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, 1996
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Commission File Number: 0-19380
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INSIGNIA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1656308
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10801 Red Circle Drive, Minnetonka, Minnesota 55343
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(Address of principal executive offices) (Zip Code)
(612) 930-8200
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(Registrant's telephone number, including area code)
Not applicable
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(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 Par Value -- 5,403,858 shares as of November 5, 1996.
Total number of pages: 12
Exhibit index is on page: 11
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets -- September 30, 1996 and December 31, 1995
Statements of Operations -- Three months ended September 30, 1996
and 1995; Nine months ended September 30, 1996 and 1995.
Statements of Cash Flows -- Nine months ended September 30, 1996
and 1995
Notes to Financial Statements -- September 30, 1996
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
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<CAPTION>
Part I. Financial Information
Item 1. Financial Statements
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
September 30, December 31,
ASSETS 1996 1995
- ------------------------------------------------------------------ ------------ ------------
(UNAUDITED) (NOTE)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ (44,099) $ 583,613
Marketable securities 706,059 503,906
Accounts receivable - net of $94,434 allowance 2,373,121 2,235,374
Inventories 1,981,662 2,027,566
Prepaid expenses 288,830 331,618
------------ ------------
TOTAL CURRENT ASSETS 5,305,573 5,682,077
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 2,325,837 2,107,719
Office furniture and fixtures 363,075 363,075
Computer equipment 759,198 710,573
Leasehold improvements 312,420 312,420
------------ ------------
3,760,530 3,493,787
Accumulated depreciation and amortization (2,741,581) (2,344,271)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 1,018,949 1,149,516
INTANGIBLES 539,187 539,187
Accumulated amortization (539,187) (539,187)
------------ ------------
-- --
------------ ------------
TOTAL ASSETS $ 6,324,522 $ 6,831,593
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 703,980 $ 784,051
Accrued compensation and benefits 144,051 222,702
Accrued expenses 105,084 114,562
Other 91,083 125,373
Current portion of long-term debt 175,129 84,497
------------ ------------
TOTAL CURRENT LIABILITIES 1,219,327 1,331,185
LONG-TERM DEBT 313,557 382,717
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding September 30, 1996-- 5,403,858 shares;
December 31, 1995--5,361,006 shares 54,039 53,610
Additional paid-in capital 10,102,397 10,056,117
Unearned compensation (9,516) (16,125)
Accumulated deficit (5,355,282) (4,975,911)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,791,638 5,117,691
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 6,324,522 $ 6,831,593
============ ============
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date. See Notes to Financial
Statements.
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<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 3,543,712 $ 3,293,806 $ 11,161,668 $ 11,937,413
Cost of Sales 1,653,563 1,564,889 5,303,904 5,629,737
------------ ------------ ------------ ------------
GROSS PROFIT 1,890,149 1,728,917 5,857,764 6,307,676
OPERATING EXPENSES:
Sales 1,125,614 945,867 3,200,218 3,793,867
Marketing 363,508 448,864 1,278,037 1,829,974
Product Development 128,486 120,292 356,311 389,095
General & Administrative 466,513 498,761 1,404,261 1,693,751
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 2,084,121 2,013,784 6,238,827 7,706,687
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (193,972) (284,867) (381,063) (1,399,011)
OTHER INCOME (EXPENSE):
Interest Income 14,105 16,736 38,095 45,754
Interest Expense (17,477) (11,699) (44,803) (11,699)
Other Income (Expense) 1,792 (17,558) 12,979 (16,808)
------------ ------------ ------------ ------------
PRE-TAX INCOME (LOSS) (195,552) (297,388) (374,792) (1,381,764)
Provision for Income Tax 500 0 4,578 0
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (196,052) $ (297,388) $ (379,370) $ (1,381,764)
============ ============ ============ ============
Net Income (Loss) per share $ (0.04) $ (0.06) $ (0.07) $ (0.26)
============ ============ ============ ============
Weighted average shares and
share equivalents outstanding 5,403,858 5,361,006 5,403,544 5,359,996
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
---------------------------
1996 1995
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OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (379,370) $(1,381,760)
Non-cash expenses included in income (loss):
Depreciation and amortization 397,310 482,441
Provision for bad debt expense 51,000 63,500
Amortization of unearned compensation 6,609 15,047
Loss on disposal of fixed assets 0 7,122
Changes in operating assets & liabilities:
Accounts receivable (188,747) 294,786
Inventories 45,904 (468,222)
Prepaids and other (159,365) 100,718
Accounts payable (80,071) (252,995)
Accrued compensation and benefits (78,651) (90,070)
Other accrued expenses 40,278 (52,453)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (345,103) (1,281,886)
INVESTING ACTIVITIES:
Purchases of property and equipment (266,743) (205,442)
Purchase of marketable securities 0 (517,239)
Maturity of marketable securities 0 1,036,923
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (266,743) 314,242
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 46,709 131,377
Principal payments under long-term debt agreement (162,574) (12,951)
Proceeds from credit line 100,000 0
Pay-off of capital lease payments 0 500,000
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (15,865) 618,426
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INCREASE (DECREASE) IN CASH & EQUIVALENTS (627,711) (349,218)
Cash and equivalents at beginning of period 583,613 933,855
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ (44,098) $ 584,637
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</TABLE>
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, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 1995.
NOTE B -- INVENTORIES
Inventories consist primarily of Finished Goods on site.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Third Quarter and Nine Months Ended September 30, 1996)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the third quarter ended September 30,
1996 were $3,544,000, an increase of 8% compared to net sales of $3,294,000 for
the third quarter of 1995. For the nine months ended September 30, 1996, net
sales were $11,162,000, a decrease of 6% compared to net sales of $11,033,000
for the first nine months of 1995. Revenue from the sale of the Impulse Retail
System decreased over the first nine months of 1996. The sale of sign cards used
with the Impulse Retail System also decreased over the first nine months of
1996. Sales of Stylus(R) our PC-based sign and label software and related
supplies increased substantially in the third quarter.
GROSS PROFIT. The Company's gross profit for the third quarter of 1996 increased
9% to $1,890,000, compared to $1,729,000 for the third quarter of 1995. Gross
profit for the first nine months of 1996 decreased 7% to $5,858,000, compared to
$6,308,000 for the first nine months of 1995. The increase in gross profit for
the third quarter is primarily due to a change in product mix. Gross profit as a
percentage of net sales was 53.3% for the third quarter of 1996, compared to
52.5% for the third quarter of 1995 and was 52.5% for the first nine months of
1996, compared to 52.8% for the first half nine months of 1995.
OPERATING EXPENSES. Operating expenses increased 3% in the third quarter of 1996
compared to the third quarter of 1995 and decreased 19% for the first nine
months of 1996 compared to the first nine months of 1995. Sales expenses
increased 19% in the third quarter of 1996 compared to the third quarter of
1995, but decreased 16% for the first nine months of 1996 compared to the first
nine months of 1995. The decrease reflects lower commissions due to lower sales.
Marketing expenses decreased 19% and 30%, respectively. Product development
expenses increased 7% in the third quarter of 1996 compared to the third quarter
of 1995, but decreased 8% for the first nine months of 1996 compared to the
first nine months of 1995. General and administrative expenses decreased 6% and
17%, respectively. The Company expects that its operating expenses will continue
to remain flat, except for sales commissions which will increase as sales
increase.
Operating expenses as a percentage of net sales were 59% in the third quarter of
1996 and 56% for the first nine months of 1996, compared to 63% for the third
quarter of 1995 and 33% for the first nine months of 1995. The Company expects
its operating expenses as a percentage of net sales to decrease as sales
increase faster than expenses.
NET INCOME OR LOSS. The Company had a net loss of $(196,000), or $(.04) per
share for the third quarter of 1996, compared to a net loss of $(297,000), or
$(06) per share for the third quarter of 1995. For the first nine months of
1996, the net loss was $(379,000), or $(.07) per share compared to a net loss of
$(1,382,000), or $(.26) per share for the first nine months of 1995. The
decrease in net loss for the first nine months of 1996 was the result of the
expense reduction effort and operating expenses being reduced substantially
while net sales remain relatively flat. The net loss for the third quarter of
1996 was due to decreased sales of the Impulse system.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, working capital was $4,087,000 compared to $4,351,000 at
December 31, 1995. Cash, cash equivalents and marketable securities decreased
$427,000 from $1,088,000 at December 31, 1995 to $661,000 at September 30, 1996,
primarily due to the net loss. Accounts receivable increased $308,000 during the
first nine months of 1996 due to an increase in extended payment terms offered
to certain customers. Inventories decreased $46,000 as the company reduced its
inventory levels. Accounts payable decreased $278,000 as the Company reduced its
payable balances. The Company expects accounts receivable and inventory levels
to grow as sales volume increases.
The Company believes that its current cash position, cash flow from operations,
and access to capital resources, 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
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on page following signature.
(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: November 5, 1996 Insignia Systems, Inc.
-----------------------------------
(Registrant)
/s/ G. L. Hoffman
-------------------------------
G. L. Hoffman
President
/s/ John R. Whisnant
-------------------------------
John R. Whisnant
Vice President of Finance
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 10-Q
For the quarter ended Commission File No.: 0-19380
September 30, 1996
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INSIGNIA SYSTEMS, INC.
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Page Number in
Sequential
Numbering of
All Pages
Exhibit Including Exhibits
- ------- ------------------
11 Statement re computation of earnings per share.......................12
Exhibit 11
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<CAPTION>
INSIGNIA SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
PRIMARY:
<S> <C> <C> <C> <C>
Average shares outstanding 5,403,858 5,361,006 5,403,544 5,359,996
Net effective of dilutive stock
options--based on treasury stock
method using average market price 0 0 0 0
----------- ----------- ----------- -----------
TOTAL 5,403,858 5,361,006 5,403,544 5,359,996
=========== =========== =========== ===========
Net Income (Loss) $ (196,052) $ (297,388) $ (379,370) $(1,381,760)
=========== =========== =========== ===========
Net Income (Loss) per share $ (0.04) $ (0.06) $ (0.07) $ (0.26)
=========== =========== =========== ===========
FULLY DILUTED:
Average shares outstanding 5,403,858 5,361,006 5,403,544 5,359,966
Net effect of dilutive stock options-
-based on treasury stock method using
ending market price,
if higher than average market price 0 0 0 0
----------- ----------- ----------- -----------
TOTAL 5,403,858 5,361,006 5,403,544 5,359,966
=========== =========== =========== ===========
Net Income (Loss) $ (196,052) $ (297,388) $ (379,370) $(1,381,760)
=========== =========== =========== ===========
Net Income (Loss) per share $ (0.04) $ (0.06) $ (0.07) $ (0.26)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> (44,098)
<SECURITIES> 706,059
<RECEIVABLES> 2,467,555
<ALLOWANCES> (94,434)
<INVENTORY> 1,981,662
<CURRENT-ASSETS> 5,305,573
<PP&E> 3,760,530
<DEPRECIATION> 2,741,581
<TOTAL-ASSETS> 6,324,522
<CURRENT-LIABILITIES> 1,219,327
<BONDS> 0
0
0
<COMMON> 54,039
<OTHER-SE> 6,270,483
<TOTAL-LIABILITY-AND-EQUITY> 6,324,522
<SALES> 3,543,712
<TOTAL-REVENUES> 3,559,609
<CGS> 1,653,563
<TOTAL-COSTS> 2,084,121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17,477)
<INCOME-PRETAX> (195,552)
<INCOME-TAX> 500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,052)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
