Cover
Cover - shares | 3 Months Ended | |
Sep. 30, 2022 | Nov. 07, 2022 | |
Cover [Abstract] | ||
Entity Registrant Name | INSIGNIA SYSTEMS, INC/MN | |
Entity Central Index Key | 0000875355 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2022 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Entity Common Stock Shares Outstanding | 1,796,506 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 1-13471 | |
Entity Incorporation State Country Code | MN | |
Entity Address Address Line 1 | 212 Third Ave N | |
Entity Address Address Line 2 | Ste 356 | |
Entity Address City Or Town | Minneapolis | |
Entity Address State Or Province | MN | |
Entity Address Postal Zip Code | 55401 | |
City Area Code | 763 | |
Local Phone Number | 392-6200 | |
Security 12b Title | Common Stock, $0.01 par value | |
Trading Symbol | ISIG | |
Security Exchange Name | NASDAQ | |
Entity Interactive Data Current | Yes | |
Entity Tax Identification Number | 41-1656308 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current Assets: | ||
Cash and cash equivalents | $ 14,168,000 | $ 3,766,000 |
Restricted cash | 85,000 | 85,000 |
Accounts receivable, net | 4,723,000 | 5,247,000 |
Inventories | 37,000 | 19,000 |
Income taxes receivable | 0 | 4,000 |
Prepaid production costs | 636,000 | 867,000 |
Other prepaid expense | 208,000 | 366,000 |
Total Current Assets | 19,857,000 | 10,354,000 |
Other Assets: | ||
Property and equipment, net | 84,000 | 113,000 |
Operating lease right-of-use assets | 126,000 | 183,000 |
Total Assets | 20,067,000 | 10,650,000 |
Current Liabilities: | ||
Accounts payable | 1,944,000 | 2,539,000 |
Accrued liabilities: | ||
Compensation | 930,000 | 464,000 |
Sales tax | 775,000 | 1,287,000 |
Other | 736,000 | 1,430,000 |
Income taxes payable | 482,000 | 0 |
Current portion of operating lease liabilities | 71,000 | 76,000 |
Deferred revenue | 919,000 | 842,000 |
Total Current Liabilities | 5,857,000 | 6,638,000 |
Long-Term Liabilities: | ||
Accrued income taxes | 52,000 | 711,000 |
Operating lease liabilities | 56,000 | 108,000 |
Total Long-Term Liabilities | 108,000 | 819,000 |
Commitments and Contingencies | 0 | 0 |
Shareholders' Equity: | ||
Common stock, par value $.01: Authorized shares - 5,714,000 Issued and outstanding shares - 1,796,000 at September 30, 2022 and 1,782,000 at December 31, 2021, respectively | 18,000 | 18,000 |
Additional paid-in capital | 16,426,000 | 16,296,000 |
Accumulated deficit | (2,342,000) | (13,121,000) |
Total Shareholders' Equity | 14,102,000 | 3,193,000 |
Total Liabilities and Shareholders' Equity | $ 20,067,000 | $ 10,650,000 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2022 | Dec. 31, 2021 |
CONDENSED BALANCE SHEETS (Unaudited) | ||
Common Stock, Par Value | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 5,714,000 | 5,714,000 |
Common Stock, Shares Issued | 1,796,000 | 1,782,000 |
Common Stock, Shares Outstanding | 1,796,000 | 1,782,000 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) | ||||
Net services revenues | $ 4,869,000 | $ 3,493,000 | $ 14,271,000 | $ 14,975,000 |
Cost of services | 4,031,000 | 2,948,000 | 11,737,000 | 12,293,000 |
Gross Profit | 838,000 | 545,000 | 2,534,000 | 2,682,000 |
Operating Expenses: | ||||
Selling | 294,000 | 425,000 | 926,000 | 1,406,000 |
Marketing | 249,000 | 266,000 | 787,000 | 761,000 |
General and administrative | 756,000 | 779,000 | 2,310,000 | 4,052,000 |
Total Operating Expenses | 1,299,000 | 1,470,000 | 4,023,000 | 6,219,000 |
Gain from litigation settlement, net | 12,000,000 | 0 | 12,000,000 | 0 |
Operating Income (Loss) | 11,539,000 | (925,000) | 10,511,000 | (3,537,000) |
Other Income (Expense): | ||||
Gain on forgiveness of debt and accrued interest | 0 | 0 | 0 | 1,062,000 |
Other income (expense) | 72,000 | 13,000 | 100,000 | (45,000) |
Total Other Income | 72,000 | 13,000 | 100,000 | 1,017,000 |
Income (Loss) Before Taxes | 11,611,000 | (912,000) | 10,611,000 | (2,520,000) |
Income tax (benfit) expense | (190,000) | 9,000 | (168,000) | 32,000 |
Net Income (Loss) | $ 11,801,000 | $ (921,000) | $ 10,779,000 | $ (2,552,000) |
Net income (loss) per share: | ||||
Basic | $ 6.57 | $ (0.52) | $ 6.02 | $ (1.45) |
Diluted | $ 6.57 | $ (0.52) | $ 6 | $ (1.45) |
Shares used in calculation of net income (loss) per share: | ||||
Basic | 1,795,000 | 1,766,000 | 1,790,000 | 1,757,000 |
Diluted | 1,796,000 | 1,766,000 | 1,796,000 | 1,757,000 |
CONDENSED STATEMENTS OF SHAREHO
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) | Total | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) |
Balance, shares at Dec. 31, 2020 | 1,748,000 | |||
Balance, amount at Dec. 31, 2020 | $ 6,668,000 | $ 17,000 | $ 16,238,000 | $ (9,587,000) |
Issuance of common stock, net, shares | 6,000 | |||
Issuance of common stock, net, amount | 26,000 | $ 1,000 | 25,000 | 0 |
Value of stock-based compensation | 56,000 | 0 | 56,000 | 0 |
Net loss | (737,000) | $ 0 | 0 | (737,000) |
Balance, shares at Mar. 31, 2021 | 1,754,000 | |||
Balance, amount at Mar. 31, 2021 | 6,013,000 | $ 18,000 | 16,319,000 | (10,324,000) |
Balance, shares at Dec. 31, 2020 | 1,748,000 | |||
Balance, amount at Dec. 31, 2020 | 6,668,000 | $ 17,000 | 16,238,000 | (9,587,000) |
Net loss | (2,552,000) | |||
Balance, shares at Sep. 30, 2021 | 1,768,000 | |||
Balance, amount at Sep. 30, 2021 | 4,322,000 | $ 18,000 | 16,443,000 | (12,139,000) |
Balance, shares at Mar. 31, 2021 | 1,754,000 | |||
Balance, amount at Mar. 31, 2021 | 6,013,000 | $ 18,000 | 16,319,000 | (10,324,000) |
Value of stock-based compensation | 86,000 | 0 | 86,000 | 0 |
Net loss | (894,000) | $ 0 | 0 | (894,000) |
Repurchase of common stock upon vesting of restricted stock units, shares | 11,000 | |||
Repurchase of common stock upon vesting of restricted stock units, amount | (9,000) | $ 0 | (9,000) | 0 |
Balance, shares at Jun. 30, 2021 | 1,765,000 | |||
Balance, amount at Jun. 30, 2021 | 5,196,000 | $ 18,000 | 16,396,000 | (11,218,000) |
Value of stock-based compensation | 56,000 | 0 | 56,000 | 0 |
Net loss | (921,000) | $ 0 | 0 | (921,000) |
Repurchase of common stock upon vesting of restricted stock units, shares | 3,000 | |||
Repurchase of common stock upon vesting of restricted stock units, amount | (9,000) | $ 0 | (9,000) | 0 |
Balance, shares at Sep. 30, 2021 | 1,768,000 | |||
Balance, amount at Sep. 30, 2021 | 4,322,000 | $ 18,000 | 16,443,000 | (12,139,000) |
Balance, shares at Dec. 31, 2021 | 1,782,000 | |||
Balance, amount at Dec. 31, 2021 | 3,193,000 | $ 18,000 | 16,296,000 | (13,121,000) |
Issuance of common stock, net, shares | 4,000 | |||
Issuance of common stock, net, amount | 28,000 | $ 0 | 28,000 | 0 |
Value of stock-based compensation | 30,000 | 0 | 30,000 | 0 |
Net loss | 62,000 | $ 0 | 0 | 62,000 |
Balance, shares at Mar. 31, 2022 | 1,786,000 | |||
Balance, amount at Mar. 31, 2022 | 3,313,000 | $ 18,000 | 16,354,000 | (13,059,000) |
Balance, shares at Dec. 31, 2021 | 1,782,000 | |||
Balance, amount at Dec. 31, 2021 | 3,193,000 | $ 18,000 | 16,296,000 | (13,121,000) |
Net loss | 10,779,000 | |||
Balance, shares at Sep. 30, 2022 | 1,796,000 | |||
Balance, amount at Sep. 30, 2022 | 14,102,000 | $ 18,000 | 16,426,000 | (2,342,000) |
Balance, shares at Mar. 31, 2022 | 1,786,000 | |||
Balance, amount at Mar. 31, 2022 | 3,313,000 | $ 18,000 | 16,354,000 | (13,059,000) |
Issuance of common stock, net, shares | 1,000 | |||
Issuance of common stock, net, amount | 11,000 | $ 0 | 11,000 | 0 |
Value of stock-based compensation | 29,000 | 0 | 29,000 | 0 |
Net loss | (1,084,000) | $ 0 | 0 | (1,084,000) |
Issuance of common stock upon vesting of restricted stock units, shares | 6,000 | |||
Issuance of common stock upon vesting of restricted stock units, amount | 0 | $ 0 | 0 | 0 |
Balance, shares at Jun. 30, 2022 | 1,793,000 | |||
Balance, amount at Jun. 30, 2022 | 2,269,000 | $ 18,000 | 16,394,000 | (14,143,000) |
Value of stock-based compensation | 32,000 | 0 | 32,000 | 0 |
Net loss | 11,801,000 | $ 0 | 0 | 11,801,000 |
Issuance of common stock upon vesting of restricted stock units, shares | 3,000 | |||
Issuance of common stock upon vesting of restricted stock units, amount | 0 | $ 0 | 0 | 0 |
Balance, shares at Sep. 30, 2022 | 1,796,000 | |||
Balance, amount at Sep. 30, 2022 | $ 14,102,000 | $ 18,000 | $ 16,426,000 | $ (2,342,000) |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Operating Activities: | ||
Net income (loss) | $ 10,779,000 | $ (2,552,000) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 46,000 | 46,000 |
Gain on sale of property and equipment | 0 | (7,000) |
Changes in allowance for doubtful accounts | (50,000) | 34,000 |
Stock-based compensation expense | 91,000 | 198,000 |
Gain on forgiveness of debt and accrued interest | 0 | (1,062,000) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 574,000 | 1,620,000 |
Inventories | (18,000) | (2,000) |
Income taxes receivable | 4,000 | (1,000) |
Prepaid expenses and other | 389,000 | (27,000) |
Accounts payable | (587,000) | (1,655,000) |
Accrued liabilities | (740,000) | 28,000 |
Income taxes payable | 482,000 | 0 |
Accrued income taxes | (659,000) | 26,000 |
Deferred revenue | 77,000 | 31,000 |
Net cash provided by (used in) operating activities | 10,388,000 | (3,323,000) |
Investing Activities: | ||
Purchases of property and equipment | (25,000) | (81,000) |
Sale of property and equipment | 0 | 16,000 |
Net cash used in investing activities | (25,000) | (65,000) |
Financing Activities: | ||
Proceeds from issuance of common stock, net | 39,000 | 26,000 |
Cash dividends paid ($0.70 per share) | 0 | (14,000) |
Repuchase of common stock upon vesting of restricted stock awards | 0 | (18,000) |
Net cash provided by (used in) financing activities | 39,000 | (6,000) |
Increase (decrease) in cash and cash equivalents and restricted cash | 10,402,000 | (3,394,000) |
Cash and cash equivalents and restricted cash at beginning of period | 3,851,000 | 7,128,000 |
Cash and cash equivalents and restricted cash at end of period | 14,253,000 | 3,734,000 |
Supplemental disclosures for cash flow information: | ||
Cash paid during the period for income taxes | 5,000 | 6,000 |
Non-cash financing activity: | ||
Operating lease right-of-use asset obtained in exchange for lease obligation | 0 | 219,000 |
Forgiveness of debt and accrued interest | 0 | 1,062,000 |
Purchase of property and equipment included in accounts payable | $ 0 | $ 13,000 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2022 | |
Summary of Significant Accounting Policies | |
Summary Of Significant Accounting Policies | 1. Summary of Significant Accounting Policies. Description of Business . Basis of Presentation . As discussed in Note 6, the Company settled a lawsuit and recorded a net pre-tax gain from litigation settlement of $12,000,000 in operations in the three months ended September 30, 2022. Cash and Cash Equivalents and Restricted Cash. September 30, December 31, 2022 2021 Cash and cash equivalents $ 14,168,000 $ 3,766,000 Restricted cash 85,000 85,000 Total cash, cash equivalents and restricted cash $ 14,253,000 $ 3,851,000 Included in cash and cash equivalents is a U.S. Treasury Bill with a carrying value of $11,100,000. Inventories . Property and Equipment . September 30, December 31, 2022 2021 Property and Equipment: Production tooling, machinery and equipment $ 27,000 $ 27,000 Office furniture and fixtures 95,000 95,000 Computer equipment and software 758,000 753,000 Leasehold improvements 19,000 19,000 Construction in-progress 15,000 4,000 914,000 898,000 Accumulated depreciation and amortization (830,000 ) (785,000 ) Net Property and Equipment $ 84,000 $ 113,000 Depreciation expense was approximately $15,000 and $46,000 in the three and nine months ended September 30, 2022, respectively, and was $14,000 and $46,000 in the three and nine months ended September 30, 2021, respectively. Stock-Based Compensation During the nine months ended September 30, 2022 and 2021, no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors in August 2022 and in June 2021. In August 2022, non-employee members of the Board of Directors received restricted stock grants totaling 6,248 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”). The shares underlying the awards were assigned a value of $9.60 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $60,000. The shares are scheduled to vest the day immediately preceding the date of the next annual shareholder meeting. In June 2021, non-employee members of the Board of Directors received restricted stock grants totaling 5,514 shares pursuant to the 2018 Plan. The shares underlying the awards were assigned a value of $8.16 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $45,000. The shares vested on June 1, 2022. Total stock-based compensation expense recorded for the three and nine months ended September 30, 2022 was $32,000 and $91,000, respectively, and for the three and nine months ended September 30, 2021 was $56,000 and $198,000, respectively. Net Income (Loss) per Share . Options to purchase approximately 14,086 shares of common stock with a weighted average exercise price of $11.91 and $11.98, respectively, were outstanding at September 30, 2022 and were not included in the computation of common stock equivalents for the three and nine months ended September 30, 2022 because their exercise prices were higher than the average fair market value of the common stock during the reporting period. Due to the net loss incurred during the three and nine months ended September 31, 2021 all outstanding stock options were anti-dilutive for those periods. As of September 30, 2021 the Company had options to purchase 21,741 shares of common stock and 32,410 restricted stock units, each representing the contingent right to receive one share of common stock, outstanding. Weighted average common shares outstanding: Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Denominator for basic net income (loss) per share - weighted average shares 1,795,000 1,766,000 1,790,000 1,757,000 Effect of dilutive securities: Stock options and restricted stock units 1,000 6,000 Denominator for diluted net income (loss) per share - weighted average shares 1,796,000 1,766,000 1,796,000 1,757,000 |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Sep. 30, 2022 | |
Revenue Recognition | |
Revenue Recognition | 2. Revenue Recognition. Revenue from Contracts with Customers Performance Obligations Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. The Company includes shipping and handling fees in revenues. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of services. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The following is a description of the Company’s performance obligations included in its primary revenue streams and the timing or method of revenue recognition for each: Merchandising, On-Pack, and Non-POPS Signage Solutions POPS Signage Solution Services. Each of the individual activities under the Company’s services, including production activities, are inputs to an integrated sign display service. Customers receive and consume the benefits from the promotional displays over the duration of the contracted display cycle. Additionally, the display of the signs does not have an alternative use to the Company and the Company has an enforceable right to payment for services performed to date. As a result, the Company recognizes the transaction price for service performance obligations as revenue over time. Given the nature of the Company’s performance obligations is to provide a display service over the duration of a specified period or periods, the Company recognizes revenue on a straight-line basis over the display service period as it best reflects the timing of transfer of its sign solutions. Disaggregation of Revenue In the following table, revenue is disaggregated by major revenue stream and timing of revenue recognition. Three months ended September 30 Nine months ended September 30 2022 2021 2022 2021 Services Revenues Services Revenues Services Revenues Services Revenues Timing of revenue recognition: Services transferred over time $ 398,000 $ 1,482,000 $ 1,355,000 $ 5,366,000 Services transferred at a point in time 4,471,000 2,011,000 12,916,000 9,609,000 Total $ 4,869,000 $ 3,493,000 $ 14,271,000 $ 14,975,000 Contract Costs Sales commissions that are paid to internal or external sales representatives are eligible for capitalization as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company is applying the practical expedient in Accounting Standards Codification 340-40-25-4 that allows the incremental costs of obtaining a contract to be recorded as an expense when incurred when the amortization period of the asset that would have otherwise been recognized is one year or less. These costs are included in selling expenses. Deferred Revenue Deferred revenues represent amounts collected from customers in advance of the satisfaction of performance obligations. Significant changes in deferred revenue during the period are as follows: Balance at December 31, 2021 $ 842,000 Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied (478,000 ) Cash received in advance and not recognized as revenue 555,000 Balance at September 30, 2022 $ 919,000 Transaction Price Allocated to Remaining Performance Obligations The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, which reflect the majority of its performance obligations. This practical expedient is being applied to arrangements for certain incomplete services and unshipped custom signage materials. Among our contracts with an expected duration of greater than one year, we anticipate that revenue of $28,000 and $57,000 related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2022 will be recognized during the remainder of fiscal 2022 and 2023, respectively. |
Leases
Leases | 3 Months Ended |
Sep. 30, 2022 | |
Leases | |
Leases | 3. Leases. The Company’s leases include options to renew. The exercise of lease renewal options is at the Company’s sole discretion. Therefore, the renewals to extend the lease terms are not included in the Company’s right of use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. The Company used its incremental borrowing rate of approximately 4.8% in determining the present value of the lease payments based on the information available at the lease commencement date. The cost components of the Company’s operating leases were as follows: Three months ended September 30, 2022 Nine months ended September 30, 2022 Corporate Operating Corporate Operating Headquarters Warehouse Leases Headquarters Warehouse Leases Operating lease cost $ 17,000 $ 4,000 $ 21,000 $ 50,000 $ 13,000 $ 63,000 Variable lease cost 10,000 3,000 $ 13,000 30,000 9,000 39,000 Total $ 27,000 $ 7,000 $ 34,000 $ 80,000 $ 22,000 $ 102,000 Three months ended September 30, 2021 Corporate Additional Operating Headquarters Office Space Warehouse Leases Operating lease cost $ 11,000 $ - $ 4,000 $ 15,000 Variable lease cost 7,000 - 4,000 11,000 Short-term lease cost - 7,000 - 7,000 Total $ 18,000 $ 7,000 $ 8,000 $ 33,000 Nine months ended September 30, 2021 Prior Corporate Corporate Additional Operating Headquarters Headquarters Office Space Warehouse Leases Operating lease cost $ 38,000 $ 11,000 $ - $ 9,000 $ 58,000 Variable lease cost 24,000 7,000 - 9,000 40,000 Short-term lease cost - - 28,000 - 28,000 Total $ 62,000 $ 18,000 $ 28,000 $ 18,000 $ 126,000 Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs which are paid based on actual costs incurred by the lessor. Maturities of the Company’s lease liabilities for is corporate headquarters and its warehouse operating leases are as follows as of September 30, 2022: Maturity of Lease Liabilities Leases 2022 $ 21,000 2023 72,000 2024 40,000 Total lease payments 133,000 Less: Interest (6,000 ) Present value of lease liabilities $ 127,000 The remaining lease terms as of September 30, 2022 for the Company’s corporate headquarters and its warehouse leases were 1.8 years and 0.5 years, respectively. The discount rate for both leases is 4.8%. The cash outflow for operating leases for the three and nine months ended September 30, 2022 was $21,000 and $62,000, respectively. The cash outflow for operating leases for the three and nine months ended September 30, 2021 was $15,000 and $76,000, respectively. |
Income Taxes
Income Taxes | 3 Months Ended |
Sep. 30, 2022 | |
Income Taxes | |
Income Taxes | 4. Income Taxes. Nine months ended September 30, 2022 2021 Federal statutory rate 21.0 % 21.0 % Stock-based awards 0.1 (0.9 ) State taxes 3.6 3.6 Impact of uncertain tax positions (6.2 ) (1.1 ) Valuation allowance (20.0 ) (34.3 ) PPP forgiveness - 10.5 Other (0.1 ) (0.1 ) Effective federal income tax rate (1.6 )% (1.3 )% The Company reassesses its effective rate each reporting period and adjusts the annual effective rate if deemed necessary, based on projected annual taxable income (loss). Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of enacted tax laws. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which we operate, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustment to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria. At September 30, 2022, and December 31, 2021, the Company had unrecognized tax benefits totaling $52,000 and $711,000, respectively, including interest, which relates to state nexus issues. The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $52,000. The Company recorded a decrease of approximately $679,000 in unrecognized tax benefits related to state income tax exposure in the third quarter of 2022, which reduced accrued income taxes and increased income tax benefit. The Company has determined it is no longer more likely than not that the Company will realize the tax expense. At December 31, 2021, the Company had Federal net operating loss (NOL) to carry forward of approximately $9,700,000. As of September 30, 2022 the Company estimates remaining Federal NOL carryforwards to be approximately $2,000,000. The federal NOL utilization was limited to 80% of estimated taxable income. The estimated NOL carry-forward will be adjusted at year end for fourth quarter results. |
Concentrations
Concentrations | 3 Months Ended |
Sep. 30, 2022 | |
Concentrations | |
Concentrations | 5. Concentrations. |
Legal Proceedings
Legal Proceedings | 3 Months Ended |
Sep. 30, 2022 | |
Legal Proceedings | |
Legal Proceedings | 6. Legal Proceedings. On July 1, 2022, the Company entered into a $20 million settlement agreement with News America. The agreement memorializes the amicable settlement of the Company’s outstanding lawsuit against News America. The agreement resulted in net proceeds before income tax of $12,000,000 for the Company, which was recorded as a gain on litigation settlement in operations in the three months ended September 30, 2022. |
Loan
Loan | 3 Months Ended |
Sep. 30, 2022 | |
Loan | |
Loan | 7. Loan. In accordance with the requirements of the CARES Act, the Company used the proceeds from the loan exclusively for qualified expenses under the PPP, including payroll costs, rent and utility costs. Interest was accrued on the outstanding balance of the Note at a rate of 1.00% per annum. The Note was scheduled to mature on April 22, 2022 and required 18 equal monthly payments of principal and interest. The Company’s application for forgiveness of the amount due under the Note, including accrued interest, was approved by the SBA on January 29, 2021. Accordingly, for the year ended December 31, 2021 the debt of $1,054,000, plus accrued interest of $8,000 was eliminated with a gain on debt extinguishment included in other income. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Sep. 30, 2022 | |
Summary of Significant Accounting Policies | |
Description Of Business | Description of Business . |
Basis Of Presentation | Basis of Presentation . As discussed in Note 6, the Company settled a lawsuit and recorded a net pre-tax gain from litigation settlement of $12,000,000 in operations in the three months ended September 30, 2022. |
Cash And Cash Equivalents And Restricted Cash | Cash and Cash Equivalents and Restricted Cash. September 30, December 31, 2022 2021 Cash and cash equivalents $ 14,168,000 $ 3,766,000 Restricted cash 85,000 85,000 Total cash, cash equivalents and restricted cash $ 14,253,000 $ 3,851,000 Included in cash and cash equivalents is a U.S. Treasury Bill with a carrying value of $11,100,000. |
Inventories | Inventories . |
Property And Equipment | Property and Equipment . September 30, December 31, 2022 2021 Property and Equipment: Production tooling, machinery and equipment $ 27,000 $ 27,000 Office furniture and fixtures 95,000 95,000 Computer equipment and software 758,000 753,000 Leasehold improvements 19,000 19,000 Construction in-progress 15,000 4,000 914,000 898,000 Accumulated depreciation and amortization (830,000 ) (785,000 ) Net Property and Equipment $ 84,000 $ 113,000 Depreciation expense was approximately $15,000 and $46,000 in the three and nine months ended September 30, 2022, respectively, and was $14,000 and $46,000 in the three and nine months ended September 30, 2021, respectively. |
Stock-based Compensation | Stock-Based Compensation During the nine months ended September 30, 2022 and 2021, no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors in August 2022 and in June 2021. In August 2022, non-employee members of the Board of Directors received restricted stock grants totaling 6,248 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”). The shares underlying the awards were assigned a value of $9.60 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $60,000. The shares are scheduled to vest the day immediately preceding the date of the next annual shareholder meeting. In June 2021, non-employee members of the Board of Directors received restricted stock grants totaling 5,514 shares pursuant to the 2018 Plan. The shares underlying the awards were assigned a value of $8.16 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $45,000. The shares vested on June 1, 2022. Total stock-based compensation expense recorded for the three and nine months ended September 30, 2022 was $32,000 and $91,000, respectively, and for the three and nine months ended September 30, 2021 was $56,000 and $198,000, respectively. |
Net Income (Loss) per Share | Net Income (Loss) per Share . Options to purchase approximately 14,086 shares of common stock with a weighted average exercise price of $11.91 and $11.98, respectively, were outstanding at September 30, 2022 and were not included in the computation of common stock equivalents for the three and nine months ended September 30, 2022 because their exercise prices were higher than the average fair market value of the common stock during the reporting period. Due to the net loss incurred during the three and nine months ended September 31, 2021 all outstanding stock options were anti-dilutive for those periods. As of September 30, 2021 the Company had options to purchase 21,741 shares of common stock and 32,410 restricted stock units, each representing the contingent right to receive one share of common stock, outstanding. Weighted average common shares outstanding: Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Denominator for basic net income (loss) per share - weighted average shares 1,795,000 1,766,000 1,790,000 1,757,000 Effect of dilutive securities: Stock options and restricted stock units 1,000 6,000 Denominator for diluted net income (loss) per share - weighted average shares 1,796,000 1,766,000 1,796,000 1,757,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Summary of Significant Accounting Policies | |
Schdule of Cash And Cash Equivalents And Restricted Cash | September 30, December 31, 2022 2021 Cash and cash equivalents $ 14,168,000 $ 3,766,000 Restricted cash 85,000 85,000 Total cash, cash equivalents and restricted cash $ 14,253,000 $ 3,851,000 |
Schedule Of Property And Equipment | September 30, December 31, 2022 2021 Property and Equipment: Production tooling, machinery and equipment $ 27,000 $ 27,000 Office furniture and fixtures 95,000 95,000 Computer equipment and software 758,000 753,000 Leasehold improvements 19,000 19,000 Construction in-progress 15,000 4,000 914,000 898,000 Accumulated depreciation and amortization (830,000 ) (785,000 ) Net Property and Equipment $ 84,000 $ 113,000 |
Schdule of Weighted Average Common Shares Outstanding | Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Denominator for basic net income (loss) per share - weighted average shares 1,795,000 1,766,000 1,790,000 1,757,000 Effect of dilutive securities: Stock options and restricted stock units 1,000 6,000 Denominator for diluted net income (loss) per share - weighted average shares 1,796,000 1,766,000 1,796,000 1,757,000 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Revenue Recognition | |
Disaggregation Of Revenue | Three months ended September 30 Nine months ended September 30 2022 2021 2022 2021 Services Revenues Services Revenues Services Revenues Services Revenues Timing of revenue recognition: Services transferred over time $ 398,000 $ 1,482,000 $ 1,355,000 $ 5,366,000 Services transferred at a point in time 4,471,000 2,011,000 12,916,000 9,609,000 Total $ 4,869,000 $ 3,493,000 $ 14,271,000 $ 14,975,000 |
Deferred Revenue | Balance at December 31, 2021 $ 842,000 Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied (478,000 ) Cash received in advance and not recognized as revenue 555,000 Balance at September 30, 2022 $ 919,000 |
Lease (Tables)
Lease (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Leases | |
Cost Components Of Operating Leases | Three months ended September 30, 2022 Nine months ended September 30, 2022 Corporate Operating Corporate Operating Headquarters Warehouse Leases Headquarters Warehouse Leases Operating lease cost $ 17,000 $ 4,000 $ 21,000 $ 50,000 $ 13,000 $ 63,000 Variable lease cost 10,000 3,000 $ 13,000 30,000 9,000 39,000 Total $ 27,000 $ 7,000 $ 34,000 $ 80,000 $ 22,000 $ 102,000 Three months ended September 30, 2021 Corporate Additional Operating Headquarters Office Space Warehouse Leases Operating lease cost $ 11,000 $ - $ 4,000 $ 15,000 Variable lease cost 7,000 - 4,000 11,000 Short-term lease cost - 7,000 - 7,000 Total $ 18,000 $ 7,000 $ 8,000 $ 33,000 Nine months ended September 30, 2021 Prior Corporate Corporate Additional Operating Headquarters Headquarters Office Space Warehouse Leases Operating lease cost $ 38,000 $ 11,000 $ - $ 9,000 $ 58,000 Variable lease cost 24,000 7,000 - 9,000 40,000 Short-term lease cost - - 28,000 - 28,000 Total $ 62,000 $ 18,000 $ 28,000 $ 18,000 $ 126,000 |
Schdule of Maturity Of Lease Liabilities | Maturity of Lease Liabilities Leases 2022 $ 21,000 2023 72,000 2024 40,000 Total lease payments 133,000 Less: Interest (6,000 ) Present value of lease liabilities $ 127,000 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Income Taxes | |
Income Taxes | Nine months ended September 30, 2022 2021 Federal statutory rate 21.0 % 21.0 % Stock-based awards 0.1 (0.9 ) State taxes 3.6 3.6 Impact of uncertain tax positions (6.2 ) (1.1 ) Valuation allowance (20.0 ) (34.3 ) PPP forgiveness - 10.5 Other (0.1 ) (0.1 ) Effective federal income tax rate (1.6 )% (1.3 )% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Summary of Significant Accounting Policies | ||
Cash And Cash Equivalents | $ 14,168,000 | $ 3,766,000 |
Restricted Cash | 85,000 | 85,000 |
Total Cash, Cash Equivalents And Retricted Cash | $ 14,253,000 | $ 3,851,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Gross Property And Equipment | $ 914,000 | $ 898,000 |
Accumulated Depreciation And Amortization | (830,000) | (785,000) |
Net Property And Equipment | 84,000 | 113,000 |
Production tooling, machinery and equipment | ||
Gross Property And Equipment | 27,000 | 27,000 |
Office Furniture and Fixtures | ||
Gross Property And Equipment | 95,000 | 95,000 |
Computer Equipment and Software | ||
Gross Property And Equipment | 758,000 | 753,000 |
Leasehold improvements | ||
Gross Property And Equipment | 19,000 | 19,000 |
Construction in-Progress | ||
Gross Property And Equipment | $ 15,000 | $ 4,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Summary of Significant Accounting Policies | ||||
Denominator For Basic Net Loss Per Share - Weighted Average Shares | 1,795,000 | 1,766,000 | 1,790,000 | 1,757,000 |
Effect Of Dilutive Securities: | ||||
Denominator For Diluted Net Loss Per Share - Weighted Average Shares | 1,796,000 | 1,766,000 | 1,796,000 | 1,757,000 |
Stock Options, Restricted Stock And Restricted Stock | 1,000 | 6,000 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Aug. 30, 2022 | Jun. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Summary of Significant Accounting Policies | ||||||
Depreciation Expense | $ 15,000 | $ 14,000 | $ 46,000 | $ 46,000 | ||
Restricted stock units outstanding | 32,410 | 32,410 | ||||
Restricted stock received by non employee members,Numbers | 6,248 | 5,514 | ||||
Restricted stock received by non employee members,per share value | $ 9.60 | $ 8.16 | ||||
Restricted stock received by non employee members,Total grant value | $ 60,000 | $ 45,000 | ||||
Stock-based Compensation Expense | $ 32,000 | $ 56,000 | $ 91,000 | $ 198,000 | ||
Gain litigation settlement | 12,000,000 | |||||
Cash and cash equivalents | $ 11,100,000 | $ 11,100,000 | ||||
Weighted average exercise price | $ 11.91 | $ 11.98 | ||||
Options to purchase | 21,741 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Total Net Sales | $ 4,869,000 | $ 3,493,000 | $ 14,271,000 | $ 14,975,000 |
Services Transferred At a Point in Time [Member] | ||||
Total Net Sales | 4,471,000 | 2,011,000 | 12,916,000 | 9,609,000 |
Services Transferred Over Time [Member] | ||||
Total Net Sales | $ 398,000 | $ 1,482,000 | $ 1,355,000 | $ 5,366,000 |
Revenue Recognition (Details 1)
Revenue Recognition (Details 1) | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Revenue Recognition | |
Reclassification Of Beginning Deferred Revenue To Revenue, As A Result Of Performance Obligations Satisfied | $ (478,000) |
Cash Received In Advance And Not Recognized As Revenue | 555,000 |
Deferred Revenue, ending | 919,000 |
Deferred Revenue, Beginning | $ 842,000 |
Revenue Recognition (Details Na
Revenue Recognition (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue | $ 4,869,000 | $ 3,493,000 | $ 14,271,000 | $ 14,975,000 |
2022 [Member] | ||||
Revenue | 28,000 | |||
2023 [Member] | ||||
Revenue | $ 57,000 |
Leases (Details)
Leases (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Corporate Headquarters | ||||
Operating Lease Cost | $ 17,000 | $ 11,000 | $ 50,000 | $ 11,000 |
Variable Lease Cost | 10,000 | 7,000 | 30,000 | 7,000 |
Short-term Lease Cost | 0 | 0 | ||
Total | 27,000 | 18,000 | 80,000 | 18,000 |
Warehouse | ||||
Operating Lease Cost | 4,000 | 4,000 | 13,000 | 9,000 |
Variable Lease Cost | 3,000 | 4,000 | 9,000 | 9,000 |
Short-term Lease Cost | 0 | 0 | ||
Total | 7,000 | 8,000 | 22,000 | 18,000 |
OperatingLeases | ||||
Operating Lease Cost | 21,000 | 15,000 | 63,000 | 58,000 |
Variable Lease Cost | 13,000 | 11,000 | 39,000 | 40,000 |
Short-term Lease Cost | 7,000 | 28,000 | ||
Total | $ 34,000 | 33,000 | $ 102,000 | 126,000 |
Additional Office Space | ||||
Operating Lease Cost | 0 | 0 | ||
Variable Lease Cost | 0 | 0 | ||
Short-term Lease Cost | 7,000 | 28,000 | ||
Total | $ 7,000 | 28,000 | ||
Prior Corporate Headquarters | ||||
Operating Lease Cost | 38,000 | |||
Variable Lease Cost | 24,000 | |||
Short-term Lease Cost | 0 | |||
Total | $ 62,000 |
Leases (Details 1)
Leases (Details 1) | Sep. 30, 2022 USD ($) |
Leases | |
2022 | $ 21,000 |
2023 | 72,000 |
2024 | 40,000 |
Total Lease Payments | 133,000 |
Less: Interest | (6,000) |
Present Value Of Lease Liabilities | $ 127,000 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Restricted Cash | $ 85,000 | $ 85,000 | ||
Incremental Borrowing Rate | 4.80% | 4.80% | ||
Cash Outflow For Operating Leases | $ 21,000 | $ 15,000 | $ 62,000 | $ 76,000 |
Corporate Headquarters | ||||
Remaining Lease Term | 6 months | |||
Warehouse | ||||
Remaining Lease Term | 1 year 9 months 18 days |
Income Taxes (Details)
Income Taxes (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2020 | |
Income Taxes | ||
Federal statutory rate | 21% | 21% |
Stock based awards | 0.10% | (0.90%) |
State taxes | 3.60% | 3.60% |
Impact of uncertain tax positions | (6.20%) | (1.10%) |
Valuation allowance | (20.00%) | 34.30% |
PPP forgiveness | 10.50% | |
Other | (0.10%) | (0.10%) |
Effective federal income tax rate | (1.60%) | (1.30%) |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Income Taxes | |||||
Income Tax Benefit (expense) | $ 190,000 | $ 9,000 | $ 168,000 | $ 32,000 | |
Income Tax Rate, Percentage | (1.60%) | 1% | (1.60%) | 1.30% | |
Decrease Of Unrecognized Tax Benefits | $ 679,000 | ||||
Unrecognized Tax Benefits | $ 52,000 | 52,000 | $ 711,000 | ||
Unrecognized Tax Benefits Effective Income Tax Rates Of Future Periods | 52,000 | ||||
Net operating loss to carry forward | $ 2,000,000 | $ 2,000,000 | $ 9,700,000 | ||
Estimated taxable income | 80% |
Concentrations (Details Narrati
Concentrations (Details Narrative) | 6 Months Ended | 9 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Sep. 30, 2022 | Dec. 31, 2021 | |
Sales Revenue, Net | Customer One | |||
Customer's Percentage Of Net Sales | 16% | 19% | |
Sales Revenue, Net | Customer Two | |||
Customer's Percentage Of Net Sales | 10% | 12% | |
Sales Revenue, Net | Customer Three | |||
Customer's Percentage Of Net Sales | 11% | ||
Accounts Receivable | Customer One | |||
Customer's Percentage Of Net Sales | 20% | 25% | |
Accounts Receivable | Customer Two | |||
Customer's Percentage Of Net Sales | 12% | 19% |
Legal Proceedings (Details Narr
Legal Proceedings (Details Narrative) - Settlement agreement - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Jul. 01, 2022 | |
Agreement amount | $ 20,000,000 | |
Net proceeds before income tax | $ 12,000,000 |
Loan (Details Narrative)
Loan (Details Narrative) | 1 Months Ended | 12 Months Ended |
Apr. 30, 2020 USD ($) integer | Dec. 31, 2021 USD ($) | |
Loan (Details Narrative) | ||
Debt Face Amount | $ 1,054,000 | |
Rate Of Interest Per Annum | 1% | |
Laon Maturity Date | Apr. 22, 2022 | |
Number Of Monthly Payments Of Principal And Interest | integer | 18 | |
Accrued Interest | $ 8,000 | |
Paycheck Protection Program Loan Amount | $ 1,054,000 |