, 2017 at a weighted average exercise price of $0.50 per share. There were no
stock options exercised during the three and nine months ended September 30, 2017.
There were no stock options granted,
and no stock options exercised during the three and nine months ended September 30, 2016.
The fair value calculations for
the stock options granted are based on the following assumptions:
|
|
|
Nine Months Ended
September 30, 2017
|
|
|
Risk free interest rate
|
|
|
1.56
|
%
|
|
Expected life (years)
|
|
|
5.3
|
|
|
Expected volatility
|
|
|
212.15
|
%
|
|
Expected dividends
|
|
|
None
|
|
The following table summarizes
the allocation of stock-based compensation expense related to stock option grants for the three and nine-month periods ended September
30, 2017 and 2016.
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Research and development
|
|
$
|
15
|
|
|
$
|
12
|
|
|
$
|
35
|
|
|
$
|
46
|
|
|
Sales and marketing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
General and administrative
|
|
|
19
|
|
|
|
15
|
|
|
|
39
|
|
|
|
59
|
|
|
Director options
|
|
|
10
|
|
|
|
5
|
|
|
|
25
|
|
|
|
19
|
|
|
Stock-based compensation expense
|
|
$
|
44
|
|
|
$
|
32
|
|
|
$
|
99
|
|
|
$
|
139
|
|
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
FORM 10-Q
|
6.
|
Equity (Deficit) (continued)
|
A summary of option
activity under the Company’s plans as of September 30, 2017 and 2016 is as follows:
|
|
|
2017
|
|
|
2016
|
|
|
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,
|
|
|
71
|
|
|
$
|
45.21
|
|
|
|
|
|
|
$
|
-
|
|
|
|
82
|
|
|
$
|
45.35
|
|
|
|
|
|
|
$
|
-
|
|
|
Granted
|
|
|
502
|
|
|
$
|
0.50
|
|
|
|
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
Forfeited or expired
|
|
|
(7
|
)
|
|
$
|
7.21
|
|
|
|
|
|
|
$
|
-
|
|
|
|
(11
|
)
|
|
$
|
45.66
|
|
|
|
|
|
|
$
|
-
|
|
|
Outstanding at September 30
|
|
|
566
|
|
|
$
|
6.02
|
|
|
|
6.09
|
|
|
$
|
-
|
|
|
|
71
|
|
|
$
|
45.30
|
|
|
|
3.41
|
|
|
$
|
-
|
|
|
Vested and expected to vest at September 30
|
|
|
520
|
|
|
$
|
6.04
|
|
|
|
6.04
|
|
|
$
|
-
|
|
|
|
70
|
|
|
$
|
46.14
|
|
|
|
3.36
|
|
|
$
|
-
|
|
|
Exercisable at September 30
|
|
|
106
|
|
|
$
|
29.05
|
|
|
|
3.92
|
|
|
$
|
-
|
|
|
|
58
|
|
|
$
|
49.70
|
|
|
|
2.95
|
|
|
$
|
-
|
|
The following table summarizes
significant ranges of outstanding and exercisable options as of September 30, 2017:
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
|
Weighted Average Remaining Contractual Life (in years)
|
|
|
Weighted Average Exercise Price Per Share
|
|
|
Number Outstanding
|
|
|
Weighted Average Exercise Price Per Share
|
|
|
$0.01 – $25.00
|
|
|
498
|
|
|
|
6.60
|
|
|
$
|
0.56
|
|
|
|
42
|
|
|
$
|
1.02
|
|
|
$25.01 - $625.00
|
|
|
68
|
|
|
|
2.33
|
|
|
$
|
46.17
|
|
|
|
64
|
|
|
$
|
47.25
|
|
|
Total
|
|
|
566
|
|
|
|
6.09
|
|
|
$
|
6.02
|
|
|
|
106
|
|
|
$
|
29.05
|
|
The following table summarizes
the Company’s non-vested option shares as of September 30, 2017:
|
Non-vested Option Shares
|
|
Shares
|
|
|
Weighted Average
Grant-Date
Fair Value
|
|
|
Non-vested at January 1, 2017
|
|
|
11
|
|
|
$
|
23.01
|
|
|
Granted
|
|
|
502
|
|
|
$
|
0.50
|
|
|
Forfeited
|
|
|
(6
|
)
|
|
$
|
0.75
|
|
|
Vested
|
|
|
(47
|
)
|
|
$
|
0.99
|
|
|
Non-vested at September 30, 2017
|
|
|
460
|
|
|
$
|
0.76
|
|
As of September 30, 2017, there was $101 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 2.1 years.
iSign Solutions Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(In thousands, except per share amounts)
FORM 10-Q
|
6.
|
Equity (Deficit) (continued)
|
Warrants
A summary of the warrant activity for the nine months
ended September 30 is as follows:
|
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
|
|
|
Shares
|
|
|
Weighted Average Exercise Price Per Share
|
|
|
Shares
|
|
|
Weighted Average Exercise Price Per Share
|
|
|
Outstanding at beginning of period
|
|
|
1,882
|
|
|
$
|
2.52
|
|
|
|
205
|
|
|
$
|
35.51
|
|
|
Issued
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,551
|
|
|
$
|
2.18
|
|
|
Expired
|
|
|
(4
|
)
|
|
$
|
34.38
|
|
|
|
-
|
|
|
$
|
-
|
|
|
Outstanding at end of period
|
|
|
1,878
|
|
|
$
|
1.53
|
|
|
|
1,756
|
|
|
$
|
5.27
|
|
|
Exercisable at end of period
|
|
|
1,878
|
|
|
$
|
1.53
|
|
|
|
1,756
|
|
|
$
|
5.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the status of the warrants outstanding
and exercisable as of September 30, 2017 is as follows:
Number of shares exercisable
under Warrants
|
|
|
Weighted Average
Remaining Life Years
|
|
|
Weighted Average Exercise
Price per share
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
0.01
|
|
|
$
|
0.42
|
|
|
277
|
|
|
|
0.42
|
|
|
$
|
0.24
|
|
|
1,551
|
|
|
|
3.04
|
|
|
$
|
1.80
|
|
|
1,878
|
|
|
|
2.57
|
|
|
$
|
1.53
|
|
iSign Solutions Inc.
(In thousands, except per share amounts)
FORM 10-Q
Forward Looking Statements
Certain statements contained
in this quarterly report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”,
“hopes”, “intends”, “expects”, and other words of similar import, constitute “forward
looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors which may cause actual events to differ materially from expectations. Such factors
include those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, 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, 2016.
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
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, 2016, net losses attributable to common stockholders aggregated approximately
$12,676, and, at September 30, 2017, the Company's accumulated deficit was approximately $131,839.
For the three months
ended September 30, 2017, total revenue was $230, an increase of $9, or 4%, compared to total revenue of $221 in the prior year
period. For the nine months ended September 30, 2017, total revenue was $655, a decrease of $198, or 23%, compared to total revenue
of $853 in the prior year period. The increase in revenue for the three months ended September 30, 2017 is due to higher product
revenue partially offset by a decrease in maintenance revenue. The decrease in revenue for the nine months ended September 30,
2017 is due to decreases in both product and maintenance revenue compared to the prior year.
For the three months ended September
30, 2017, the loss from operations was $365, a decrease of $205, or 36%, compared with a loss from operations of $570 in the prior
year period. The decrease in the loss for the three months ended September 30, 2017 was due primarily to cost reductions put in
place in the beginning of 2016. For the nine months ended September 30, 2017, the loss from operations was $1,388, a decrease
of $1,177, or 46%, compared with a loss from operations of $2,565 in the prior year period. The decrease in the loss from operations
for the nine months ended September 30, 2017 is primarily attributable to the same factors discussed above.
iSign Solutions Inc.
(In thousands, except per share amounts)
FORM 10-Q
Critical Accounting Policies and Estimates
Refer to Item 7, “Management
Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2016 Form 10-K.
Results of Operations
Revenue
For the three months
ended September 30, 2017, product revenue was $65, an increase of $15, or 30%, compared to product revenue of $50 in the prior
year period. The increase in product revenue is primarily due to an increase in product licensing revenue. For the three months
ended September 30, 2017, maintenance revenue was $165, a decrease of $6, or 4%, compared to maintenance revenue of $171 in the
prior year period. This decrease is primarily due to the non-renewal of certain maintenance contracts.
For the nine months
ended September 30, 2017, product revenue was $157, a decrease of $116, or 42%, compared to product revenue of $273 in the prior
year period. The decrease in product revenue is primarily attributable to a reduction in product licensing sales compared to the
prior year. For the nine months ended September 30, 2017, maintenance revenue was $498, a decrease of $82, or 14%, compared to
maintenance revenue of $580 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 September 30, 2017, cost of sales
was $27, a decrease of $62, or 70%, compared to cost of sales of $89 in the prior year period. The decrease in cost of sales was
primarily due to a decrease in direct labor related to maintenance revenue generating contracts during the three months ended September
30, 2017 compared to the prior year period.
For the nine months ended September 30, 2017,
cost of sales was $103, a decrease of $257, or 71%, compared to cost of sales of $360 in the prior year period. The decrease in
cost of sales was due to a decrease 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 September 30,
2017, research and development expense was $299, an increase of $17, or 6%, compared to research and development expense of $282
in the prior year period. Research and development expenses consist primarily of salaries and related costs, outside engineering,
maintenance items, and allocated facilities expenses. Research and development expenses increased primarily due to lower allocation
of labor costs to cost of sales in comparison to the prior year. Total expenses, before allocations for the three months ended
September 30, 2017, were $340, a decrease of $41, or 11%, compared to $381 in the prior year period.
For the nine months ended September 30, 2017, research and development
expense was $884, a decrease of $84, or 9%, compared to research and development expense of $968 in the prior year period. The
most significant factors in the decrease include a decrease in total salaries and benefits due to the reduction of one engineer
in the third quarter of the prior year and reduction in the time commitment of a second engineer working part time. Total expenses,
before allocations to cost of sales, for the nine months ended September 30, 2017, were $1,028 a decrease of $340, or 25%, compared
to $1,368 in the prior year period.
iSign Solutions Inc.
(In thousands, except per share amounts)
FORM 10-Q
Sales and Marketing Expense
For the three months
ended September 30, 2017, sales and marketing expense was $28, a decrease of $24, or 46%, compared to sales and marketing expense
of $52 in the prior year period. For the nine months ended September 30, 2017, sales and marketing expense was $136, a decrease
of $245, or 64%, compared to sales and marketing expense of $381 in the prior year period. These decreases were primarily attributable
to salary and related cost savings implemented in 2016 as part of the Company’s transition to a go to market strategy principally
focused on partner integrations.
General and Administrative Expense
For the three months ended September 30, 2017, general and administrative
expense was $241, a decrease of $127, or 35%, compared to general and administrative expense of $368 in the prior year period.
The decrease was primarily due to reductions in salaries and related expense and professional services including legal and accounting
fees compared to the prior year period.
For the nine months
ended September 30, 2017, general and administrative expense was $920, a decrease of $789, or 46%, compared to general and administrative
expense of $1,709 in the prior year period. The decrease was primarily due to lower legal, accounting and other offering expenses
related to the public offering that was completed May 2016, as well as decreases in salaries and certain related expense.
Other Income and Expense, net
For the nine-months ended September 30, 2017,
the Company recorded a gain on sale of the source code and rights to one of the Company’s older toolkit software products,
net of related costs, of $239. The purchaser granted the Company a fully-paid, royalty-free, worldwide, irrevocable license to
use the software to support current and existing customers and partners of the Company. The Company did not retain the right to
distribute the software either as a source code or as an object code. However, the Company retained the right to create new non-
toolkit software from the original source code and to market, sell and distribute the new non- toolkit software in the ordinary
course of business to its customers and partners.
For the three months
ended September 30, 2017, interest expense was $29, an increase of $10, compared to interest expense of $19 in the prior year period.
The increase is due to an increase in long-term debt compared to the prior year period.
For the nine months
ended September 30, 2017, interest expense was $71, a decrease of $127, compared to interest expense of $198 in the prior year
period. The decrease was due to the conversion of long-term debt into common stock of the Company in May of 2016.
For the three months
ended September 30, 2017, amortization of debt discount was $24, an increase of $7, compared to $17 in the prior year period. The
increase was due to the amortization of the warrants issued along with long-term debt in November of 2016.
For the nine months
ended September 30, 2017, amortization of debt discount was $72, a decrease of $211, compared to $283 in the prior year period.
The decrease was due to the write-off of un-amortized debt discount associated with the conversion of notes payable into shares
of Common Stock in May 2016.
For the three and nine months ended September 30, 2017, the
gain on derivative liability was $0, a decrease of $156 and $330, respectively, compared to prior year periods.
iSign Solutions Inc.
(In thousands, except per share amounts)
FORM 10-Q
Liquidity and Capital Resources
At September 30, 2017, cash and cash equivalents
totaled $164, compared to cash and cash equivalents of $389 at December 31, 2016. The decrease in cash was primarily due to net
cash used in operating activities of $967 and the acquisition of property and equipment of $2. The use of cash was partially offset
by the proceeds from the issuance of $505 in long-term debt during the nine-month period and the $239 in proceeds from the sale
of intangible assets during the nine months ended September 30, 2017. At September 30, 2017, total current assets were $277, compared
to total current assets of $582 at December 31, 2016. At September 30, 2017, the Company's principal sources of funds included
its aggregated cash and cash equivalents of $164.
At September 30, 2017,
accounts receivable net, was $83, a decrease of $54, or 39%, compared to accounts receivable net of $137 at December 31, 2016.
The decrease is due primarily to the timing of billings during the three months ended September 30, 2017.
At September 30, 2017,
prepaid expenses and other current assets were $30, a decrease of $26, or 46%, compared to prepaid expenses and other current assets
of $56 at December 31, 2016. The decrease is due primarily to the expensing of prepaid director and officer insurance premiums
during the nine-month period. At September 30, 2017, total current liabilities were $2,498, an increase of $106, or 4%, compared
to total current liabilities of $2,392 at December 31, 2016. At September 30, 2017, accounts payable was $1,295, a decrease of
$73, or 5%, compared to accounts payable of $1,368 at December 31, 2016. At September 30, 2017, accrued compensation was $200,
a decrease of $57, or 22%, compared to accrued compensation of $257 at December 31, 2016. The decreases are due primarily to cost
saving measures put in place by the Company. Other accrued liabilities were $622, an increase of $117, or 23%, from $505 at December
31, 2016 due primarily to the accrual of additional deferred professional services.
At September 30, 2017,
current deferred revenue as of September 30, 2017 was $377, an increase of $119, or 46%, compared to current deferred revenue of
$258 at December 31, 2016. 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 February 2017, the
Company received, from investors and affiliates of the Company, advances aggregating $120 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 Company used the funds received from the above advances for working capital and general corporate purposes.
The receivables were collected and the advances were repaid in March 2017, along with $6 in advance fees per the agreement.
In May 2017, the Company
issued long-term secured convertible promissory notes to investors and affiliates of the Company aggregating $505 in cash. In addition,
certain investors and affiliates of the Company that had taken part in the November 2016 financing discussed above and that also
participated in the May 2017 financing, exchanged $250 of unsecured convertible promissory notes received in the November 2016
financing for $250 of the same secured notes issued in the May 2017 financing. The secured notes are mandatorily convertible into
Common Stock at a conversion rate of the lesser of $.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, 2018
and are secured by an interest in all the Company's right, 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.
The Company is using
the funds received from the above financing for working capital and general corporate purposes.
The Company recorded
$24 and $72 in debt discount amortization for the three and nine months ended September 30, 2017, respectively, related to the
2016 debt financings.
The Company
incurred $29 and $71, respectively, of interest expense for the three and nine months ended September 30, 2017, of which $3 and
$9, respectively were paid in cash.
iSign Solutions Inc.
(In thousands, except per share amounts)
FORM 10-Q
The Company had the
following material commitments as of September 30, 2017:
Contractual obligations
|
|
Total
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
Operating lease commitments (1)
|
|
$
|
213
|
|
|
$
|
25
|
|
|
$
|
101
|
|
|
$
|
87
|
|
|
$
|
─
|
|
Capital lease commitments
|
|
|
15
|
|
|
|
1
|
|
|
|
6
|
|
|
|
6
|
|
|
|
2
|
|
|
|
$
|
228
|
|
|
$
|
26
|
|
|
$
|
107
|
|
|
$
|
93
|
|
|
$
|
2
|
|
|
1.
|
In November 2016, the Company moved its principal facilities to San Jose, California, pursuant
to a lease that expires in 2019. In addition to monthly rent, the facilities are subject to additional rental payments for utilities
and other costs above the base amount.
|
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.
(In thousands, except per share amounts)
FORM 10-Q