INSIGNIA SYSTEMS,
INC.
|
(Exact
name of registrant as specified in its charter)
|
Minnesota
|
|
41-1656308
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(State
or other jurisdiction of incorporation or
organization)
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|
(I.R.S.
Employer Identification No.)
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8799 Brooklyn Blvd., Minneapolis, MN 55445
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(Address
of principal executive offices; zip code)
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(763) 392-6200
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(Registrant’s
telephone number, including area code)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common
Stock, $0.01 par value
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ISIG
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The
Nasdaq Stock Market LLC
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting company
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☑
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Emerging
growth company
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☐
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Page
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FINANCIAL INFORMATION
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1
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Financial Statements
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1
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Condensed Balance Sheets – March 31, 2020 (unaudited) and
December 31, 2019
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1
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Condensed Statements of Operations – Three months ended March
31, 2020 and 2019 (unaudited)
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2
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Condensed Statements of Shareholders’ Equity – Three
months ended March 31, 2020 and 2019 (unaudited)
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3
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Condensed Statements of Cash Flows – Three months ended March
31, 2020 and 2019 (unaudited)
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4
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Notes to Financial Statements – (unaudited)
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5
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Management's Discussion and Analysis of Financial Condition and
Results
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11
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of Operations
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Quantitative and Qualitative Disclosures about Market
Risk
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16
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Controls and Procedures
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16
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OTHER INFORMATION
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17
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Legal Proceedings
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17
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Risk Factors
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17
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Unregistered Sales of Equity Securities and Use of
Proceeds
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18
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Defaults upon Senior Securities
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18
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Mine Safety Disclosures
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18
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Other Information
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18
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Exhibits
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19
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Insignia Systems, Inc.
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||
CONDENSED BALANCE SHEETS
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||
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March
31,
|
|
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2020
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December
31,
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(Unaudited)
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2019
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ASSETS
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|
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Current Assets:
|
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Cash
and cash equivalents
|
$7,755,000
|
$7,510,000
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Accounts
receivable, net
|
6,199,000
|
7,559,000
|
Inventories
|
313,000
|
322,000
|
Income
tax receivable
|
245,000
|
126,000
|
Prepaid
expenses and other
|
371,000
|
375,000
|
Total
Current Assets
|
14,883,000
|
15,892,000
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|
|
|
Other Assets:
|
|
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Property
and equipment, net
|
496,000
|
549,000
|
Operating
lease right-of-use assets
|
143,000
|
177,000
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Other,
net
|
150,000
|
372,000
|
|
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Total Assets
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$15,672,000
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$16,990,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
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|
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Current Liabilities:
|
|
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Accounts
payable
|
2,846,000
|
3,036,000
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Accrued
liabilities:
|
|
|
Compensation
|
347,000
|
539,000
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Other
|
261,000
|
570,000
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Current
portion of operating lease liabilities
|
216,000
|
212,000
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Deferred
revenue
|
350,000
|
140,000
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Total
Current Liabilities
|
4,020,000
|
4,497,000
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|
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Long-Term Liabilities:
|
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Accrued
income taxes
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652,000
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643,000
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Operating
lease liabilities
|
—
|
56,000
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Total
Long-Term Liabilities
|
652,000
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699,000
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Commitments and Contingencies
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—
|
—
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Shareholders' Equity:
|
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Common
stock, par value $.01:
|
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Authorized
shares - 40,000,000
|
|
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Issued
and outstanding shares - 12,107,000 at March 31, 2020 and
12,074,000 at December 31, 2019, respectively
|
121,000
|
121,000
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Additional
paid-in capital
|
16,003,000
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15,934,000
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Accumulated
deficit
|
( 5,124,000)
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( 4,261,000)
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Total
Shareholders' Equity
|
11,000,000
|
11,794,000
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Total Liabilities and Shareholders' Equity
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$15,672,000
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$16,990,000
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See accompanying notes to financial
statements.
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CONDENSED STATEMENTS OF OPERATIONS
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(Unaudited)
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Three Months Ended March 31
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2020
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2019
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Services
revenues
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$4,436,000
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$4,639,000
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Products
revenues
|
246,000
|
501,000
|
Total
Net Sales
|
4,682,000
|
5,140,000
|
|
|
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Cost
of services
|
3,382,000
|
3,974,000
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Cost
of goods sold
|
172,000
|
392,000
|
Impairment
loss
|
159,000
|
—
|
Total
Cost of Sales
|
3,713,000
|
4,366,000
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Gross
Profit
|
969,000
|
774,000
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Operating Expenses:
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Selling
|
720,000
|
738,000
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Marketing
|
365,000
|
665,000
|
General
and administrative
|
993,000
|
708,000
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Total
Operating Expenses
|
2,078,000
|
2,111,000
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Operating
Loss
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( 1,109,000)
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( 1,337,000)
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Other
income
|
24,000
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37,000
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Loss
Before Taxes
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( 1,085,000)
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( 1,300,000)
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Income
tax benefit
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( 222,000)
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( 204,000)
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Net
Loss
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$(863,000)
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$(1,096,000)
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Net
loss per share:
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Basic
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$(0.07)
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$(0.09)
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Diluted
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$(0.07)
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$(0.09)
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Shares
used in calculation of net loss per share:
|
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Basic
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12,066,000
|
11,856,000
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Diluted
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12,066,000
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11,856,000
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See accompanying notes to financial statements.
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Insignia Systems, Inc.
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|||||
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
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(Unaudited)
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|||||
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Common
Stock
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Additional
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Shares
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Amount
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Paid-In
Capital
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Accumulated
Deficit
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Total
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Balance at December 31, 2019
|
12,074,000
|
$121,000
|
$15,934,000
|
$(4,261,000)
|
$11,794,000
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Issuance
of common stock, net
|
33,000
|
—
|
20,000
|
—
|
20,000
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Value
of stock-based compensation
|
—
|
—
|
49,000
|
—
|
49,000
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Net
loss
|
—
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—
|
—
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(863,000)
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(863,000)
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Balance at March 31, 2020
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12,107,000 -
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$121,000
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$16,003,000
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$(5,124,000)
|
$11,000,000
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Common
Stock
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Additional
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Retained
Earnings
|
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Shares
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Amount
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Paid-In
Capital
|
(Accumulated
Deficit)
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Total
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Balance at December 31, 2018
|
11,840,000
|
$118,000
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$15,442,000
|
$760,000
|
$16,320,000
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Issuance
of common stock, net
|
107,000
|
1,000
|
107,000
|
—
|
108,000
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Value
of stock-based compensation
|
—
|
—
|
138,000
|
—
|
138,000
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Net
loss
|
—
|
—
|
—
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(1,096,000)
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(1,096,000)
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Balance at March 31, 2019
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11,947,000 -
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$119,000
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$15,687,000
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$(336,000)
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$15,470,000
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See accompanying notes to financial statements.
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Insignia Systems, Inc.
|
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CONDENSED STATEMENTS OF CASH FLOWS
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(Unaudited)
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Three Months Ended March 31
|
2020
|
2019
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Operating Activities:
|
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Net
loss
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$(863,000)
|
$(1,096,000)
|
Adjustments
to reconcile net loss to
net cash provided by (used in) operating activities:
|
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Depreciation
and amortization
|
148,000
|
335,000
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Impairment
loss
|
159,000
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-
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Changes
in allowance for doubtful accounts
|
9,000
|
( 3,000)
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Deferred
income tax benefit
|
-
|
( 214,000)
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Stock-based
compensation expense
|
49,000
|
138,000
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Accrued
interest on held to maturity investments
|
-
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( 13,000)
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Changes
in operating assets and liabilities:
|
|
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Accounts
receivable
|
1,351,000
|
2,406,000
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Inventories
|
9,000
|
( 25,000)
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Income
tax receivable
|
( 119,000)
|
2,000
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Prepaid
expenses and other
|
4,000
|
39,000
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Accounts
payable
|
( 208,000)
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( 1,263,000)
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Accrued
liabilities
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( 501,000)
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( 1,900,000)
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Income
tax payable
|
9,000
|
8,000
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Deferred
revenue
|
210,000
|
500,000
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Net
cash provided by (used in) operating activities
|
257,000
|
( 1,086,000)
|
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Investing Activities:
|
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Purchases
of property and equipment
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( 32,000)
|
( 235,000)
|
Purchase
of investments
|
-
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( 4,981,000)
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Net
cash used in investing activities
|
( 32,000)
|
( 5,216,000)
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Financing Activities:
|
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Proceeds
from issuance of common stock
|
20,000
|
108,000
|
Net
cash provided by financing activities
|
20,000
|
108,000
|
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|
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Increase
(decrease) in cash and cash equivalents
|
245,000
|
( 6,194,000)
|
|
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|
Cash
and cash equivalents at beginning of period
|
7,510,000
|
10,160,000
|
Cash
and cash equivalents at end of period
|
$7,755,000
|
$3,966,000
|
|
|
|
Supplemental disclosures for cash flow information:
|
|
|
Cash
refunded during the year for income taxes
|
$112,000
|
$-
|
|
|
|
Non-cash investing and financing activities:
|
|
|
Purchases
of property and equipment included in accounts payable
|
$-
|
$35,000
|
|
|
|
See accompanying notes to financial statements.
|
|
|
|
March
31,
|
December
31,
|
|
2020
|
2019
|
Raw
materials
|
$45,000
|
$47,000
|
Work-in-process
|
11,000
|
16,000
|
Finished
goods
|
257,000
|
259,000
|
|
$313,000
|
$322,000
|
|
March
31,
|
December
31,
|
|
2020
|
2019
|
Property and Equipment:
|
|
|
Production
tooling, machinery and equipment
|
$3,685,000
|
$3,685,000
|
Office
furniture and fixtures
|
425,000
|
393,000
|
Computer
equipment and software
|
1,426,000
|
1,426,000
|
|
5,536,000
|
5,504,000
|
Accumulated
depreciation and amortization
|
( 5,040,000)
|
( 4,955,000)
|
Net
Property and Equipment
|
$496,000
|
$549,000
|
Three
months ended March 31
|
2020
|
2019
|
Denominator
for basic net loss per share - weighted average shares
|
12,066,000
|
11,856,000
|
Effect
of dilutive securities:
|
|
|
Stock
options, restricted stock and restricted stock units
|
—
|
—
|
Denominator
for diluted net loss per share - weighted average
shares
|
12,066,000
|
11,856,000
|
|
Three months ended March
31, 2020
|
||
|
Services
Revenues
|
Products
Revenue
|
Total
Revenue
|
Timing of revenue recognition:
|
|
|
|
Products
and services transferred over time
|
$3,344,000
|
$-
|
$3,344,000
|
Products
and services transferred at a point in time
|
1,092,000
|
246,000
|
1,338,000
|
Total
|
$4,436,000
|
$246,000
|
$4,682,000
|
|
Three months ended March
31, 2019
|
||
|
Services
Revenues
|
Products
Revenue
|
Total
Revenue
|
Timing of revenue recognition:
|
|
|
|
Products
and services transferred over time
|
$3,555,000
|
$-
|
$3,555,000
|
Products
and services transferred at a point in time
|
1,084,000
|
501,000
|
1,585,000
|
Total
|
$4,639,000
|
$501,000
|
$5,140,000
|
Balance
at December 31, 2019
|
$140,000
|
Reclassification
of beginning deferred revenue to revenue, as a result of
performance obligations satisfied
|
( 140,000)
|
Cash
received in advance and not recognized as revenue
|
350,000
|
Balance
at March 31, 2020
|
$350,000
|
Net
sales
|
100.0%
|
100.0%
|
Cost
of sales
|
79.3
|
84.9
|
Gross
profit
|
20.7
|
15.1
|
Operating
expenses:
|
|
|
Selling
|
15.4
|
14.4
|
Marketing
|
7.8
|
12.9
|
General
and administrative
|
21.2
|
13.8
|
Total
operating expenses
|
44.4
|
41.1
|
Operating
loss
|
(23.7)
|
(26.0)
|
Other
income
|
0.5
|
0.7
|
Loss
before taxes
|
(23.2)
|
(25.3)
|
Income
tax benefit
|
(4.8)
|
(4.0)
|
Net
loss
|
(18.4)%
|
(21.3)%
|
Exhibit
Number
|
|
Description
|
|
Method
of Filing
|
|
|
|
|
|
|
Composite
Articles of Incorporation of Registrant, as amended through
July 31, 2008 (incorporated by reference to Exhibit 3.1
to annual report on Form 10-K for the year ended December 31,
2015)
|
|
Incorporated
by Reference
|
|
|
|
|
|
|
|
Composite
Bylaws of Registrant, as amended through December 5, 2015
(incorporated by reference to Exhibit 3.2 to annual report on
Form 10-K for the year ended December 31, 2015)
|
|
Incorporated
by Reference
|
|
|
|
|
|
|
|
Promissory
Note with Alerus Financial, N.A., dated April 22, 2020
|
|
Exhibit
10.1 of the Registrant’s Form 8-K filed April 28,
2020
|
|
|
|
|
|
|
|
Certification
of Principal Executive Officer
|
|
Filed
Electronically
|
|
|
|
|
|
|
|
Certification
of Principal Financial and Accounting Officer
|
|
Filed
Electronically
|
|
|
|
|
|
|
|
Section
1350 Certification
|
|
Furnished
Electronically
|
|
|
|
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|
101
|
|
The
following materials from Insignia Systems, Inc.’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020, formatted
in XBRL (eXtensible Business Reporting Language): (i) Condensed
Balance Sheets; (ii) Condensed Statements of Operations; (iii)
Condensed Statements of Shareholders’ Equity; (iv) Condensed
Statements of Cash Flows; and (v) Notes to Financial
Statements.
|
|
Filed
Electronically
|
|
INSIGNIA
SYSTEMS, INC.
|
|
|
(Registrant)
|
|
|
|
|
Dated: May
14, 2020
|
/s/
Kristine A. Glancy
|
|
|
Kristine
A. Glancy
|
|
|
President
and Chief Executive Officer
|
|
|
(on
behalf of registrant)
|
|
|
|
|
Dated: May
14, 2020
|
/s/
Jeffrey A. Jagerson
|
|
|
Jeffrey
A. Jagerson
|
|
|
Chief
Financial Officer and Treasurer
|
|
|
(principal
financial and accounting officer)
|
|
|
|
||
|
|
|
|
Date:
May 14, 2020
|
By:
|
/s/ Kristine
A. Glancy
|
|
|
|
Kristine
A. Glancy
|
|
|
|
President
and Chief Executive Officer
(principal
executive officer)
|
|
|
|
|
|
|
|
|
|
Date:
May 14, 2020
|
By:
|
/s/ Jeffrey
A. Jagerson
|
|
|
|
Jeffrey
A. Jagerson
|
|
|
|
Chief
Financial Officer and Treasurer
(principal
financial and accounting officer)
|
|
|
|
|
|
|
|
|
|
Date:
May 14, 2020
|
By:
|
/s/ Kristine
A. Glancy
|
|
|
|
Kristine
A. Glancy
|
|
|
|
President
and Chief Executive Officer
(principal
executive officer)
|
|
|
|
|
|
|
|
|
|
Date:
May 14, 2020
|
By:
|
/s/ Jeffrey
A. Jagerson
|
|
|
|
Jeffrey
A. Jagerson
|
|
|
|
Chief
Financial Officer and Treasurer
(principal
financial and accounting officer)
|
|
Revenue Recognition (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Deferred Revenue |
|
Selling Arrangement |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Selling Arrangement | |
Selling Arrangement | In 2011, the Company paid News America Marketing In-Store, LLC (News America) $4,000,000 in exchange for a 10-year arrangement to sell signs with price into News America’s network of retailers as News America’s exclusive agent. The $4,000,000 was being amortized over the 10-year term of the arrangement. In 2019, the Company accelerated the amortization based on the anticipated recovery period over the remaining term of the contract due to the loss of a significant retailer that exited the Company’s retailer network in the first half of 2019 as a result of competitive pressures. During the three months ended March 31, 2020 the impact of COVID-19 was determinded to be a triggering event requiring an impairment review. The Company determined the asset was impaired based upon continued revenue declines driven by changes in market conditions due to COVID-19 within the stores that this agreement affords the Company access to. As a result, an impairment of $159,000 was recognized as of March 31, 2020. The Company also shortened the useful life of the underlying asset from March 31, 2021 to December 31, 2020 and will record remaining amortization expense on a straight-line basis over the remainder of 2020. Amortization expense without the impairment was $61,000 and $150,000 in the three months ended March 31, 2020 and 2019, respectively. Amortization expense is expected to be $97,000 for the remainder of 2020. The net carrying amount of the selling arrangement as of March 31, 2020 is $97,000 and is recorded within other assets on the Company’s balance sheet. |
Legal Proceedings |
3 Months Ended |
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Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Legal Proceedings |
In July 2019, the Company brought suit against News America in the U.S. District Court in Minnesota, alleging violations of federal and state antitrust and tort laws by News America. The complaint alleges that News America has monopolized the national market for third-party in-store advertising and promotion products and services through various wrongful acts designed to harm the Company, its last significant competitor. The suit seeks, among other relief, an injunction sufficient to prevent further antitrust injury and an award of treble damages to be determined at trial for the harm caused to our Company.
In August 2019, News America filed an answer and counterclaim. In October 2019, News America moved for a judgment on the pleadings. Management believes that the counterclaim is without merit, and the Company filed a response brief on November 11, 2019. The Company also moved to dismiss the counterclaim against us. The Court heard oral arguments from both parties on January 14, 2020, subsequently denied both motions. Further dispositive motions on News America’s counterclaim are due by June 15, 2020.
Discovery is underway and trial has been scheduled for December 2021. Due to the early nature of these proceedings, the Company is unable to determine the likelihood of an unfavorable outcome or estimate any potential resulting liability at this time. |
Revenue Recognition |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Under Accounting Standards Update 2014-09 Revenue from Contracts with Customers (“Topic 606”), revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to a customer and significant financing components. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, as further described below under “Performance Obligations.”
Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting.
The Company includes shipping and handling fees in revenues. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.
The majority of the Company’s accounts receivable is due from companies in the consumer-packaged goods industry. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within 30-150 days and are stated at amounts due from customers, net of an allowance for doubtful accounts.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The following is a description of the Company’s performance obligations included in its primary revenue streams and the timing or method of revenue recognition for each:
In-Store Signage Solution Services. The Company’s primary source of revenue is from executing in-store advertising solutions and services primarily to CPG manufacturers. The Company provides a service of displaying promotional signs in close proximity to the manufacturer’s product in participating stores, which the Company maintains in two-to-four-week cycle increments.
Each of the individual activities under the Company’s services, including production activities, are inputs to an integrated sign display service. Customers receive and consume the benefits from the promotional displays over the duration of the contracted display cycle. Additionally, the display of the signs does not have an alternative use to the Company and the Company has an enforceable right to payment for services performed to date. As a result, the Company recognizes the transaction price for its Point-Of-Purchase Services (POPS®) service performance obligations as revenue over time. Given the nature of the Company’s performance obligations is to provide a display service over the duration of a specified period or periods, the Company recognizes revenue on a straight-line basis over the display service period as it best reflects the timing of transfer of its POPS services.
Other Service Revenues. The Company also supplies CPG manufacturers with other retailer approved promotional services and sign solutions. These services are more customized than the POPS solutions program, consisting of variable durations and variable specifications. Due to the variable nature of these services, revenue recognition is a mix of over time and point in time recognition.
Products. The Company also sells custom print solutions directly to its customers. Each such product is a distinct performance obligation. Revenue is recognized at a point in time upon shipment, when control of the goods transfers to the customer.
Disaggregation of Revenue
In the following table, revenue is disaggregated by major revenue stream and timing of revenue recognition.
Contract Costs
Sales commissions that are paid to internal or external sales representatives are eligible for capitalization as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company is applying the practical expedient in ASC 340-40-25-4 that allows the incremental costs of obtaining a contract to be recorded as an expense when incurred when the amortization period of the asset that would have otherwise been recognized is one year or less. These costs are included in selling expenses.
Deferred Revenue
Significant changes in deferred revenue during the period are as follows:
Transaction Price Allocated to Remaining Performance Obligations
The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, which reflect the majority of its performance obligations. This practical expedient is being applied to arrangements for certain incomplete services and unshipped custom signage materials. At March 31, 2020, there were no contracts with an expected duration of greater than one year.
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Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
May 11, 2020 |
|
Document and Entity Information | ||
Entity Registrant Name | INSIGNIA SYSTEMS INC/MN | |
Entity Central Index Key | 0000875355 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | MN | |
Entity File Number | 1-13471 | |
Entity Common Stock, Shares Outstanding | 12,106,689 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Accounting Policies [Abstract] | ||
Depreciation expense | $ 85,000 | $ 181,000 |
Stock option awards granted | 0 | |
Restricted stock units issued | 0 | |
Stock-based awards granted, estimated life | 1 year | |
Stock-based awards granted, expected volatility | 58.50% | |
Stock-based awards granted, dividend yield | 0.00% | |
Stock-based awards granted, risk-free interest rate | 1.56% | |
Stock-based compensation expense | $ 49,000 | $ 138,000 |
Income Taxes (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||
Income tax benefit | $ 222,000 | $ 204,000 | |
Income tax rate, percentage | 20.50% | 15.70% | |
Deferred tax asset valuation allowance | $ 886,000 | $ 848,000 | |
Unrecognized tax benefits | $ 652,000 | $ 643,000 |
CONDENSED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Total Net Sales | $ 4,682,000 | $ 5,140,000 |
Cost of services | 3,382,000 | 3,974,000 |
Cost of goods sold | 172,000 | 392,000 |
Impairment loss | 159,000 | 0 |
Total Cost of Sales | 3,713,000 | 4,366,000 |
Gross Profit | 969,000 | 774,000 |
Operating Expenses: | ||
Selling | 720,000 | 738,000 |
Marketing | 365,000 | 665,000 |
General and administrative | 993,000 | 708,000 |
Total Operating Expenses | 2,078,000 | 2,111,000 |
Operating Loss | (1,109,000) | (1,337,000) |
Other income | 24,000 | 37,000 |
Loss Before Taxes | (1,085,000) | (1,300,000) |
Income tax benefit | 222,000 | 204,000 |
Net Loss | $ (863,000) | $ (1,096,000) |
Net loss per share: | ||
Basic | $ (0.07) | $ (0.09) |
Diluted | $ (0.07) | $ (0.09) |
Shares used in calculation of net loss per share: | ||
Basic | 12,066,000 | 11,856,000 |
Diluted | 12,066,000 | 11,856,000 |
Services | ||
Total Net Sales | $ 4,436,000 | $ 4,639,000 |
Products | ||
Total Net Sales | $ 246,000 | $ 501,000 |
Investments |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Investments [Abstract] | |
Investments | As of March 31, 2020, the Company did not have any investments. During 2019, the Company had invested its excess cash in debt securities, with an average maturity of approximately six months, and were classified as held to maturity within current assets in accordance with Accounting Standards Codification (“ASC”) 320-10, “Investments – Debt and Equity Securities.” |
Revenue Recognition (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Total Net Sales | $ 4,682,000 | $ 5,140,000 |
Products and Services Transferred Over Time | ||
Total Net Sales | 3,344,000 | 3,555,000 |
Products and Services Transferred at a Point in Time | ||
Total Net Sales | 1,338,000 | 1,585,000 |
Services | ||
Total Net Sales | 4,436,000 | 4,639,000 |
Services | Products and Services Transferred Over Time | ||
Total Net Sales | 3,344,000 | 3,555,000 |
Services | Products and Services Transferred at a Point in Time | ||
Total Net Sales | 1,092,000 | 1,084,000 |
Products | ||
Total Net Sales | 246,000 | 501,000 |
Products | Products and Services Transferred Over Time | ||
Total Net Sales | 0 | 0 |
Products | Products and Services Transferred at a Point in Time | ||
Total Net Sales | $ 246,000 | $ 501,000 |
Concentrations (Details Narrative) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
|
Total Net Sales | Customer One | |||
Customer's concentration risk percentage | 16.00% | 16.00% | |
Accounts Receivable | Customer One | |||
Customer's concentration risk percentage | 15.00% | 17.00% | |
Accounts Receivable | Customer Two | |||
Customer's concentration risk percentage | 10.00% | 12.00% | |
Accounts Receivable | Customer Three | |||
Customer's concentration risk percentage | 12.00% | ||
Accounts Receivable | Customer Four | |||
Customer's concentration risk percentage | 10.00% |
Income Taxes |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | For the three months ended March 31, 2020, the Company recorded income tax benefit of $222,000, or 20.5% of loss before taxes. For the three months ended March 31, 2019, the Company recorded income tax benefit of $204,000, or 15.7% of loss before taxes. The income tax benefit for the three months ended March 31, 2020 and 2019 is comprised of federal and state taxes. The primary differences between the Company’s March 31, 2020 and 2019 effective tax rates and the statutory federal rate are nondeductible stock-based compensation, nondeductible meals and entertainment and increases in the Company’s valuation allowance against its deferred tax assets. In addition, for the three months ended March 31, 2020, the Company recognized a decrease in its valuation allowance against certain net operating losses which the Company now expects to be able to carry back to prior years with respect to federal income taxes.
The Company reassesses its effective tax rate each reporting period and adjusts the annual effective tax rate if deemed necessary, based on projected annual taxable income (loss).
Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of enacted tax laws. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which it operates, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustment to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria. At March 31, 2020 and December 31, 2019, the Company had a valuation allowance of approximately $886,000 and $848,000, respectively, against its entire deferred tax asset because the Company does not believe it is more likely than not that it will realize its deferred tax asset.
As of March 31, 2020, and December 31, 2019, the Company had unrecognized tax benefits totaling $652,000 and $643,000, respectively, including interest, which relates to state nexus issues. The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $652,000. Due to the current statute of limitations regarding the unrecognized tax benefits, the unrecognized tax benefits and associated interest is not expected to change significantly in 2020.
On March 27, 2020, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act, among other provisions, allows for companies to carry back federal net operating losses (NOLs) generated in 2018, 2019 and 2020 for up to five years for refunds of federal taxes paid. This provision created an opportunity for the Company to utilize NOLs not previously expected to be utilized. Thus, the Company has reversed approximately $215,000 of its valuation allowance against the NOLs in its deferred tax assets which the Company will carry back for a refund of federal taxes paid. As the Company expects to receive the tax refund from the ability to carry back the NOL’s within the next 12 months, this discrete benefit has been recorded within income taxes receivable on the balance sheet. In addition, to the $215,000 recognized, an additional $17,000 was also included as a discrete tax benefit for the quarter and included in income taxes receivable related to the NOL carry back due to differences in the federal tax rate utilized for the deferred tax asset compared to the rates in effect for the years in which the NOL is being carried back.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | On April 22, 2020, the Company entered into a promissory note (the “Note”) with Alerus Financial, N.A. The Note evidences a loan to the Company in the amount of $1,054,200 pursuant to the Paycheck Protection Program (the “PPP”) of the CARES Act administered by the U.S. Small Business Administration (the “SBA”).
In accordance with the requirements of the CARES Act, the Company expects to use the proceeds from the loan exclusively for qualified expenses under the PPP, including payroll costs, rent and utility costs, as further detailed in the CARES Act and applicable guidance issued by the SBA. Interest will accrue on the outstanding balance of the Note at a rate of 1.00% per annum. However, the Company expects to apply for forgiveness of up to all amounts due under the Note, in an amount equal to the sum of qualified expenses under the PPP during the eight weeks following disbursement. Notwithstanding the Company’s eligibility to apply for forgiveness, no assurance can be given that the Company will obtain forgiveness of all or any portion of amounts due under the Note.
Subject to any forgiveness granted under the PPP, the Note is scheduled to mature on April 22, 2022 and requires 18 equal monthly payments of principal and interest beginning November 22, 2020. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default, including, among others, those relating to failure to make payments, bankruptcy, breaches of representations, significant changes in ownership, and material adverse effects. The Company’s obligations under the Note are not secured by any collateral. |
Summary of Significant Accounting Policies (Details) - USD ($) |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventories | ||
Raw materials | $ 45,000 | $ 47,000 |
Work-in-process | 11,000 | 16,000 |
Finished goods | 257,000 | 259,000 |
Inventories | $ 313,000 | $ 322,000 |
Summary of Significant Accounting Policies (Details 2) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Accounting Policies [Abstract] | ||
Denominator for basic net loss per share - weighted average shares | 12,066,000 | 11,856,000 |
Effect of dilutive securities: Stock options and restricted stock units and awards | $ 0 | $ 0 |
Denominator for diluted net loss per share - weighted average shares | 12,066,000 | 11,856,000 |
Selling Arrangement (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Selling Arrangement | ||
Payments for arrangements to sell signs | $ 4,000,000 | |
Term of arrangement | 10 years | |
Amortization expense | $ 61,000 | $ 15,000 |
Amortization expense for the remainder of 2020 | $ 97,000 |
Share Repurchases |
3 Months Ended |
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Mar. 31, 2020 | |
Share Repurchases | |
Share Repurchases | On April 5, 2018, the Board authorized the repurchase of up to $3,000,000 of the Company’s common stock on or before March 31, 2020. The plan allowed the repurchases to be made in open market or privately negotiated transactions. The plan did not obligate the Company to repurchase any particular number of shares and may be suspended at any time at the Company’s discretion. During the three months ended March 31, 2020 and 2019, the Company did not repurchase any shares.
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Summary of Significant Accounting Policies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories |
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Schedule of Property and Equipment |
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Schedule of Weighted Average Common Shares Outstanding |
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Concentrations |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentrations | During the three months ended March 31, 2020, one customer accounted for 16% of the Company’s total net sales. During the three months ended March 31, 2019, one customer accounted for 16% of the Company’s total net sales. At March 31, 2020, two customers represented 15% and 10% of the Company’s total accounts receivable. At December 31, 2019, four customers represented 17%, 12%, 12% and 10%, respectively of the Company’s total accounts receivable.
Although there are a number of customers that the Company sells to, the loss of a major customer could adversely affect operating results. Additionally, the loss of a major retailer from the Company’s retail network could further adversely affect operating results.
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Summary of Significant Accounting Policies (Policies) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business | Insignia Systems, Inc. (the “Company”) is a leading provider of in-store and digital advertising solutions to consumer-packaged goods (“CPG”) manufacturers, retailers, shopper marketing agencies and brokerages. The Company operates in a single reportable segment. The Company’s leadership and employees have extensive industry knowledge with direct experience in both CPG manufacturers and retailers. The Company provides marketing solutions to CPG manufacturers spanning from some of the largest multinationals to new and emerging brands.
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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, 2019 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.
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Inventories | Inventories are primarily comprised of sign cards and hardware. 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:
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Property and Equipment | Property and equipment consisted of the following as of the dates indicated:
Depreciation expense was approximately $85,000 and $181,000 in the three months ended March 31, 2020 and 2019, respectively.
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Stock-Based Compensation | The Company measures and recognizes 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. The Company uses 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, 2020 and 2019, no stock option awards were granted by the Company.
During the three months ended March 31, 2020 and 2019, 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, 2020, under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 years, expected volatility of 58.5%, dividend yield of 0% and risk-free interest rate of 1.56%.
The Company recorded total stock-based compensation expense of $49,000 and $138,000 for the three months ended March 31, 2020 and 2019, respectively.
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Net Loss per Share | Basic net loss per share is computed by dividing net loss by the weighted average shares outstanding and excludes any potential dilutive effects of stock options and restricted stock units and awards. Diluted net 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, 2020 and 2019 all outstanding stock options were anti-dilutive for the periods.
Weighted average common shares outstanding for the three months ended March 31, 2020 and 2019 were as follows:
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