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, 2001
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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)
(763) 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 -- 10,379,106 shares as of April 16, 2001.
Total number of pages: 7
Page 1 of 7
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets -- March 31, 2001 and December 31, 2000
Statements of Operations -- Three months ended March 31, 2001 and 2000
Statements of Cash Flows -- Three months ended March 31, 2001 and 2000
Notes to Financial Statements -- March 31, 2001
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
SIGNATURES
Page 2 of 7
Part I. Financial Information
Item 1. Financial Statements
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
March 31, December 31,
ASSETS 2001 2000
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(UNAUDITED) (NOTE)
CURRENT ASSETS:
Cash and cash equivalents $ 1,474,816 1,106,160
Marketable securities 160,000 160,000
Accounts receivable - net of $152,470 allowance 3,143,032 2,089,786
Inventories 1,273,132 1,242,402
Prepaid expenses and other 90,414 216,792
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TOTAL CURRENT ASSETS 6,141,394 4,815,140
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 1,726,576 1,713,240
Office furniture and fixtures 208,113 201,457
Computer equipment 438,858 399,447
Leasehold improvements 184,141 178,796
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2,557,688 2,492,940
Accumulated depreciation and amortization (2,282,871) (2,242,887)
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TOTAL PROPERTY AND EQUIPMENT 274,817 250,053
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TOTAL ASSETS $ 6,416,211 $ 5,065,193
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Line of credit $ 439,795 $ 602,852
Accounts payable 1,691,110 988,707
Accrued compensation and benefits 246,085 439,795
Accrued expenses 107,269 149,800
Deferred revenue 713,470 186,367
Other 75,019 85,440
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TOTAL CURRENT LIABILITIES 3,272,748 2,452,961
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding March 31, 2001--10,379,106 shares;
December 31, 2000--10,287,371 shares 103,791 102,874
Additional paid-in capital 17,750,511 17,524,200
Unearned compensation (6,712) (9,588)
Accumulated deficit (14,704,127) (15,005,254)
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TOTAL STOCKHOLDERS' EQUITY 3,143,463 2,612,232
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 6,416,211 $ 5,065,193
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Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date. See Notes to Financial Statements.
Page 3 of 7
INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
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2001 2000
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NET SALES $ 5,147,500 $ 2,878,226
Cost of Sales 2,218,553 1,304,977
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GROSS PROFIT 2,928,967 1,573,249
OPERATING EXPENSES:
Sales 1,656,943 1,099,878
Marketing 428,444 269,865
General and Administrative 536,893 441,783
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TOTAL OPERATING EXPENSES 2,622,280 1,811,526
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OPERATING INCOME (LOSS) 306,687 (238,277)
Other Income (Expense):
Interest Income 18,016 17,999
Interest Expense (19,185) (32,107)
Other Income (Expense) 684 (921)
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PRE-TAX INCOME (LOSS) 306,202 (253,306)
Provision For Income Tax 5,075 500
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NET INCOME (LOSS) $ 301,127 $ (253,806)
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Basic Earnings Per Share $ 0.03 $ (0.03)
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Diluted Earnings Per Share $ 0.03 $ (0.03)
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Shares used in calculation of earnings per share:
Basic 10,362,771 9,502,646
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Diluted 11,651,449 9,502,646
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Page 4 of 7
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
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2001 2000
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OPERATING ACTIVITIES:
Net income (loss) $ 301,127 $ (253,806)
Non-cash expenses included in income (loss):
Depreciation and amortization 39,984 41,143
Provision for bad debt expense 45,000 25,000
Amortization of unearned compensation 2,876 4,794
Changes in operating assets and liabilities:
Accounts receivable (1,098,246) (403,682)
Inventories (30,730) 83,954
Prepaids and other 126,378 (68,669)
Accounts payable 702,403 228,990
Accrued compensation and benefits (193,710) (45,928)
Deferred revenue 527,103 121,678
Other accrued expenses (52,952) (91,511)
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NET CASH USED IN OPERATING ACTIVITIES 369,232 (358,037)
INVESTING ACTIVITIES:
(Purchase) Sale of property and equipment (64,748) (24,672)
(Purchase) Sale of marketable securities 0 456,480
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NET CASH PROVIDED BY INVESTING ACTIVITIES (64,748) 431,808
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 227,228 399,271
Principal payments under long-term debt agreement 0 (30,098)
Proceeds from credit line (163,057) (163,832)
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CASH PROVIDED BY FINANCING ACTIVITIES 64,171 205,341
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS 368,656 279,112
Cash and cash equivalents at beginning of period 1,106,160 64,091
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,474,816 $ 343,203
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Page 5 of 7
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, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. For further information, refer to the financial statements
and footnotes thereto for the year ended December 31, 2000.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(First Quarter Ended March 31, 2001)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the first quarter ended March 31, 2001
were $5,148,000, an increase of 79%, compared to net sales of $2,878,000 for the
first quarter of 2000. Revenue from the Insignia POPS program was $3,777,000 in
the first quarter of 2001, compared to $1,099,000 in the first quarter of 2000.
As of March 31, 2001 the Company had approximately 6,867 stores under contract
of which 6,678 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. Sign card
sales decreased 31% from $1,030,000 in the first quarter of 2000 to $708,000 in
the first quarter of 2001. Printing sales increased 4% from $361,000 in the
first quarter of 2000 to $3,777,000 in the first quarter of 2001. Stylus
software sales and maintenance decreased 23% from $167,000 in the first quarter
of 2000 to $128,000 in the first quarter of 2001. Machine, maintenance and
accessories sales decreased 41% from $205,000 in the first quarter of 2000 to
$120,000 in the first quarter of 2001.
GROSS PROFIT. The Company's gross profit for the first quarter of 2001 increased
86% to $2,929,000, compared to $1,573,000 for the first quarter of 2000. Gross
profit as a percentage of net sales was 57% in the first quarter of 2001,
compared to 55% for the first quarter of 2000. The increase in gross profit in
2001 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 7
OPERATING EXPENSES. Operating expenses increased 45% in the first quarter of
2001 from $1,812,000 to $2,622,000. Sales expenses increased 51% from $1,100,000
to $1,657,000. This increase reflects additional POPS program salaries and
commissions incurred in the sales area during the first quarter of 2001.
Marketing expenses increased 59% from $270,000 to $428,000. This increase
reflects the additional POPS program promotional efforts during the first
quarter of 2001. General and Administrative expenses increased 21% from $442,000
to $537,000. This increase reflects an increase in rent, legal expenses,
employee benefit costs and investor relation expenses.
NET INCOME (LOSS). The Company had a net income of $301,000, or $0.03 per share
for the first quarter of 2001, compared to a net loss of $(254,000), or $(0.03)
per share for the first quarter of 2000. The net income for the first quarter of
2001 was the due primarily to the increase in revenues in the POPS program.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, working capital was $2,869,000, compared to $2,362,000 at
December 31, 2000. Cash and cash equivalents increased $369,000 to $1,106,000 at
March 31, 2001, primarily due to the net income plus proceeds from the issuance
of common stock, an increase in accrued expenses and accounts payable, offset by
an increase in accounts receivable.
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
has a $2 million line of credit agreement with a finance corporation against
which $440,000 was outstanding as of March 31, 2001, and the Company believes
that it will have sufficient capital resources to finance its current business
operations and anticipated growth for the foreseeable future.
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: April 17, 2001 Insignia Systems, Inc.
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(Registrant)
/s/ Gary L. Vars
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Gary L. Vars
Chairman, Executive Vice President and
General Manager
/s/ Scott F. Drill
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Scott F. Drill
President and CEO
/s/ John R. Whisnant
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John R. Whisnant
Vice President of Finance and CFO
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