ATTRACT . TRANSACT . MEASURE
.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION and ANALYSIS
FOR THE THREE AND NINE MONTH PERIODS ENDED
JANUARY 31, 2011
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
2
The following Management’s Discussion and Analysis (“MD&A) for the three and nine months
ended January 31, 2011, as compared with the three and nine months ended January 31, 2010,
provides readers with an overview of the operations of iSIGN Media Solutions Inc. (“iSIGN” or the
“Company”) and a detailed explanation of the consolidated financial statements.
This MD&A provides information that the management of iSIGN believes is important to assess
and understand the results of operations and financial condition of the Company. Our objective
is to present readers with a view of iSIGN through the eyes of management by interpreting the
material trends and activities that affect the operating results, liquidity and financial position of
iSIGN. This discussion and analysis should be read in conjunction with iSIGN’s audited
consolidated financial statements and accompanying notes for the twelve month period ended
April 30, 2010, that have been prepared in accordance with generally accepted accounting
principles (“GAAP”) in Canada. All monetary amounts unless otherwise specified are expressed
in Canadian dollars.
Additional information relating to iSIGN is available on SEDAR, at www.sedar.com. The common
shares of the Company are listed for trading on the TSX Venture Exchange under the trading
symbol of ISD-V. For more information on the Company, please visit our website at
www.isignmedia.com.
This MD&A is current as of March 31, 2011.
Forward Looking Statements
This MD&A contains ―forward-looking statements‖ and ―forward-looking information‖ within the
meaning of the applicable Canadian securities legislation. Forward-looking statements are not
historical facts and include statements regarding the Company‘s planned development
activities, anticipated future profitability, losses, revenues, expected future expenditures, the
Company‘s intention to rise new financing, sufficiency of working capital for continued
operations and other statements regarding anticipated future events and Company‘s
anticipated future performance. Generally, these forward-looking statements can be identified
by the use of forward-looking terminology such as ―plans‖, ―expects‖ or ―does not expect‖, ―is
expected‖, ―budget‖, ―scheduled‖, ―estimates‖, ―forecasts‖, ―intends‖, ―continue‖,
―anticipates‖ or ―does not anticipate‖, or ―believes‖ or variation of such words and phrases or
state that certain actions, events or results ―may‖, ―could‖, ―would‖, ―might‖ or ―will be taken‖,
―occur‖ or ―be achieved‖. All forward-looking statements are based on our beliefs and
assumptions based on information available at the time the assumption was made. While iSIGN
considers its assumptions to be reasonable and appropriate based on the current information
available, there is a risk that they may not be accurate. Forward-looking statements are subject
to known and unknown risks, uncertainties and other factors that may cause the actual results,
level of activity, performance or achievement of iSIGN to be materially different from those
expressed or implied by such forward-looking statements, including but not limited to risks
related to the integration of acquisitions, as well as those factors discussed in the section entitle
―Risk Factors‖ in this MD&A. Before making any investment decisions and for a detailed
discussion of the risks, uncertainties and environment associated with our business, fully review
the section entitled ―Risk Factors‖ in this MD&A. Although management has attempted to
identify important factors that could cause actual results to differ materially from those
contained in forward-looking statements, there may be other factors that cause results not to be
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
3
as anticipated, estimated or intended. There can be no assurance that such statements will
prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue reliance on
forward-looking statements. iSIGN does not undertake to update any forward-looking
statements that are incorporated by reference herein, except as required by law.
About iSIGN Media Solutions Inc.
Introduction
The Company was incorporated on May 15, 2007 under the Business Corporations Act (Ontario)
as Corbal Capital Corp (―Corbal‖). Prior to September 3, 2009, the Company was a capital pool
company created pursuant to the policies of the TSX Venture Exchange. The principal business
of the Company was the identification and evaluation of assets or businesses with a view to
completing a qualifying transaction (a ―Qualifying Transaction‖).
On September 3, 2009, the Company completed its Qualifying Transaction by acquiring all of
the issued and outstanding shares of iSIGN Media Corp. (―iSIGN Media‖) (the ―Transaction‖). On
November 18, 2009, the Company changed its name from Corbal Capital Corp. to iSIGN Media
Solutions Inc.
The acquisition of iSIGN Media by the Company has been accounted for as a reverse takeover
transaction. iSIGN Media is deemed to be the acquirer and is deemed to have purchased the
assets and liabilities of iSIGN as the former iSIGN Media shareholders, as a group, became
owners of more than 51% of the voting shares of iSIGN following the Transaction. The results of
operations of iSIGN are included in the consolidated financial statements from the date of the
completion of the Transaction, September 3, 2009. For accounting purposes, the Company is
considered to be a continuation of iSIGN Media, with the exception that the authorized and
issued share capital is that of the legal parent, iSIGN. The financial position of iSIGN and the
results of operations and cash flows for the periods prior to September 3, 2009 presented in the
consolidated financial statements are of iSIGN Media only.
iSIGN, through its wholly owned subsidiary, is in the business of developing location-based
interactive proximity advertising technology that delivers rich media, permission based
messages, free of charge to consumers‘ mobile phones using Bluetooth® connectivity while
capturing and quantifying consumer responses and provides clients with customized reporting
systems that allows for continuous measurement and analysis.
Our Product
Our customizable, scalable Interactive Marketing Solution (―IMS‖) software enables businesses to
offer promotional campaigns with timely, relevant content to consumers, at absolutely no cost
to the recipient of the messages. Our software platform offers various levels of reporting, making
location-based interactive proximity advertising to mobile devices measurable, accountable,
flexible and affordable, providing real-time captured consumer responses and information,
improved shopper insight and business intelligence.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
4
Businesses can utilize proximity marketing by simultaneously targeting shoppers already inside
their environments as well as potential shoppers within relative proximity of their stores. Our
software solutions can be operated independently, on a single digital engine/media player, or
in conjunction with other digital engines/media players to form a wireless marketing network
operated from a central location through a Web-based interface.
Following the recent agreements with our business partners, AOpen and Skipton, the Company‘s
is embedding its software into the products of our business partners.
The Company is confident that location-based interactive proximity advertising will become a
recognized and accepted communication vehicle. The Company believes that it is strongly
positioned to capitalize on the achievements it has made to date and upon the potential in the
field of proximity messaging and mobile advertising.
The Company‘s goal is to become a world leader in the location-based interactive proximity
advertising market utilizing Bluetooth® technology.
Overview and Achievements
In May 2010, iSIGN and AOpen America Inc, (―AOpen‖) reached an agreement (―OEM
agreement‖) to embed iSIGN‘s software technology into AOpen‘s digital media players, leading
to the creation of the world‘s first multi-function media player, capable of providing content
management, message broadcasting and data logging of consumer responses into a single
unit.
In July 2010, iSIGN signed a distribution agreement with BlueStar Inc. (―BlueStar‖), a leading
distributor of Point-of-Sale mobility and Radio-frequency Identification (―RFID‖) products with a
6,000 value added reseller client base.
In August 2010, iSIGN received its first order from AOpen under the OEM agreement. The order
was for 100 units of a total forecast of 1,000 IMS Deluxe Edition software licenses and
accompanying iSIGN Transceivers.
In September 2010, iSIGN received its first order from BlueStar for 100 units of a total forecast of
1,500 IMS Deluxe Edition software licenses and accompanying iSIGN Transceivers.
Under the Deluxe Edition, the revenue per unit is a one-time charge for the iSIGN Transceiver and
activation fee, and per unit monthly recurring revenue that varies based upon the term of the
agreement, which could be 12, 24 or 36 months. In the event that 2,500 software licenses are
fully activated, which is dependent on AOpen‘s and BlueStar‘s customers registering for the
monthly service, these orders could generate significant gross revenue over a thirty-six month
term.
In November 2010, iSIGN signed a reseller agreement with Dynasign Corporation to integrate its
Dynasign Digital Signage, Interactive Digital Signage and Kiosk application publisher and player
software with our Ultimate IMS package.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
5
In December 2010, iSIGN announced that AOpen had commenced the embedding of our IMS
3.0 software into their digital media players, thus creating the world‘s first multi-function media
player, capable of providing content management, Bluetooth® message broadcasting and
data logging of consumer responses into a single unit, allowing consumers to interact directly
with marketers‘ messages shown on iSIGN enhanced digital signs through their mobile phones.
In December 2010, iSIGN entered into an agreement with Pinpoint Media Group Inc. (―Pinpoint‖)
to have our IMS 3.0 software embedded into Pinpoint‘s digital signage network located in
Mac‘s/Couche-Tard convenience store chain, of approximately 5,600 digital signs/faces,
throughout Canada.
Financial Overview
In the current quarter, the Company cancelled its involvement in the development of the Asian
back-end reporting systems, because of continual delays with completion of the software
development and related local government grant funding. Consequently, the Company has
written-off the capitalized intangible asset and related accrued costs. The Company has
determined it has no further obligations with respect to this project. The write-off charge
reported in the statement of loss is approximately $37,000 in the quarter ending January 31, 2011.
The Company has made available its back-end platform developed for the North American
market that has been fully operational since July 2010. Originally the Company had contracted
with the Asian software developer to create a bank-end specifically for the Asian market in
January 2010.
As at January 31, 2011, the Company‘s allowance on the accounts receivable owed by the
Asian distributor was $244,925, leaving the carrying value of net accounts receivable
approximately $84,000. The Asian distributor has transferred Canadian marketable securities to a
third party, including power of attorney for authority to sell these securities and use the
proceeds against the unpaid accounts receivable. The current market value of those securities is
approximately $100,000.
Subsequent to January 31, 2011, the Company has received $43,496 in payments against these
receivables, from the sale of these securities.
For the three month period ended January 31, 2011, iSIGN‘s revenues were $24,416, as
compared to $25,789 during the same period of the prior year. For the nine month period
ended January 31, 2011, iSIGN‘s revenues were $76,613 as compared to $160,391 during the
same period of the prior year. The decrease in revenue for the nine month period is directly
attributable to absence of ongoing licensing revenue. The revenues in fiscal 2011 result mainly
from earned revenues transferred from the Company‘s deferred revenues balance.
During the three month period ended January 31, 2011, iSIGN generated a gross loss of $211, as
compared to $707 during the same period in the prior year. For the nine month period ended
January 31, 2011, gross profits were $578, as compared to $92,135 during the same period of the
prior year. The decrease in profitability for the nine month period is mainly due to the decreased
licensing revenue and to incurring costs of assembling iSIGN Transceivers.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
6
For the three month period ended January 31, 2011 net loss was $524,824, as compared to
$710,837 during the same period of the prior year. For the nine month period ended January 31,
2011, net loss was $1,315,648, as compared to $1,076,791during the same period of the prior
year.
The decreased loss for the three months ended January 31, 2010 is a combination of reduced
selling and administrative expenses, specifically for: promotional costs; stock-based
compensation; consultants fees; professional fees; research and development expenses; office
expenses, partially offset by higher administrative salaries and benefits, the write-off of the asset
carrying value for the Asian market back-end system net of the accounts payable , and offset
by the reduced bad debt allowance costs (see section ―Additional Disclosure for Venture Issuers
Without Significant Revenue‖).
The increased loss for the nine months ended January 31, 2011 is a combination of reduced
gross profit and increased administration expenses, specifically for: salaries and benefits for
additional staff; travel and entertainment; research and development and investor relations
costs partially offset by reduced consulting; professional fees; office expenses and currency
exchange losses, the write-off of the asset carrying value for the Asian market back-end system
net of the accounts payable, and offset by the reduced bad debt allowance combined with a
timing difference in the receipt of government rebates for Scientific Research and Experimental
Development funds (―SR&ED‖) (see section ―Additional Disclosure for Venture Issuers Without
Significant Revenue‖). In addition, during the nine months ended January 31, 2010, the
Company recorded a one-time debt forgiveness by its Chief Executive Officer of $122,173.
Total assets as at January 31, 2011 were $1,291,621, an increase of $389,852 from April 30, 2010.
This increase can be attributed to increases in cash of $320,954, other receivable of $23,587,
inventories of $64,506, prepaid expenses of $5,777, and intangible assets of $45,558, partially
offset by decreases in trade receivables of $45,540 and property and equipment of $24,990.
The increase in inventories is due to the 1,500 iSIGN Transceivers that are being assembled for
delivery to our distributor BlueStar for future sales and to Pinpoint for installation in their digital
signage network in Mac‘s Milk/Couche-Tard convenience stores.
The increase in intangible assets relates to the development costs of the back-end reporting
systems for the North America market and enhancements to our IMS software technology,
partially offset by the write-off of the asset carrying value for the Asian market back-end system
net of the accounts payable. The decrease in property and equipment is strictly due to the
amortization taken in the quarter.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
7
Selected Annual Information
For the nine month period ended
January 31,
2011 2010
Revenue $ 76,613 $ 160,391
Gross profit/(loss) 578 92,135
Expenses
Selling 113,577 216,309
General and administrative 1,123,000 1,027,621
Bad debt 33,945 50,000
Amortization 2,329 1,914
Asset write-off 36,835 -
Debt forgiveness - (122,173)
Interest 6,540 (4,745)
Net Loss from continuing operations (1,315,648) (1,076,791)
Loss per share $ (0.036) $ (0.038)
Total Assets $ 1,291,621 $ 1,474,063
Total long-term liabilities $ - $ 41,556
Results of Operations
Revenue
During the three month period ended January 31, 2011, iSIGN reported revenues of $24,416, as
compared to $25,789 in the same period of the prior year, a decrease of $1,373. During the nine
month period ended January 31, 2011, revenues were $76,613, as compared to $160,391 in the
same period of the prior year, a decrease of $83,778. The decrease in revenues for the nine
month period is the result of the absence of licensing revenue in the Asian market in fiscal 2011.
During the fiscal years of 2010 and 2009, the Company‘s revenue was generated by charging
an activation and programming fee for our Interactive Marketing Solution (―IMS‖) units and
licensing fees for these units. At the time of invoicing, activation and programming revenue was
deferred and taken into revenue evenly over the life of our sales agreements, typically 3 years.
Licensing revenue was generated when the majority of the advertising slots in our IMS units were
filled and the unit starts to generate revenue for our clients. The global economic downturn and
tightened credit policies, resulted in reduced advertising spending, which negatively impacted
the number of advertisers utilizing our IMS units. Customers in Asia signed short-term contracts for
advertising, with their advertising clients, particularly in Singapore. As a result, the advertising
revenues generated by the IMS units during the first quarter of fiscal 2010, dropped below the
minimum levels for charging licensing fees to customers. Consequently, the Company has been
unable to charge for licensing fees from June 2009 onward. The Company is unable to state
when it will be able to recommence billing for Asian licensing fees.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
8
It was also determined that our back-end reporting system needed upgrades to reporting and
information analysis. The delay in building the Asian back-end is partly attributable to the
procedures and processes to access the funds from the grant the Asian distributor acquired from
the Singapore government towards the cost of the project. Due to these delays the Company
has offered the Asian distributor the back-end developed by the Company for the North
American market.
The Company has invested both staff time and expenses in undertaking a training program with
the sales staff, distributors and Value Added Resellers (―VARs‖) of AOpen and BlueStar, both
during the quarter and subsequent to the quarter-end to familiarize them with our software
platform and its features and benefits. The purpose of the training program being to enable
them to properly understand, promote and sell our product to end clients.
Gross Profit/(Loss)
During the three month period ended January 31, 2011, iSIGN reported a gross loss of $211, as
compared to $707 during the same period of the prior year. For the nine month period ended
January 31, 2011, iSIGN reported a gross profit of $578, as compared to $92,135 during the same
period of the prior year, a decrease of $91,557.
Total direct costs in the three months ended January 31, 2011 were $24,627, compared to
$26,496 in the same period of the prior year, a decrease of $1,869. Total direct costs in the nine
months ended January 31, 2011 were $76,035, compared to $68,256 during the same period of
the prior year, an increase of $7,779. The increase for the year to date is mainly the result of
incurring costs to build and stock iSIGN Transceivers combined with increased server hosting
costs and packaging and shipping costs, partially offset by having previously eliminated the
outsourced software loading and monitoring services during the quarter ended April 30, 2010,
and reduced amortization of IMS units.
Sales, General and Administrative Expenses
Selling expenses for the three months ended January 31, 2011 were $55,982, a decrease of
$55,730 from the $111,712 recorded in the same period of the prior year. For the nine month
period ended January 31, 2011, sales expenses were $113,577, a decrease of $102,732, from the
$216,309 recorded in the same period of the prior year.
The major variances for selling expenses are as follows (See ―Additional Disclosure for Venture
Issuers Without Significant Revenue‖):
1) promotional, advertising and sales material costs, which were $30,350 and $55,909 for the
three and nine months ended January 31, 2011 respectfully, decreases of $64,208 and
$107,108 from the $94,558 and $163,017 recorded in both the three and nine month
period of the prior year. The decrease is due to having eliminated promotional expenses
in Asia, partially offset by our sponsorship costs for Ashleigh McIvor, which started in the
third quarter of fiscal 2010, combined with attending various trade shows with our
business partners, AOpen and BlueStar.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
9
2) training costs were $5,982 in both periods, an increase of $5,982 from the $Nil recorded
last year. Training costs involves our need to train the sales staff of our distributor and
their various VARs, as well as the sales staff of AOpen.
3) travel and entertainment costs were $3,626 and $3,672 respectively in the three and nine
month periods ended January 31, 2010, increases of $3,626 and $1,346 from the $Nil and
$2,326 recorded in the same periods last year.
General and administrative expenses for the three months ended January 31, 2011 were
$426,568, a decrease of $128,155 from the $554,723 recorded during the same period of the prior
year. For the nine month period ended January 31, 2011, general and administrative expenses
were $1,123,000, an increase of $95,379 from the $1,027,621 recorded during the same period of
the prior year.
The major variances for general and administrative costs are as follows (See ―Additional
Disclosure for Venture Issuers Without Significant Revenue‖):
1) salaries and benefit costs were $297,130 for the three months ended January 31, 2011,
a decrease of $13,072 from the $310,202 recorded in the same period of the prior year.
For the nine month period ended January 31, 2011, these costs were $708,508, an
increase of $179,973 from the $528,535 recorded in the same period of the prior year.
The decrease in the three month period is due to reduced stock-based compensation
during the period, partially offset by increased salaries due to having increased our
staffing late in the third quarter of fiscal 2010. The increase in costs for the nine month
period is due to increased salaries due to increased staffing levels, commencing late in
the third quarter of fiscal 2010.
2) consulting fees were $7,723 for the three months ended January 31, 2011 a decrease
of $55,972 from the $63,695 reported in the same period of the prior year. For the nine
month period ended January 31, 2011 costs were $103,223, a decrease of $53,023 from
the $156,246 reported in the same period of the prior year.
3) professional fees were $21,547 for the three months ended January 31, 2011, a
decrease of $29,254 from the $50,801 recorded during the same period of the prior
year. For the nine month period ended January 31, 2011, costs were $90,721, a
decrease of $38,989 from the $129,710 recorded during the same period of the prior
year. The decrease for the quarter is due to last year‘s redesign and build of our
website, combined with reduced legal and transfer agent costs, partially offset by
higher audit costs. For the nine month period ended January 31, 2011, the decrease is
due to last year‘s redesign and build of our website combined with reduced legal and
transfer agent costs insurance and TSX/Sedar filing fees, partially offset by increased
audit fees and insurance costs.
4) office expenses were $16,267 for the three months ended January 31, 2011, a decrease
of $7,983 from the $24,250 recorded during the same period of the prior year. For the
nine month period ended January 31, 2011, costs were $36,508, a decrease of $14,606
from the $51,114 recorded during the same period of the prior year. The decrease for
the quarter is mainly due to reduced costs for press releases, couriers and late payment
fees. The decrease for the year to date is mainly a result of reduced costs for press
releases, printing costs and late payment fees, partially offset by the relocation costs of
our Ontario office from Markham to Richmond Hill and maintenance and hosting fees
for our website.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
10
5) research and development costs were $7,395 for the three months ended January 31,
2011, a decrease of $3,915 from the $11,310 recorded in the same period of the prior
year. For the nine month period ended January 31, 2011, costs were $33,187, an
increase of $16,155 from the $17,032 recorded in the same period of the prior year.
6) Investor relations costs were $34,302 for both the three and nine months ended January
31, 2011, an increase of $10,699 from the $23,603 recorded in the same periods of the
prior year. The increase in costs recognizes our having hired an IR firm to handle
investor/shareholder relations in December 2010 combined with costs incurred for an
email blast sent to various brokers, compared with as compared to the costs in the
prior year for BNN promotional clips.
7) travel and entertainment costs were $1,994 for the three months ended January 31,
2011, a decrease of $7,547 from the $9,541 recorded during the same period of the
prior year. For the nine month period ended January 31, 2011, costs were $20,148, an
increase of $2,083 from the $18,065 recorded in the same period of the prior year. The
decrease in the three month period is partially due to our CEO‘s travel and
entertainment costs being allocated between selling and administration costs,
whereas in prior periods the selling costs were not segregated from administration.
8) telephone costs were $8,065 for the three months ended January 31, 2011, an increase
of $3,370 from the $4,695 recorded during the same period of the prior year. For the
nine month period ended January 31, 2011, costs were $19,034, an increase of $599
from the $18,435 recorded during the same period of the prior year. The increase in
costs for the three month period relates to increased cell phone usage in the quarter.
9) currency exchange losses for the three months ended January 31, 2011 were $7,133,
an increase of $1,983 from the $5,150 realized during the same period of the prior year.
For the nine month period ended January 31, 2011, losses were $8,814, a decrease of
$31,064 from the loss of $39,878 realized during the same period of the prior year. As
our billings to international clients are in US dollars, we are at risk with fluctuations in the
US/Canadian exchange rates. These losses are directly attributable to the extended
payment terms given to our Asian distributor.
10) directors‘ fees were $5,000 for the three month ended January 31, 2011, no change
from what was recorded in the same period of the prior year. For the nine month
period ended January 31, 2011, costs were $15,000, an increase of $5,000 from the
$10,000 recorded in the same period of the prior year. The Company pays its directors
a quarterly fee for their services. As the Company was a private company up until
September 3, 2009, no payments were made to its directors for the three months
ended July 31, 2009.
11) Scientific Research and Experimental Development funds (―SR&ED‖) refunds were $Nil
for both the three and nine months ended January 31, 2011, a decrease of $43,754
from the $43,754 recovered during the nine month period ended January 31, 2010. The
Company has filed claims for refunds, and anticipates $25,000 net of commissions, for
the May 1, 2008 to September 3, 2009 period, which are currently under review by the
Canada Revenue Agency. In accordance with Company policy, a refund is booked
only when the receipt of the refund is reasonably assured.
Net Loss
Net loss of $524,824 in the three month period ended January 31, 2011 decreased by $186,013
from the $710,837 reported during the same period of the prior year. Net loss of $1,315,648 in the
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
11
nine month period ended January 31, 2011 increased by $238,857 from the $1,076,791 reported
during the same period of the prior year.
The decreased loss for the three months ended January 31, 2011 is a combination of reduced
selling and administrative expenses, specifically for: promotional costs; stock-based
compensation; consultants fees; professional fees; research and development costs and office
expenses, partially offset by higher administrative salaries and benefit costs, the write-off of the
asset carrying value for the Asian market back-end system net of the accounts payable, and
offset by the reduced bad debt allowance loss (see section ―Additional Disclosure for Venture
Issuers Without Significant Revenue‖).
The increased loss for the nine months ended January 31, 2011 is a combination of reduced
licensing revenues, increased direct costs and increased administration expenses, specifically
for: salaries and benefits for additional staff; travel and entertainment costs; research and
development expenditures, investor relations costs and the write-off of the asset carrying value
for the Asian market back-end system net of the accounts payable,, partially offset by reduced
consulting fees; professional fees; office expenses and currency exchange losses and bad debt
allowance loss combined with a timing difference in the receipt of government rebates for
SR&ED claims (see section ―Additional Disclosure for Venture Issuers Without Significant
Revenue‖). In addition, during the nine months ended January 31, 2010, the Company
recorded a one-time debt forgiveness by its Chief Executive Officer of $122,173.
Summary of Fiscal 2011, 2010 and 2009 Quarterly Results
Fiscal 2011 Q1 Q2 Q3
(unaudited)
Revenue $ 25,894 $ 26,303 $ 24,416
Cost of sales 17,018 34,390 24,627
Gross profit/(loss) 8,876 (8,087) (211)
Expenses
Selling 25,374 32,221 55,982
General and administrative 324,375 372,057 426,568
Accounts receivable allowance 20,813 13,132 -
Amortization 740 760 829
Asset write-off - - 36,835
Interest expense (income) 605 1,536 4,399
371,907 419,706 524,613
Net Loss (363,031) (427,793) (524,824)
Loss per share $ (0.010) $ (0.012) $ (0.013)
Weighted average number of
common shares outstanding 36,007,472 36,354,863 40,861,811
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
12
Fiscal 2010 Q1 Q2 Q3 Q4
(unaudited)
Revenue $ 109,743 $ 24,859 $ 25,789 $ 23,373
Cost of sales 22,178 19,583 26,496 11,215
Gross profit/(loss) 87,565 5,276 (707) 12,158
Expenses
Selling 18,138 86,459 111,712 57,317
General and administrative 232,867 240,031 554,723 507,832
Accounts receivable allowance - - 50,000 160,979
Amortization 317 985 612 909
Debt forgiveness - (122,173) - (1,146)
Interest expense (income) 11,382 (9,210) (6,917) 1,202
262,704 196,092 710,130 727,093
Net Loss (175,139) (190,816) (710,837) (714,935)
Loss per share $ (0.009) $ (0.007) $ (0.022) $ (0.020)
Weighted average number of
common share outstanding 20,000,000 29,100,753 31,620,929 35,935,110
Fiscal 2009 Q4
(unaudited)
Revenue $ 202,049
Cost of sales 23,943
Gross profit/(loss) 178,106
Expenses
Selling 40,143
General and administrative 257,946
Amortization 262
Interest expense (income) 8,577
306,928
Net Loss from continuing operations (128,822)
Loss on disposal of discontinued
Operations -
Net Loss from discontinued
Operations 277
Net Income/(Loss) $ (128,545)
Loss per share
Continuing operations $ (0.007)
Discontinued operations $ -
Net Income/(Loss) $ (0.007)
Weighted average number of
common share outstanding 20,000,000
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
13
Liquidity
iSIGN‘s primary sources of liquidity have historically been equity and debt financings and a
revolving line of credit to a maximum of $25,000. As at January 31, 2011, the net cash position
was $728,276, compared to $407,322 at April 30, 2010.
The Company‘s liquidity issues are due to:
recurring operating losses in its past fiscal years, including losses of $1,278,813 during the
nine months ended January 31, 2011,
extended payment terms to our Asian distributor in recognition that our technology, as
well as the concept of location-based interactive proximity advertising was new and
untested in the marketplace, and,
The Asian distributor‘s inability to pay accounts receivable that are overdue and owed
to the Company of approximately $90,000, at January 31, 2011.
The Company‘s working capital at January 31, 2011 was $514,960, as compared to working
capital of $244,695 at April 30, 2010. The increase in working capital reflects the cash from the
private placements in the Company during October, November and December 2010, offset by
the Company‘s ongoing losses.
The Company will continue to require additional financing to fund working capital until revenues
from its operations provide sufficient cash flow to meet ongoing requirements.
The Company anticipates that improvements to the cash flow from operations will eventually be
realized. Based on the feedback from tradeshows, prospects and other independent sources,
the Company believes that:
1. There is an overwhelming trend of the swift advent of ―mobile culture‖ – consumers
increasingly leverage mobile phones as a de facto portal, a primary interface, available
anywhere at any time, through which they conduct research, connect and share with
others and in many cases, make purchasing decisions; and,
2. A second trend is digital signage — a dynamic opportunity for retailers to promote their
brands, their products, and their services via the full power of a true multimedia
experience. By integrating with our proximity marketing, content on digital signs can
become far more skillfully matched with shopper interests.
The Company has been successful in attracting business partners, a distributor and clients on a
test basis, as well as in generating significant interest from a variety of potential clients and
business partners.
With the OEM and distribution agreements now in place as of the date of this MD&A our
revenue opportunities have improved and might be realized in future through partnering with
these large multi-national companies. Our business partners recognize that embedding our
software solutions into their products will potentially allow them to increase their own sales and
expand their client base.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
14
Contractual Obligations and Guarantees
The Company currently has lease agreements for the rental of its Richmond Hill, Ontario and
Vancouver, British Columbia, Canada offices, as well as for hosting our IMS 3.0 back-end
reporting system for clients. In addition, in October 2009, the Company entered into a
sponsorship agreement with Ashleigh McIvor, Canada‘s gold medal winning female athlete at
the Vancouver 2010 Winter Games. On November 9, 2010, the Company outsourced its public
relations to a third party, for a period of six months from December 1, 2010. On December 8,
2010, the Company outsourced its investor relations to a third party for a period of six months
from December 1, 2010. In February 2011, the Company signed a two year lease extension for
its Vancouver office space.
Future minimum contractual payments are as follows:
Year ending Total 2011 2012 2013 2014 on
Operating Lease Obligations $ 106,179 $ 16,396 $ 45,714 $ 41,011 $ 3,058
Consulting Agreements 47,300 35,475 11,825 - -
Sponsorship Agreement 38,523 3,556 14,224 14,224 6,519
Total $ 192,002 $ 55,427 $ 71,763 $ 55,235 $ 9,577
During the quarter ended July 31, 2010, the Company entered into two agreements with
client/business partners whereby the Company has agreed to indemnify the counterparties for
liabilities that may arise during the terms of the agreements. The maximum amount of any
potential future payment cannot be reasonably estimated at this time.
Capital Resources
With the Company‘s change in strategy to licensing and or embedding our software into our
business partners‘ products, as opposed to buying and leasing IMS units, it is anticipated that our
requirements to purchase IMS units will be decreased. Our main capital requirement will be for
further enhancements to our software.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet arrangements.
Transactions with Related Parties
In the normal course of operations, the Company:
pays the monthly fees of our Chief Executive Officer to a company owned by him.
The amount of fees expensed during the three months ended January 31, 2011 is
$47,550 (2010 - $47,550) and for the nine months ended January 31, 2011 is $142,650
(2010 - $142,650). The amount outstanding in trade accounts payable at January
31, 2011 is $Nil (2010 - $82,772). In the event of termination of this agreement for any
reason other than just cause, a penalty of $190,200 would be owed.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
15
pays the monthly fees of our Chief Financial Officer to a company owned by him.
The amount of fees expensed during the three months ended January 31, 2011 is
$6,000 (2010 - $6,000) and for the nine months ended January 31, 2011 is $18,000
(2010 - $8,000). The amount outstanding in Trade accounts payable at January 31,
2011 is $2,260 (2010 - $Nil).
engaged a law firm to provide legal services to the Company. One of the partners
in the law firm is a director and secretary of the Company. During the three months
ended January 31, 2011, $10,692 in legal fees and disbursements were Incurred with
this law firm (2010 - $31,940) and for the nine months ended January 31, 2011 is
$10,692 (2009 - $52,986). The amount outstanding in trade accounts payable at
January 31, 2011 is $4,540 (2010 - $Nil).
Consolidated Financial Position
Total assets increased to $1,291,621 at January 31, 2011 from $901,769 at April 30, 2010. Total
Shareholders‘ Equity increased to $832,967 at January 31, 2011 from $520,274 at April 30, 2010.
Critical Accounting Policies and Changes in Accounting Policies
The Company‘s significant accounting policies and accounting policy changes are described in
Note 2 to the annual audited financial statements. The preparation of the Company‘s financial
statements, in conformity with Canadian GAAP, requires management to make estimates and
assumptions that affect amounts reported in the financial statements and accompanying notes.
Significant management estimates include revenue recognition, allowance for doubtful
accounts, useful lives of capital and intangible assets, fair value for stock-based compensation
and the fair value of warrants.
Recent pronouncements by the Canadian Institute of Chartered Accountants (―CICA‖) or the
Canadian Accounting Standards Board (―AcSB‖) that may result in future changes to our
accounting policies, are described in Note 3 to the annual audited financial statements.
The Canadian Accounting Standards Board confirmed the requirement for Canadian public
companies to adopt International Financial Reporting Standards (―IFRS‖) for fiscal years
beginning on or after January 1, 2011. The Company has contracted with an on-line service
that will enable the Company plan and execute its conversion to IFRS based GAAP. The
implementation timeline for the conversion to IFRS from Canadian financial reporting standards
is expected to be completed with an implementation date of May 1, 2011.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
16
The Company has performed an initial review of IFRS and the potential impact on its financial
statements that has not been finalized as at the date of preparation of this MD&A. Preliminary
comments are tabled below:
IAS / IFRS
Description of change –
under IFRS
Impact on financial
statements
Considerations
IAS 18 –
Revenue
Less detailed guidance
could result in different
determination of multiple
element arrangements
Changes may
accelerate or
decelerate recognition
of revenues, gross
margin, net income,
accounts receivable and
deferred revenues
Review ongoing sales
contracts to determine
different components
IAS 36 -
Impairment
Different
methodology on
impairment test (one
step approach);
Reversals of some
impairment losses
Impairment may more
likely but smaller
incremental amounts
Consider which items
susceptible in the
business: intangibles,
development costs and
improve appropriate
monitoring
Stock
compensation
– IFRS 2
Vesting installments
Non employees
Compulsory estimate
forfeiture rates
Impact valuation of
compensation.
Understanding the
entity‘s compensation
practices and how these
will be impacted
Financial Instruments
Fair Value
The carrying amounts of cash, accounts receivable, other receivables, accounts payable and
accrued liabilities and notes payable approximate fair value due to the short-term nature of
these instruments.
Credit Risk
Credit risk is the risk of financial loss associated with the counterparty‘s inability to fulfill its
payment obligations in accordance with the terms and conditions of its contract with the
Company. Credit risk arises from cash and deposits with banks as well as credit exposure to
outstanding receivables.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
17
The aging of accounts receivables at January 31, 2011 was as follows:
1 to 30 days $ 793
31 to 60 days 732
61 to 90 days -
Over 91 days 83,859
$ 85,384
The Company‘s credit risk arises primarily from the Company‘s trade receivable. The carrying
amount of financial assets represents the maximum credit exposure to the Company. The
Company‘s credit risk is a result of its trade receivable being concentrated with our two largest
clients accounting for 98.3% of total trade receivables. The Company manages its credit risk by
regular credit assessments of its customers and provides allowances for potentially uncollectible
accounts receivable, when, based upon management‘s evaluation, the collection of an
account receivable is not reasonably certain. The Company‘s exposure to credit risk as at
January 31, 2011 includes $85,384 of accounts receivable, net of allowances of $244,925 (2010 -
$50,000l) and $55,401 of other receivables. Our key customer, which includes 98.3% of accounts
receivable, will be liquidating marketable securities to cover their indebtedness to the
Company. Based upon the realized share price, there may be an additional requirement for an
adjustment to our provision for doubtful accounts. The Company received an additional
$43,496 from the sale of these securities subsequent to January 31, 2011.
Liquidity Risk
Liquidity risk is the risk that the Company will experience difficulty in meeting its obligations that
are associated with financial liabilities. The Company‘s approach to managing liquidity risk is to
ensure that it will have sufficient liquidity to meet financial obligations when they fall due, from its
funding sources, such as equity and debt issuances, accounts receivable and line of credit. The
Company is raising funds through the issuance of stock from treasury to ensure that it will have
funds available to meet liabilities when they fall due.
The following table represents the Company‘s financial liabilities identified by type and future
contractual dates of payment:
Total Under 1 – 3 After
1 Year Years 3 Years
Accounts payable and accrued liabilities $ 245,187 $ 245,187 $ - $ -
Loan 150,000 150,000 - -
$ 395,187 $ 395,187 $ - $ -
Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Company is subject to interest rate
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
18
cash flow risk to the extent that its operating line of credit bears interest at bank prime plus 1.8%.
Based upon the Company‘s operating line limit of $25,000, a 1% increase (decrease) in the bank
prime rate would increase (decrease) interest expense by $250, based upon a 100% utilization of
the credit line.
Currency Risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. Financial instruments, which expose
the Company to financial risk arising from foreign exchange rates and the degree of volatility of
these rates, consist primarily of the US dollar denominated portion of accounts receivable and
accounts payable and accrued liabilities. Substantially all of the Company‘s accounts
receivable are denominated in US dollars. As at January 31, 2011, the Company has not
entered into any derivative instruments to mitigate this risk. The Company has reflected losses in
its Statement of Operations for both the three and nine month periods ended January 31, 2011
as a result of exposure to foreign currency exchange rate fluctuations of $7,133 (2010 –
exchange loss of $5,150) and $8,814 (2010 – exchange loss of $39,878) respectively.
Revenue or expenses arising from a foreign currency transaction are translated into Canadian
dollars at the transaction date using the exchange rate in effect at that date and are recorded
in general and administrative costs.
As at January 31, 2011, holding all other variables constant, a 5% strengthening or weakening of
the Canadian dollar against the United States dollar, would not materially affect net equity or
net loss for the year.
Additional Disclosure for Venture Issuers without Significant Revenue
Direct costs for the three and nine month periods ended January 31, 2011 and 2010 are as
follows:
Three months ended January 31, Nine months ended January 31,
2011 2010 2011 2010
Amortization of IMS units $ 9,363 $ 13,832 $ 28,089 $ 36,413
iSIGN Transceivers 6,532 - 27,926 -
Server costs 1,126 523 9,394 523
Shipping/packaging costs 7,606 257 7,799 566
Software Maintenance/Testing - - 2,500 -
Miscellaneous costs - 484 327 914
IMS System Modifications - 900 - 1,340
Software loading costs - 10,500 - 28,500
$ 24,627 $ 26,496 $ 76,035 $ 68,256
Selling costs for the three and nine month periods ended January 31, 2011 and 2010 are as
follows:
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
19
Three months ended January 31, Nine months ended January 31,
2011 2010 2011 2010
Promotional and sales material costs $ 30,350 $ 94,558 $ 55,909 $ 163,017
Salaries and benefits 12,967 13,746 40,157 41,708
Automobile expenses 2,400 3,019 7,200 7,819
Training expenses 5,982 - 5,982 -
Travel and entertainment 3,626 - 3,672 2,326
Memberships 657 - 657 -
Outside services - 389 - 1,439
$ 55,982 $ 111,712 $ 113,577 $ 216,309
General and administration expenses for the three and nine month periods ended January 31,
2011 and 2010 are as follows:
Three months ended January 31, Nine months ended January 31,
2011 2010 2011 2010
Salaries and benefits $ 297,130 $ 310,202 $ 708,508 $ 528,535
Consulting fees 7,723 63,695 103,223 156,246
Professional expenses 21,547 50,801 90,721 129,710
Office rents 13,785 12,984 40,933 39,307
Office expenses 16,267 24,250 36,508 51,114
Research & development 7,395 11,310 33,187 17,032
Investor relations expense 34,302 23,603 34,302 23,603
Travel and entertainment 1,994 9,541 20,148 18,065
Telephone expenses 8,065 4,695 19,034 18,435
Directors‘ fees 5,000 5,000 15,000 10,000
Automobile expenses 3,062 3,142 9,081 8,575
Currency exchange (gain)/ loss 7,133 5,150 8,814 39,878
Memberships and subscriptions 3,165 350 3,541 875
Financing fees - 30,000 - 30,000
Research refunds - - - (43,754)
$ 426,568 $ 554,723 $ 1,123,000 $ 1,027,621
Outstanding Share Data
Capital Stock
Authorized
Unlimited number of common shares, voting, with no par value
Issued
The following is a summary of shares issued for the nine months ended January 31,
2011:
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
20
Number Dollars
Balance at April 30, 2010 36,607,472 $ 2,792,384
Adjustment in valuation of warrants from year-end 6.b)(i) - 6,900
Exercise of options (i) 110,000 22,000
Issuance in a private placement (ii) 965,000 70,922
Issuance in a private placement (iii) 2,000,000 136,209
Issuance in a private placement (iv) 1,835,200 143,834
Issuance in a private placement (v) 3,184,900 238,762
Cost of share issuance (vi) - (197,604)
Balance at January 31, 2011 44,702,572 $ 3,213,407
(i) On August 12, 2010, 110,000 stock options were exercised at a price of $0.20,
for proceeds of $22,000.
(ii) ‗On October 6, 2010, the Company completed a private placement of
965,000 shares and 482,500 whole warrants, at a price of $0.20, for proceeds
of $193,000 (share value of $70,922 and warrant value of $99,877). In
addition, 107,250 warrants were issued to various brokers, with these warrants
valued at $22,201.
(iii) On November 26, 2010, the Company completed a private placement of
2,000,000 shares and 1,000,000 whole warrants, at a price of $0.20, for
proceeds of $400,000 (share value of $136,209 and warrant value of
$217,000). In addition, 215,625 warrants were issued to various brokers, with
these warrants valued at $46,791.
(iv) On November 30, 2010, the Company completed the first tranche of a
private placement by issuing 1,835,200 shares and 917,600 whole warrants, at
a price of $0.20, for proceeds of $367,040 (share value of $143,834 and
warrant value of $199,119). In addition, 111,000 warrants were issued to
various brokers, with these warrants valued at $24,087.
(v) On December 30, 2010, the Company completed the second tranche of a
private placement by issuing 3,184,900 shares and 1,592,450 whole warrants,
at a price of $0.20, for proceeds of $636,980 (share value of $238,762 and
warrant value of $391,743). In addition, 26,250 warrants were issued to
various brokers, with these warrants valued at $6,475.
(vi) Share issuance costs consist of commissions of $110,910, legal fees of $76,412
and TSX fees of $10,282.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
21
Warrants
The following is a summary of share purchase warrants activity for the nine months ended
January 31, 2011:
Exercise
Number Valuation Price Expiry Date
Balance at April 30, 2010 11,705,332 $ 1,195,852
Adjustment to year-end 2010 6.b) i) (150,000) (6,900)
Issued 6. a)(ii) 482,500 99,877 0.30 October 6, 2012
Issued 6. a)(ii) 71,500 14,801 0.20 October 6, 2012
Issued 6. a)(ii) 35,750 7,400 0.30 October 6, 2012
Issued 6. a)(iii) 1,000,000 217,000 0.30 November 26, 2012
Issued 6. a)(iii) 143,750 31,194 0.20 November 26, 2012
Issued 6. a)(iii) 71,875 15,597 0.30 November 26, 2012
Issued 6. a)(iv) 917,600 199,119 0.30 November 30, 2012
Issued 6. a)(iv) 74,000 16,058 0.20 November 30, 2012
Issued 6. a)(iv) 37,000 8,029 0.30 November 30, 2012
Issued 6. a)(v) 1,592,450 391,743 0.30 December 30, 2012
Issued 6. a)(v) 17,500 4,323 0.20 December 30, 2012
Issued 6. a)(v) 8,750 2,152 0.30 December 30, 2012
Balance at January 31, 2011 16,008,007 $ 2,196,245
i) Finder warrants issued in September 3, 2009 were overstated at April 30, 2010.
For the warrants issued during the nine month period ended January 31, 2011,
reallocation of the warrant value from Share capital has been calculated utilizing the
Black-Scholes option pricing model with the following assumptions: risk free interest rate
range of 1.35% to 1.71%; dividend yield of 0%; weighted average expected life of 24
months and an expected volatility factor 349.3%.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
22
The following table summarizes information about warrants outstanding:
Number of
Warrants
Outstanding
Weighted
Average
Exercise Price
Weighted
Average
Remaining Life
(in months)
132,636 0.40 1.0
480,000 0.40 1.5
3,214,996 0.40 7.0
1,800,000 0.25 7.0
50,000 0.35 8.0
38,850 0.50 12.5
38,850 0.25 12.5
518,250 0.30 20.0
71,500 0.20 20.0
2,026,475 0.30 22.0
217,750 0.20 22.0
1,601,200 0.30 23.0
17,500 0.20 23.0
800,000 0.50 24.5
5,000,000 0.45 47.5
16,008,007 $ 0.37 24.5
Subsequent to January 31, 2011, 132,636 options expired and 91,200 options were
exercised.
Stock Options
The shareholders of the Company on November 18, 2009 approved a Stock Option Plan
(the ―Plan‖) for the directors, officers, employees and consultants of the Company.
Options granted under the Plan are exercisable for a period up to five years, as
determined by the Board, from the date of the grant. The exercise price of the options
shall be determined by the Board at the time of the grant, but shall not be less than the
Discounted Market Price as set by the TSX Venture Exchange Policy 1.1 as amended from
time to time. The aggregate number of shares issuable upon the exercise of all options
granted under the Plan shall not exceed 10% of the issued and outstanding common
shares of the Company from time to time. The number of common shares reserved for
issuance to (a) any individual director or officer will not exceed 5% of the issued and
outstanding common shares, and (b) investor relations consultants will not exceed 2% of
the issued and outstanding common shares.
Stock Options
The following is a summary of stock option activity for the nine months ended January 31,
2011:
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
23
# of
Options
Average
Exercise
Price
Expiry Date
Outstanding at April 30, 2010 2,982,400 $ 0.27
Issued 900,000 0.25 September 27, 2015
Issued 300,000 0.25 December 1, 2015
Issued 300,000 0.25 January 10, 2016
Expired (312,400) 0.20
Expired (300,000) 0.25
Exercised (110,000) 0.20
Outstanding at January 31, 2011 3,760,000 $ 0.27
The following table summarizes the stock options outstanding at January 31, 2011:
Total Options Outstanding Total Options Exercisable
Exercise
Price
# of Options Weighted Average
Remaining Contractual
Life
# of Options Weighted Average
Remaining Contractual
Life
$ 0.25 625,000 44 months 625,000 44 months
0.38 500,000 47.0 months 333,334 47.0 months
0.25 1,035,000 48.5 months 345,000 48.5 months
0.25 100,000 48.5 months 50,000 48.5 months
0.25 900,000 56 months 300,000 56 months
0.25 300,000 58 months 75,000 58 months
0.25 300,000 58.5 months 100,000 58.5 months
3,760,000 1,828,334
Stock-based Compensation
The fair value of employee stock options granted is recognized as compensation cost in
the consolidated statements of operations. The weighted average fair value of options
granted under the stock option plan in the 9 months ended January 31, 2011 was $0.25
(2010 - $0.31) and the stock-based compensation expense for options issued was
$206,925 (2010 - $206,525), recorded under general and administrative expenses. The
share-based compensation was calculated using the Black-Scholes pricing model, using
the following assumptions: risk free interest rate range of 2.09% to 2.46%; expected
dividend yield of 0%; expected volatility of 381.7% and an expected option life of 2.5
years.
Shares Held in Escrow
Pursuant to the Transaction, 2,015,000 iSIGN Shares (29.6%) are subject to escrow
continuing from part of the initial public offering of the Company (―CPC Escrow Shares‖).
Under the policies of the Exchange, 10% of the CPC Escrow Shares were released on the
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
24
date of issuance of the Final Exchange Bulletin and an additional 15% will be released
every six months from the date of the Final Exchange Bulletin.
The 10,747,516 iSIGN Shares that were issued to the principals of iSIGN Media have been
placed in surplus security escrow agreements (―Surplus Escrow Shares‖). Under the
policies of the Exchange, 5% of the Surplus Escrow Shares were released on the date of
the Final Exchange Bulletin, with additional releases as follows: 5% on the six month
anniversary of the Final Exchange Bulletin; 10% on each of the twelfth and eighteenth
month anniversaries of the Final Exchange Bulletin; 15% on each of the twenty-fourth and
thirtieth month anniversaries of the Final Exchange Bulletin; and the remaining 40% on the
thirty-sixth month anniversary of the Final Exchange Bulletin.
1,461,187 iSIGN Shares that were issued to non-principals of iSIGN Media have been
placed in value security escrow agreements (―Value Escrow Shares‖). Under the policies
of the Exchange, 10% of the Value Escrow Shares were released on the date of the Final
Exchange Bulletin and an additional 15% will be released every six months from the date
of the Final Exchange Bulletin.
The following table summarizes the shares held in escrow at January 31, 2011:
Outstanding at April 30, 2010 12,279,908
Released - principals of iSIGN Media (1,074,753)
Released – non-principals of iSIGN Media (521,428)
Outstanding at January 31, 2011 10,683,727
Nature of Operations
Location-based interactive proximity advertising is a relatively new field, with the result that our
revenues and purchases are concentrated among a limited number of companies. For the
three months ended January 31, 2011, two of our customers accounted for 80.7% of our
revenue. For the nine months ended January 31, 2011, two of our customers accounted for
77.1% of our revenue. For the three months ended January 31, 2011, one of our suppliers
accounted for 11.3% of our total purchases. For the nine months ended January 31, 2011, two of
our suppliers accounted for 23.9% of our total purchases.
Internal Controls
Disclosure controls and procedures (―DC&P‖) are intended to provide reasonable assurance
that information required are disclosed, processed, summarized and reported within the time
periods specified by securities regulations, and that information required to be disclosed is
accumulated and communicated to management. Internal controls over financial reporting
(―ICFR‖) are intended to provide assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with Canadian
GAAP.
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
25
TSX Venture listed companies are not required to provide representations in their annual and
interim filings related to the establishment and maintenance of DC&P and ICFR, as defined in
Multinational Instrument MI 52-109. In particular, the CEO and CFO certifying officers do not
make any representations relating to the establishment and maintenance of: (a) controls and
other procedures designed to provide reasonable assurance that information required to be
disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under
securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation, and (b) a process to provide reasonable assurance regarding
the reliability financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. The issuers‘ certifying officers are responsible for ensuring
that processes are in place to provide them with sufficient knowledge to support the
representations they are making in their certificate regarding absence of misrepresentations and
fair disclosure of financial information. Investors should be aware that inherent limitations on the
ability of certifying officers of a venture issuer to design and implement on a cost effective basis
DC&P and ICFR as defined in MI 52-109 may result in additional risks to the quality, reliability,
transparency and timeliness of interim and annual filings and other reports provided under
securities legislation.
Risk Factors
Any investment in the securities of the Company is speculative due to the nature of its business
and its general stage of development. These risk factors could materially affect the Company‘s
future operating results and could cause actual events to differ materially from those described
in forward-looking statements relating to the Company. In addition to the usual risks associated
with investment in a business, investors should carefully consider the following risk factors:
Location-based Interactive Proximity Advertising Medium
Although there is a large and growing amount of interest in this field from both the advertising
community and digital sign companies, it is still new and relatively untested. There can be no
assurances that advertisers will accept proximity messaging as an acceptable advertising
medium or that they will either increase their advertising spending to include this medium or
divert some of their existing advertising budget to this medium.
Competition
iSIGN‘s competition for advertising dollars, are the more traditional forms of advertising -
television, the print mediums (magazines and newspapers), radio and out-of-home advertising –
that advertisers immediately consider when they think of communicating with potential
consumers. The Company also has competition from other companies who are in the Proximity
Messaging field. However, these companies have positioned themselves in an entirely different
fashion than iSIGN‘s business model. They have generally positioned themselves as the
advertising medium, retaining all advertising revenues. Conversely, iSIGN has positioned itself as
a partner with the retail establishments and digital sign companies in order to allow them to
generate and retain advertising revenue.
Dependence on International Trade
iSIGN‘s current primary client is located in Asia. Most of our potential future clients are located in
the United States. Such trade is influenced by many factors, including economic and political
conditions, major work stoppages, wars, terrorist acts or security operations, currency fluctuations
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
26
and Canadian and foreign laws relating to duties and trade restrictions. There can be no
assurance that trade-related events beyond the control of iSIGN, such as an increase in trade
restrictions, will not have an adverse effect on iSIGN‘s business.
Dependence on Key/Qualified Personnel
The Company‘s success is dependent on the abilities, experience and efforts of its senior staff.
The experience of these individuals, as well as new employees that we attract to our
organization, will be an important factor contributing to iSIGN‘s continued success and growth.
While iSIGN has entered into employment agreements with its senior management and staff,
should these persons be unable or unwilling to continue their employment with the Company,
the loss of one or more of these individuals could have an adverse effect upon iSIGN‘s
operations and business prospects. There can be no assurance that iSIGN will not experience
employee turnover in the future, or that iSIGN‘s staffing costs will not increase. There is no
assurance that the Company will be able to continue to hire and retain a sufficient number of
qualified personnel, although our track record in this regard is positive. The Company does not
presently carry ―key man‖ insurance policies on any of its officers, directors or employees
Creating New Product Features
iSIGN‘s ability to grow its revenue and client base will be impacted to a degree, by its ability to
create and/or to react to the desire for additional features and functions for its technology.
Vulnerability to Economic Conditions
iSIGN is dependent upon the economic environments in which it operates. Demand for iSIGN‘s
product could be adversely affected by economic conditions in the countries in which iSIGN‘s
clients operate. iSIGN‘s business may be sensitive to external factors such as events which may
adversely affect the economy and consumer spending. There can be no assurance that such
factors may not have an adverse effect upon iSIGN‘s business. However, as stated earlier, it is
important to note that the Company‘s advertising model in the only one that the Company is
aware of that enables clients to generate revenue for themselves. In the current economic
recession, this gives us a distinct advantage in our dealings with clients who are looking to
communicate with prospective purchasers in their retail outlets.
Technology
iSIGN currently holds patent pending applications in Canada, United States, China, Singapore
and Malaysia. Despite precautions that iSIGN may take to protect its rights, third parties may
copy or obtain and use our intellectual property and other proprietary information without our
authorization or they may develop similar or superior technologies. iSIGN enters into
confidentiality agreements with its employees, clients, prospective clients and others. However,
these agreements may not provide meaningful protection of our technologies in the event of
unauthorized use or disclosure. Policing unauthorized use of intellectual property is difficult and
the cost of enforcing our rights by way of litigation may be prohibitive. iSIGN‘s success will
partially depend upon its ability to obtain, enforce and maintain patent protection for its
intellectual property worldwide.
Contingencies
In the normal course of operations, there may be claims or proceedings instituted against iSIGN.
Any losses sustained from any future proceedings will be recorded on the statement of
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
27
operations at such time as the loss is determined. At the present time, there are no actions
against the Company.
Limited Operating History
iSIGN has a limited operating history upon which its business can be evaluated. iSIGN‘s business
and prospects must be considered in light of the risk, expenses and difficulties encountered by
companies in the early stages of development, particularly companies in new and evolving
technology and its application to related markets.
No History of Profits
iSIGN has not earned profits to date and there is no assurance that iSIGN will earn profits in the
future, or that profitability, if achieved, will be sustained. The success of iSIGN ultimately depends
upon its abilities to generate significant revenues to finance operations as opposed to external
funding. There is no assurance that future revenues will be sufficient to generate the funds
required to continue operations without external funding. If the Company does not have
sufficient capital to fund its operations, it may be required to forego certain business
opportunities.
Future Capital Requirements
iSIGN will require additional financing in order to grow and expand its operations. Additional
financing could include the incurrence of debt and the issuance of additional equity securities,
which could result in substantial dilution to existing shareholders. It is possible that required future
financing will not be available, or if available, will not be available on favourable terms. If
adequate funds are not available, or are not available on acceptable terms, iSIGN may not be
able to take advantage of opportunities or otherwise respond to competitive pressures and
remain in business. There can be no assurances that iSIGN will be able to raise additional capital
if its capital resources are exhausted.
Management of Growth
Any expansion of iSIGN‘s business may place a significant strain on its financial, operational and
managerial resources. There can be no assurance that the Company will be able to implement
and subsequently improve its operations and financial systems successfully and in a timely
manner in order to manage any growth it experiences. There can be no assurances that iSIGN
will be able to manage growth successfully. Any inability of iSIGN to manage growth
successfully could have a material adverse effect on the Company‘s business, financial
condition and operational results.
Our sales efforts require significant time and effort and could hinder our ability to expand our
customer base and increase revenue
Attracting new customers requires substantial time and expense and we cannot assure that we
will be successful in establishing new relationships, or maintaining or advancing our current
relationships. For example, it may be difficult to identify, engage and market to customers who
do not currently perform mobile marketing or advertising or are unfamiliar with our current
services or platform. Further, many of our potential customers typically require input from one or
more internal levels of approval. As a result, during our sales effort, we must identify multiple
people involved in the purchasing decision and devote a sufficient amount of time to
presenting our products and services to those individuals. The newness and complexity of our
iSIGN MEDIA SOLUTIONS INC.
(FORMERLY KNOWN AS CORBAL CAPITAL CORP.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011
28
services, including our software as a service model, often requires us to spend substantial time
and effort assisting potential customers in evaluating our products and services including
providing demonstrations and benchmarking against other available technologies. This process
can be costly and time consuming. We expect that our sales process will become less
burdensome as our products and services become more widely known and used. However, if
this change does not occur, we will not be able to expand our sales effort as quickly as
anticipated and our sales will be adversely affected.
Approval
The Audit Committee and the Directors of iSIGN Media Solutions Inc. have approved the
disclosures in this MD&A and the accompanying unaudited Financial Statements.