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: March 31, 1997
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 Per Value -- 6,860,081 shares as of May 6, 1997.
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 -- March 31, 1997 and December 31, 1996
Statements of Operations -- Three months ended March 31, 1997
and 1996
Statements of Cash Flows -- Three months ended March 31, 1997
and 1996
Notes to Financial Statements -- March 31, 1997
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
March 31, December 31,
ASSETS 1997 1996
- ----------------------------------------------------------------- ------------ ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,147,375 $ 448,668
Marketable securities 150,410 149,427
Accounts receivable - net of $147,440 allowance 3,012,497 2,644,851
Inventories 1,674,831 2,015,963
Prepaid expenses 784,933 215,562
------------ ------------
TOTAL CURRENT ASSETS 7,770,046 5,474,471
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 1,873,618 1,862,311
Office furniture and fixtures 364,119 364,119
Computer equipment 865,492 780,675
Leasehold improvements 312,420 312,420
------------ ------------
3,415,649 3,319,525
Accumulated depreciation and amortization (2,513,587) (2,368,221)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 902,062 951,304
INTANGIBLES 539,187 539,187
Accumulated amortization (539,187) (539,187)
------------ ------------
-- --
------------ ------------
TOTAL ASSETS $ 8,672,108 $ 6,425,775
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 555,804 $ 682,161
Accrued compensation and benefits 180,719 229,019
Accrued expenses 136,751 93,534
Other 95,532 191,077
Line of credit -- 673,281
Current portion of lease 233,678 93,391
------------ ------------
TOTAL CURRENT LIABILITIES 1,202,484 1,962,463
LONG-TERM DEBT 279,706 289,326
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares; issued and
outstanding March 31, 1997--6,860,080 shares;
December 31, 1996--5,403,858 shares 68,577 54,039
Additional paid-in capital 13,101,117 10,102,397
Unearned compensation (6,046) (7,313)
Accumulated deficit (5,973,730) (5,975,137)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,189,918 4,173,986
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 8,672,108 $ 6,425,775
============ ============
Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date.
See Notes to Financial Statements.
</TABLE>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
--------------------------------
1997 1996
----------- -----------
NET SALES $ 4,155,566 $ 3,799,817
Cost of Sales 1,869,829 1,767,613
----------- -----------
GROSS PROFIT 2,285,737 2,032,204
OPERATING EXPENSES:
Insignia POPS Program 168,924 --
Sales 1,151,363 1,027,222
Marketing 425,557 519,199
Product Development 107,946 111,517
General and Administrative 415,787 472,093
----------- -----------
TOTAL OPERATING EXPENSES 2,269,577 2,130,031
----------- -----------
OPERATING INCOME (LOSS) 16,160 (97,827)
Other Income (Expense):
Interest Income 26,056 13,107
Interest Expense (15,109) (13,609)
Other Income (Expense) (24,071) 7,402
----------- -----------
PRE-TAX INCOME (LOSS) 3,036 (90,909)
Provision For Income Tax 1,629 3,578
----------- -----------
NET INCOME (LOSS) $ 1,407 $ (95,965)
=========== ===========
Net income (loss) per share $ 0.00 $ (0.02)
=========== ===========
Weighted average shares and
share equivalents outstanding 6,586,956 5,403,382
=========== ===========
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,407 $ (94,487)
Non-cash expenses included in income (loss):
Depreciation and amortization 145,366 135,145
Provision for bad debt expense 17,000 17,000
Amortization of unearned compensation 1,267 2,203
Changes in operating assets and liabilities:
Accounts receivable (384,646) (114,363)
Inventories 341,132 (172,728)
Prepaids and other (570,354) 80,362
Accounts payable (126,357) 159,073
Accrued compensation and benefits (48,300) (57,731)
Other liabilities 42,601 9,992
Other accrued expenses 59,237 6,356
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (521,647) (29,178)
INVESTING ACTIVITIES:
Purchases of property and equipment (96,124) (115,369)
NET CASH PROVIDED BY (USED IN) ___________ ___________
INVESTING ACTIVITIES (96,124) (115,369)
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 3,013,288 46,709
Principle payments under long-term debt agreement (7,479) (20,338)
Proceeds from credit line (673,281) --
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 2,322,528 26,371
----------- -----------
DECREASE IN CASH AND EQUIVALENTS 1,714,757 (118,176)
Cash and cash equivalents at beginning of period 448,668 583,613
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,163,425 $ 465,437
=========== ===========
</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 three month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 1996.
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
(First Quarter Ended March 31, 1997)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the first quarter ended March 31, 1997
were $4,156,000, an increase of 9%, compared to net sales of $3,800,000 for the
first quarter of 1996. Sales increased primarily due to an increase in the
Stylus software sales. Revenue from the SIGNright machines was only 56% of sales
from the Impulse machine for the first quarter of 1996. This is due primarily
due to the continued introductory phase of the SIGNright machine. Sign card
sales were relatively flat compared to sign card sales for the first quarter of
1996. Printing sales were substantially higher for the first quarter of 1997
compared to the first quarter of 1996.
GROSS PROFIT. The Company's gross profit for the first quarter of 1997 increased
12% to $2,286,000, compared to $2,032,000 for the first quarter of 1996. Gross
profit as a percentage of net sales was 55% the first quarter of 1996, compared
to 53.5% for the first quarter of 1996. The increase in gross profit from 1996
of $254,000 and as a percentage of net sales was due to the higher proportion of
sales of Stylus software which has a much higher margin than other products.
OPERATING EXPENSES. Operating expenses increased 7% in the first quarter of 1997
compared to the first quarter of 1996. Sales expenses increased 12%. The
increase reflects higher commissions due to higher sales. Marketing expenses
decreased 19%, product development expenses decreased 3%, and general and
administrative expenses decreased 12%, all as a result of the continued expense
reduction effort instituted during the second 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 55% in the first quarter of 1997, compared to 56%
in the first quarter of 1996.
NET INCOME (LOSS). The Company had a net income of $1,407, or $0.00 per share
for the first quarter of 1997, compared to a net loss of $(94,000), or $(.02)
per share for the first quarter of 1996. The net income for the first quarter of
1997 was the due primarily to higher Stylus sales with high margins offset by
lower machine sales with lower margins.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, working capital was $6,568,000, compared to $3,512,000 at
December 31, 1996. Cash, cash equivalents and marketable securities increased
$1,700,000 to $2,298,000 at March 31, 1997, primarily due to the decrease in
inventories and proceeds received from the issuance of common stock, offset by
an increase in accounts receivable, an increase in prepaids and other, and a
decrease in accounts payable. The $570,000 increase to prepaids was due
primarily to prepayments made for future inventory to be shipped. Accounts
receivable increased $385,000 during the first quarter due to strong quarter-end
sales. Accounts payable decreased $126,000, as inventory levels were decreased
during the later part of the quarter.
The Company anticipates that its working capital needs will continue to increase
due to the expected growth in the business. However, as a result of the issuance
of additional common stock during the first quarter of 1997, the Company
believes that it will have sufficient capital resources to fund its current
business operations and anticipated growth for the foreseeable future.
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
On January 17, 1997, the Company issued 1,376,020 shares of common
stock in a private placement. These shares were sold for $2.125 per
share and the Company received $2,924,040 as a result of the issuance
of these shares of common stock. In addition, the Company issued to
the purchasers of these shares warrants for the purchase of 688,011
shares of common stock which have an exercise price of $2.125 per
share and expire on January 17, 2000. There were no underwriters or
placement agents involved in this issuance and no commissions were
paid. The shares and warrants were issued to a limited number of
persons who purchased these securities as an investment for his, her
or its own account and not with a view to a distribution. Based on
these facts the Company relied upon the exemption provided by Section
4(c) of the Securities Act of 1933, as amended.
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: May 9, 1997 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
March 31, 1997
- --------------------------------------------------------------------------------
INSIGNIA SYSTEMS, INC.
- --------------------------------------------------------------------------------
Page Number in
Sequential
Numbering of
All Pages
Exhibit Including Exhibits
11 Statement re computation of earnings per share.......................12
Exhibit 11
<TABLE>
<CAPTION>
INSIGNIA SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
March 31
1997 1996
----------- -----------
<S> <C> <C>
PRIMARY:
Average shares outstanding 6,586,956 5,403,382
Net effect of dilutive stock
options--based on treasury stock
method using average market price -- --
----------- -----------
TOTAL 6,586,956 5,403,382
=========== ===========
Net Income (Loss) $ 1,407 $ (94,487)
=========== ===========
Net Income (Loss) per share $ 0.00 $ (0.02)
=========== ===========
FULLY DILUTED:
Average shares outstanding 6,586,956 5,403,382
Net effect of dilutive stock options--based on treasury
stock method using ending market price,
if higher than average market price -- --
----------- -----------
TOTAL 6,586,956 5,403,382
=========== ===========
Net Income (Loss) $ 1,407 $ (94,487)
=========== ===========
Net Income (Loss) per share $ 0.00 $ (0.02)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,147,375
<SECURITIES> 150,410
<RECEIVABLES> 3,012,497
<ALLOWANCES> 0
<INVENTORY> 1,674,831
<CURRENT-ASSETS> 7,770,046
<PP&E> 902,062
<DEPRECIATION> (2,513,587)
<TOTAL-ASSETS> 8,672,108
<CURRENT-LIABILITIES> 1,202,484
<BONDS> 0
0
0
<COMMON> 68,577
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,672,108
<SALES> 4,155,566
<TOTAL-REVENUES> 4,155,566
<CGS> 1,869,829
<TOTAL-COSTS> 1,869,829
<OTHER-EXPENSES> 2,269,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15,109)
<INCOME-PRETAX> 3,036
<INCOME-TAX> 1,629
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,407
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
