-----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, NdMcZ1h40ztiI8zkN3eQkACCaU/fEjk2+74+JF1k0BD0I4Q6pRdSW4Ddxl1IZSgb 5pXduJTsfoLmIY4rIG1FGg== 0000897101-98-001047.txt : 19981103 0000897101-98-001047.hdr.sgml : 19981103 ACCESSION NUMBER: 0000897101-98-001047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGNIA SYSTEMS INC/MN CENTRAL INDEX KEY: 0000875355 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [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: 98736082 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 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, 1998 ----------------------------------------------------------- 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.) 10801 Red Circle Drive, Minnetonka, Minnesota 55343 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (612) 930-8200 - -------------------------------------------------------------------------------- (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-- 8,497,721 shares as of October 30, 1998. Total number of pages: 9 Page 1 of 9 INDEX REGISTRANT COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets - September 30, 1998 and December 31, 1997 Statements of Operations - Three months ended September 30, 1998 and 1997; Nine months ended September 30, 1998 and 1997 Statements of Cash Flows -- Nine months ended September 30, 1998 and 1997 Notes to Financial Statements - September 30, 1998 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 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 9 Part I. Financial Information Item 1. Financial Statements INSIGNIA SYSTEMS, INC. BALANCE SHEETS
September 30, December 31, ASSETS 1998 1997 - ----------------------------------------------------- ------------ ------------ (UNAUDITED) (NOTE) CURRENT ASSETS: Cash and cash equivalents $ 144,424 $ 0 Marketable securities 1,441,863 464,837 Accounts receivable - net of $194,126 allowance 1,280,904 2,712,505 Inventories 1,284,869 1,617,578 Prepaid expenses & other 330,860 540,028 ------------ ------------ TOTAL CURRENT ASSETS 4,482,920 5,334,948 PROPERTY AND EQUIPMENT: Production tooling, machinery and equipment 1,876,957 1,902,704 Office furniture and fixtures 356,099 356,099 Computer equipment 972,720 978,952 Leasehold improvements 312,420 312,420 ------------ ------------ 3,518,196 3,550,175 Accumulated depreciation and amortization (3,234,125) (3,030,500) ------------ ------------ TOTAL PROPERTY AND EQUIPMENT 284,071 519,675 INTANGIBLES 539,187 539,187 Accumulated amortization (539,187) (539,187) ------------ ------------ -- -- ------------ ------------ TOTAL ASSETS $ 4,766,991 $ 5,854,623 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ----------------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 387,571 $ 424,361 Accrued compensation and benefits 158,945 234,291 Accrued expenses 119,432 245,028 Current portion of long-term debt 111,268 103,221 Line of credit 0 365,447 Other 477,120 500,929 ------------ ------------ TOTAL CURRENT LIABILITIES 1,254,336 1,873,277 LONG-TERM DEBT 101,619 186,104 STOCKHOLDERS' EQUITY: Common stock, par value $.01; authorized--20,000,000 shares; issued and outstanding Sept. 30, 1998--8,497,721 shares; December 31, 1997--6,857,721 shares 87,478 68,578 Additional paid-in capital 15,098,214 13,083,563 Unearned compensation 0 (2,250) Accumulated deficit (11,774,656) (9,354,649) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 3,411,036 3,795,242 ------------ ------------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,766,991 $ 5,854,623 ============ ============
Note: The balance sheet at December 31, 1997 has been derived from the audited financial statements at that date. See Notes to Financial Statements. Page 3 of 9 INSIGNIA SYSTEMS, INC. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ---------------------------- ---------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ NET SALES $ 2,226,163 $ 2,778,771 6,752,261 $ 11,132,669 Cost of Sales 1,069,415 1,501438 3,512,384 5,258,293 ------------ ------------ ------------ ------------ GROSS PROFIT 1,156,748 1,277,333 3,239,877 5,874,376 OPERATING EXPENSES: Restructuring Charge -- -- 510,190 -- POPS Program 453,652 320,607 1,224,492 679,459 Sales 376,221 1,147,682 1,419,682 3,576,135 Marketing 157,502 371,125 640,514 1,139,743 Product Development 107,477 139,757 341,368 375,859 General & Administrative 500,651 500,862 1,487,658 1,410,009 ------------ ------------ ------------ ------------ TOTAL OPERATING EXPENSES 1,595,503 2,480,033 5,623,904 7,181,205 ------------ ------------ ------------ ------------ OPERATING INCOME (LOSS) (438,755) (1,202,700) (2,384,027) (1,306,829) OTHER INCOME (EXPENSE): Interest Income 27,125 20,476 38,630 75,037 Interest Expense (35,212) (12,686) (105,249) (38,091) Other Income (Expense) 2,235 200 32,639 (15,329) ------------ ------------ ------------ ------------ PRE-TAX INCOME (LOSS) (444,607) (1,194,710) (2,418,007) (1,285,212) Provision for Income Tax -- -- 2,000 3,129 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (444,607) $ (1,194,710) $ (2,420,007) $ (1,288,341) ============ ============ ============ ============ Net Income (Loss) per share $ (0.05) $ (0.17) $ (0.32) $ (0.19) ============ ============ ============ ============ Weighted average shares and share equivalents outstanding 8,497,721 6,860,080 7,449,369 6,775,062 ============ ============ ============ ============
Page 4 of 9 INSIGNIA SYSTEMS, INC. STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30 ---------------------------- 1998 1997 ------------ ------------ OPERATING ACTIVITIES: Net income (loss) $(2,420,007) $(1,288,341) Non-cash expenses included in income (loss): Depreciation and amortization 203,625 404,590 Provision for bad debt expense 76,500 59,500 Amortization of unearned compensation 2,250 3,767 Changes in operating assets & liabilities: Accounts receivable 1,355,101 (938,180) Inventories 332,709 234,677 Prepaids and other 209,168 (443,847) Accounts payable (36,790) (45,400) Accrued compensation and benefits (75,346) 9,966 Other accrued expenses (149,405) (36,547) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (502,195) (2,039,815) INVESTING ACTIVITIES: Purchases of property and equipment 31,979 (183,915) Purchase of marketable securities (977,026) (919,948) ----------- ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (945,047) (1,103,863) FINANCING ACTIVITIES: Proceeds from issuance of Common Stock 2,033,551 2,995,734 Principal payments under long-term debt agreement (76,438) (54,159) Proceeds from credit line (365,447) (402,268) ----------- ----------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,591,666 2,539,307 ----------- ----------- INCREASE (DECREASE) IN CASH & EQUIVALENTS 144,424 (604,371) Cash and equivalents at beginning of period 0 448,668 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 144,424 $ (155,703) =========== ===========
Pagge 5 of 9 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 six month period ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1997. NOTE B -- INVENTORIES Inventories consist primarily of Finished Goods on site. Page 6 of 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Third Quarter Ended September 30, 1998) RESULTS OF OPERATIONS NET SALES. The Company's net sales for the third quarter ended September 30, 1998 were $2,226,000, a decrease of 20%, compared to net sales of $2,779,000 for the third quarter of 1997. For the nine months ended September 30, 1998, net sales were $6,752,000, a decrease of 39% compared to net sales of $11,133,000 for the first nine months of 1997. Revenue from the sales of the SIGNright system decreased over the first nine months of 1998 due to the decision in April of 1998 to terminate domestic sales of SIGNright machines. The sale of sign cards used with the Impulse Retail System and SIGNright system also decreased by 15% over the first nine months of 1997. Stylus software sales also decreased by 72% between the first nine months of 1997 and the first nine months of 1998. GROSS PROFIT. The Company's gross profit for the third quarter of 1998 decreased 9% to $1,157,000, compared to $1,277,000 for the third quarter of 1997. Gross profit for the first nine months of 1998 decreased 45% to $3,240,000, compared to $5,874,000 for the first nine months of 1997. The decrease in gross profit for the third quarter of 1998 is primarily due to the overall decrease in net sales. Gross profit as a percentage of net sales was 52% for the third quarter of 1998, compared to 41% for the third quarter of 1997, and was 48% for the first nine months of 1998, compared to 52.1% for the first nine months of 1997. OPERATING EXPENSES. Operating expenses decreased 36% in the third quarter of 1998 compared to the third quarter of 1997, and decreased 22% for the first nine months of 1998, compared to the first nine months of 1997. Sales expenses decreased 67% in the third quarter of 1998, compared to the third quarter of 1997 and decreased 60% for the first nine months of 1998, compared to the first nine months of 1997. Marketing expenses decreased 58% in the third quarter of 1998, compared to the third quarter of 1997 and decreased 44% for the first nine months of 1998, compared to the first nine months of 1997. Product development expenses decreased 25% and 9%, respectively. General and administrative expenses decreased one tenth of 1% for the third quarter of 1998, compared to the third quarter of 1997, but increased 6% for the first nine months of 1998, compared to the first nine months of 1997. All of the decreases resulted from the corporate restructuring and downsizing which occurred in January and April of 1998. Operating expenses as a percentage of net sales were 72% in the third quarter of 1998 and 83% for the first nine months of 1998, compared to 89% in the third quarter of 1997 and 65% for the first nine months of 1997. For the fourth quarter of 1997 the Company expects its operating expenses as a percentage of net sales to decrease compared to the fourth quarter of 1997 as a result of the April, 1998 restructuring and downsizing, and to remain flat compared to the third quarter of 1998 net loss. Page 7 of 9 NET INCOME (LOSS). The Company had a net loss of $(445,000), or $(.05) per share for the third quarter of 1998, compared to a net loss of $(1,195,000), or $(.17) per share for the third quarter of 1997. For the first nine months of 1998, the net loss was $(2,420,000), or $(0.32) per share, compared to a net loss of $(1,288,000), or $(.19) per share for the first nine months of 1997. The net net loss for the first nine months of 1998, compared to the net loss for the first nine months of 1997 resulted primarily from the termination of domestic SIGNright sales and significantly lower Stylus software sales and somewhat lower sign card sales. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, working capital was $3,229,000, compared to $3,461,000 at December 31, 1997. Cash, cash equivalents and marketable securities increased $1,121,000 from $465,000 at December 31, 1997 to $1,586,000 at September 30, 1998, due to the proceeds received from the issuance of common stock of $2,034,000, a decrease to accounts receivable of $1,355,000, a decrease in inventories of $333,000, and a decrease in prepaids of $209,000, offset by the net loss of $2,420,000, a decrease in accrued expenses of $149,000 and principal payments under the long term debt agreement and credit line of $442,000. The decrease to accounts receivable resulted from payments received from extended pay plans. The decrease to inventory resulted from the Company reducing its machine inventory levels. The Company expects inventory levels to remain the same through 1998. Accounts receivable balances should also remain flat during the remainder of 1998. The Company believes its current cash position, cash flow from operations, its access to capital resourcess, including the present line of credit will be sufficient to fund current business operations and anticipated growth for the foreseeable future. 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. Page 8 of 9 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter covered by this Form 10-Q. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: October 30, 1998 Insignia Systems, Inc. ------------------------------------------ (Registrant) /s/ Scott Drill ---------------------------------- Scott Drill President /s/ John R. Whisnant ---------------------------------- John R. Whisnant Vice President of Finance EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 JUL-01-1998 SEP-30-1998 144,424 1,441,863 1,475,030 194,126 1,284,869 4,482,920 3,518,196 3,239,125 4,766,991 1,254,336 0 0 0 15,185,692 0 4,766,991 2,226,163 2,226,163 1,069,415 1,595,503 0 0 35,212 (444,607) 0 0 0 0 0 (444,607) (.06) 0.00
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