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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1995 Commission File Number 0-19380
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INSIGNIA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1656308
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10801 Red Circle Drive
Minnetonka, MN 55343
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 930-8200
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, Par Value $.01 Per Share
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Indicate by check mark whether the registrant (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 period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K/A. [X]
Number of shares of outstanding Common Stock, $.01 par value, as of March
15, 1996 was 5,403,858.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 15, 1996 was approximately $7,430,305 based upon the
last sale price of the registrant's Common Stock on such date.
Documents Incorporated By Reference: Portions of registrant's 1995 Annual
Report to Shareholders are incorporated by reference in Part II; portions of the
registrant's proxy statement for the Annual Meeting of Shareholders scheduled
for May 9, 1996 are incorporated by reference into Part III.
This Form 10-K/A consists of 6 pages.
TABLE OF CONTENTS
PART II Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 3-4
SIGNATURES................................................................. 5
INDEPENDENT AUDITOR'S CONSENT.............................................. 6
PART II.
Item 7. "Item 7" is hereby amended to read as follows:
MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GROSS PROFIT
The Company's gross profit decreased 13% in 1995 to $8,207,000 as a result of
the decrease in net sales. The gross profit increased 5% in 1994 as a result of
the increase in net sales in 1994. Gross profit as a percentage of net sales
decreased to 52.8% for 1995 compared to 57.9% for 1994 and 63.0% in 1993. The
decrease in 1995 was due to a higher proportion of sales of lower margin
products and the continued increase in paper and machine costs. Due to high
competition, the Company was unable to pass on the increased paper costs to its
customers. In addition, the Company felt that an increase to the sales price of
machines would have an adverse affect to net sales. The Company does not
anticipate this trend to continue since paper costs have leveled off and machine
costs have remained stable due to the increase in the conversion rate between
the U.S. dollar and the Japanese yen. The Company's foreign sales were 16% in
1995 compared to 12% in 1994 and 10% in 1993. The Company expects that sales to
foreign distributors will be approximately 20% in 1996.
OPERATING EXPENSES
Operating expenses decreased 7% in 1995. Operating expenses increased 19% in
1994. The Company initiated a downsizing and expense reduction effort during the
third quarter of 1995 which impacted the overall operating expense levels. Sales
and marketing expenses decreased 9% in 1995. The decrease reflects lower
commissions due to decreased sales. Sales and marketing expenses increased 24%
in 1994. That increase reflects higher commissions due to increased sales,
additions of personnel, and increased telephone costs. General and
administrative expenses decreased 2% in 1995 and increased 7% in 1994. The
decrease in general and administrative expenses was primarily due to the
downsizing and expense reduction. Product development expenses increased 1% in
1995 and 1% in 1994 as the Company continued to reduce its development
activities. The Company expects that its operating expenses will remain flat as
the Company continued to closely monitor its operating expenses.
Operating expenses as a percentage of net sales were 62% in 1995, compared to
64% in 1994, and 61% in 1993. The decrease as a percentage of net sales in 1995
was due primarily to the expense reduction effort. The Company expects its
operating expenses as a percentage of net sales to decrease as sales increase
faster than expenses and the Company is able to leverage its fixed expenses. The
Company expects its net sales to increase at a faster rate than operating
expenses as the Company's telemarketing personnel continue to sell machines to
new customers while the demand for sign card from current customers continues to
increase as more and more machines are sold.
Liquidity and Capital Resources
The Company has financed its operations with proceeds from public and private
equity placements and funds from operations. At December 31, 1995, working
capital was $4,351,000 compared to $4,952,000 at December 31, 1994. Cash, cash
equivalents and marketable securities decreased $876,000 to $1,089,000 at
December 31, 1995.
Net cash decreased $1,145,000 due to operating activities, primarily due to the
net loss, the decrease in accounts payable and the increase in inventories.
Accounts payable decreased $347,000 during 1995 primarily due to the difference
in the purchasing schedule for the Impulse machines. Inventories increased
$102,000 during 1995 in anticipation of increased sales. The Company expects
accounts receivable and inventory levels to grow as sales volume increases.
Net cash of $191,000 was provided by investing activities. This net cash
increase was due to the maturity of marketable securities in the amount of
$1,037,000 offset by the purchases of property and equipment of $336,000 and the
purchase or marketable securities in the amount of $510,000.
Net cash of $603,000 was provided by financing activities, primarily due to
proceeds from the issuance of long term debt of $500,000 and proceeds from the
issuance of common stock of $136,000 offset by principal payments on long term
debt of $33,000.
The Company anticipates that its working capital needs will continue to increase
due to the expected growth in the business. However, the Company believes that
its current cash position, cash flow from operations, and access to capital
resources will be sufficient to fund current business operations and anticipated
growth for the foreseeable future.
Net Income (Loss)
The Company had a net loss of $1,451,000 in 1995 compared to a net loss of
$909,000 in 1994, and a net income of $365,000 in 1993. The loss in 1995 was due
to a decrease in margins due to higher paper and machine costs and decreased net
sales.
The higher machines cost was a result of the fluctuations in the exchange rate
between the Japanese yen and the U.S. dollar. During 1993, 1994 and 1995, the
exchange rate fluctuations caused the Company to incur additional losses of
$234,000, $50,000 and $405,000, respectively.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Amendment No. 1 on Form 10-K/A
to Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, in Minnetonka, Minnesota.
INSIGNIA SYSTEMS, INC.
By: /s/ G. L. Hoffman
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G. L. Hoffman
President
Dated: January 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/ G. L. Hoffman Chairman, President, Chief Executive Officer and January 27, 1997
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G. L. Hoffman Secretary (principal executive officer)
/s/ John R. Whisnant Vice President of Finance and Chief Financial January 27, 1997
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John R. Whisnant Officer (principal financial officer)
/s/ Erwin A. Kelen Director January 27, 1997
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Erwin A. Kelen
/s/ Gordon F. Stofer Director January 27, 1997
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Gordon F. Stofer
/s/ Frank D. Trestman Director January 27, 1997
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Frank D. Trestman
</TABLE>
Exhibit No. 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K/A)
of Insignia Systems, Inc. of our report dated January 26, 1996, included in the
1995 Annual Report to Stockholders of Insignia Systems, Inc.
Our audits also included the financial statement schedule of Insignia Systems,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-47003 and Form S-8 No. 33-92376) pertaining to the 1990 Stock
Plan and in the Registration Statements (Form S-8 No. 33-75372 and Form S-8 No.
33-92374) pertaining to the Employee Stock Purchase Plan of Insignia Systems,
Inc. of our report dated January 26, 1996, with respect to the financial
statements incorporated herein by reference and our report included in the
preceding paragraph with respect to the financial statement schedule included in
this Annual Report (Form 10-K/A) of Insignia Systems, Inc.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
January 24, 1997
