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, 2002
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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 -- 10,727,070 shares as of April 23, 2002.
Total number of pages: 7
Page 1 of 7
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Balance Sheets -- March 31, 2002 and December 31, 2001
Statements of Operations -- Three months ended March 31, 2002 and 2001
Statements of Cash Flows -- Three months ended March 31, 2002 and 2001
Notes to Financial Statements -- March 31, 2002
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 2002 2001
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(UNAUDITED) (NOTE)
CURRENT ASSETS:
Cash and cash equivalents $ 2,096,778 $ 2,209,448
Marketable securities 80,000 80,000
Accounts receivable - net of $188,453 allowance 3,457,215 2,995,527
Inventories 887,111 843,965
Prepaid expenses and other 370,720 146,002
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TOTAL CURRENT ASSETS 6,891,824 6,274,942
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 1,747,163 1,740,462
Office furniture and fixtures 243,051 243,051
Computer equipment 577,525 517,510
Leasehold improvements 269,426 266,836
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2,837,165 2,767,859
Accumulated depreciation and amortization (2,453,648) (2,411,900)
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TOTAL PROPERTY AND EQUIPMENT 383,517 355,959
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TOTAL ASSETS $ 7,275,341 $ 6,630,901
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable 1,536,308 $ 2,140,452
Accrued compensation and benefits 303,734 509,636
Accrued expenses 1,066,736 176,242
Line of credit 319,806 511,619
Other 47,353 53,618
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TOTAL CURRENT LIABILITIES 3,273,937 3,391,567
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; authorized--20,000,000 shares;
issued and outstanding March 31, 2002--10,717,070 shares;
December 31, 2001--10,614,098 shares 107,171 106,141
Additional paid-in capital 18,458,752 18,017,617
Accumulated deficit (14,564,519) (14,884,424)
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TOTAL STOCKHOLDERS' EQUITY 4,001,404 3,239,334
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 7,275,341 $ 6,630,901
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Note: The balance sheet at December 31, 2001 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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2002 2001
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NET SALES $ 6,015,117 $ 5,147,500
Cost of Sales 2,477,178 2,218,533
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GROSS PROFIT 3,537,939 2,928,967
OPERATING EXPENSES:
Sales 2,119,097 1,656,943
Marketing 476,953 428,444
General and Administrative 614,839 536,893
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TOTAL OPERATING EXPENSES 3,210,889 2,622,280
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OPERATING INCOME 327,050 306,687
Other Income (Expense):
Interest Income 10,442 18,016
Interest Expense (13,869) (19,185)
Other Income (Expense) 5,072 684
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PRE-TAX INCOME 328,695 306,202
Provision For Income Tax 8,790 5,075
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NET INCOME $ 319,905 $ 301,127
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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 10,700,131 10,362,771
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Diluted 11,773,798 11,651,449
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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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2002 2001
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OPERATING ACTIVITIES:
Net income $ 319,905 $ 301,127
Non-cash expenses included in income:
Depreciation and amortization 41,748 39,984
Provision for bad debt expense (15,000) 45,000
Amortization of unearned compensation 0 2,876
Changes in operating assets and liabilities:
Accounts receivable (446,688) (1,098,246)
Inventories (43,146) (30,730)
Prepaids and other (224,718) 126,378
Accounts payable (298,395) 702,403
Accrued compensation and benefits (205,902) (193,710)
Deferred revenue (6,265) 527,103
Other accrued expenses 584,745 (52,952)
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NET CASH USED IN OPERATING ACTIVITIES (293,716) 369,233
INVESTING ACTIVITIES:
(Purchase) Sale of property and equipment (69,306) (64,748)
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NET CASH PROVIDED BY INVESTING ACTIVITIES (69,306) (64,748)
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 442,165 227,228
Proceeds from (payment to) credit line (191,813) (163,057)
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CASH PROVIDED BY FINANCING ACTIVITIES 250,352 64,171
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (112,670) 368,656
Cash and cash equivalents at beginning of period 2,209,448 1,106,160
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,096,778 $ 1,474,816
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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 accounting principles generally accepted in the United States 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, 2002
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(First Quarter Ended March 31, 2002)
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the first quarter ended March 31, 2002
were $6,015,000, an increase of 17%, compared to net sales of $5,148,000 for the
first quarter of 2001. Revenue from the Insignia POPS program was $4,811,000 in
the first quarter of 2002, compared to $3,777,000 in the first quarter of 2001.
As of March 31, 2002 the Company had approximately 6,433 grocery stores and
3,559 drug stores under contract of which 6,336 grocery 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 10% from $708,000 in
the first quarter of 2001 to $638,000 in the first quarter of 2002. Printing
sales decreased 3% from $377,000 in the first quarter of 2001 to $365,000 in the
first quarter of 2002. Stylus software sales and maintenance decreased 31% from
$128,000 in the first quarter of 2001 to $88,000 in the first quarter of 2002.
Machine, maintenance and accessories sales were $120,000 in the first quarter of
2001 and $120,000 in the first quarter of 2002.
GROSS PROFIT. The Company's gross profit for the first quarter of 2001 increased
21% to $3,538,000, compared to $2,929,000 for the first quarter of 2001. Gross
profit as a percentage of net sales was 59% in the first quarter of 2002,
compared to 57% for the first quarter of 2001. 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 22% in the first quarter of
2002 from $2,622,000 to $3,211,000. Sales expenses increased 28% from $1,657,000
to $2,119,000. This increase reflects additional POPS program salaries and
commissions incurred in the sales area during the first quarter of 2002.
Marketing expenses increased 11% from $428,000 to $477,000. This increase
reflects the additional POPS program promotional efforts during the first
quarter of 2002. General and Administrative expenses increased 15% from $537,000
to $615,000. This increase reflects an increase in rent and legal expenses.
NET INCOME. The Company had a net income of $320,000, or $0.03 per share for the
first quarter of 2002, compared to a net income of $301,000, or $0.03 per share
for the first quarter of 2001. The net income for the first quarter of 2002 was
the due primarily to the increase in revenues in the POPS program, offset by
additional POPS related operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, working capital was $3,698,000, compared to $2,883,000 at
December 31, 2001. Cash and cash equivalents decreased $113,000 to $2,097,000 at
March 31, 2002, primarily due to an increase in accounts receivable and prepaids
and a decrease in accounts payable, accrued compensation and payments to the
credit line, offset by the net income plus proceeds from the issuance of common
stock and increases in accrued expenses.
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 $320,000 was outstanding as of March 31, 2002, 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 24, 2002 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
Page 7 of 7