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, 2000
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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 -- 9,563,971 shares as of April 28, 2000.
Total number of pages: 8
Page 1 of 8
<PAGE>
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets -- March 31, 2000 and December 31, 1999
Statements of Operations -- Three months ended March 31, 2000 and 1999
Statements of Cash Flows -- Three months ended March 31, 2000 and 1999
Notes to Financial Statements -- March 31, 2000
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
Page 2 of 8
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
- ------------------------------------------------------ ------------ ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 343,203 $ 64,091
Marketable securities 730,453 1,186,933
Accounts receivable - net of $94,675 allowance 1,659,836 1,281,154
Inventories 1,133,830 1,217,784
Prepaid expenses and other 142,808 74,138
------------ ------------
TOTAL CURRENT ASSETS 4,010,130 3,824,100
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 1,760,352 1,743,020
Office furniture and fixtures 262,767 262,767
Computer equipment 837,762 833,440
Leasehold improvements 108,168 105,151
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2,969,049 2,944,378
Accumulated depreciation and amortization (2,766,220) (2,725,077)
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TOTAL PROPERTY AND EQUIPMENT 202,829 219,301
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TOTAL ASSETS $ 4,212,959 $ 4,043,401
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 659,001 $ 387,396
Accrued compensation and benefits 163,088 209,016
Accrued expenses 140,532 149,800
Current portion of long-term debt 51,869 81,967
Line of credit 643,188 807,020
Other 388,189 391,370
------------ ------------
TOTAL CURRENT LIABILITIES 2,045,867 2,026,569
LONG-TERM DEBT 0 0
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding March 31, 2000--9,553,871 shares;
December 31, 1999--9,327,946 shares 95,747 93,279
Additional paid-in capital 16,530,806 16,134,002
Unearned compensation (23,970) (28,764)
Accumulated deficit (14,435,491) (14,181,685)
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TOTAL STOCKHOLDERS' EQUITY 2,167,092 2,016,832
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,212,959 $ 4,043,401
============ ============
</TABLE>
Note: The balance sheet at December 31, 1999 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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2000 1999
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<S> <C> <C>
NET SALES $ 2,878,226 $ 2,290,852
Cost of Sales 1,304,977 1,147,041
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GROSS PROFIT 1,573,249 1,143,811
OPERATING EXPENSES:
Insignia POPS Program 755,895 557,330
Sales 343,983 238,072
Marketing 269,865 171,381
General and Administrative 441,783 445,726
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TOTAL OPERATING EXPENSES 1,811,526 1,412,509
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OPERATING INCOME (LOSS) (238,277) (268,698)
Other Income (Expense):
Interest Income 17,999 12,228
Interest Expense (32,107) (10,284)
Other Income (Expense) (921) 7,523
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PRE-TAX INCOME (LOSS) (253,306) (259,231)
Provision For Income Tax 500 500
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NET INCOME (LOSS) $ (253,806) $ (259,731)
=========== ===========
Net income (loss) per share:
Basic and diluted $ (0.03) $ (0.03)
=========== ===========
Shares used in calculation of net loss per share:
Basic and diluted 9,502,646 8,631,697
=========== ===========
</TABLE>
Page 4 of 8
<PAGE>
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (253,806) $ (259,731)
Non-cash expenses included in income (loss):
Depreciation and amortization 41,143 62,677
Provision for bad debt expense 25,000 15,000
Amortization of unearned compensation 4,794 4,786
Changes in operating assets and liabilities:
Accounts receivable (403,682) 66,599
Inventories 83,954 (96,752)
Prepaids and other (68,669) 63,145
Accounts payable 228,990 191,978
Accrued compensation and benefits (45,928) (68,447)
Other accrued expenses 30,167 (329,061)
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NET CASH USED IN OPERATING ACTIVITIES (358,037) (349,806)
INVESTING ACTIVITIES:
(Purchase) Sale of property and equipment (24,672) (104,301)
(Purchase) Sale of marketable securities 456,480 241,381
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NET CASH PROVIDED BY INVESTING ACTIVITIES 431,808 137,080
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 399,271 199,725
Principal payments under long-term debt agreement (30,098) (27,461)
Proceeds from credit line (163,832) 0
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CASH PROVIDED BY FINANCING ACTIVITIES 205,341 172,264
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS 279,341 (40,462)
Cash and cash equivalents at beginning of period 64,091 0
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 343,203 $ (40,462)
=========== ===========
</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, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 1999.
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, 2000)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the first quarter ended March 31, 2000
were $2,878,000, an increase of 26%, compared to net sales of $2,291,000 for the
first quarter of 1999. Sign card sales decreased 11% from $1,151,000 in the
first quarter of 1999 to $1,030,000 in the first quarter of 2000. Printing sales
increased 58% from $229,000 in the first quarter of 1999 to $361,000 in the
first quarter of 2000. Stylus software sales and maintenance decreased 12% from
$189,000 in the first quarter of 1999 to $167,000 in the first quarter of 2000.
Machine, maintenance and accessories sales decreased 21% from $258,000 in the
first quarter of 1999 to $205,000 in the first quarter of 2000. Revenue from the
Insignia POPS program was $1,099,000 in the first quarter of 2000, compared to
$361,000 in the first quarter of 1999. The Company currently has approximately
4,450 stores under contract of which 3,500 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 2000 increased
38% to $1,573,000, compared to $1,144,000 for the first quarter of 1999. Gross
profit as a percentage of net sales was 55% in the first quarter of 2000,
compared to 50% for the first quarter of 1999. The increase in gross profit in
2000 was due to a higher proportion of sales of POPS program sales which has a
higher margin than most of the Company's other products.
Page 6 of 8
<PAGE>
OPERATING EXPENSES. Operating expenses increased 28% in the first quarter of
2000 from $1,413,000 to $1,811,000. Sales expenses increased 44% from $238,000
to $344,000. This increase reflected the additional sales efforts in the Stylus
products. Marketing expenses increased 57% from $171,000 to $270,000. This
increase reflects the POPS program promotional efforts during the first quarter
of 2000. General and Administrative expenses decreased 1%.
NET INCOME (LOSS). The Company had a net loss of $(254,000), or $(0.03) per
share for the first quarter of 2000, compared to a net loss of $(260,000), or
$(0.03) per share for the first quarter of 1999. The net loss for the first
quarter of 2000 was the due primarily to a continuing investment in the POPS
program.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, working capital was $1,964,000, compared to $2,105,000 at
December 31, 1999. Cash and cash equivalents increased $279,000 to $343,000 at
March 31, 2000, primarily due to proceeds from the issuance of common stock,
sale of marketable securities, increase in accounts payable and decrease in
inventories, offset by an increase in accounts receivable, the net loss, and
pay-down on the credit line.
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 $643,000 was outstanding as of March 31, 2000, 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
<PAGE>
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 3, 2000 Insignia Systems, Inc.
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(Registrant)
/s/ G. L. Hoffman
------------------------------------
G. L. Hoffman
Chairman
/s/ Scott F. Drill
------------------------------------
Scott F. Drill
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-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 343,203
<SECURITIES> 730,453
<RECEIVABLES> 1,754,511
<ALLOWANCES> (94,675)
<INVENTORY> 1,133,830
<CURRENT-ASSETS> 4,010,130
<PP&E> 2,969,049
<DEPRECIATION> (2,766,220)
<TOTAL-ASSETS> 4,212,959
<CURRENT-LIABILITIES> 2,045,867
<BONDS> 0
0
0
<COMMON> 16,626,553
<OTHER-SE> (23,970)
<TOTAL-LIABILITY-AND-EQUITY> 4,212,959
<SALES> 2,878,226
<TOTAL-REVENUES> 2,878,226
<CGS> 1,304,977
<TOTAL-COSTS> 1,811,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,107
<INCOME-PRETAX> (253,306)
<INCOME-TAX> 500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253,806)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
