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-premises 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 September 30, 2022, the Company's
accumulated deficit was approximately $136,270.
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19)
originated in Wuhan, China and has since spread to several 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 disrupt
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 September 30, 2022, total revenue was $233, compared
to total revenue of $282 in the prior year period. For the nine months ended
September 30, 2022, total revenue was $716, a decrease of $94, or 12%, compared
to total revenue of $810 in the prior year period. The change in revenue for the
nine months ended September 30, 2022, is primarily due to a decrease in product
revenue of $38 or 13%, 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 nine months was $472, a decrease of $56, or 12% compared to $528
in the prior year.
The net loss for the three months ended September 30, 2022, was $161, an
increase of $159, or 7950%, compared to a net loss of $2 in the prior year
period. The three-month loss from operations increased by $24, or 57%, to $66
compared to $42 in the prior year period. The decrease was due to the decrease
in revenue and a net increase in overhead expenses. For the nine months ended
September 30, 2022, the net loss was $581, an increase of $220, or 61%, compared
to a net loss of $361 in the prior year period. The nine-month loss from
operations increased $65, or 27%, to $306 compared to $241 in the prior year
period.
- 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 September 30, 2022, product revenue was $91, a
decrease of $10, or 10%, compared to product revenue of $101 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 September 30, 2022, maintenance revenue was $142, a decrease of $39, or
21%, compared to maintenance revenue of $181 in the prior year period.
For the nine months ended September 30, 2022, product revenue was $244, a
decrease of $38, or 13%, compared to product revenue of $282 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 nine months ended September 30,
2022, maintenance revenue was $472, a decrease of $56, or 11%, compared to
maintenance revenue of $528 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 September 30, 2022, cost of sales was $46, an
increase of $23, or 100%, compared to cost of sales of $23 in the prior year
period. The increase in cost of sales was due to an increase in direct labor
related to maintenance contracts during the three months ended September 30,
2022, compared to the prior year period.
For the nine months ended September 30, 2022, cost of sales was $88, an increase
of $5, or 6%, compared to cost of sales of $83 in the prior year period. The
increase in cost of sales was due to an increase 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 September 30, 2022, research and development expense
was $138, a decrease of $16, or 11%, compared to research and development
expense of $156 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 September 30, 2022, were $190, an
increase of $6, or 4%, compared to $183 in the prior year period. The increase
in gross expenses is primarily due to the increase in employee benefit during
the year 2022.
For the nine months ended September 30, 2022, research and development expense
was $443, an increase of $7, or 2%, compared to research and development expense
of $436 in the prior year period. Total expenses, before allocations to cost of
sales, for the nine months ended September 30, 2022, were $540, an increase of
$12, or 2%, compared to $528 in the prior year period. The reasons for these
increase during the nine-month period ended September 30, 2022, are the same as
for the three-month period discussed above.
- 13 -
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
Sales and Marketing Expense
For the three months ended September 30, 2022, sales and marketing expense was
$7, a decrease of $8, or 53%, compared to sales and marketing expense of $15 in
the prior year period. For the nine months ended September 30, 2022, sales and
marketing expense was $74, a decrease of $12, or 14%, compared to sales and
marketing expense of $86 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 September 30, 2022, general and administrative
expense was $108, a decrease of $22, or 17%, compared to general and
administrative expense of $130 in the prior year period. The decrease was
primarily due to a decrease in professional services, Investor relations and
employee benefit expense from period to period.
For the nine months ended September 30, 2022, general and administrative expense
was $417, a decrease of $29, or 7%, compared to general and administrative
expense of $446 in the prior year period. The decrease was primarily due to the
same as for the three-month period discussed above.
.
Other Income and Expense
For the three and nine months ended September 30, 2022, other expense was $0 and
$0, respectively, a decrease of $125 and $125, respectively, compared to other
expense of $125 and $125 for the three and nine months ended September 30, 2021.
The decrease in other income for three and nine months of 2022 was due to no PPP
loan waiver this year.
For the three months ended September 30, 2022, interest expense was $95, an
increase of $10, or 12% compared to interest expense of $85 in the prior year
period. For the nine months ended September 30, 2022, interest expense was $275,
an increase of $31, or 13%, compared to interest expense of $244 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 nine months ended September
30, 2022, compared to the prior year period.
Amortization of debt discount was $0 for the three- and nine-month periods ended
September 30, 2022, compared to $0 in the same periods of the prior year,
respectively.
Income tax expense for the three and nine months ended September 30, 2022, and
2021 were $0 and $1, respectively.
Liquidity and Capital Resources
On September 30, 2022, cash and cash equivalents totaled $71, compared to cash
and cash equivalents of $40 on December 31, 2021. The increase in cash was due
primarily to $16 used in operating activities offset by $3 in cash used in
investing activities and $50 provided by financing for the nine-month period
ended September 30, 2022. On September 30, 2022, total current assets were $158,
compared to total current assets of $186 on December 31, 2021. On September 30,
2022, the Company's principal sources of funds included its aggregated cash and
cash equivalents of $71.
On September 30, 2022, accounts receivable net, was $69, a decrease of $55 or
44%, compared to accounts receivable net of $124 on December 31, 2021. The
decrease is due primarily due to faster collection times for accounts
receivable.
On September 30, 2022, prepaid expenses and other current assets were $18, a
decrease of $4, or 18%.
On September 30, 2022, total current liabilities were $5,840, an increase of
$466, or 9%, compared to total current liabilities of $5,374 on December 31,
2021.
- 14 -
iSign Solutions Inc.
FORM 10-Q
(In thousands, except per share amounts)
On September 30, 2022, accounts payable was $376, a decrease of $2, or 1%,
compared to accounts payable of $378 on December 31, 2021.
On September 30, 2022, accrued compensation was $59, a decrease of $10, or 14%,
compared to accrued compensation of $69 on December 31, 2021.
On September 30, 2022, deferred revenue was $319, an increase of $123, or 63%,
compared to deferred revenue of $196 on December 31, 2021. Deferred revenue
primarily reflects advance payments for maintenance fees from the Company's
licensees that are 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, September of
2023.
The Company incurred $95 and $275, respectively, of interest expense for the
three and nine months ended September 30, 2022, of which was $0 and $32,
respectively, was paid in cash.
The Company had no material commitments as of September 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 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. 
