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: June 30, 1996
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 Par Value -- 5,403,858 shares as of August 1, 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 -- June 30, 1996 and December 31, 1995
Statements of Operations -- Three months ended June 30, 1996 and
1995; Six months ended June 30, 1996 and 1995.
Statements of Cash Flows -- Six months ended June 30, 1996
and 1995
Notes to Financial Statements -- June 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
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
June 30, December 31,
ASSETS 1996 1995
------------ ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 621,771 $ 583,613
Marketable securities 394,556 503,906
Accounts receivable - net of $94,434 allowance 2,543,065 2,235,374
Inventories 1,750,440 2,027,566
Prepaid expenses 198,229 331,618
------------ ------------
TOTAL CURRENT ASSETS 5,508,061 5,682,077
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 2,227,294 2,107,719
Office furniture and fixtures 363,075 363,075
Computer equipment 738,681 710,573
Leasehold improvements 312,420 312,420
------------ ------------
3,641,470 3,493,787
Accumulated depreciation and amortization (2,611,318) (2,344,271)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 1,030,152 1,149,516
INTANGIBLES 539,187 539,187
Accumulated amortization (539,187) (539,187)
------------ ------------
-- --
------------ ------------
TOTAL ASSETS $ 6,538,213 $ 6,831,593
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 504,359 $ 784,051
Accrued compensation and benefits 173,675 222,702
Accrued expenses 139,412 114,562
Other 209,258 125,373
Current portion of lease 88,832 84,497
------------ ------------
TOTAL CURRENT LIABILITIES 1,115,536 1,331,185
LONG-TERM DEBT 437,190 382,717
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding June 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 (11,719) (16,125)
Accumulated deficit (5,159,230) (4,975,911)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,985,487 5,117,691
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 6,538,213 $ 6,831,593
============ ============
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date. See Notes to Financial
Statements.
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 3,818,139 $ 4,356,656 $ 7,617,956 $ 8,643,606
Cost of Sales 1,882,728 2,174,166 3,650,341 4,064,848
----------- ----------- ----------- -----------
GROSS PROFIT 1,935,411 2,182,490 3,967,615 4,578,758
OPERATING EXPENSES:
Sales 1,047,382 1,457,390 2,074,604 2,848,000
Marketing 395,330 664,309 914,529 1,381,110
Product Development 116,308 130,708 227,825 268,803
General & Administrative 465,655 585,905 937,748 1,194,990
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 2,024,675 2,838,312 4,154,706 5,692,903
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (89,264) (655,822) (187,091) (1,114,145)
OTHER INCOME (EXPENSE):
Interest Income 10,883 13,830 23,990 29,020
Interest Expense (13,717) 0 (27,326) 0
Other Income (Expense) 3,767 744 11,187 751
----------- ----------- ----------- -----------
PRE-TAX INCOME (LOSS) (88,331) (641,248) (179,240) (1,084,374)
Provision for Income Tax 500 0 4,078 0
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (88,831) $ (641,248) $ (183,318) $(1,084,374)
=========== =========== =========== ===========
Net Income (Loss) per share $ (0.02) $ (0.12) $ (0.03) $ (0.20)
=========== =========== =========== ===========
Weighted average shares and
share equivalents outstanding 5,403,858 5,361,006 5,403,384 5,358,811
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (183,318) $(1,084,374)
Non-cash expenses included in income (loss):
Depreciation and amortization 267,047 327,652
Provision for bad debt expense 25,500 31,500
Amortization of unearned compensation 4,406 10,032
Changes in operating assets & liabilities:
Accounts receivable (333,191) (311,573)
Inventories 277,126 (266,962)
Prepaids and other 242,739 43,147
Accounts payable (279,692) 149,702
Accrued compensation and benefits (49,027) (57,713)
Other accrued expenses 108,735 98,036
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES 80,325 (1,060,553)
INVESTING ACTIVITIES:
Purchases of property and equipment (147,683) (176,444)
Purchase of marketable securities 0 (517,239)
Maturity of marketable securities 0 1,036,923
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (147,683) 343,240
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 46,709 125,377
Principal payments under long-term debt agreement (41,192) 0
Proceeds from credit line 100,000 0
----------- -----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 105,517 125,377
----------- -----------
INCREASE (DECREASE) IN CASH & EQUIVALENTS 38,159 (591,936)
Cash and equivalents at beginning of period 583,613 933,855
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 621,772 $ 341,919
=========== ===========
</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 six month period ended June 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
(Second Quarter and Six Months Ended June 30, 1996)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the second quarter ended June 30, 1996
were $3,818,000, a decrease of 13% compared to net sales of $4,357,000 for the
second quarter of 1995. For the six months ended June 30, 1996, net sales were
$7,618,000, a decrease of 12% compared to net sales of $8,644,000 for the first
half of 1995. Revenue from the sale of the Impulse Retail System was relatively
flat for the first half of 1996. The sale of sign cards used with the Impulse
Retail System also remained relatively flat. Sales of Stylus(R) our PC-based
sign and label software and related supplies increased substantially in the
second quarter.
GROSS PROFIT. The Company's gross profit for the second quarter of 1996
decreased 12% to $1,935,000, compared to $2,182,000 for the second quarter of
1995. Gross profit for the first six months of 1996 decreased 13% to $3,968,000,
compared to $4,579,000 for the first half of 1995. The decrease in gross profit
for the second quarter and six months of 1996 is due to increases in product
costs, a reduction in the selling price of the Impulse system and a change in
product mix. Gross profit as a percentage of net sales was 50.7% for the second
quarter of 1996, compared to 50.1% for the second quarter of 1995 and was 52.1%
for the first six months of 1996, compared to 53.0% for the first half of 1995.
OPERATING EXPENSES. Operating expenses decreased 29% in the second quarter of
1996 compared to the second quarter of 1995 and decreased 27% for the first six
months of 1996 compared to the first half of 1995. Sales expenses decreased 28%
and 27%, respectively. The decrease reflects lower commissions due to lower
sales. Marketing expenses decreased 40% and 34%, respectively, product
development expenses decreased 11% and 15%, respectively, and general and
administrative expenses decreased 21% and 22%, respectively. Although these
expense reductions were the result of the expense reduction effort instituted
during the third quarter of 1995, 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 53% in the second quarter
of 1996 and 55% for the first six months of 1996, compared to 65% for the second
quarter of 1995 and 66% for the first half of 1995. The decrease as a percentage
of net sales in 1996 was the result of the expense reduction effort. 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 $89,000, or $.02 per share for
the second quarter of 1996, compared to a net loss of $641,000, or $.12 per
share for the second quarter of 1995. For the first six months of 1996, the net
loss was $183,000, or $.03 per share compared to a net loss of $1,084,000, or
$.20 per share for the first half of 1995. The decrease in net loss for the
first half 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 second quarter of 1996 was due to flat sales of the Impulse
system.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, working capital was $4,393,000 compared to $4,154,000 at
December 31, 1995. Cash, cash equivalents and marketable securities decreased
$71,000 from $1,088,000 at December 31, 1995 to $1,016,000 at June 30, 1996,
primarily due to the net loss. Accounts receivable increased $333,000 during the
first six months of 1996 due to an increase in extended payment terms offered to
certain customers. Inventories decreased $277,000 as the company reduced its
inventory levels. Accounts payable decreased $280,000 as the Company reduced its
payable balances. The Company expects accounts receivable and inventory levels
to grow as sales volume increases.
Although the loss from the first half of 1996 did not substantially reduce the
Company's working capital further, the Company believes that it should continue
to conserve its cash resources. Therefore, during the second quarter of 1996,
the Company borrowed $100,000 from its line of credit. 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
The Company held its Annual Meeting of Shareholders on May 9, 1996.
The shareholders present or by proxy voted to elect G. L. Hoffman,
Erwin A. Kelen, Gordon F. Stofer, and Frank D. Trestman as directors
with each director receiving the following votes:
WITHHOLD
FOR AUTHORITY
--- ---------
G. L. Hoffman 4,964,677 21,250
Erwin A. Kelen 4,973,540 12,387
Gordon F. Stofer 4,973,540 12,387
Frank D. Trestman 4,973,540 12,387
The shareholders present or by proxy voted to amend the Company's
Stock Plan to increase by 300,000 shares the number of shares
available under the Plan with 3,072,958 votes for, 299,487 votes
against, 20,000 votes abstaining and no broker non-votes.
The shareholders present or by proxy voted to approve the appointment
of Ernst & Young LLP as independent auditors with 4,953,427 votes
for, and 28,000 votes against, 4,400 votes abstaining and no broker
non-votes.
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: August 1, 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
June 30, 1996
- - --------------------------------------------------------------------------------
INSIGNIA SYSTEMS, INC.
- - --------------------------------------------------------------------------------
Page Number in
Sequential
Numbering of
All Pages
Exhibit Including Exhibits
11 Statement re computation of earnings per share.....................12
27 Financial Data Schedule
Exhibit 11
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 5,403,858 5,361,006 5,403,384 5,358,811
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 5,403,384 5,358,811
=========== =========== =========== ===========
Net Income (Loss) $ (88,831) $ (641,247) $ (183,318) $(1,084,374)
=========== =========== =========== ===========
Net Income (Loss) per share $ (0.02) $ (0.12) $ (0.03) $ (0.20)
=========== =========== =========== ===========
FULLY DILUTED:
Average shares outstanding 5,403,858 5,361,006 5,403,384 5,358,811
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 5,403,384 5,358,811
=========== =========== =========== ===========
Net Income (Loss) $ (88,831) $ (641,247) $ (183,318) $(1,084,374)
=========== =========== =========== ===========
Net Income (Loss) per share $ (0.02) $ (0.12) $ (0.03) $ (0.20)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 621,771
<SECURITIES> 394,556
<RECEIVABLES> 2,637,499
<ALLOWANCES> (94,434)
<INVENTORY> 1,750,440
<CURRENT-ASSETS> 5,508,061
<PP&E> 3,641,470
<DEPRECIATION> 2,611,318
<TOTAL-ASSETS> 6,538,213
<CURRENT-LIABILITIES> 1,115,536
<BONDS> 0
0
0
<COMMON> 54,309
<OTHER-SE> 6,484,174
<TOTAL-LIABILITY-AND-EQUITY> 6,538,213
<SALES> 3,818,139
<TOTAL-REVENUES> 3,832,789
<CGS> 1,882,728
<TOTAL-COSTS> 2,024,635
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (13,717)
<INCOME-PRETAX> (88,331)
<INCOME-TAX> 500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,831)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
