iSign Solutions Inc. - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: September 30, 2019

OR

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

For the transition period from                  to                 

Commission File Number: 000-19301

iSign Solutions Inc.

(Exact name of registrant as specified in its charter)

2033 Gateway Place, Suite 659, San Jose, CA 95110

(Address of principal executive offices) (Zip Code)

(650) 802-7888

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.

Yes ☒   No  ☐

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).

Yes ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Section 12b-2 of the exchange Act)

Yes  ☐   No ☒

Number of shares outstanding of the issuer’s Common Stock as of November 14, 2019: 5,761,980.

Securities registered pursuant to Section 12(b) of the Act:

INDEX

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements

iSign Solutions Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value amounts)

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)

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

iSign Solutions Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

Unaudited

(In thousands)

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

iSign Solutions Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited

(In thousands)

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements

iSign Solutions Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

Unaudited

(In thousands)

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)

Nature of Business

iSign Solutions Inc. and its subsidiary is a leading supplier of digital transaction management (DTM) software enabling the paperless, secure and cost-effective management and authentication of document-based transactions. iSign’s solutions encompass a wide array of functionality and services, including electronic signatures, simple-to-complex workflow management and various options for biometric authentication. These solutions are available across virtually all enterprise, desktop and mobile environments as a seamlessly integrated platform for both ad-hoc and fully automated transactions. iSign’s platform can be deployed both on premise and as a cloud-based (“SaaS”) service, with the ability to easily transition between deployment models. The Company is headquartered in San Jose, California. The Company’s products include SignatureOne® Ceremony® Server, the iSign® suite of products and services, including iSign® Enterprise, 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, 2018.

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, 2019, the Company’s accumulated deficit was $134,402. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of September 30, 2019, the Company’s cash balance was $37. 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)

Accounting Changes and Recent Accounting Pronouncements

Accounting Standards Update No. 2019-01, Leases (Topic 842), Codification Improvements. The amendments in this Update include the following items: (1) determining the fair value of the underlying asset by lessors that are not manufacturers or dealers; (2) presentation on the statement of cash flows—sales-type and direct financing leases; and (3) transition disclosures related to Topic 250, Accounting Changes and Error Corrections. The amendments in ASU 2019-01 for Issue 1 affect all lessors that are not manufacturers or dealers (generally financial institutions and captive finance companies); for Issue 2, all lessors that are depository and lending entities within the scope of Topic 942; for Issue 3, all entities that are lessees or lessors. The effective date of the amendments in ASU 2019-01 are for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

The Company adopted ASU 2019-01 effective January 1, 2019. The adoption of ASU 2019-01 had no impact on the Company’s financial statements.

Other Accounting Standards Updates issued in 2019 are not currently applicable to the Company, therefore implementation would not be expected to have a material impact on the Company’s financial position, results of operations and cash flows.

The following table summarizes accounts receivable and revenue concentrations:

iSign Solutions Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except per share amounts)

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 exercise of such options and warrants would be antidilutive:

Advances:

In April, May, and June 2018, the Company received, from investors, advances aggregating $115 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 $40 of the advances were repaid in May 2018, along with $2 in advance fees per the agreement. The advance fees were recorded as interest expense in the quarter ended June 30, 2018. The remaining $75 advances were converted into secured convertible notes in August 2018.

Notes payable:

In August 2018, the Company issued secured convertible promissory notes to investors and affiliates of the Company aggregating $341, of which $205 was paid in cash, $75 was exchanged for the remaining advances described above and $61 was in the form of an Original Issue Discount (“OID”) on these amounts. 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, 2019 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.

In December 2018, the Company issued short-term unsecured convertible promissory notes to investors and affiliates of the Company aggregating $346 in cash. The short-term 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 debt and/or equity financing of at least $1,000 in aggregate proceeds. The notes bear interest at the rate of 10% per annum and are due December 31, 2019.

The Company used the funds received from the above financing for working capital and general corporate purposes.

In June 2019, one noteholder sold its unsecured note in the amount of $400 plus accrued interest of $72 to six current investors, one of which is a related party. The original note was replaced by the issuance of new notes that continue to bear interest at the rate of 10% per annum and remain due December 31, 2019.

During the three and nine months ended September 30, 2019, the Company accrued $65 and $188 of interest expense, of which $19 and $46 was to related parties and $46 and $142 was to other investors. During the three and nine months ended September 30, 2018, the Company accrued $45 and $125 of interest expense, of which $9 and $25 was to related parties and $36 and $100 was to other investors.

iSign Solutions Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except per share amounts)

The Company recorded $10 and $30 in debt discount amortization for the three and nine months ended September 30, 2019. The Company recorded $48 and $100 in debt discount amortization for the three and nine months ended September 30, 2018.

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 September 30, 2019 and 2018, was approximately 13.4% and 5.91%, 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 using the accrual method over the vesting period of the options.

The Company granted 40 stock options during the nine months ended September 30, 2019 at a weighted average exercise price of $0.50 per share. The Company granted 393 stock options during the nine months ended September 30, 2018 at a weighted average exercise price of $0.78 per share. There were no stock options exercised during the three and nine months ended September 30, 2019 and 2018. The fair value calculations for the stock options granted are based on the following assumptions:

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, 2019 and 2018.

iSign Solutions Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except per share amounts)

A summary of option activity under the Company’s plans as of September 30, 2019 and 2018 is as follows:

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2019:

The following table summarizes the Company’s non-vested option shares as of September 30, 2019:

As of September 30, 2019, there was $112 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 1.44 years.

iSign Solutions Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except per share amounts)

Warrants

On February 2, 2019, the Company issued warrants to purchase 985 shares of common stock to employees and consultants associated with their unpaid salaries and consulting fees. The warrants are only exercisable on a cashless basis if the warrant holder elects to exchange their deferred salaries and consulting fees. The Company ascribed a value of $212 to the warrants which is booked as a discount to other long-term liabilities in the balance sheet. The value of the warrants will be amortized to warrant expenses on long−term liabilities in the statement of operations over the life of the warrants. The warrants have a three year life and an exercise price of $0.50 per share.

As of September 30, 2019, the Company has charged $47 of the warrant value to expense.

A summary of the warrant activity for the nine months ended September 30 is as follows:

A summary of the status of the warrants outstanding and exercisable as of September 30, 2019 is as follows:

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, 2018, including the following:

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, 2018.

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, 2018, net losses aggregated $2,974, and, at September 30, 2019, the Company’s accumulated deficit was $134,402.

For the three months ended September 30, 2019, total revenue was $213, an increase of $16, or 8%, compared to total revenue of $197 in the prior year period. For the nine months ended September 30, 2019, total revenue was $638, an increase of $2, or 0.3%, compared to total revenue of $636 in the prior year period. The increases in revenue for the three and nine months ended September 30, 2019 are due primarily to increases in product revenue compared to the prior year periods.

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

The net loss for the three months ended September 30, 2019 was $273, an increase of $78, or 40%, compared to a net loss of $195 in the prior year period. The $78 increase in the net loss was primarily due to an $86 refund from an insurance carrier in the prior year period. For the nine months ended September 30, 2019 the net loss was $813, compared to a net loss of $812 in the prior year period.

In June 2019, one noteholder sold its unsecured note in the amount of $400 plus accrued interest of $72 to six current investors, one of which is a related party. The original note was replaced by the issuance of new notes that continue to bear interest at the rate of 10% per annum and remain due December 31, 2019.

Critical Accounting Policies and Estimates

Refer to Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2018 Form 10-K.

Effect of Recent Accounting Pronouncements

Accounting Standards Updates issued in 2019 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, 2019, product revenue was $45, an increase of $21, or 88%, compared to product revenue of $24 in the prior year period. The increase was primarily due to an increase in product and billable engineering revenue. For the three months ended September 30, 2019, maintenance revenue was $168, a decrease of $5, or 3%, compared to maintenance revenue of $173 in the prior year period. This decrease is primarily due to non-renewal of certain maintenance contracts.

For the nine months ended September 30, 2019, product revenue was $126, an increase of $29, or 30%, compared to product revenue of $97 in the prior year period. The increase in product revenue is primarily attributable to the factors discussed for the three month period above. For the nine months ended September 30, 2019, maintenance revenue was $512, a decrease of $27, or 5%, compared to maintenance revenue of $539 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, 2019, cost of sales was $28, a decrease of $2, or 7%, compared to cost of sales of $30 in the prior year period. The decrease in cost of sales was primarily due to a decrease in direct labor related to maintenance contracts partially offset by an increase in labor costs associated with billable engineering revenue during the three months ended September 30, 2019, compared to the prior year period.

For the nine months ended September 30, 2019, cost of sales was $64, an increase of $11, or 21%, compared to cost of sales of $53 in the prior year period. The increase in cost of sales was due to an increase in direct labor related to maintenance contracts and billable engineering revenue compared to the prior year period.

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

Operating expenses

Research and Development Expenses

For the three months ended September 30, 2019, research and development expense was $179, an increase of $13, or 8%, compared to research and development expense of $166 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 an increase outside engineering costs. Total expenses, before allocations for the three months ended September 30, 2019, were $211, a decrease of $16, or 7%, compared to $227 in the prior year period.

For the nine months ended September 30, 2019, research and development expense was $531, a decrease of $101, or 16%, compared to research and development expense of $632 in the prior year period. The most significant factors in the decrease include a decrease in stock option expense and other overhead expense, including professional services and allocated facilities expense. Total expenses, before allocations to cost of sales, for the nine months ended September 30, 2019, were $605, a decrease of $124, or 17%, compared to $729 in the prior year period.

Sales and Marketing Expense

For the three months ended September 30, 2019, sales and marketing expense was $10, a decrease of $4, or 29%, compared to sales and marketing expense of $14 in the prior year period. For the nine months ended September 30, 2019, sales and marketing expense was $63, a decrease of $12, or 16%, compared to sales and marketing expense of $75 in the prior year period. These decreases were primarily attributable to decreases in professional services and commissions compared to the prior year periods.

General and Administrative Expense

For the three months ended September 30, 2019, general and administrative expense was $147, a decrease of $32, or 18%, compared to general and administrative expense of $179 in the prior year period. The decrease was primarily due to reductions in stock option compensation expense and other general operating expenses compared to the prior year period.

For the nine months ended September 30, 2019, general and administrative expense was $541, an increase of $34, or 7%, compared to general and administrative expense of $507 in the prior year period. The increase was primarily due to increased stock option compensation expense offset by reductions in other operating expenses compared to the prior year period.

Other Income and Expense, net

For the three months ended September 30, 2019, other income and expense, net was $0, a decrease of $90, or 100% compared to $90 in the prior year period. In the prior year period the Company recorded an $86 refund from the insurance carrier of its Directors and Officers insurance as the result of an audit by the State of California. For the nine-months ended September 30, 2019 other income and expense, net was $14, a decrease of $32, or 70% compared to $46 in the prior year period. Over the current nine months the Company collected approximately $13 of accounts receivable written off in the prior year while the insurance refund from the prior year was partially offset by a termination settlement fee on the Company’s prior office lease. In addition, the company expensed $47 in warrant value associated with other long-term liabilities.

For the three months ended September 30, 2019, interest expense was $65, an increase of $20, or 44% compared to interest expense of $45 in the prior year period. For the nine months ended September 30, 2019, interest expense was $188, an increase of $63, or 50%, compared to interest expense of $125 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, 2019 compared to the prior year period. In addition, the company expensed $47 in warrant value associated with other long-term liabilities.

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

Amortization of debt discount was $10 and $30 for the three and nine month periods ended September 30, 2019 compared to $48 and $100 in the same periods of the prior year, respectively. The decrease was due to the extension of the maturity date of the Company’s debt to December 31, 2019.

Liquidity and Capital Resources

At September 30, 2019, cash and cash equivalents totaled $37, compared to cash and cash equivalents of $335 at December 31, 2018. The decrease in cash was primarily due to net cash used in operating activities of $289 and $9 used in investing activities. At September 30, 2019, total current assets were $134, compared to total current assets of $465 at December 31, 2018. At September 30, 2019, the Company’s principal sources of funds included its aggregated cash and cash equivalents of $37. 

At September 30, 2019, accounts receivable net, was $61, a decrease of $23, or 27%, compared to accounts receivable net of $84 at December 31, 2018. The decrease is due primarily to the timing of billings and collections during the nine months ended September 30, 2019.

At September 30, 2019, prepaid expenses and other current assets were $36, a decrease of $10, or 22%, compared to prepaid expenses and other current assets of $46 at December 31, 2018. The decrease is due primarily to the expensing of prepaid assets in excess of new prepaid assets acquired during the period.

At September 30, 2019, accounts payable was $1,249, a decrease of $31, or 2%, compared to accounts payable of $1,280 at December 31, 2018. At September 30, 2019, accrued compensation was $72, a decrease of $9, or 11%, compared to accrued compensation of $81 at December 31, 2018. The decreases are due primarily to cost saving measures put in place by the Company. Other accrued liabilities were $744, an increase of $220, or 42%, from $524 at December 31, 2018 due primarily to accrued interest expense on the Company’s short –term debt and deferred professional services.

At September 30, 2019, deferred revenue was $293, a decrease of $24, or 8%, compared to deferred revenue of $317 at December 31, 2018. 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.

At September 30, 2019, total current liabilities were $4,597, an increase of $221, or 5%, compared to total current liabilities of $4,376 at December 31, 2018.

The Company recorded $10 and $30 in debt discount amortization for the three and nine months ended September 30, 2019, respectively, related to the debt financings.

The Company incurred $65 and $188, respectively, of interest expense for the three and nine months ended September 30, 2019, of which $0 and $1, respectively were paid in cash.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

The Company did not enter into any short-term security investments during the three and nine months ended September 30, 2019.

Foreign Currency Risk

From time to time, the Company makes certain capital equipment or other purchases denominated in foreign currencies. As a result, the Company’s cash flows and earnings are exposed to fluctuations in interest rates and foreign currency exchange rates. The Company attempts to limit these exposures through operational strategies and generally has not hedged currency exposures. During the three and nine months ended September 30, 2019 and 2018, foreign currency translation gains and losses were insignificant.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to paragraph (b) of Rule 13a-15 and

15d-15 under the Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation and because of the material weaknesses in our internal control over financial reporting described below, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act (1) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management identified the following control deficiencies that constitute material weaknesses that are not fully remediated as of the filing date of this report:

As a small company with limited resources that are mainly focused on the development and sales of software products and services, iSign does not employ a sufficient number of staff in its finance department to possess an optimal segregation of duties or to provide optimal levels of oversight. This has resulted in certain audit adjustments and management believes that there may be a possibility for a material misstatement to occur in future periods while it employs the current number of personnel in its finance department.

The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedures are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The Company considered these limitations during the development of its disclosure controls and procedures, and will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

Part II-Other Information

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sale of Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.

(a) Exhibits.

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

iSign Solutions Inc.

(In thousands, except per share amounts)

FORM 10-Q

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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