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, 1999
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Commission File Number: 0-19380
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INSIGNIA SYSTEMS, INC.
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(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.)
5025 Cheshire Lane North, Plymouth, Minnesota 55446
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(Address of principal executive offices) (Zip Code)
(612) 392-6200
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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 Per Value -- 8,726,496 shares as of April 30, 1999.
Total number of pages: 8
Page 1 of 8
<PAGE>
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Balance Sheets -- March 31, 1999 and December 31, 1998
Statements of Operations -- Three months ended March 31, 1999 and 1998
Statements of Cash Flows -- Three months ended March 31, 1999 and 1998
Notes to Financial Statements -- March 31, 1999
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II. OTHER INFORMATION
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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
Page 2 of 8
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Part I. Financial Information
Item 1. Financial Statements
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
- -------------------------------------------------------- ------------ ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ (40,461) $ 0
Marketable securities 878,719 1,120,100
Accounts receivable - net of $98,242 allowance 1,198,422 1,280,021
Inventories 1,307,252 1,210,500
Prepaid expenses & other 124,639 187,784
------------ ------------
TOTAL CURRENT ASSETS 3,468,571 3,798,405
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 1,717,687 1,894,577
Office furniture and fixtures 262,767 358,602
Computer equipment 810,474 954,096
Leasehold improvements 94,176 35,134
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2,885,104 3,242,409
Accumulated depreciation and amortization (2,573,374) (2,972,303)
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TOTAL PROPERTY AND EQUIPMENT 311,730 270,106
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TOTAL ASSETS $ 3,780,301 $ 4,068,511
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 710,507 $ 518,529
Accrued compensation and benefits 108,299 176,746
Accrued expenses 48,929 85,138
Current portion of long-term debt 116,977 114,087
Line of credit 0 0
Other 379,232 672,084
------------ ------------
TOTAL CURRENT LIABILITIES 1,363,944 1,566,584
LONG-TERM DEBT 41,667 72,018
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding March 31, 1999--8,651,496 shares;
December 31, 1998--8,499,800 shares 86,515 84,998
Additional paid-in capital 15,361,279 15,163,071
Unearned compensation (43,146) (47,932)
Accumulated deficit (13,029,958) (12,770,228)
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TOTAL STOCKHOLDERS' EQUITY 2,374,690 2,429,909
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,780,301 $ 4,068,511
============ ============
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date. See Notes to Financial Statements.
Page 3 of 8
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INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1999 1998
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<S> <C> <C>
NET SALES $ 2,290,852 $ 2,331,926
Cost of Sales 1,147,041 1,315,898
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GROSS PROFIT 1,143,811 1,016,028
OPERATING EXPENSES:
Restructuring Charge 0 572,293
Insignia POPS Program 557,330 369,652
Sales 238,072 603,849
Marketing 171,381 282,698
Product Development 0 128,569
General and Administrative 445,726 514,579
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TOTAL OPERATING EXPENSES 1,412,509 2,471,640
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OPERATING INCOME (LOSS) (268,698) (1,455,612)
Other Income (Expense):
Interest Income 27,125 4,887
Interest Expense (35,212) (27,324)
Other Income (Expense) 2,235 (5,669)
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PRE-TAX INCOME (LOSS) (274,550) (1,483,718)
Provision For Income Tax 0 500
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NET INCOME (LOSS) $ (274,550) $(1,484,218)
=========== ===========
Net income (loss) per share:
Basic and diluted $ (0.03) $ (0.22)
=========== ===========
Shares used in calculation of net loss per share:
Basic and diluated 8,631,697 6,861,277
=========== ===========
</TABLE>
Page 4 of 8
<PAGE>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (259,731) $(1,484,217)
Non-cash expenses included in income (loss):
Depreciation and amortization 62,677 94,076
Provision for bad debt expense 15,000 25,500
Amortization of unearned compensation 4,786 1,267
Changes in operating assets and liabilities:
Accounts receivable 66,599 803,752
Inventories (96,752) (6,380)
Prepaids and other 63,145 371,174
Accounts payable 191,978 262,546
Accrued compensation and benefits (68,447) (56,150)
Other accrued expenses (329,061) (49,760)
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NET CASH USED IN OPERATING ACTIVITIES (349,806) (38,192)
INVESTING ACTIVITIES:
Purchases of property and equipment (104,301) (32,105)
Sale of marketable securities 241,381 296,211
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NET CASH PROVIDED BY INVESTING ACTIVITIES 137,080 264,106
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 199,725 27,499
Principle payments under long-term debt agreement (27,461) (24,844)
Proceeds from credit line 0 337,945
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CASH PROVIDED BY FINANCING ACTIVITIES 172,264 340,600
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (40,462) 566,514
Cash and cash equivalents at beginning of period 0 0
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ (40,462) $ 566,514
=========== ===========
</TABLE>
Page 5 of 8
<PAGE>
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, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 1998.
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, 1999)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the first quarter ended March 31, 1999
were $2,291,000, a decrease of 2%, compared to net sales of $2,332,000 for the
first quarter of 1998. Sign card sales decreased 10% from $1,286,000 in the
first quarter of 1998 to $1,151,000 in the first quarter of 1999. Printing sales
decreased 25% from $305,000 in the first quarter of 1998 to $229,000 in the
first quarter of 1999. Stylus software sales and maintenance increased from
$106,000 in the first quarter of 1998 to $189,000 in the first quarter of 1999.
Machine, maintenance and accessories sales decreased from $290,000 in the first
quarter of 1998 to $258,000 in the first quarter of 1999. Revenue from the
Insignia POPS program was $10,000 in the first quarter of 1998, compared to
$361,000 in the first quarter of 1998. The Company currently has approximately
2,500 stores under contract of which 2,257 stores are on-line for the POPS
program. The Company anticipates substantial growth in the POPS program revenue
area as additional stores are put on-line and additional retailers decide to
join the POPS program.
GROSS PROFIT. The Company's gross profit for the first quarter of 1999 increased
13% to $1,144,000, compared to $1,106,000 for the first quarter of 1998. Gross
profit as a percentage of net sales was 50% the first quarter of 1999, compared
to 44% for the first quarter of 1998. The increase in gross profit from 1998 was
due to a higher proportion of sales of Stylus software which has a much higher
margin than other products.
Page 6 of 8
<PAGE>
OPERATING EXPENSES. Operating expenses decreased 43% in the first quarter of
1999. Operating expenses for the first quarter of 1999 were $1,413,000. Sales
expenses decreased 60%. This decrease reflected the restructuring in January and
April 1998. Marketing expenses decreased 39%. This decrease reflected a cut in a
variety of marketing related programs during the first quarter of 1999. Product
development expenses decreased 100% as the Company is relying upon internal
development for its Stylus product. General and Administrative expenses
decreased 13%.
NET INCOME (LOSS). The Company had a net loss of $(275,000), or $(0.03) per
share for the first quarter of 1999, compared to a net loss of $(1,484,000), or
$(0.22) per share for the first quarter of 1998. The net loss for the first
quarter of 1999 was the due primarily to a continuing investment in the POPS
program.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, working capital was $2,105,000, compared to $2,041,000 at
December 31, 1998. Cash and cash equivalents decreased $41,000 to $(41,000) at
March 31, 1999, primarily due to the net loss, along with an increase in
inventories, a decrease in accrued compensation and other accrued expenses and
purchases of property and equipment, offset by a decrease in accounts
receivables and prepaids, an increase in accounts payable, the sale of
marketable securities, and proceeds from the issuance of common stock.
The Company anticipates that its working capital needs will continue to increase
due to the expected growth in the POPS program business. However, the Company
entered into a $3 million line of credit agreement with a finance corporation
against which $0 was outstanding as of March 31, 1999, and the Company believes
that it will have sufficient capital resources to finance 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
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
None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter covered by
this Form 10-Q.
Page 7 of 8
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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 4, 1999 Insignia Systems, Inc.
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(Registrant)
/s/ G. L. Hoffman
-----------------------------------
G. L. Hoffman
Chairman
/s/ Scott F. Drill
-----------------------------------
Scott F. Dill
President and CEO
/s/ John R. Whisnant
-----------------------------------
John R. Whisnant
Vice President of Finance
Page 8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> (40,461)
<SECURITIES> 878,719
<RECEIVABLES> 1,296,664
<ALLOWANCES> 98,242
<INVENTORY> 1,307,252
<CURRENT-ASSETS> 3,468,571
<PP&E> 2,885,104
<DEPRECIATION> (2,573,374)
<TOTAL-ASSETS> 3,780,301
<CURRENT-LIABILITIES> 1,363,944
<BONDS> 0
0
0
<COMMON> 15,447,794
<OTHER-SE> (43,146)
<TOTAL-LIABILITY-AND-EQUITY> 3,780,301
<SALES> 2,290,852
<TOTAL-REVENUES> 2,320,212
<CGS> 1,147,041
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,412,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (35,212)
<INCOME-PRETAX> (274,550)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (274,550)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
