-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G0Xj+ybjEzXgzoGjoKPKbZRcj9ZW8xyhZopDInM06qltaju6Bi58wY0Ixu5MTEMH ah5gxx1y4pYwEH/6O7t6Bg== /in/edgar/work/0000897101-00-001055/0000897101-00-001055.txt : 20001108 0000897101-00-001055.hdr.sgml : 20001108 ACCESSION NUMBER: 0000897101-00-001055 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGNIA SYSTEMS INC/MN CENTRAL INDEX KEY: 0000875355 STANDARD INDUSTRIAL CLASSIFICATION: [5040 ] IRS NUMBER: 411656308 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13471 FILM NUMBER: 754908 BUSINESS ADDRESS: STREET 1: 10801 RED CIRCLE DR CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129308200 MAIL ADDRESS: STREET 1: 10801 RED CIRCLE DRIVE STREET 2: 10801 RED CIRCLE DRIVE CITY: MINNETONKA STATE: MN ZIP: 55343 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [_X_] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended: September 30, 2000 ----------------------------------------------------------- Commission File Number: 0-19380 --------------------------------------------------------- INSIGNIA SYSTEMS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-1656308 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5025 Cheshire Lane North, Plymouth, Minnesota 55446 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (763) 392-6200 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registration (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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _X_ Yes ___ No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.01 Per Value -- 10,274,771 shares as of October 17, 2000. Total number of pages: 11 Page 1 of 11 INDEX REGISTRANT COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets - September 30, 2000 and December 31, 1999 Statements of Operations - Three months ended September 30, 2000 and 1999; Nine months ended September 30, 2000 and 1999 Statements of Cash Flows -- Nine months ended September 30, 2000 and 1999 Notes to Financial Statements - September 30, 2000 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Item 3. Quantative and Qualitive Disclosures About Market Risk PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES Page 2 of 11 Part I. FINANCIAL INFORMATION Item 1. Financial Statements INSIGNIA SYSTEMS, INC. BALANCE SHEETS
September 30, December 31, ASSETS 2000 1999 - -------------------------------------------------------- ------------- ------------- (UNAUDITED) (NOTE) CURRENT ASSETS: Cash and cash equivalents $ 1,400,204 $ 64,091 Marketable securities 164,594 1,186,933 Accounts receivable (net of allowance of $106,186 as of 9/30/2000 and $71,000 as of 12/31/1999) 2,044,747 1,281,154 Inventories 1,083,366 1,217,784 Prepaid expenses & other 77,274 74,138 ------------- ------------- TOTAL CURRENT ASSETS 4,770,185 3,824,100 PROPERTY AND EQUIPMENT: Production tooling, machinery and equipment 1,781,620 1,743,020 Office furniture and fixtures 262,768 262,767 Computer equipment 864,899 833,440 Leasehold improvements 108,167 105,151 ------------- ------------- 3,017,454 2,944,378 Accumulated depreciation and amortization (2,841,964) (2,725,077) ------------- ------------- TOTAL PROPERTY AND EQUIPMENT 175,490 219,301 ------------- ------------- TOTAL ASSETS $ 4,945,675 $ 4,043,401 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY - -------------------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 865,845 $ 387,396 Accrued compensation and benefits 272,263 209,016 Accrued expenses 247,999 149,800 Current portion of long-term debt 0 81,967 Line of credit 732,789 807,020 Other 198,936 391,370 ------------- ------------- TOTAL CURRENT LIABILITIES 2,317,832 2,026,569 STOCKHOLDERS' EQUITY: Common stock, par value $.01; authorized--20,000,000 shares; issued and outstanding September 30, 2000-- 10,274,711 shares; December 31, 1999--9,327,946 shares 102,747 93,279 Additional paid-in capital 17,438,753 16,134,002 Unearned compensation 66,062 (28,764) Accumulated deficit (14,979,719) (14,181,685) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 2,627,843 2,016,832 ------------- ------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,945,675 $ 4,043,401 ============= =============
Note: The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date. See Notes to Financial Statements. Page 3 of 11 INSIGNIA SYSTEMS, INC. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ---------------------------- ---------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- NET SALES $ 2,863,480 $ 2,364,464 $ 8,789,702 6,955,427 Cost of Sales 1,172,138 1,177,281 3,890,576 3,469,601 ----------- ----------- ----------- ----------- GROSS PROFIT 1,691,342 1,187,183 4,899,126 3,485,826 OPERATING EXPENSES: POPS Program 908,988 697,962 2,498,719 1,939,399 Sales 289,755 279,130 963,983 790,210 Marketing 293,348 167,854 849,908 508,691 General & Administrative 490,589 422,152 1,362,656 1,298,565 ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 1,982,680 1,567,098 5,675,266 4,536,865 ----------- ----------- ----------- ----------- OPERATING INCOME (LOSS) (291,338) (379,915) (776,140) (1,051,039) OTHER INCOME (EXPENSE): Interest Income 25,317 13,314 60,853 34,065 Interest Expense (29,970) (24,401) (93,876) (42,900) Other Income (Expense) 1,160 1,508 12,629 12,059 ----------- ----------- ----------- ----------- PRE-TAX INCOME (LOSS) (294,831) (389,494) (796,534) (1,047,815) Provision for Income Tax 500 500 1,500 1,000 ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ (295,331) $ (389,994) $ (798,034) $(1,048,815) =========== =========== =========== =========== Net Income (Loss) per share $ (0.03) $ (0.04) $ (0.08) $ (0.12) =========== =========== =========== =========== Shares used in calculation of Net income (loss) per share: Basic and diluted 9,730,697 9,250,246 9,721,471 8,685,630
Page 4 of 11 INSIGNIA SYSTEMS, INC. STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30 ----------------------------- 2000 1999 ------------ ------------ OPERATING ACTIVITIES: Net income (loss) $ (798,034) $(1,048,815) Non-cash expenses included in income (loss): Depreciation and amortization 116,867 169,793 Provision for bad debt expense 115,000 45,000 Amortization of unearned compensation 94,826 14,374 Changes in operating assets & liabilities: Accounts receivable (878,593) (116,636) Inventories 134,418 35,209 Prepaids and other (3,136) 99,422 Accounts payable 478,449 95,069 Accrued compensation and benefits 63,247 (3,547) Other accrued expenses (94,235) (402,354) ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (771,191) (1,112,485) INVESTING ACTIVITIES: (Purchase) Sale of property and equipment (73,056) (147,286) (Purchase) Sales of marketable securities 1,022,339 866,463 ------------ ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 949,283 719,177 FINANCING ACTIVITIES: Proceeds from issuance of Common Stock 1,314,219 845,350 Principal payments under long-term debt agreement (81,967) (74,783) Proceeds from (payments to) credit line (74,231) 951,687 ------------ ------------ CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,158,021 1,722,254 INCREASE (DECREASE) IN CASH & EQUIVALENTS 1,336,113 1,328,946 Cash and equivalents at beginning of period 64,091 0 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,400,204 $ 1,328,946 ============ ============
Page 5 of 11 INSIGNIA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1999. NOTE B -- INVENTORIES Inventories consist primarily of Finished Goods on site. NOTE C - GENERAL & ADMINISTRATIVE EXPENSE In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS involving Stock Compensation, an interpretation of APB Opinion No. 25. The Interpretation, which has been adopted prospectively as of July 1, 2000, requires that stock options that have been modified to reduce the exercise price be accounted for as variable. The Company repriced 13,000 stock options on May 20, 1999, and reduced the exercise price to $1.50 per share, the then-current market price of the stock. Under the Interpretation, the options are accounted for as variable from July 1, 2000 until the options are exercised, forfeited or expire unexercised. Prior to the adoption of the Interpretation, the Company accounted for these repriced stock options as fixed. Because the market price of the Company's stock increased since May 20, 1999, the effect of adopting the Interpretation was to decrease net income for the quarter ended September 30, 2000 by $.008 per share. NOTE D - LITIGATION On August 7, 2000, News America Marketing In-Store, Inc., a major provider of in-store, shelf mounted signs for retail stores, filed a suit against the Company in federal district court in New Yor, New York. The compliant alleges that News America has exclusive promotional agreements with various major retail chains, and that those agreements prevented retailers from contracting for the Page 6 of 11 Company's POPS program. The complaint accuses the Company of interfering with business relationships, unfair competition and false advertising and seeks an injunction against the Company and actual and punitive damages in an unspecified amount. The Company believes that News America's suit is without merit. On August 11, 2000 the Company filed suit against News America in federal district court in Minneapolis, Minnesota. The Company's suit alleges that News America has and is engaged in anti-competitive practices and is attempting to use its dominant position in the market to stifle competition. In particular, the Company's suit alleges that News America is violating the anit-trust laws by attempting to use unenforceable exclusive dealing clauses to dissuade customers from using the Company's POPS program. The complaint seeks declaratory and injunctive relief, actual damages in an unspecified amount and treble damages and attorneys fees under federal antitrust law. Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Third Quarter Ended September 30, 2000) RESULTS OF OPERATIONS NET SALES. The Company's net sales for the third quarter ended September 30, 2000 were $2,863,000, an increase of 21%, compared to net sales of $2,364,000 for the third quarter of 1999. For the nine months ended September 30, 2000, net sales were $8,790,000, an increase of 26% compared to net sales of $6,955,000 for the first nine months of 1999. Revenue from the sales of machines, cartridges and machine maintenance was $564,000 for the first nine months of 2000 versus similar sales of $748,000 for the first nine months of 1999. Stylus software and maintenance sales decreased 9% from $619,000 in the first nine months of 1999 to $563,000 in the first nine months of 2000. Thermal sign card sales decreased 15% from $3,187,000 during the first nine months of 1999 to $2,708,000 in the first nine months of 2000. Printing sales increased 19% from $929,000 in the first nine months of 1999 to $1,110,000 in the first nine months of 2000. POPS program sales increased 179% from $1,347,000 in the first nine months of 1999 to $3,757,000 for the first nine months of 2000. GROSS PROFIT. The Company's gross profit for the third quarter of 2000 increased 42% to $1,691,000, compared to $1,187,000 for the third quarter of 1999. Gross profit for the first nine months of 2000 increased 41% to $4,899,000, compared to $3,486,000 for the first nine months of 1999. The increase in gross profit for the third quarter and the first nine months of 2000 is primarily due to the increase in the POPS program sales which have higher margins. Gross profit as a percentage of net sales was 59.1% for the third quarter of 2000, compared to 50.2% for the third quarter of 1999, and was 55.7% for the first nine months of 2000, compared to 50.1% for the first nine months of 1999. Page 7 of 11 OPERATING EXPENSES. Operating expenses increased 27% in the third quarter of 2000 compared to the third quarter of 1999, and increased 25% for the first nine months of 2000, compared to the first nine months of 1999. Sales expenses increased 4% for the third quarter of 2000, compared to the third quarter of 1999. Marketing expenses increased 75% for the third quarter of 2000, compared to the third quarter of 1999. This increase was due primarily to additional sign promotional expenses incurred during the third quarter of 2000. General and administrative expenses increased 16% for the third quarter of 2000, compared to the third quarter of 1999. This increase was due primarily to the option repricing under variable accounting rules. POPS expenses increased 30% for the third quarter of 2000, compared to the third quarter of 1999 and reflects the continuing commitment to the POPS program. Sales expenses increased 22% for the first nine months of 2000, compared to the first nine months of 1999. This increase reflects additional commissions and bonuses paid during the first nine months of 2000 as a result in the increase in sales in the Printing areas, plus additional expenses incurred relative to Stylus maintenance. Marketing expenses increased 67% for the first nine months of 2000, compared to the first nine months of 1999 and is due primarily to additional sign promotional expenses during the first nine months of 2000. General and administrative expenses increased 5% for the first nine months of 2000, compared to the first nine months of 1999. POPS expenses increased 29% for the first nine months of 2000, compared to the first nine months of 1999. This increase in POPS operating expenses for the first nine months of 2000 reflects the continuing commitment to the POPS program. Operating expenses as a percentage of net sales were 69% in the third quarter of 2000 and 65% for the first nine months of 2000, compared to 66% in the third quarter of 1999 and 65% for the first nine months of 1999. NET INCOME (LOSS). The Company had a net loss of $(295,000), or $(.03) per share for the third quarter of 2000, compared to a net loss of $(390,000), or $(.04) per share for the third quarter of 1999. For the first nine months of 2000, the net loss was $(798,000), or $(0.08) per share, compared to a net loss of $(1,049,000), or $(.12) per share for the first nine months of 1999. The decrease in net loss for the first nine months of 2000 and the third quarter of 2000, compared to the first nine months of 1999 and the third quarter of 1999 resulted primarily from the company's ability to increase its net sales at a proportionally higher rate than the increase in operating expenses. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, working capital was $2,452,000, compared to $1,798,000 at December 31, 1999. Cash, cash equivalents and marketable securities increased $314,000 from $1,251,000 at December 31, 1999 to $1,565,000 on September 30, 2000, primarily due to the net loss of $798,000 and a increase in accounts receivable of $879,000, offset by the proceeds received from the issuance of common stock of $1,314,000, plus an increase in accounts payable of $478,000, and a decrease in inventories of $134,000. Page 8 of 11 The Company anticipates that its working capital needs will continue to increase due to the expected growth in the business. However, the company believes that it will have sufficient capital resources to fund its current business operations and anticipated growth for the foreseeable future. Item 3. Quantitive and Qualative Disclosures About Marketing Risk None. Part II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits No. Description Page --- ----------- ---- 27 Financial Data Schedule 11 (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter covered by this Form 10-Q. Page 9 of 11 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. Dated: October 31, 2000 Insignia Systems, Inc. --------------------------------- (Registrant) /s/ Scott Drill ----------------------------- Scott Drill President /s/ John R. Whisnant ----------------------------- John R. Whisnant Vice President of Finance Page 10 of 11 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-2000 SEP-30-2000 1,400,204 164,594 2,150,933 106,186 1,083,366 4,770,185 3,017,454 2,841,964 4,945,675 2,317,832 0 0 0 17,541,500 66,062 4,945,675 2,863,480 2,863,480 1,172,138 0 1,982,680 0 29,970 (294,831) 500 (295,331) 0 0 0 (295,331) (0.03) (0.03)
-----END PRIVACY-ENHANCED MESSAGE-----