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: September 30, 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 -- 10,497,743 shares as of October 15, 2001.
Total number of pages: 9
Page 1 of 9
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 30, 2001 and December 31, 2000
Statements of Operations - Three months ended September 30, 2001
and 2000; Nine months ended September 30, 2001 and 2000
Statements of Cash Flows -- Nine months ended September 30, 2001
and 2000
Notes to Financial Statements - September 30, 2001
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 3. Quantative and Qualitive Disclosures About Market Risk
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 9
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
September 30, December 31,
ASSETS 2001 2000
------------------------------------------------------------- ------------ ------------
(UNAUDITED) (NOTE)
CURRENT ASSETS:
Cash and cash equivalents $ 1,826,767 1,106,160
Marketable securities 80,000 160,000
Accounts receivable - net of allowance of $115,000 as of
9/30/01 and $106,000 as of 12/31/2000 2,340,625 2,089,786
Inventories 963,127 1,242,402
Prepaid expenses and other 164,163 216,792
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TOTAL CURRENT ASSETS 5,374,682 4,815,140
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 1,733,068 1,713,240
Office furniture and fixtures 239,413 201,457
Computer equipment 471,734 399,447
Leasehold improvements 206,816 178,796
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2,651,031 2,492,940
Accumulated depreciation and amortization (2,370,298) (2,242,887)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 280,733 250,053
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TOTAL ASSETS $ 5,655,415 $ 5,065,193
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 1,490,882 $ 988,707
Accrued compensation and benefits 399,499 439,795
Accrued expenses 27,398 149,800
Line of credit 604,335 602,852
Other 412,213 271,807
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TOTAL CURRENT LIABILITIES 2,934,327 2,452,961
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding September 30, 2001--10,497,743 shares;
December 31, 2000--10,287,371 shares 104,977 102,874
Additional paid-in capital 17,912,892 17,524,200
Unearned compensation (958) (9,588)
Accumulated deficit (15,295,823) (15,005,254)
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TOTAL STOCKHOLDERS' EQUITY 2,721,088 2,612,232
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 5,655,415 $ 5,065,193
============ ============
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 9
INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
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2001 2000 2001 2000
------------ ------------ ------------ ------------
NET SALES $ 3,997,460 $ 2,863,480 $ 13,770,183 $ 8,789,702
Cost of Sales 1,750,282 1,172,138 5,934,153 3,890,576
------------ ------------ ------------ ------------
GROSS PROFIT 2,247,178 1,691,342 7,836,030 4,899,126
OPERATING EXPENSES:
POPS Program 1,473,565 908,988 4,260,771 2,498,719
Sales 277,554 289,755 911,346 963,983
Marketing 459,553 293,348 1,404,288 849,908
General & Administrative 529,109 490,589 1,557,721 1,362,656
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 2,739,781 1,982,680 8,134,126 5,675,266
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (492,603) (291,338) (298,096) (776,140)
OTHER INCOME (EXPENSE):
Interest Income 15,892 25,317 52,417 60,853
Interest Expense (16,381) (29,970) (54,633) (93,876)
Other Income (Expense) 569 1,160 25,393 12,629
------------ ------------ ------------ ------------
PRE-TAX INCOME (LOSS) (492,523) (294,831) (274,919) (796,534)
Provision for Income Tax 0 500 15,650 1,500
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (492,523) $ (295,331) $ (290,569) $ (798,034)
============ ============ ============ ============
Net Income (Loss) per share $ (0.05) $ (0.03) $ (0.03) $ (0.08)
============ ============ ============ ============
Shares used in calculation of
Net income (loss) per share:
Basic and diluted 10,464,820 9,730,697 10,409,591 9,721,471
Page 4 of 9
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
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2001 2000
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OPERATING ACTIVITIES:
Net income (loss) $ (290,569) $ (798,034)
Non-cash expenses included in income (loss):
Depreciation and amortization 127,411 116,867
Provision for bad debt expense (8,971) 115,000
Amortization of unearned compensation 8,630 94,826
Changes in operating assets & liabilities:
Accounts receivable (241,868) (878,593)
Inventories 279,275 134,418
Prepaids and other 52,629 (3,136)
Accounts payable 502,174 478,449
Accrued compensation and benefits (40,297) 63,247
Other accrued expenses 18,005 (94,235)
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NET CASH USED IN OPERATING ACTIVITIES 406,419 (771,191)
INVESTING ACTIVITIES:
(Purchase) Sale of property and equipment (158,091) (73,056)
(Purchase) Sales of marketable securities 80,000 1,022,339
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (78,091) 949,283
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 390,796 1,314,219
Principal payments under long-term debt agreement 0 (81,967)
Proceeds from (payments to) credit line 1,483 (74,231)
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 392,279 1,158,021
INCREASE (DECREASE) IN CASH & EQUIVALENTS 720,607 1,336,113
Cash and equivalents at beginning of period 1,106,160 64,091
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,826,767 $ 1,400,204
============ ============
Page 5 of 9
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 nine month period ended September 30, 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.
NOTE B -- INVENTORIES
Inventories consist primarily of Finished Goods on site.
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Third Quarter Ended September 30, 2001)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the third quarter ended September 30,
2001 were $3,997,000, an increase of 40%, compared to net sales of $2,863,000
for the third quarter of 2000. For the nine months ended September 30, 2001, net
sales were $13,770,000, an increase of 57% compared to net sales of $8,790,000
for the first nine months of 2000. Revenue from the sales of machines,
cartridges and machine maintenance was $328,000 for the first nine months of
2001 versus similar sales of $564,000 for the first nine months of 2000. Stylus
software and maintenance sales decreased 28% from $563,000 in the first nine
months of 2000 to $406,000 in the first nine months of 2001. Thermal sign card
sales decreased 21% from $2,708,000 during the first nine months of 2000 to
$2,139,000 in the first nine months of 2001. Printing sales increased 12% from
$1,110,000 in the first nine months of 2000 to $1,247,000 in the first nine
months of 2001. POPS program sales increased 154% from $3,757,000 in the first
nine months of 2000 to $9,534,000 for the first nine months of 2001.
Page 6 of 9
GROSS PROFIT. The Company's gross profit for the third quarter of 2001 increased
33% to $2,247,000, compared to $1,691,000 for the third quarter of 2000. Gross
profit for the first nine months of 2001 increased 60% to $7,836,000, compared
to $4,899,000 for the first nine months of 2000. The increase in gross profit
for the third quarter and the first nine months of 2001 is primarily due to the
increase in the POPS program sales which have higher margins. Gross profit as a
percentage of net sales was 56.2% for the third quarter of 2001, compared to
59.1% for the third quarter of 2000, and was 56.9% for the first nine months of
2001, compared to 55.7% for the first nine months of 2000.
OPERATING EXPENSES. Operating expenses increased 38% in the third quarter of
2001 compared to the third quarter of 2000, and increased 43% for the first nine
months of 2001, compared to the first nine months of 2000. Sales expenses
decreased 4% for the third quarter of 2001, compared to the third quarter of
2000. Marketing expenses increased 57% for the third quarter of 2001, compared
to the third quarter of 2000. This increase was due primarily to additional sign
promotional expenses incurred during the third quarter of 2001. General and
administrative expenses increased 8% for the third quarter of 2001, compared to
the third quarter of 2000. This increase was due primarily to increased legal
fees, investor relations fees and rent. POPS expenses increased 62% for the
third quarter of 2001, compared to the third quarter of 2000 and reflects the
continuing commitment to the POPS program.
Sales expenses decreased 5% for the first nine months of 2001, compared to the
first nine months of 2000. Marketing expenses increased 65% for the first nine
months of 2001, compared to the first nine months of 2000 and is due primarily
to additional sign promotional expenses during the first nine months of 2001.
General and administrative expenses increased 14% for the first nine months of
2001, compared to the first nine months of 2000. This increase was due primarily
to increased legal fees, investors relations fees and rent. POPS expenses
increased 71% for the first nine months of 2001, compared to the first nine
months of 2000. This increase in POPS operating expenses for the first nine
months of 2001 reflects the continuing commitment to the POPS program.
Operating expenses as a percentage of net sales were 69% in the third quarter of
2001 and 59% for the first nine months of 2001, compared to 69% in the third
quarter of 2000 and 65% for the first nine months of 2000.
NET INCOME (LOSS). The Company had a net loss of $(493,000), or $(.05) per share
for the third quarter of 2001, compared to a net loss of $(295,000), or $(.03)
per share for the third quarter of 2000. For the first nine months of 2001, the
net loss was $(291,000), or $(0.03) per share, compared to a net loss of
$(798,000), or $(.08) per share for the first nine months of 2000. The increase
in the net loss for the third quarter of 2001 compared to the third quarter of
2000 resulted primarily from increased POPS program expenses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, working capital was $2,440,000, compared to $2,362,000 at
December 31, 2000. Cash, cash equivalents and marketable securities increased
$721,000 from $1,106,000 at December 31, 2000 to $1,827,000 on September 30,
2001. The change in the Company's cash position is due to proceeds received from
the issuance of common stock of $391,000, plus an
Page 7 of 9
increase in accounts payable of $502,000 and a decrease in inventories of
$279,000, offset by the the net loss of $291,000 and an increase in accounts
receivable of $242,000.
The Company anticipates that its working capital needs will continue to increase
due to the expected growth in the business. However, the company believes that
it will have sufficient capital resources to fund its current business
operations and anticipated growth for the foreseeable future.
Item 3. Quantitive and Qualative Disclosures About Marketing Risk
None.
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 8 of 9
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: October 18, 2001 Insignia Systems, Inc.
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(Registrant)
/s/ Scott Drill
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Scott Drill
President
/s/ John R. Whisnant
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John R. Whisnant
Vice President of Finance
Page 9 of 9