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 QUARTERLY PERIOD ENDED MARCH 31, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________ TO _________________
Commission File Number: 1-13471
INSIGNIA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1656308
--------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6470 Sycamore Court North, Maple Grove, MN 55369
------------------------------------------------
(Address of principal executive offices)
(763) 392-6200
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable.
---------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (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 period 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
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2).
[ ] Yes [X] No
Number of shares outstanding of Common Stock, $.01 par value, as of May
7, 2003, was 12,225,920.
Page 1 of 16
INSIGNIA SYSTEMS, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets -- March 31, 2003 and December 31, 2002 (unaudited)
Statements of Operations -- Three months ended March 31, 2003 and 2002
(unaudited)
Statements of Cash Flows -- Three months ended March 31, 2003 and 2002
(unaudited)
Notes to Financial Statements -- March 31, 2003 (unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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
CERTIFICATIONS
EXHIBITS
Page 2 of 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSIGNIA SYSTEMS, INC.
BALANCE SHEETS
March 31, December 31,
ASSETS 2003 2002
- ------------------------------------------------ ------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 5,141,343 $ 6,471,581
Accounts receivable, net 3,932,638 5,263,701
Inventories 870,639 975,876
Prepaid expenses 465,407 77,248
------------ ------------
TOTAL CURRENT ASSETS 10,410,027 12,788,406
PROPERTY AND EQUIPMENT:
Production tooling, machinery and equipment 2,054,183 2,046,208
Office furniture and fixtures 257,547 257,547
Computer equipment 673,643 645,742
Leasehold improvements 258,767 174,143
Construction-in-progress -- 50,936
------------ ------------
3,244,140 3,174,576
Accumulated depreciation and amortization (2,355,297) (2,281,838)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 888,843 892,738
OTHER ASSETS:
Goodwill 3,089,690 3,041,186
Other 583,333 --
------------ ------------
TOTAL OTHER ASSETS 3,673,023 3,041,186
------------ ------------
TOTAL ASSETS $ 14,971,893 $ 16,722,330
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,649,351 $ 3,465,746
Accrued liabilities:
Commissions 226,163 269,323
Employee stock purchase plan 80,524 246,120
Other 721,996 406,061
Deferred revenue 591,610 1,077,002
------------ ------------
TOTAL CURRENT LIABILITIES 4,269,644 5,464,252
SHAREHOLDER'S EQUITY:
Common stock, par value $.01; authorized--
20,000,000 shares; issued and outstanding
March 31, 2003--12,202,920 shares;
December 31, 2002--11,767,255 shares 122,029 117,673
Additional paid-in capital 26,249,826 25,692,131
Accumulated deficit (15,669,606) (14,551,726)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 10,702,249 11,258,078
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,971,893 $ 16,722,330
============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 3 of 16
INSIGNIA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
-----------------------------
2003 2002
------------ ------------
Services revenues $ 5,391,037 $ 4,811,159
Products sold 1,070,466 1,203,958
------------ ------------
TOTAL NET SALES 6,461,503 6,015,117
Cost of services 3,337,900 2,483,370
Cost of sales 549,851 590,803
------------ ------------
TOTAL COST OF SALES 3,887,751 3,074,173
------------ ------------
Gross Profit 2,573,752 2,940,944
OPERATING EXPENSES:
Selling 2,312,193 1,688,564
Marketing 386,065 310,491
General and administrative 1,009,948 614,839
------------ ------------
Total operating expenses 3,708,206 2,613,894
------------ ------------
Operating Income (Loss) (1,134,454) 327,050
OTHER INCOME (EXPENSE):
Interest income 23,814 10,442
Interest expense -- (13,869)
Other income (expense) (7,240) (3,718)
------------ ------------
16,574 (7,145)
------------ ------------
NET INCOME (LOSS) $ (1,117,880) $ 319,905
============ ============
Net income (loss) per share:
Basic $ (0.09) $ 0.03
============ ============
Diluted $ (0.09) $ 0.03
============ ============
Shares used in calculation of net income (loss) per share:
Basic 12,012,808 10,700,131
============ ============
Diluted 12,012,808 11,773,798
============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 4 of 16
INSIGNIA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
---------------------------
2003 2002
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $(1,117,880) $ 319,905
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 73,459 41,748
Provision for bad debt expense 10,000 15,000
Changes in operating assets and liabilities:
Accounts receivable 1,321,063 (476,688)
Inventories 105,237 (43,146)
Prepaid expenses (971,492) (224,718)
Accounts payable (816,395) (298,395)
Accrued liabilities 107,179 378,843
Deferred revenue (485,392) (6,265)
----------- -----------
Net cash used in operating activities (1,774,221) (293,716)
INVESTING ACTIVITIES:
Purchases of property and equipment (69,564) (69,306)
Other (48,504) --
----------- -----------
Net cash used in investing activities (118,068) (69,306)
FINANCING ACTIVITIES:
Net change in line of credit -- (191,813)
Proceeds from issuance of common stock, net 562,051 442,165
----------- -----------
Net cash provided by financing activities 562,051 250,352
----------- -----------
Decrease in cash and cash equivalents (1,330,238) (112,670)
Cash and cash equivalents at beginning of period 6,471,581 2,209,448
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,141,343 $ 2,096,778
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Page 5 of 16
INSIGNIA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
DESCRIPTION OF BUSINESS.
------------------------
Insignia Systems, Inc. (the "Company") markets in-store promotional
products, programs and services to retailers and consumer packaged goods
manufacturers. The Company's products include the Insignia
Point-of-Purchase Services (POPS) in-store promotion program, which
includes both Insignia POPSign and VALUStix(R) programs; thermal sign card
supplies for the Company's SIGNright and Impulse systems; Stylus software;
and laser printable cardstock and label supplies.
BASIS OF PRESENTATION.
----------------------
Financial statements for the interim periods included herein are unaudited;
however, they contain all adjustments, including normal recurring accruals,
which in the opinion of management, are necessary to present fairly the
financial position of the Company at March 31, 2003, and its results of
operations and cash flows for the three months ended March 31, 2003 and
2002. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year-end. Results of operations for the
periods presented are not necessarily indicative of the results to be
expected for the full year.
The financial statements do not include certain footnote disclosures and
financial information normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America and, therefore, should be read in conjunction with the
financial statements and notes included in the Company's Annual Report on
Form 10-K/A for the year ended December 31, 2002.
The Company has included in its financial statements the assets and
liabilities recorded in connection with the acquisition of the assets
comprising the VALUStix business. The results of operations related to
VALUStix since December 23, 2002, the effective date, have been included in
the Company's Statement of Operations.
The Summary of Significant Accounting Policies in the Company's 2002 Annual
Report on Form 10-K/A describes the Company's accounting policies.
INVENTORIES.
Inventories are primarily comprised of Impulse machines, SIGNright
machines, sign cards, and accessories. Inventory is valued at the lower of
cost or market using the first-in, first-out (FIFO) method and consist of
the following:
March 31, December 31,
2003 2002
------------ ------------
Raw materials $ 263,276 $ 328,713
Finished goods 607,363 647,163
------------ ------------
$ 870,639 $ 975,876
============ ============
Page 6 of 16
INSIGNIA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
PREPAID EXPENSES.
-----------------
During the three months ended March 31, 2003 the Company made a pre-payment
of approximately $1,000,000 to a retailer, in connection with a three-year
contract. The pre-payment is being amortized ratably over the three-year
contract using the straight-line method. At March 31, 2003 the balance of
the prepaid expense related to this retailer payment was approximately
$917,000, of which approximately $583,000 was classified as long-term.
NET INCOME (LOSS) PER SHARE.
----------------------------
Basic net income (loss) per share is computed by dividing net income (loss)
by the weighted average shares outstanding and excludes any dilutive
effects of options, warrants and convertible securities. Diluted net income
per share gives effect to all diluted potential common shares outstanding
during the year. Options and warrants to purchase approximately 1,042,000
and 94,000 shares of common stock with weighted average exercise prices of
$9.72 and $8.40 were outstanding at March 31, 2003 and 2002 and were not
included in the computation of common stock equivalents because their
exercise prices were higher than the average fair market value of the
common shares during the reporting period. For the three months ended March
31, 2003, the effect of options and warrants was anti-dilutive due to the
net loss incurred during the period. Had net income been achieved,
approximately 469,000 of common stock equivalents would have been included
in the computation of diluted net income per share.
2003 2002
---------------------------------------------------------------------------
Denominator for basic net income (loss)
per share - weighted averages shares 12,012,808 10,700,131
Effect of dilutive securities:
Stock options and warrants -- 1,073,667
---------------------------------------------------------------------------
Denominator for diluted net income (loss) per
share - adjusted weighted average shares 12,012,808 11,773,798
RECLASSIFICATIONS.
------------------
Certain 2002 amounts have been reclassified to conform to the presentation
in the 2003 financial statements.
2. STOCK OPTIONS.
The Company has elected to follow APB No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES, and related interpretations in accounting for its stock-based
compensation. In addition, the Company provides pro forma disclosure of
stock-based compensation, as measured under the fair value requirements of
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. These pro forma
disclosures are provided as required under SFAS No. 148, ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE.
Page 7 of 16
INSIGNIA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the relevant information as if the fair
value recognition provisions of SFAS 123 had been applied to all
stock-based awards:
Three Months Ended
March 31,
---------------------------------------------------------------------------
2003 2002
---------------------------------------------------------------------------
Net income (loss) as reported $(1,117,880) $ 319,905
Deduct stock-based employee compensation
expense determined under fair value method 335,164 173,312
---------------------------------------------------------------------------
Pro forma net (loss) $(1,453,044) $ 146,593
Basic and diluted net loss per share:
As reported $ (.09) $ .03
Pro forma $ (.12) $ .01
3. COMMITMENTS.
RETAILER AGREEMENTS.
--------------------
The Company has contracts in the normal course of business with various
retailers, some of which provide for minimum annual program levels. If
those minimum levels are not met, the Company is obligated to pay the
contractual difference to the retailers. During the three months ended
March 31, 2003 the Company incurred approximately $173,000 of costs related
to these minimums which was recorded in Cost of Services in the Statements
of Operations. During the three months ended March 31, 2002 there were no
costs incurred related to these minimums.
4. CONCENTRATIONS.
During the three months ended March 31, 2003 one customer accounted for 24%
of the Company's total net sales. At March 31, 2003 this customer
represented 20% of the Company's total accounts receivable. During the
three months ended March 31, 2002 two other customers accounted for 20% and
12% of the Company's total net sales.
Although there are a number of customers that the Company sells to, the
loss of a major customer could cause a delay in and possible loss of sales,
which would adversely affect operating results.
Page 8 of 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in the
Company's Statements of Operations as a percentage of total net sales.
Three Months ended March 31 2003 2002
--------------------------------------------------
Net sales 100.0% 100.0%
Cost of sales 60.2 51.1
--------------------------------------------------
Gross profit 39.8 48.9
Operating expenses:
Selling 35.8 28.1
Marketing 6.0 5.2
General and administrative 15.6 10.2
--------------------------------------------------
Total operating expenses 57.4 43.5
--------------------------------------------------
Operating income (loss) (17.6) 5.4
Other income (expense) 0.3 (0.1)
--------------------------------------------------
Net income (loss) (17.3)% 5.3%
--------------------------------------------------
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
these estimates. The significant accounting policies are discussed in Note 1 of
the Company's financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K/A for the year ended December 31, 2002.
These critical accounting policies are subject to judgements and uncertainties,
which affect the application of these policies. The Company bases its estimates
on historical experience and on various other assumptions believed to be
reasonable under the circumstances. On an on-going basis, the Company evaluates
its estimates. In the event estimates or assumptions prove to be different from
actual results, adjustments are made in subsequent periods to reflect more
current information.
THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002
NET SALES. Net sales for the three months ended March 31, 2003 increased 7% to
$6,461,503 compared to $6,015,117 for the three months ended March 31, 2002.
Service revenues from our POPSign programs for the three months ended March 31,
2003 increased 12% to $5,391,037 compared to $4,811,159 for the three months
ended March 31, 2002. The increase was primarily due to an increase in the
number of retail stores on line, partially offset by a reduction in the number
of POPSign programs during the quarter. We expect our POPSign revenues to
continue to increase, both in amount and as a percentage of our total net sales.
Additionally, we expect to begin generating revenues related to our recent
VALUStix acquisition, primarily during the second half of the fiscal year.
Page 9 of 16
Product sales for the three months ended March 31, 2003 decreased 11% to
$1,070,466 compared to $1,203,958 for the three months ended March 31, 2002. The
decrease was primarily due to decreasing sales of our other product categories
based on decreased demand for those products from our customers. We expect our
sales of our other product categories to continue to decline, both in dollar
amount and as a percentage of our total net sales.
GROSS PROFIT. Gross profit for the three months ended March 31, 2003 decreased
12% to $2,573,752 compared to $2,940,944 for the three months ended March 31,
2002. Gross profit as a percentage of total net sales decreased to 39.8% for
2003 compared to 48.9% for 2002.
Gross profit from our POPSign program revenues for the three months ended March
31, 2003 decreased 12% to $2,053,137 compared to $2,327,789 for the three months
ended March 31, 2002. The decrease was primarily due to a change in our product
mix, increased payments to retailers, an increase in our occupancy costs due to
our corporate move during December 2002 and increased cost due to additional
equipment added during the fourth quarter of 2002. Gross profit as a percentage
of POPSign program revenues decreased to 38.1% for 2003 compared to 48.4% for
2002, primarily due to the factors discussed above. We expect our gross profit
from our POPSign revenues to increase in 2003 due to an expected increase in our
POPSign revenues, but to decrease as a percentage of POPSign revenue compared to
the prior year, due to the factors discussed above.
Gross profit from our product sales for the three months ended March 31, 2003
decreased 15% to $520,615 compared to $613,155 for the three months ended March
31, 2002. The decrease was primarily due to decreased sales from our other
product categories based on decreased demand for those products from our
customers. Gross profit as a percentage of other sales decreased to 48.6% for
2003 compared to 50.9% for 2002, primarily due to product mix. We expect the
gross profit from the sales of our other product categories to continue to
decline in amount and as a percentage of our total gross profit.
OPERATING EXPENSES.
SELLING. Selling expenses for the three months ended March 31, 2003 increased
37% to $2,312,193 compared to $1,688,564 for the three months ended March 31,
2002, primarily due to an increase in the number of sales related employees,
increased commissions expense related to higher total net sales, the addition of
VALUStix employees and severance expense for employees terminated at the end of
the first quarter. Selling expenses as a percentage of total net sales increased
to 35.8 % in 2003 compared to 28.1% in 2002, primarily due to the factors
discussed above, partially offset by the effect of higher net sales during the
quarter. We expect selling expenses, exclusive of commissions, to decline due to
the reduced salary costs and to decline somewhat as a percentage of net sales
due to an expected increase in total net sales.
MARKETING. Marketing expenses for the three months ended March 31, 2003
increased 24% to $386,065 compared to $310,491 for the three months ended March
31, 2002, primarily due to increased salaries to support the POPS programs.
Marketing expenses as a percentage of total net sales increased to 6.0% in 2003
compared to 5.2% in 2002, primarily due to the factors discussed above,
partially offset by the effect of higher net sales during the quarter. We expect
marketing expenses to decline somewhat due to planned reductions in
discretionary expenses, and to decline somewhat as a percentage of net sales due
to an expected increase in total net sales.
Page 10 of 16
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the three
months ended March 31, 2003 increased 64% to $1,009,948 compared to $614,839 for
the three months ended March 31, 2002, primarily due to higher legal fees,
additions to our management team and the increased cost of our new facilities.
General and administrative expenses as a percentage of total net sales increased
to 15.6% in 2003 compared to 10.2% in 2002, primarily due to the factors
discussed above, partially offset by the effect of higher net sales during the
quarter. We expect general and administrative expenses, exclusive of legal fees,
to decline as a percentage of net sales due to an expected increase in total net
sales.
OTHER INCOME (EXPENSE). Other income for the three months ended March 31, 2003
was $16,754 compared to other expense of $(7,145) for the three months ended
March 31, 2002. The difference was due primarily to an increase in interest
income as a result of the funds received from the private placement financing in
December 2002 and no interest expense as the line of credit was fully repaid
during December 2002.
NET INCOME (LOSS). Our net loss for the three months ended March 31, 2003 was
$(1,117,880) compared to net income of $319,905 for the three months ended March
31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations with proceeds from public and private
equity placements. At March 31, 2003, working capital was $6,140,383 compared to
$7,324,154 at December 31, 2002. During the three months ended March 31, 2003,
cash and cash equivalents decreased $1,330,238.
Net cash used in operating activities during the three months ended March 31,
2003 was $(1,774,221), primarily due to the net loss and an increase in prepaid
expenses due to a $1,000,000 pre-payment made to a retailer during the quarter.
Accounts receivable decreased $1,321,063 during the three months ended March 31,
2003 due to collections related to the high levels of POPSign revenues during
the fourth quarter of 2002. Accounts payable decreased $816,395 during the three
months ended March 31, 2003 due to the payments made to retailers, relating to
the high levels of POPSign revenues during the fourth quarter of 2002. Deferred
revenue decreased $485,392 primarily due to the timing of the POPSign program
cycles at quarter-end. The Company expects accounts receivable to increase
during 2003 as POPSign revenues increase. The Company expects inventory levels
to remain flat during 2003.
Net cash of $118,068 was used in investing activities during the three months
ended March 31, 2003, primarily due to the purchase of property and equipment of
$69,564.
Net cash of $562,051 was provided by financing activities during the three
months ended March 31, 2003 from the issuance of common stock related to the
exercise of stock options and the issuance of shares related to the employee
stock purchase plan.
The Company anticipates that its working capital needs will remain consistent
with prior years. The Company's $2 million line of credit with a finance
institution was paid in full during 2002 and the related agreement expired on
December 31, 2002. The Company believes that it has sufficient cash resources to
fund its current business operations and anticipated growth for the foreseeable
future.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
Statements made in this quarterly report on Form 10-Q, in the Company's other
SEC filings, in press releases and in oral statements to shareholders and
securities analysts, which are not statements of
Page 11 of 16
historical or current facts are "forward looking statements." Such forward
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results or performance of the Company to be
materially different from the results or performance expressed or implied by
such forward looking statements. The words "believes," "expects," "anticipates,"
"seeks" and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward looking statements, which
speak only as of the date the statement was made. These statements are subject
to the risks and uncertainties that could cause actual results to differ
materially and adversely from the forward looking statements. These risks and
uncertainties include, but are not limited to: we historically have not achieved
significant earnings; our results of operations may be subject to significant
fluctuations; we face significant competition from other providers of at-shelf
advertising or promotional signage; reductions in advertising and promotional
expenditures by branded product manufacturers due to changes in economic
conditions would adversely affect us; we are dependent on the number of retailer
partners; we are dependent on the success of the Insignia POPS program and
expansion of the program to the retail drug industry; we may not be able to
manage growth effectively; we are dependent on our manufacturer partners
achieving sales lift; we recently made our first business acquisition and may
acquire other businesses; we are dependent on members of our management team; we
have a significant amount of options and warrants outstanding that could affect
the market price of our common stock; the market price of our common stock has
been volatile and other factors detailed from time to time in our SEC reports.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management,
including the Company's Chief Executive Officer and Chief Financial Officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act) as
of a date (the "Evaluation Date") within 90 days prior to the filing of this
report. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that, as of the Evaluation Date, our disclosure
controls and procedures are effective in timely alerting them to the material
information relating to us required to be included in our periodic SEC filings.
(b) Changes in Internal Controls.
There were no significant changes made in our internal controls or, to
our knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
Page 12 of 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
first quarter of fiscal 2003.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
10.1 Amended Change in Control Severance Agreement with Scott F.
Drill dated March 31, 2003
10.2 Amended Change in Control Agreement Severence with Gary L.
Vars dated March 31, 2003
10.3 Change in Control Severance Agreement with Denni Jo Lester
dated February 24, 2003
10.4 Change in Control Severance Agreement with Thomas Wilkolak
dated February 24, 2003
10.5 Change in Control Severance Agreement with John Whisnant
dated April 11, 2000
99.1 Certificate of CEO
99.2 Certificate of CFO
(b) Reports on Form 8-K
The Company filed a report on Form 8-K/A on February 27, 2003 under
Item 7 to include the financial statements and pro forma information
for the Company's acquisition of the assets comprising the VALUStix
business, as described in Form 8-K filed December 31, 2002.
Page 13 of 16
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 12, 2003 Insignia Systems, Inc.
---------------------------
(Registrant)
/s/ Scott F. Drill
---------------------------
Scott F. Drill
President and
Chief Executive Officer
/s/ Denni J. Lester
---------------------------
Denni J. Lester
Vice President, Finance and
Chief Financial Officer
Page 14 of 16
CERTIFICATIONS
I, Scott F. Drill, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Insignia Systems,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
by others within the Company, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 12, 2003 /s/ Scott F. Drill
-----------------------
Scott F. Drill
President and
Chief Executive Officer
Page 15 of 16
I, Denni J. Lester, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Insignia Systems,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
by others within the Company, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 12, 2003 /s/ Denni J. Lester
---------------------------
Denni J. Lester
Vice President, Finance and
Chief Financial Officer
Page 16 of 16
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
10.1 Amended Change in Control Severance Agreement with Scott F. Drill dated
March 31, 2003
10.2 Amended Change in Control Agreement Severence with Gary L. Vars dated
March 31, 2003
10.3 Change in Control Severance Agreement with Denni Jo Lester dated
February 24, 2003
10.4 Change in Control Severance Agreement with Thomas Wilkolak dated
February 24, 2003
10.5 Change in Control Severance Agreement with John Whisnant dated
April 11, 2000
99.1 Certificate of CEO
99.2 Certificate of CFO