iSign Solutions Inc. - Quarter Report: 2016 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

                                        

FORM 10-Q

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

iSign Solutions Inc.

(Exact name of registrant as specified in its charter)

          (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.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 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)

Number of shares outstanding of the issuer's Common Stock, as of May 16, 2016: 187,463.

INDEX

Item 1. Financial Statements.

iSign Solutions Inc.

Condensed Consolidated Balance Sheets

 (In thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

iSign Solutions Inc.

Condensed Consolidated Statements of Operations

Unaudited

(In thousands, except per share amounts)

See accompanying notes to these Condensed Consolidated Financial Statements

iSign Solutions Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited

(In thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

iSign Solutions Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

Unaudited

(In thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

 

1.	Nature of Business and Summary of Significant Accounting Policies

On January 21, 2016, iSign Solutions Inc. (the "Company" or "iSign") filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the "Certificate of Amendment") with the Secretary of State of the State of Delaware to effect a 1-for-1,250 reverse split of the Company's outstanding shares of common stock.  The reverse split became effective on January 22, 2016. The information with respect to common stock for the period ended March 31, 2015 has been retroactively restated to give effect to the 1-for-1,250 reverse split.

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 Redwood Shores, 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.

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, 2015.

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, 2016 the Company's accumulated deficit was $128,448. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of March 31, 2016, the Company's cash balance was $313. 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,

1.	Nature of Business and Summary of Significant Accounting Policies (continued)

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

On February 25, 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) 2016, Leases (Topic 842) intended to improve financial reporting about leasing transactions. which requires companies to report capital and operating leases with a term of 12 Months or longer on their balance sheets. Disclosure requirements of the leasing arrangement will include qualitative and quantitative information about the amounts recorded in the financial statements.

Implementation of ASU 2016 is not expected to have a material impact on the Company's financial position, results of operations and cash flows.

The following table summarizes accounts receivable and revenue concentrations:

3.	Intangible Assets, Net

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 technology as of December 31, 2015. 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 months ended March 31, 2016 that would impact this conclusion.

Amortization of intangible asset costs was $81 for the three months ended March 31, 2016 and $87 for the three months ended March 31, 2015, respectively.

The following table summarizes the intangible assets balance:

4.	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 and the conversion of such preferred shares would be anti-dilutive:

5.

Debt

Short-term notes payable:

In fourth quarter of 2015, the Company entered into unsecured convertible promissory note purchase agreements with investors and affiliates of the Company aggregating $1,268 in cash.

The principal amount of the unsecured convertible promissory notes issued in connection with the Company's unsecured debt financing in November and December 2015 bear interest at a rate of 24% per year, are due on August 25, 2016 and are convertible into shares of our Common Stock at the holder's option (i) prior to maturity, in the event the Company consummates an SEC registered public offering of shares of common stock, at a conversion price that is 30% less than the price to the public of the Common Stock in the public offering, or (ii) up to 60 days after maturity, at a conversion price based upon a Company pre-money valuation of $5,000,000, as determined by taking into account the outstanding shares of Common Stock and Preferred Stock, on an as-converted basis, on the maturity date of the note; provided, that following such conversion after the maturity date, each holder that converted such note will also receive cash payments, payable from 1.5% for each $100,000 of notes converted of the revenue received by the Company from its European customer to be paid quarterly on a pro rata basis, with any and all other holders who converted their notes; provided, further, however, that the total amount of cash payments that the holder will be entitled to receive will not exceed three times the aggregate principal amount of each holder's note.

The conversion option included within the unsecured convertible promissory notes was deemed to be an embedded derivative, which required the Company to bifurcate and separately account for the embedded derivative as a separate liability on the consolidated balance sheets at the estimated fair value upon issuance. The Company estimated the fair value of the derivative liability to be $330 upon issuance of the notes. The amount of short-term debt recorded on the balance sheets is net of the amount of the derivative liability. The Company recorded $106 and $0 in debt discount amortization expense associated with the notes for the three months ended March 31, 2016 and 2015, respectively.

6.	Derivative Liability

The Company has determined that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company's own stock and (b) classified in stockholders' deficit in the statement of financial position would not be considered a derivative financial instrument. The Company applies a two-step model in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the scope exception.

In November and December 2015, the Company entered into unsecured convertible promissory note purchase agreements with investors and affiliates of the Company. The accounting for the unsecured convertible notes, which are convertible into shares of our common stock, requires us to bifurcate the conversion feature and account for it as a derivative liability at the estimated fair value upon issuance. The Company used a Monte Carlo simulation to value the conversion feature with the following assumptions:

The fair value framework requires a categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

There were no financial assets or liabilities measured at fair value, with the exception of cash and cash equivalents (level 1) and the above mentioned derivative liability (level 3) as of March 31, 2016 and December 31, 2015, respectively.

The fair value of the conversion feature (on the unsecured convertible promissory notes) derivative liability at March 31, 2016 and December 31, 2015 was $305 and $330, respectively.

6.	Derivative Liability (continued)

Changes in the fair value of the level 3 derivative liability for the three month period ended March 31, 2016 are as follows:

7.	Equity (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, 2016 and 2015 was approximately 11.89% and 7.57%, respectively, based on historical data.

Valuation and Expense Information:

The weighted-average fair value of stock-based compensation is based on the Black-Scholes-Merton valuation model. Forfeitures are estimated and it is assumed no dividends will be declared.  The estimated fair value of stock-based compensation awards to employees is amortized over the vesting period of the options. The fair value calculations are based on the following assumptions:

There were no stock options granted, and no stock options exercised during the three months ended March 31, 2016. The Company granted 29 stock options during the three months ended March 31, 2015 at a weighted average exercise price of $28.13 per share. No stock options were exercised during the three month period ended March 31, 2015.

The following table summarizes the allocation of stock-based compensation expense for the three months ended March 31:

7.	Equity (Deficit) (continued)

A summary of option activity under the Company's plans for the three months ended March 31, 2016 and 2015 is as follows:

The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2016:

A summary of the status of the Company's non-vested shares as of March 31, 2016 is as follows:

As of March 31, 2016, there was $179 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 1.9 years.

7.	Equity (Deficit) (continued)

Information with respect to the classes of Preferred Stock as of March 31, 2016 is as follows:

Information with respect to dividends and Preferred Shares issued for the periods ended March 31 is as follows:

 

 

On March 24, 2015, the Company sold for $1,200 in cash, net of $33 in administrative fees paid in cash to SG Phoenix, 1,233 shares of Series D-1 Preferred Stock. Investors received warrants to purchase 22 shares of Common Stock, immediately exercisable at $29 per share. In October 2015 the investors received additional warrants to purchase 18 shares of Common Stock immediately exercisable at $16 per share, and the exercise price of the March 2015 warrants was reduced to $16 per share consistent with the terms of the July 2015 financing. The warrants expire March 23, 2018. The Company ascribed a value of $422 to the warrants using the Black-Scholes-Merton pricing model. The warrants are exercisable in whole or in part.

7.	Equity (Deficit) (continued)

A summary of the warrant activity for the three months ended March 31 is as follows:

A summary of the status of the warrants outstanding and exercisable as of March 31, 2016 is as follows:

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, 2015, 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.

On January 21, 2016, iSign Solutions Inc. (the "Company" or "iSign") filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the "Certificate of Amendment") with the Secretary of State of the State of Delaware to effect a 1-for-1,250 reverse split of the Company's outstanding shares of common stock.  The reverse split became effective on January 22, 2016. The information with respect to common stock for the period ended March 31, 2015 have been retroactively restated to give effect to the 1-for-1,250 reverse split.

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, 2015.

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 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, 2015, net losses attributable to common stockholders aggregated approximately $14,998, and, at March 31, 2016, the Company's accumulated deficit was approximately $128,448.

For the three months ended March 31, 2016, total revenue was $276, a decrease of $170, or 38%, compared to total revenue of $446 in the prior year period. The decrease in revenue is primarily attributable to a decrease in the Company's product sales for the quarter.

The net loss applicable to common stockholders for the three months ended March 31, 2016 was $2,431, an increase of $171, or 8%, compared to a net loss applicable to common stockholder of $2,260 in the prior year period. The increase is due to the increase in the loss from operations of $126, an increase in interest expense and amortization of the debt discount of $217 on the Company's unsecured convertible promissory notes entered into in the fourth quarter of 2015 and an increase in dividends related expensed of $158.  These increases were offset by an increase in other income including again on derivative liabilities of $14.

 

Critical Accounting Policies and Estimates

 

Refer to Item 7, "Management Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2015 Form 10-K.

Effect of Recent Accounting Pronouncement

On February 25, 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) 2016, Leases (Topic 842) intended to improve financial reporting about leasing transactions. which requires companies to report capital and operating leases with a term of 12 Months or longer on their balance sheets. Disclosure requirements of the leasing arrangement will include qualitative and quantitative information about the amounts recorded in the financial statements.

Implementation of ASU 2016 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 March 31, 2016, product revenue was $59, a decrease of $171, or 74%, compared to product revenue of $230 in the prior year period. The decrease in product revenue is primarily due to the timing of the Company's sales opportunities for the quarter. For the three months ended March 31, 2016, maintenance revenue was $217, an increase of $1, or 0.5%, compared to maintenance revenue of $216 in the prior year period. Maintenance revenues are expected to remain consistent for the foreseeable future.

Cost of Sales

For the three months ended March 31, 2016, cost of sales was $170, an increase of $47, or 38%, compared to cost of sales of $123 in the prior year period. The increase in cost of sales is primarily attributable to an increase in direct engineering costs associated with product maintenance activities compared to the prior year period.

Operating expenses

Research and Development Expenses

For the three months ended March 31, 2016, research and development expense was $318, a decrease of $204, or 39%, compared to research and development expense of $522 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 decrease in research and development expense was due to reductions in salaries and related expense due to a reduction of one test engineer, reduced stock-based compensation expense and reductions in the utilization of outside engineering services compared to the prior year. Other engineering expenses, including payroll and related expense travel, professional services and allocated facilities expense, decreased $158, or 24%, compared to the prior year period, due to the reduction in headcount of one engineer and a decrease in the use of outside engineering services.

Sales and Marketing Expenses

For the three months ended March 31, 2016, sales and marketing expense was $202, a decrease of $96, or 32%, compared to $298 in the prior year period. The decrease in sales and marketing expenses was due a reduction in salaries and related expenses of $71, or 34%, owing to the reduction in headcount resulting from the departure of one senior level sales executive and one salesperson in the first quarter of 2016 compared to the prior year. In addition, general overhead expenses including facilities allocation decreased $25, or 29%, compared to the prior year period.

General and Administrative Expenses

For the three months ended March 31, 2016, general and administrative expense was $730, an increase of $209, or 40%, compared to general and administrative expense of $521 in the prior year period. The increase was primarily due to an increase in professional service expenses of $248, or 120%, related to legal, accounting and other offering expenses that could not be brought forward and applied against the new public offering expected to be completed in the second quarter of 2016. The increase in professional services was partially offset by a decrease in salaries and related expense of $29, or 21%. The decrease in salaries and related expense is due to the reduction in stock-based compensation expense, compared to the prior year period.

Other income and expense

Other income for the three months ended March 31, 2016 was $4, an increase of $5, or 500%, compared to other expense of $1 in the prior year period. The increase was due to payments received on past due accounts receivable expensed during the prior year period.

For the three months ended March 31, 2016, the gain on derivative liability was $25, an increase of $9, or 56%, compared to the gain on derivative liability of $16 in the prior year period. The increase in the gain on derivative liability is primarily due to the reduction in remaining lives of the derivatives at March 31, 2016 compared to the prior year period.

For the three months ended March 31, 2016, accretion of the beneficial conversion feature on the Company's Preferred Stock, with an conversion price less than the closing market price on the issuance date (Series A-1, B, C and Series D Preferred Stock), that was issued as dividends in kind was $245, an increase of $216, or 745%, compared to $29 in the prior year period. The increase is due to the conversion prices of the Preferred shares being less than the market price of the Company's Common Stock at March 31, 2016. The Company recorded a beneficial conversion feature of $498 on the Series D Preferred Stock financing that occurred in March 2015. There was no such financing during the quarter ended March 31, 2016. The accretion of the beneficial conversion feature on the Company's dividends issued in kind that was associated with related parties at March 31, 2016 and 2015 was $115 $14, respectively, and the non-related party expense was $130 and $15, respectively, compared to the prior year period. The accretion of the beneficial conversion feature on the Series D financing in March 31, 2015 associated with related parties was $444 and non-related parties was $54.

Liquidity and Capital Resources

At March 31, 2016, cash and cash equivalents totaled $313, compared to cash and cash equivalents of $846 at December 31, 2015. The decrease in cash was primarily due to cash used in operating activities of $533. At March 31, 2016, total current assets were $727, compared to total current assets of $1,312 at December 31, 2015. At March 31, 2016, the Company's principal sources of funds included its cash and cash equivalents aggregating $313.

At March 31, 2016, accounts receivable net, was $61, a decrease of $33, or 35%, compared to accounts receivable net of $94 at December 31, 2015. The decrease is due primarily to the decrease in product sales during the quarter ended March 31, 2016 compared to the quarter ended December 31, 2015.

At March 31, 2016, prepaid expenses and other current assets were $353, a decrease of $19, or 5%, compared to prepaid expenses and other current assets of $372 at December 31, 2015. The increase is due primarily to the prepayment related to the public offering of the Company's Common Stock expected to close in the second quarter of 2016.

At March 31, 2016, total current liabilities were $3,996, an increase of $626, or 19%, compared to total current liabilities of $3,370 at December 31, 2015. At March 31, 2016, accounts payable was $1,079, an increase of $292, or 37%, from December 31, 2015 due to cash constraints and to professional service and engineering fees incurred in the first quarter of 2016. At March 31, 2016, accrued compensation was $269, an increase of $6, or 2%, compared to accrued compensation of $263 at December 31, 2015. The increase is due primarily to the accrual of deferred compensation expected to be paid out in the second quarter of 2016. Other accrued liabilities were $827,

an increase of $212, or 34%, from December 31, 2015 due to professional services accruals during the period. Short-term debt has increased $106 or 11%, to $1,097 compared to $991 at December 31, 2015, due to the amortization of the debt discount. Current deferred revenue was $419, an increase of $35, or 9%, compared to current deferred revenue of $384 at December 31, 2015. 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.

For the three months ended March 31, 2016, the Company exercised its option to pay in kind the accrued dividends on Preferred Stock. For the three months ended March 31, 2016, the Company issued an aggregate of 19 shares of Series A-1 Preferred Stock, 337 shares of Series B Preferred Stock, 137 shares of Series C Preferred Stock, 202 shares of Series D-1 Preferred Stock and 159 shares of Series D-2 Preferred Stock in payment of dividends.

The Company incurred $111 of interest expense and $106 in amortization of debt discount for the three months ended March 31, 2016. There were no such charges for the three months ended March 31, 2015.

The Company had the following material commitments as of March 31, 2016:

1.	The Company extended the lease on its offices in April 2010. The base rent decreased by approximately 6% in November 2011 and will increase by approximately 3% per annum over the term of the new lease, which expires on October 31, 2016.

2.	The Company sublet approximately 3,000 feet of unutilized office space in August 2015.  The sub-lease will expire on October 31, 2016

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.

The Company did not enter into any short-term security investments during the three months ended March 31, 2016.

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, 2016 and 2015, foreign currency translation gains and losses were insignificant.

Item 4. Controls and Procedures.

As of the end of the period covered by this report, we conducted an evaluation 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 our Chief Executive Officer and Chief Financial Officer concluded

that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that the information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and 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.

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors or 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.

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

Not applicable.

None.

None.

Not applicable

None.

 

 

*	Filed herewith.

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.

 

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