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, 2021.
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 June 30, 2022, the Company's
accumulated deficit was approximately $136,109.
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.
New variants of COVID-19 have surfaced around the world, including the United
States which may cause additional closures of economies depending on how
virulent the new strains are. New COVID-19 variant outbreaks may further
disrupted supply chains and affected production and sales across a wide range of
industries. The extent of the impact of new COVID-19 outbreaks on our
operational and financial performance will depend on certain developments,
including the duration and further spread of the outbreak, continued impact on
our customers, employees and vendors all of which are uncertain and cannot be
predicted.
For the three months ended June 30, 2022, total revenue was $228, compared to
total revenue of $268 in the prior year period. For the six months ended June
30, 2022, total revenue was $483, a decrease of $44, or 8%, compared to total
revenue of $527 in the prior year period. The change in revenue for the six
months ended June 30, 2022 is primarily due to a decrease in product revenue of
$28 or 15%, compared to the prior year period. The decrease in product revenue
is the result of no SOW transaction for this year. Maintenance revenue for the
six months was $330, a decrease of $16, or 5% compared to $346 in the prior
year.
The net loss for the three months ended June 30, 2022 was $189, an increase of
$20, or 12%, compared to a net loss of $169 in the prior year period. The three
month loss from operations increased by $11, or 12%, to $100 compared to $89 in
the prior year period. The decrease was due to the decrease in revenue and a net
decrease in overhead expenses. For the six months ended June 30, 2022 the net
loss was $420, an increase of $61, or 17%, compared to a net loss of $359 in the
prior year period. The six month loss from operations increased $40, or 20%, to
$240 compared to $200 in the prior year period. This increase was due to the
same factors described for the three month period above.
- 12 -
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 Pronouncements
Accounting Standards Updates issued in 2021 are being evaluated by the Company,
however, implementation is not expected to have a material impact on the
Company's financial position, results of operations and cash flows.
Results of Operations
Revenue
For the three months ended June 30, 2022, product revenue was $73, a decrease of
$26, or 25%, compared to product revenue of $99 in the prior year period. The
decrease in revenue is primarily attributable to decreases in SOW transactional
revenue compared to the prior year period. For the three months ended June 30,
2022, maintenance revenue was $155, a decrease of $14, or 8%, compared to
maintenance revenue of $169 in the prior year period.
For the six months ended June 30, 2022, product revenue was $153, a decrease of
$28, or 15%, compared to product revenue of $181 in the prior year period. The
decrease in product revenue is primarily due to the same factors for the
three-month period discussed above. For the six months ended June 30, 2022,
maintenance revenue was $330, a decrease of $16, or 5%, compared to maintenance
revenue of $346 in the prior year period. The decrease in maintenance revenue is
primarily due to less maintenance contracts.
Cost of Sales
For the three months ended June 30, 2022, cost of sales was $22, a decrease of
$8, or 27%, compared to cost of sales of $30 in the prior year period. The
decrease in cost of sales was due to a decrease in direct labor related to
maintenance contracts during the three months ended June 30, 2022, compared to
the prior year period.
For the six months ended June 30, 2022, cost of sales was $42, a decrease of
$18, or 30%, compared to cost of sales of $60 in the prior year period. The
decrease in cost of sales was due to a decrease in direct labor related to
revenue from SOW contracts, compared to the prior year period.
Operating expenses
Research and Development Expenses
For the three months ended June 30, 2022, research and development expense was
$144, an increase of $9, or 6%, compared to research and development expense of
$135 in the prior year period. Research and development expenses consist
primarily of salaries and related costs, outside engineering, maintenance items,
and allocated facilities expenses. Total expenses, before allocations for the
three months ended June 30, 2022, were $168, a decrease of $1, or 0%, compared
to $169 in the prior year period. The decrease in gross expenses is primarily
due to the factors discussed above and certain cost saving measures put in place
in the current year to safeguard against possible negative repercussions of the
COVID-19 pandemic.
For the six months ended June 30, 2022, research and development expense was
$305, an increase of $26, or 9%, compared to research and development expense of
$279 in the prior year period. Total expenses, before allocations to cost of
sales, for the six months ended June 30, 2021, were $353, an increase of $10, or
3%, compared to $343 in the prior year period. The reasons for these increase
during the six-month period ended June 30, 2022 are the same as for the
three-month period discussed above. The decrease in total expenses was offset by
a reduction the amount of direct labor allocated to cost of sales during the six
month period.
- 13 -
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Sales and Marketing Expense
For the three months ended June 30, 2022, sales and marketing expense was $13, a
decrease of $9, or 42%, compared to sales and marketing expense of $22 in the
prior year period. For the six months ended June 30, 2022, sales and marketing
expense was $67, a decrease of $4, or 6%, compared to sales and marketing
expense of $71 in the prior year period. These decreases are primarily
attributable to a decrease in commission expense due to low renewal of
maintenance contracts.
General and Administrative Expense
For the three months ended June 30, 2021, general and administrative expense was
$149, a decrease of $21, or 12%, compared to general and administrative expense
of $170 in the prior year period. The decrease was primarily due to a decrease
in overhead expense from period to period.
For the six months ended June 30, 2022, general and administrative expense was
$309, a decrease of $8, or 3%, compared to general and administrative expense of
$317 in the prior year period. The decrease was due to the reduction in
accounting and auditing services and investor relations expense accounts.
Other Income and Expense
For the three and six months ended June 30, 2022, other expense was $0 and $0,
respectively, an increase of $0 and $1, respectively, compared to other expense
of $0 and $1 for the three and six months ended June 30, 2021
For the three months ended June 30, 2022, interest expense was $89, an increase
of $9, or 11% compared to interest expense of $80 in the prior year period. For
the six months ended June 30, 2022, interest expense was $180, an increase of
$21, or 13%, compared to interest expense of $159 in the prior year period. The
increase in interest expense is primarily due to the increase in the amount of
debt outstanding for the three and six months ended June 30, 2022 compared to
the prior year period.
Amortization of debt discount was $0 for the three and six month periods ended
June 30, 2022 compared to $0 in the same periods of the prior year,
respectively.
Income tax expense for the three and six months ended June 30, 2022 and 2021
were $0 and $1, respectively.
Liquidity and Capital Resources
At June 30, 2022, cash and cash equivalents totaled $165, compared to cash and
cash equivalents of $40 at December 31, 2021. The increase in cash was due
primarily to $128 provided by operating activities offset by $3 in cash used in
investing activities and $0 used in financing for the six month period ended
June 30, 2022. At June 30, 2022, total current assets were $285, compared to
total current assets of $186 at December 31, 2021. At June 30, 2021, the
Company's principal sources of funds included its aggregated cash and cash
equivalents of $165.
At June 30, 2021, accounts receivable net, was $108, a decrease of $16 or 13%,
compared to accounts receivable net of $124 at December 31, 2021. The decrease
is due primarily due to faster collection times for accounts receivable.
At June 30, 2022, prepaid expenses and other current assets were $12, a decrease
of $10, or 45%. The Company has been working on minimizing the dollar amount of
new prepaid expenses incurred during the six-month period in light of the
financial uncertainty surrounding the current COVID-19 pandemic.
At June 30, 2022, total current liabilities were $5,852, an increase of $478, or
9%, compared to total current liabilities of $5,374 at December 31, 2021.
- 14 -
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
At June 30, 2022, accounts payable was $371, a decrease of $7, or 2%, compared
to accounts payable of $378 at December 31, 2021.
At June 30, 2022, accrued compensation was $74, an increase of $5, or 7%,
compared to accrued compensation of $69 at December 31, 2021. The increase is
due primarily to the accrual of commissions during the quarter ended June 30,
2022
At June 30, 2022, deferred revenue was $471, an increase of $275, or 140%,
compared to deferred revenue of $196 at December 31, 2021. Deferred revenue
primarily reflects advance payments for maintenance fees from the Company's
licensees that are generally recognized as revenue by the Company when all
obligations are met or over the term of the maintenance agreement, whichever is
longer. Deferred revenue is recorded when the Company receives advance payment
from its customers.
In June 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 reaming $45 plus
interest at the rate of 4% per annum is due in two installments, June of 2023.
The Company incurred $89 and $180, respectively, of interest expense for the
three and six months ended June 30, 2022, of which was $28 and $4, respectively,
was paid in cash.
The Company had no material commitments as of June 30, 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.
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ISIGN SOLUTIONS INC. 
