Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Description of Business

Description of Business. Insignia Systems, Inc. (the “Company”) markets in-store advertising products, programs and services to retailers and consumer packaged goods manufacturers. The Company operates in a single reportable segment. The Company’s primary products include the Insignia Point-of-Purchase Services (POPS®), and other retailer approved promotional services, in-store marketing solutions, and custom adhesive and non-adhesive signage materials directly to our retail customers.

Basis of Presentation

Basis of Presentation. The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. They do not include all information and footnotes required by U.S. GAAP for complete financial statements. However, except as described herein, there has been no material change in the information disclosed in the notes to financial statements included in our financial statements as of and for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. 

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements. Effective January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, “Leases” “Topic 842” under which lessees will recognize most leases on the balance sheet. At the date of adoption of the standard the Company recorded a right of use asset of $305,000, reduced deferred rent by $158,000 and recorded a lease liability of $463,000. The Company elected the option under Topic 842 to not restate comparative periods in the transition. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward the historical lease classification. Additional information and required disclosures for Topic 842 are contained in Note 5.

Inventories

Inventories. Inventories are primarily comprised of sign cards, hardware and roll stock. Inventory is valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method, and consisted of the following as of the dates indicated:

	March 31,		December 31,
	2019		2018
Raw materials	$	74,000	$	80,000
Work-in-process		11,000		12,000
Finished goods		293,000		261,000
	$	378,000	$	353,000

Property and Equipment

Property and Equipment. Property and equipment consisted of the following as of the dates indicated:

	March 31,			December 31,
	2019			2018
Property and Equipment:
Production tooling, machinery and equipment	$	3,727,000		$	3,694,000
Office furniture and fixtures		385,000			385,000
Computer equipment and software		2,743,000			2,743,000
Leasehold improvements		577,000			577,000
Construction in-progress		1,357,000			1,179,000
		8,789,000			8,578,000
Accumulated depreciation and amortization		( 5,492,000	)		( 5,310,000	)
Net Property and Equipment	$	3,297,000		$	3,268,000

Depreciation expense was approximately $181,000 and $186,000 in the three months ended March 31, 2019 and 2018, respectively.

Stock-Based Compensation

Stock-Based Compensation. We measure and recognize compensation expense for all stock-based payments at fair value. Restricted stock units and awards are valued at the closing market price of the Company’s stock as of the date of the grant. We use the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

During the three months ended March 31, 2019 and 2018, no stock option awards were granted by the Company.

During the three months ended March 31, 2019 and 2018, no restricted stock units were issued by the Company.

The Company estimated the fair value of stock-based awards granted during the three months ended March 31, 2019, under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 years, expected volatility of 57%, dividend yield of 0% and risk-free interest rate of 2.60%.

The Company recorded total stock-based compensation expense of $138,000 and $67,000 for the three months ended March 31, 2019 and 2018, respectively.

Net Income (Loss) per Share

Net Income (Loss) per Share. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding and excludes any potential dilutive effects of stock options and restricted stock units and awards. Diluted net income (loss) per share gives effect to all diluted potential common shares outstanding during the period.

Due to the net loss incurred during the three months ended March 31, 2019 all outstanding stock options were anti-dilutive for that period. Options to purchase approximately 247,000 shares of common stock with a weighted average exercise price of $2.74 were outstanding at March 31, 2018 and were not included in the computation of common stock equivalents for the three months ended March 31, 2018 because their exercise prices were higher than the average fair market value of the common shares during the reporting period.

Weighted average common shares outstanding for the three months ended March 31, 2019 and 2018 were as follows:

Three months ended March 31	2019		2018
Denominator for basic net income (loss) per share - weighted average shares		11,856,000		11,819,000
Effect of dilutive securities:
Stock options, restricted stock and restricted stock units		—		163,000
Denominator for diluted net income (loss) per share - weighted average shares		11,856,000		11,982,000