iSign Solutions Inc. - Quarter Report: 2021 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, 2021

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

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

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 every Interactive Data File required to be submitted 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 such files).

Yes ☒   No ☐

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.

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, par value $0.01, as of November 15, 2021: 6,321,980

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’ 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

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, and Sign-it® programs.

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.

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, 2020.

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, 2021, the Company’s accumulated deficit was $135,564. The Company has primarily met its working capital needs through the sale of debt and equity securities. As of September 30, 2021, the Company’s cash balance was $108. 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.

Accounting Changes and Recent Accounting Pronouncements

Accounting Standards Update No. 2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). A modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be treated as an exchange of the original instrument for a new instrument. In addition, the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity should be measured. The effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be recognize on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021. Early adoption is permitted for all entities, including adoption in an interim period.

The Company will evaluate ASU 2021-04 to determine what impact, if any, the adoption will have on the Company’s financial statements.

Other Accounting Standards Updates issued in 2021 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:

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

On February 17 and February 22, 2021, the Company repaid $30 and $30, respectively, of accounts receivable advances from unrelated parties along with $4 of accrued but unpaid advance fees. In addition, on March 31, 2021, the Company repaid $20 in accounts receivable advances to a related party. The advance fee of $1 was repaid on April 1, 2021.

In March 2021, the Company received, from related parties, advances aggregating $25 in cash against certain accounts receivable of the Company. Upon collection of an invoice, the Company agreed to repay the advance to the lenders on a pro rata basis together with a 5% advance fee. The Company accrued $1 in advance fees recorded as interest expense on the Statement of Operations.

In July 2021, the Company received $10,000 in cash from an affiliate as an advance against certain accounts receivable. The company accrued a 5% advance fee and recorded $500 as interest expense during the three months ended September 30, 2021. Upon collection of the accounts receivable the Company will repay the advance plus the 5% fee.

In August and September 2021, the Company received $50,000 and $36,000, respectively in cash from an affiliate as advances against certain accounts receivable. The company accrued a 5% advance fees in August and September 2021, and recorded $4 as interest expense during the three months ended September 30, 2021. Upon collection of the accounts receivable the Company will repay the advances plus the 5% fee.

Notes payable:

The Company applied for full loan and interest forgiveness. In September 2021 the Company received notification that the loan related to the Paycheck Protection Program had been forgiven in full. The Company record $125 of other income on the Statement of Operations related to the forgiveness of the debt plus accrued interest.

On February 28, 2021, the Company issued an aggregate of $75 in unsecured notes, $30 to related parties and $45 to other investors. The Company received $15 in cash and $15 in exchange for an account receivable advance, received in the prior year, from related parties, and $45 in cash from other investors. The unsecured notes are convertible by the holder into common stock at any time at a price per share of $0.50. Upon closing a new financing of at least $1,000 in aggregate proceeds, the Company can force conversion at a price equal to the lesser of $0.50 per share or the price per share of the new financing. The notes bear interest at the rate of 10% per annum and are due December 31, 2021.

In April 2021, the Company re-paid $49 of Accounts Receivable Advances and $6 in accrued but unpaid 5% advance fees to an affiliate. In addition the Company repaid to another affiliate $64 of Accounts Receivable Advances and $4 in accrued but unpaid 5% advance fees.

In June 2021, the Company paid the first installment in the amount of $40 plus accrued interest of $5 of a note entered into associated with a settlement agreement dated July 1, 2020 with one of its vendors. The remaining $90 plus interest at the rate of 4% per annum is due in two installments, June of 2022 and June of 2023.

On September 30, 2021 the Company issued a note to one an affiliate investor and received $75 in cash. The note bears interest at the rate of 20% per annum and is due upon demand.

During the three and nine months ended September 30, 2021, the Company accrued $84 and $243 of interest expense, $75 and $211, respectively, associated with the outstanding secured and unsecured convertible promissory notes, of which $35 and $97 was to related parties and $40 and $114 was to other investors. For the three and nine months ended September 30, 2020, the Company accrued $83 and $221 of interest expense, $73 and $194, respectively, associated with the outstanding secured and unsecured convertible promissory notes, of which $28 and $76 was to related parties and $45 and $118 was to other investors.

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, 2021 and 2020, was approximately 11.2% and 13.4%, 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.

No options were granted during the three and nine months ended September 30, 2021 and 2020. There were no stock options exercised during the three and nine months ended September 30, 2021 and 2020, respectively.

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, 2021 and 2020.

A summary of option activity under the Company’s plans as of September 30, 2021 and 2020 is as follows:

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2021:

The following table summarizes the Company’s non-vested option shares as of September 30, 2021:

As of September 30, 2021, there was $33 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 1.19 years.

In June 2021, the Company, with approval of the Board of Directors, reallocated all of the $560,000 of accrued compensation owed to SG Phoenix in equal parts to Mr. Sassower and Mr. Goren, according to their respective ownership in SG Phoenix. Mr. Sassower settled $280,000 of Accrued Long -term deferred salary allocated to him into 560,000 shares of the Company’s Common Stock at a price of $0.50 per share, which was substantially above the then current market price of the company’s common stock.

Warrants

The Company did not issue any warrants during the three and six month periods ended June 30, 2021. The Company issued 30,000 warrants during the three and six months ended June 30, 2020 to a consultant for services. The warrants are exercisable for three years with an exercise price of $0.50 per share. The Company ascribed a value of $13 to the warrants which is based on the Black-Scholes-Merton valuation model.

In June 2021, the Company transferred from SGP to Andrea Goren the Common Stock Purchase Warrant numbers 19-01 and 20-2, respectively dated February 6, 2019 and August 11, 2020 (the “SGP Warrants”) to purchase Seven Hundred Thousand (700,000) and Two hundred Fifty Thousand (250,000) shares of Company common stock, respectively.

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, 2021 is as follows:

The Company has evaluated subsequent events for potential recognition or disclosure for the period from September 30, 2021 through November 15, 2021, the date the financial statements were issued.

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, 2020, 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.

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, 2020.

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, 2020, net losses aggregated $1,614, and, at September 30, 2021, the Company’s accumulated deficit was $135,564.

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 September 30, 2021, total revenue was $282, an increase of $40, or 17%, compared to total revenue of $242 in the prior year period. For the nine months ended September 30, 2021, total revenue was $810, an increase of $151, or 23%, compared to total revenue of $659 in the prior year period. The increases in revenue for the three and nine months ended September 30, 2021 are due primarily to increases in product revenue compared to the prior year periods.

For the three and nine months ended September 30, 2021, the Company recorded a net loss of $2 and $361, a decrease of $28 and $189, or 93% and 34%, respectfully, compared to a net loss of $30 and $550, respectively, in the prior year period. The reduction in the net loss was due to the increase in revenues, the decrease in operating costs offset by reduction in other income compared to the prior year periods.

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, 2021, product revenue was $101, an increase of $57, or 130%, compared to product revenue of $44 in the prior year period. The increase was primarily due to the increase in engineering service and transactional revenue received in the quarter. For the three months ended September 30, 2021, maintenance revenue was $181, a decrease of $17, or 9%, compared to maintenance revenue of $198 in the prior year period. The decrease is due to the change in certain maintenance contract from an annual to a time and material bases and the timing of certain contract renewals.

For the nine months ended September 30, 2021, product revenue was $282, an increase of $148, or 110%, compared to product revenue of $134 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, 2021, maintenance revenue was $528, an increase of $3, or 1%, compared to maintenance revenue of $525 in the prior year period. The increase in maintenance revenue is primarily due to the timing of certain contract renewals.

Cost of Sales

For the three months ended September 30, 2021, cost of sales was $23, a decrease of $6, or 21%, compared to cost of sales of $29 in the prior year period. The decrease in cost of sales was primarily due to a decrease in direct labor costs associated with billable engineering revenue and a decrease in labor related to maintenance contracts during the three months ended September 30, 2021, compared to the prior year period.

For the nine months ended September 30, 2021, cost of sales was $83, a decrease of $3, or 3%, compared to cost of sales of $86 in the prior year period. The decrease in cost of sales was due to a decrease in direct labor related to maintenance contracts offset by an increase in direct labor associated with billable engineering revenue compared to the prior year period.

Operating expenses

Research and Development Expenses

For the three months ended September 30, 2021, research and development expense was $156, an increase of $30, or 24%, compared to research and development expense of $126 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 increase is primarily due to an bonus and dues & subscriptions increase the current quarter. Total expenses, before allocations for the three months ended September 30, 2021, were $183, an increase of $11, or 6%, compared to $172 in the prior year period. The increase was primarily due to the factors discussed above.

For the nine months ended September 30, 2021, research and development expense was $436, a decrease of $10, or 2%, compared to research and development expense of $446 in the prior year period. The most significant factors in the decrease include a decrease in professional services expense and other overhead expense, including outside engineering offset by a reduction in allocated engineering expense to cost of sales. Total expenses, before allocations to cost of sales, for the nine months ended September 30, 2021, were $528, a decrease of $18, or 3%, compared to $545 in the prior year period. The decrease in total engineering expense is primarily due to the factors discussed for the three month period above.

Sales and Marketing Expense

For the three months ended September 30, 2021, sales and marketing expense was $15, an increase of $5, or 50%, compared to sales and marketing expense of $10 in the prior year period. For the nine months ended September 30, 2021, sales and marketing expense was $86, an increase of $24, or 39%, compared to sales and marketing expense of $62 in the prior year period. These increase was primarily attributable to an increase in commissions due to the increase in revenue compared to the prior year periods.

General and Administrative Expense

For the three months ended September 30, 2021, general and administrative expense was $130, a decrease of $268 or 67%, compared to general and administrative expense of $397 in the prior year period. The decrease was primarily due to $288 in stock based compensation expense recorded in the prior year partially offset by decreases in other general overhead expenses.

For the nine months ended September 30, 2021, general and administrative expense was $446, a decrease of $370, or 45%, compared to general and administrative expense of $816 in the prior year period. The decrease in total general and administrative expense is primarily due to the factors discussed for the three month period above.

Other Income and Expense, net

For the three and nine months ended September 30, 2021, other income was $125, respectively, a decrease of $248 and $300, respectively, compared to other income of $373 and $425 for the three and nine months ended September 30, 2020. The decrease in other income and expense is due primarily to the forgiveness of the $125 loan plus accrued interest in September 2021 related to the Paycheck Protection Program, compared to $373 and $425, respectively, of accounts payable forgiveness during the three and nine months ended September 30, 2020. Such accounts payable forgiveness during the three and nine months ended September 30, 2020 was generated in conjunction with cash payments of approximately $287. Other income for the three and nine months ended June 30 2019 also included the collection of $14 of accounts receivable written off in the prior year.

For the three months ended September 30, 2021, interest expense was $85, an increase of $3, or 4% compared to interest expense of $82 in the prior year period. For the nine months ended September 30, 2021, interest expense was $244, an increase of $23, or 10%, compared to interest expense of $221 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, 2021 compared to the prior year period.

Amortization of debt discount was $0 for the three and nine month periods ended September 30, 2021 compared to $1 and $1 in the same periods of the prior year, respectively. The debt discount was fully amortized by December 31, 2020.

Liquidity and Capital Resources

At September 30, 2021, cash and cash equivalents totaled $108, compared to cash and cash equivalents of $26 at December 31, 2020. Net cash provided by operating activities was $62. Cash of $23 was provided by financing activities, offset by $3 used in investing activities. At September 30, 2021, total current assets were $248, compared to total current assets of $136 at December 31, 2020. At September 30, 2021, the Company’s principal sources of funds included its aggregated cash and cash equivalents of $108. 

At September 30, 2021, accounts receivable, net was $128, an increase of $28, or 28%, compared to accounts receivable, net of $100 at December 31, 2020. The increase is due primarily to the timing of billings and collections during the nine months ended September 30, 2021.

At September 30, 2021, prepaid expenses and other current assets were $12, an increase of $2, or 20%, compared to prepaid expenses and other current assets of $10 at December 31, 2020. The increase is due primarily to an increase of prepaids associated with engineering activities during the period.

At September 30, 2021, accounts payable was $402, an increase of $49, or 14%, compared to accounts payable of $353 at December 31, 2020. The increase is due primarily to an increase in outstating trade payables for professional services.

At September 30, 2021, accrued compensation was $77, a decrease of $5, or 6%, compared to accrued compensation of $82 at December 31, 2020. The decrease is due primarily to a decrease in accrued vacation expense. Other accrued liabilities were $1,381, an increase of $240, or 21%, from $1,141 at December 31, 2020 due primarily to the accrual of interest on the Company’s short –term debt and deferred professional services.

At September 30, 2021, deferred revenue was $339, an increase of $124, or 58%, compared to deferred revenue of $215 at December 31, 2020. 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, 2021, total current liabilities were $5,358, an increase of $353, or 7%, compared to total current liabilities of $5,005 at December 31, 2020.

On February 28, 2021, the Company issued an aggregate of $75 in unsecured notes to affiliates and other investors. The Company received $60 in cash and $15 in exchange for advances received in the prior year. The unsecured notes are convertible by the holder into common stock at any time at a price per share of $0.50. Upon closing a new financing of at least $1,000 in aggregate proceeds, the Company can force conversion at a price equal to the lesser of $0.50 per share or the price per share of the new financing. The notes bear interest at the rate of 10% per annum and are due December 31, 2021.

In March 2021, the Company received, from related parties, advances aggregating $25 in cash against certain accounts receivable of the Company. Upon collection of an invoice, the Company agreed to repay the advance to the lenders on a pro rata basis together with a 5% advance fee. The Company accrued $1 in advance fees recorded as interest expense on the Statement of Operations.

In April 2021, the Company re-paid $49 of Accounts Receivable Advances and $6 in accrued but unpaid 5% advance fees to an affiliate. In addition the Company repaid to another affiliate $64 of Accounts Receivable Advances and $4 in accrued but unpaid 5% advance fees.

In June 2021, the Company paid the first installment in the amount of $40 plus accrued interest of $5 of a note entered into associated with a settlement agreement dated July 1, 2020 with one of its vendors. The reaming $90 plus interest at the rate of 4% per annum is due in two installments, June of 2022 and June of 2023.

Liquidity and Capital Resources (continued)

In July 2021, the Company received $10,000 in cash from an affiliate as an advance against certain accounts receivable. The company accrued a 5% advance fee and recorded $500 as interest expense during the three months ended September 30, 2021. Upon collection of the accounts receivable the Company will repay the advance plus the 5% fee.

In August and September 2021, the Company received $50,000 and $36,000, respectively in cash from an affiliate as advances against certain accounts receivable. The company accrued a 5% advance fees in August and September 2021, and recorded $4 as interest expense during the three months ended September 30, 2021. Upon collection of the accounts receivable the Company will repay the advances plus the 5% fee.

In September 2021 the Company received notification that the loan related to the Paycheck Protection Program had been forgiven in full. The Company record $125 of other income on the Statement of Operations related to the forgiveness of the debt plus accrued interest.

On September 30, 2021 the Company issued a note to an affiliate investor and received $75 in cash. The note bears interest at the rate of 20% per annum and is due upon demand.

The Company incurred $85 and $244, respectively, of interest expense for the three and nine months ended September 30, 2021, of which was $1 and $17, respectively, was paid in cash.

The Company had no material commitments as of June 30, 2021.

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.

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, 2021.

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, 2021 and 2020, 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, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II-Other Information

None.

Not applicable.

None.

None.

Not applicable.

None.

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.

-24-