Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 07, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | INSIGNIA SYSTEMS INC/MN | |
Entity Central Index Key | 0000875355 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 12,045,229 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 4,282,000 | $ 10,160,000 |
Held to maturity investments | 5,014,000 | 0 |
Accounts receivable, net | 6,248,000 | 8,763,000 |
Inventories | 361,000 | 353,000 |
Income tax receivable | 130,000 | 127,000 |
Prepaid expenses and other | 212,000 | 306,000 |
Total Current Assets | 16,247,000 | 19,709,000 |
Other Assets: | ||
Property and equipment, net | 3,126,000 | 3,268,000 |
Operating lease right-of-use assets | 242,000 | 0 |
Other, net | 676,000 | 976,000 |
Total Assets | 20,291,000 | 23,953,000 |
Current Liabilities: | ||
Accounts payable | 2,801,000 | 3,334,000 |
Accrued liabilities: | ||
Compensation | 457,000 | 2,021,000 |
Other | 374,000 | 701,000 |
Current portion of operating lease liabilities | 203,000 | 0 |
Deferred revenue | 436,000 | 302,000 |
Total Current Liabilities | 4,271,000 | 6,358,000 |
Long-Term Liabilities: | ||
Deferred tax liabilities | 116,000 | 504,000 |
Accrued income taxes | 628,000 | 613,000 |
Deferred rent | 0 | 158,000 |
Operating lease liabilities | 164,000 | 0 |
Total Long-Term Liabilities | 908,000 | 1,275,000 |
Commitments and Contingencies | ||
Shareholders' Equity: | ||
Common stock, par value $.01: Authorized shares - 40,000,000 Issued and outstanding shares - 12,045,000 at June 30, 2019 and 11,840,000 at December 31, 2018 | 120,000 | 118,000 |
Additional paid-in capital | 15,816,000 | 15,442,000 |
Retained earnings (Accumulated deficit) | (824,000) | 760,000 |
Total Shareholders' Equity | 15,112,000 | 16,320,000 |
Total Liabilities and Shareholders' Equity | $ 20,291,000 | $ 23,953,000 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 12,045,000 | 11,840,000 |
Common stock, shares outstanding | 12,045,000 | 11,840,000 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Services revenues | $ 5,435,000 | $ 7,868,000 | $ 10,074,000 | $ 14,894,000 |
Products revenues | 407,000 | 377,000 | 908,000 | 770,000 |
Total Net Sales | 5,842,000 | 8,245,000 | 10,982,000 | 15,664,000 |
Cost of services | 4,044,000 | 4,964,000 | 8,018,000 | 9,368,000 |
Cost of goods sold | 333,000 | 276,000 | 725,000 | 545,000 |
Total Cost of Sales | 4,377,000 | 5,240,000 | 8,743,000 | 9,913,000 |
Gross Profit | 1,465,000 | 3,005,000 | 2,239,000 | 5,751,000 |
Operating Expenses: | ||||
Selling | 693,000 | 719,000 | 1,431,000 | 1,622,000 |
Marketing | 585,000 | 566,000 | 1,250,000 | 1,170,000 |
General and administrative | 870,000 | 1,467,000 | 1,578,000 | 2,474,000 |
Total Operating Expenses | 2,148,000 | 2,752,000 | 4,259,000 | 5,266,000 |
Operating Income (Loss) | (683,000) | 253,000 | (2,020,000) | 485,000 |
Other income | 30,000 | 7,000 | 67,000 | 12,000 |
Income (Loss) Before Taxes | (653,000) | 260,000 | (1,953,000) | 497,000 |
Income tax expense (benefit) | (165,000) | 76,000 | (369,000) | 149,000 |
Net Income (Loss) | $ (488,000) | $ 184,000 | $ (1,584,000) | $ 348,000 |
Net income (loss) per share: | ||||
Basic | $ (0.04) | $ 0.02 | $ (0.13) | $ 0.03 |
Diluted | $ (0.04) | $ 0.02 | $ (0.13) | $ 0.03 |
Shares used in calculation of net income (loss) per share: | ||||
Basic | 11,888,000 | 11,804,000 | 11,872,000 | 11,812,000 |
Diluted | 11,888,000 | 12,076,000 | 11,872,000 | 12,040,000 |
STATEMENTS OF SHAREHOLDERS' EQU
STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid In Capital [Member] | Retained Earnings (Accumulated Deficit) [Member] | Total |
Balances at Dec. 31, 2017 | $ 119,000 | $ 15,361,000 | $ (639,000) | $ 14,841,000 |
Balances, shares at Dec. 31, 2017 | 11,914,000 | |||
Issuance of common stock, net | 49,000 | 49,000 | ||
Issuance of common stock, net, shares | 49,000 | |||
Value of stock-based compensation | 67,000 | 67,000 | ||
Net income (loss) | 164,000 | 164,000 | ||
Balances at Mar. 31, 2018 | $ 119,000 | 15,477,000 | (475,000) | 15,121,000 |
Balances, shares at Mar. 31, 2018 | 11,963,000 | |||
Balances at Dec. 31, 2017 | $ 119,000 | 15,361,000 | (639,000) | 14,841,000 |
Balances, shares at Dec. 31, 2017 | 11,914,000 | |||
Net income (loss) | 348,000 | |||
Balances at Jun. 30, 2018 | $ 119,000 | 15,358,000 | (291,000) | 15,186,000 |
Balances, shares at Jun. 30, 2018 | 11,851,000 | |||
Balances at Mar. 31, 2018 | $ 119,000 | 15,477,000 | (475,000) | 15,121,000 |
Balances, shares at Mar. 31, 2018 | 11,963,000 | |||
Value of stock-based compensation | 82,000 | 82,000 | ||
Repurchase of common stock upon vesting of restricted stock awards and vesting of restricted stock units | (14,000) | (14,000) | ||
Repurchase of common stock upon vesting of restricted stock awards and vesting of restricted stock units, shares | (9,000) | |||
Repurchase of common stock, net | (187,000) | (187,000) | ||
Repurchase of common stock, net, shares | (103,000) | |||
Net income (loss) | 184,000 | 184,000 | ||
Balances at Jun. 30, 2018 | $ 119,000 | 15,358,000 | (291,000) | 15,186,000 |
Balances, shares at Jun. 30, 2018 | 11,851,000 | |||
Balances at Dec. 31, 2018 | $ 118,000 | 15,442,000 | 760,000 | 16,320,000 |
Balances, shares at Dec. 31, 2018 | 11,840,000 | |||
Issuance of common stock, net | $ 1,000 | 107,000 | 108,000 | |
Issuance of common stock, net, shares | 107,000 | |||
Value of stock-based compensation | 138,000 | 138,000 | ||
Net income (loss) | (1,096,000) | (1,096,000) | ||
Balances at Mar. 31, 2019 | $ 119,000 | 15,687,000 | (336,000) | 15,470,000 |
Balances, shares at Mar. 31, 2019 | 11,947,000 | |||
Balances at Dec. 31, 2018 | $ 118,000 | 15,442,000 | 760,000 | 16,320,000 |
Balances, shares at Dec. 31, 2018 | 11,840,000 | |||
Net income (loss) | (1,584,000) | |||
Balances at Jun. 30, 2019 | $ 120,000 | 15,816,000 | (824,000) | 15,112,000 |
Balances, shares at Jun. 30, 2019 | 12,045,000 | |||
Balances at Mar. 31, 2019 | $ 119,000 | 15,687,000 | (336,000) | 15,470,000 |
Balances, shares at Mar. 31, 2019 | 11,947,000 | |||
Value of stock-based compensation | 139,000 | 139,000 | ||
Repurchase of common stock upon vesting of restricted stock awards and vesting of restricted stock units | $ 1,000 | (10,000) | (9,000) | |
Repurchase of common stock upon vesting of restricted stock awards and vesting of restricted stock units, shares | 98,000 | |||
Net income (loss) | (488,000) | (488,000) | ||
Balances at Jun. 30, 2019 | $ 120,000 | $ 15,816,000 | $ (824,000) | $ 15,112,000 |
Balances, shares at Jun. 30, 2019 | 12,045,000 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating Activities: | ||
Net income (loss) | $ (1,584,000) | $ 348,000 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 742,000 | 570,000 |
Changes in allowance for doubtful accounts | (2,000) | (36,000) |
Deferred income tax benefit | (388,000) | 0 |
Stock-based compensation expense | 277,000 | 149,000 |
Accrued interest on held to maturity investments | (33,000) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,517,000 | 2,296,000 |
Inventories | (8,000) | (63,000) |
Income tax receivable | (3,000) | 107,000 |
Prepaid expenses and other | 92,000 | 109,000 |
Accounts payable | (459,000) | (131,000) |
Accrued liabilities | (1,924,000) | 17,000 |
Accrued income taxes | 15,000 | 15,000 |
Deferred revenue | 134,000 | 659,000 |
Net cash provided by (used in) operating activities | (624,000) | 4,040,000 |
Investing Activities: | ||
Purchases of property and equipment | (358,000) | (528,000) |
Purchase of investments | (4,981,000) | 0 |
Net cash used in investing activities | (5,339,000) | (528,000) |
Financing Activities: | ||
Proceeds from issuance of common stock | 108,000 | 49,000 |
Repurchase of common stock upon vesting of restricted stock awards | (9,000) | (14,000) |
Cash dividends paid ($0.70 per share) | (14,000) | (14,000) |
Repurchase of common stock, net | 0 | (187,000) |
Net cash provided by (used in) financing activities | 85,000 | (166,000) |
Increase (decrease) in cash and cash equivalents | (5,878,000) | 3,346,000 |
Cash and cash equivalents at beginning of period | 10,160,000 | 4,695,000 |
Cash and cash equivalents at end of period | 4,282,000 | 8,041,000 |
Supplemental disclosures for cash flow information: | ||
Cash paid during the period for income taxes | 6,000 | 0 |
Non-cash investing and financing activities: | ||
Purchases of property and equipment included in accounts payable | $ 0 | $ 111,000 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Description of Business . Basis of Presentation . Recently Adopted Accounting Pronouncements . “Leases Inventories . June 30, December 31, 2019 2018 Raw materials $ 64,000 $ 80,000 Work-in-process 35,000 12,000 Finished goods 262,000 261,000 $ 361,000 $ 353,000 Property and Equipment . June 30, December 31, 2019 2018 Property and Equipment: Production tooling, machinery and equipment $ 3,728,000 $ 3,694,000 Office furniture and fixtures 385,000 385,000 Computer equipment and software 4,187,000 2,743,000 Leasehold improvements 577,000 577,000 Construction in-progress — 1,179,000 8,877,000 8,578,000 Accumulated depreciation and amortization (5,751,000 ) (5,310,000 ) Net Property and Equipment $ 3,126,000 $ 3,268,000 Depreciation expense was approximately $259,000 and $440,000 in the three and six months ended June 30, 2019, respectively, and was $181,000 and $367,000 in the three and six months ended June 30, 2018, respectively. Stock-Based Compensation During the six months ended June 30, 2019 and 2018, no stock awards were granted by the Company, except for those awarded to non-employee members of the Board of Directors. During the six months ended June 30, 2018, the Company issued 178,000 restricted stock units under the 2013 Omnibus Stock and Incentive Plan (the “2013 Plan”). The shares underlying the awards were assigned a value of $1.77 per share, which was the closing price of our common stock on the date of grant and are scheduled to vest over three years. The Company estimated the fair value of stock-based awards granted during the six months ended June 30, 2019 under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 year, expected volatility of 57%, dividend yield of 0% and risk-free interest rate of 2.60%. During June 2019, non-employee members of the Board of Directors received restricted stock grants totaling 70,755 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”). The shares underlying the awards were assigned a value of $1.06 per share, which was the closing price of our common stock on the date of grants, for a total value of $75,000, and are scheduled to vest the day immediately preceding the date of the 2020 annual shareholder meeting. During July 2018, non-employee members of the Board of Directors received restricted stock grants totaling 46,152 shares pursuant to the 2018 Plan. The shares underlying the awards were assigned a value of $1.95 per share, which was the closing price of our common stock on the date of grants, for a total value of $90,000, which vested the day immediately preceding the date of our 2019 annual shareholder meeting. During June 2019, the Company issued 8,370 shares of common stock in settlement of $9,000 of total deferred fees due to a non-employee director’s departure from the board. Our non-employee directors are eligible to participate in our director deferred compensation plan, which allows a director to make voluntary deferrals of up to 100% of their annual cash retainers relating to board or committee chair service. Total stock-based compensation expense recorded for the three and six months ended June 30, 2019 was $139,000 and $277,000, respectively, and for the three and six months ended June 30, 2018 was $82,000 and $149,000, respectively. Net Income (Loss) per Share . Due to the net loss incurred during the three and six months ended June 30, 2019 all outstanding stock options were anti-dilutive for that period. Options to purchase approximately 245,000 shares of common stock with a weighted average exercise price of $2.71 were outstanding at June 30, 2018 and were not included in the computation of common stock equivalents for the three and six months ended June 30, 2018 because their exercise prices were higher than the average fair market value of the common shares during the reporting period. Weighted average common shares outstanding for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended June 30 June 30 2019 2018 2019 2018 Denominator for basic net income (loss) per share - weighted average shares 11,888,000 11,804,000 11,872,000 11,812,000 Effect of dilutive securities: Stock options and restricted stock units — 272,000 — 228,000 Denominator for diluted net income (loss) per share - weighted average shares 11,888,000 12,076,000 11,872,000 12,040,000 |
Investments
Investments | 6 Months Ended |
Jun. 30, 2019 | |
Investments [Abstract] | |
Investments | The Company currently invests its excess cash in debt securities, with an average maturity of approximately six months. At June 30, 2019, there were $5,014,000 of held to maturity investments, all with maturity dates of less than one year. These investments are accounted for in accordance with Accounting Standards Codification (“ASC”) 320-10, “Investments – Debt and Equity Securities.” At June 30, 2019, the Company’s investment balances consisted solely of held to maturity investments and are carried at cost which approximates fair value due to the negligible risk of changes in value due to interest rates. |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2019 | |
Revenue Recognition [Abstract] | |
Revenue Recognition | Under ASU 2014-09 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 revenue. 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 goods sold. The majority of the Company’s accounts receivable is due from companies in the consumer-packaged goods (“CPG”) industry. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within 30-150 days and are stated at amounts due from customers, net of an allowance for doubtful accounts. 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 our performance obligations included in our primary revenue streams and the timing or method of revenue recognition for each: In-Store Signage Solution Services Each of the individual activities under our 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 us and we have an enforceable right to payment for services performed to date. As a result, we recognize the transaction price for our POPS solution performance obligations as revenue over time. Given the nature of our performance obligations is to provide a display service over the duration of a specified period or periods, we recognize revenue on a straight-line basis over the display service period as it best reflects the timing of transfer of our POPS service solution . Other Service Revenues Products . Disaggregation of Revenue In the following table, revenue is disaggregated by major revenue stream and timing of revenue recognition. Three months ended June 30, 2019 Six months ended June 30, 2019 Services Revenues Products Revenue Total Revenue Services Revenues Products Revenue Total Revenue Timing of revenue recognition: Products and services transferred over time $ 4,144,000 $ - $ 4,144,000 $ 7,699,000 $ - $ 7,699,000 Products and services transferred at a point in time 1,291,000 407,000 1,698,000 2,375,000 908,000 3,283,000 Total $ 5,435,000 $ 407,000 $ 5,842,000 $ 10,074,000 $ 908,000 $ 10,982,000 Three months ended June 30, 2018 Six months ended June 30, 2018 Services Revenues Products Revenue Total Revenue Services Revenues Products Revenue Total Revenue Timing of revenue recognition: Products and services transferred over time $ 7,868,000 $ - $ 7,868,000 $ 14,894,000 $ - $ 14,894,000 Products and services transferred at a point in time - 377,000 377,000 - 770,000 770,000 Total $ 7,868,000 $ 377,000 $ 8,245,000 $ 14,894,000 $ 770,000 $ 15,664,000 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 ASC 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 Significant changes in deferred revenue during the period are as follows: Balance at December 31, 2018 $ 302,000 Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied (301,000 ) Cash received in advance and not recognized as revenue 435,000 Balance at June 30, 2019 $ 436,000 Transaction Price Allocated to Remaining Performance Obligations The Company applies the practical expedient in paragraph ASC 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 our performance obligations. This practical expedient is being applied to arrangements for certain incomplete services and unshipped custom signage materials. Of those contracts with an expected duration of greater than one year, we estimate that revenue of $775,000 and $2,000,000 related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2019 will be recognized during the remainder of 2019 and in 2020, respectively. |
Selling Arrangement
Selling Arrangement | 6 Months Ended |
Jun. 30, 2019 | |
Selling Arrangement | |
Selling Arrangement | In 2011, the Company paid to News America Marketing In-Store, L.L.C. (“News America Marketing”) $4,000,000 in exchange for a 10-year arrangement to sell signs with price into News America Marketing’s network of retailers as its exclusive agent. The $4,000,000 is being amortized over the 10-year term of the arrangement. Amortization expense was $150,000 and $300,000 in the three and six months ended June 30, 2019. Amortization expense was $100,00 and $200,000 in the three and six months ended June 30, 3018. Amortization expense is expected to be $600,000 in 2019, $262,000 in 2020 and $55,000 in the year ending December 31, 2021. The acceleration of amortization in 2019 is based on the anticipated recovery period over the remaining term of the contract due to the loss of a significant retailer which exited our retailer network in the first half of 2019 as a result of competitive pressures. The net carrying amount of the selling arrangement is recorded within other assets on the Company’s balance sheet. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Leases | The Company leases space under a non-cancelable operating lease for our corporate headquarters. This lease has escalating lease terms and also includes a tenant incentive that was recorded at the time the lease was originally entered into. The lease does not contain contingent rent provisions. The Company also has a lease for additional office space under an operating lease. The lease for our corporate headquarters includes both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. The lease for our additional office space is non-cancelable with a lease term of less than one year and therefore, we have elected the practical expedient to exclude this short-term lease from our right-of-use assets and lease liabilities. Our leases include options to renew. The exercise of lease renewal options is at our sole discretion. Therefore, the renewals to extend the lease terms are not included in our right of use assets and lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise, we include the renewal period in our lease term. We used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The cost components of our operating leases were as follows for the periods ended June 30, 2019: Three months ended June 30, 2019 Six months ended June 30, 2019 Corporate Additional Operating Corporate Additional Operating Headquarters Office Space Leases Headquarters Office Space Leases Operating lease cost $ 38,000 $ - $ 38,000 $ 75,000 $ - $ 75,000 Variable lease cost 26,000 - 26,000 54,000 - 54,000 Short-term lease cost - 9,000 9,000 - 19,000 19,000 Total $ 64,000 $ 9,000 $ 73,000 $ 129,000 $ 19,000 $ 148,000 Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our leased corporate headquarters which are paid based on actual costs incurred by the lessor. Maturities of our lease liabilities for our corporate headquarters operating lease were as follows as of June 30, 2019: Maturity of Lease Liabilities Operating Leases 2019 $ 108,000 2020 222,000 2021 57,000 Total lease payments $ 387,000 Less: Interest 20,000 Present value of lease liabilities $ 367,000 The remaining lease term as of June 30, 2019 was 1.75 years and the discount rate was 6%. The cash outflow for operating leases for the three and six months ended June 30, 2019 was $54,000 and $108,000, respectively. The following table presents future minimum lease payments for our operating leases at December 31, 2018 under ASC 840 and is being presented for comparative purposes: 2019 $ 217,000 2020 $ 222,000 2021 $ 57,000 Rent expense under these leases was approximately $75,000 and $135,000 for the three and six months ended June 30, 2018, respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | For the three and six months ended June 30, 2019, the Company recorded income tax benefit of $165,000 and $369,000, or 25.3% and.18.9% of loss before taxes, respectively. For the three and six months ended June 30, 2018, the Company recorded income tax expense of $76,000 and $149,000, or 29.2% and 30.0% of income before taxes, respectively. The income tax benefit or expense for the three and six months ended June 30, 2019 and 2018 is comprised of federal and state taxes. The primary differences between the Company’s June 30, 2019 and 2018 effective tax rates and the statutory federal rate are expenses related to stock-based compensation and nondeductible meals and entertainment as well as for the three and six months ended June 30, 2019 an increase in the Company’s valuation allowance against its deferred tax assets. 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, we consider 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 June 30, 2019 and December 31, 2018, the Company had a valuation allowance of approximately $99,000 and $79,000, respectively, as a result of certain capital losses, credits and net operating losses carried forward which the Company does not believe are more likely than not to be realized. As of June 30, 2019, and December 31, 2018, the Company had unrecognized tax benefits totaling $628,000 and $613,000, 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 $628,000. Due to the current statute of limitations regarding the unrecognized tax benefits, the unrecognized tax benefits and associated interest are not expected to change significantly in 2019. |
Concentrations
Concentrations | 6 Months Ended |
Jun. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentrations | During the six months ended June 30, 2019, two customers accounted for 15% and 12% respectively, of the Company’s total net sales. During the six months ended June 30, 2018, two customers accounted for 25% and 24%, respectively, of the Company’s total net sales. At June 30, 2019, two customers represented 18% and 16% respectively, of the Company’s total accounts receivable. At December 31, 2018, two customers represented 31% and 16% of the Company’s total accounts receivable. Although there are a number of customers that the Company sells to, the loss of an additional significant customer could adversely affect operating results. Additionally, the loss of an additional major retailer from the Company’s retail network could further adversely affect operating results. |
Share Repurchases
Share Repurchases | 6 Months Ended |
Jun. 30, 2019 | |
Share Repurchases | |
Share Repurchases | On April 5, 2018, the Board of Directors authorized the repurchase of up to $3,000,000 of the Company’s common stock on or before March 31, 2020. The plan allows the repurchases to be made in open market or privately negotiated transactions. The plan does not obligate the Company to repurchase any particular number of shares, and may be suspended at any time at the Company’s discretion. During the six months ended June 30, 2019, there was no share repurchase activity under the plan. During the six months ended June 30, 2018 the Company repurchased and retired approximately 103,000 shares, at a total cost of $187,000. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | On July 11, 2019, the Company brought suit against News Corporation, News America Marketing FSI L.L.C., and News America Marketing In-Store Services L.L.C. (collectively, “News America”) in the U.S. District Court in Minnesota, alleging violations of federal and state antitrust and tortious interference laws by News America. The complaint alleges that News America has expanded and maintained its monopoly power through various wrongful acts designed to harm the Company, its last significant competitor, in the third-party in-store advertising and promotion products and services market. The suit seeks, among other relief, an injunction sufficient to prevent further antitrust injury and an award of treble damages to be determined at trial for the harm caused to the Company. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business . |
Basis of Presentation | Basis of Presentation . |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements . “Leases |
Inventories | Inventories . June 30, December 31, 2019 2018 Raw materials $ 64,000 $ 80,000 Work-in-process 35,000 12,000 Finished goods 262,000 261,000 $ 361,000 $ 353,000 |
Property and Equipment | Property and Equipment . June 30, December 31, 2019 2018 Property and Equipment: Production tooling, machinery and equipment $ 3,728,000 $ 3,694,000 Office furniture and fixtures 385,000 385,000 Computer equipment and software 4,187,000 2,743,000 Leasehold improvements 577,000 577,000 Construction in-progress — 1,179,000 8,877,000 8,578,000 Accumulated depreciation and amortization (5,751,000 ) (5,310,000 ) Net Property and Equipment $ 3,126,000 $ 3,268,000 Depreciation expense was approximately $259,000 and $440,000 in the three and six months ended June 30, 2019, respectively, and was $181,000 and $367,000 in the three and six months ended June 30, 2018, respectively. |
Stock-Based Compensation | Stock-Based Compensation During the six months ended June 30, 2019 and 2018, no stock awards were granted by the Company, except for those awarded to non-employee members of the Board of Directors. During the six months ended June 30, 2018, the Company issued 178,000 restricted stock units under the 2013 Omnibus Stock and Incentive Plan (the “2013 Plan”). The shares underlying the awards were assigned a value of $1.77 per share, which was the closing price of our common stock on the date of grant and are scheduled to vest over three years. The Company estimated the fair value of stock-based awards granted during the six months ended June 30, 2019 under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 year, expected volatility of 57%, dividend yield of 0% and risk-free interest rate of 2.60%. During June 2019, non-employee members of the Board of Directors received restricted stock grants totaling 70,755 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”). The shares underlying the awards were assigned a value of $1.06 per share, which was the closing price of our common stock on the date of grants, for a total value of $75,000, and are scheduled to vest the day immediately preceding the date of the 2020 annual shareholder meeting. During July 2018, non-employee members of the Board of Directors received restricted stock grants totaling 46,152 shares pursuant to the 2018 Plan. The shares underlying the awards were assigned a value of $1.95 per share, which was the closing price of our common stock on the date of grants, for a total value of $90,000, which vested the day immediately preceding the date of our 2019 annual shareholder meeting. During June 2019, the Company issued 8,370 shares of common stock in settlement of $9,000 of total deferred fees due to a non-employee director’s departure from the board. Our non-employee directors are eligible to participate in our director deferred compensation plan, which allows a director to make voluntary deferrals of up to 100% of their annual cash retainers relating to board or committee chair service. Total stock-based compensation expense recorded for the three and six months ended June 30, 2019 was $139,000 and $277,000, respectively, and for the three and six months ended June 30, 2018 was $82,000 and $149,000, respectively. |
Net Income (Loss) per Share | Net Income (Loss) per Share . Due to the net loss incurred during the three and six months ended June 30, 2019 all outstanding stock options were anti-dilutive for that period. Options to purchase approximately 245,000 shares of common stock with a weighted average exercise price of $2.71 were outstanding at June 30, 2018 and were not included in the computation of common stock equivalents for the three and six months ended June 30, 2018 because their exercise prices were higher than the average fair market value of the common shares during the reporting period. Weighted average common shares outstanding for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended June 30 June 30 2019 2018 2019 2018 Denominator for basic net income (loss) per share - weighted average shares 11,888,000 11,804,000 11,872,000 11,812,000 Effect of dilutive securities: Stock options and restricted stock units — 272,000 — 228,000 Denominator for diluted net income (loss) per share - weighted average shares 11,888,000 12,076,000 11,872,000 12,040,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Schedule Of Inventories | June 30, December 31, 2019 2018 Raw materials $ 64,000 $ 80,000 Work-in-process 35,000 12,000 Finished goods 262,000 261,000 $ 361,000 $ 353,000 |
Schedule of Property and Equipment | June 30, December 31, 2019 2018 Property and Equipment: Production tooling, machinery and equipment $ 3,728,000 $ 3,694,000 Office furniture and fixtures 385,000 385,000 Computer equipment and software 4,187,000 2,743,000 Leasehold improvements 577,000 577,000 Construction in-progress — 1,179,000 8,877,000 8,578,000 Accumulated depreciation and amortization (5,751,000 ) (5,310,000 ) Net Property and Equipment $ 3,126,000 $ 3,268,000 |
Schedule Of Weighted Average Common Shares Outstanding | Three Months Ended Six Months Ended June 30 June 30 2019 2018 2019 2018 Denominator for basic net income (loss) per share - weighted average shares 11,888,000 11,804,000 11,872,000 11,812,000 Effect of dilutive securities: Stock options and restricted stock units — 272,000 — 228,000 Denominator for diluted net income (loss) per share - weighted average shares 11,888,000 12,076,000 11,872,000 12,040,000 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Revenue Recognition [Abstract] | |
Disaggregation of Revenue | Three months ended June 30, 2019 Six months ended June 30, 2019 Services Revenues Products Revenue Total Revenue Services Revenues Products Revenue Total Revenue Timing of revenue recognition: Products and services transferred over time $ 4,144,000 $ - $ 4,144,000 $ 7,699,000 $ - $ 7,699,000 Products and services transferred at a point in time 1,291,000 407,000 1,698,000 2,375,000 908,000 3,283,000 Total $ 5,435,000 $ 407,000 $ 5,842,000 $ 10,074,000 $ 908,000 $ 10,982,000 Three months ended June 30, 2018 Six months ended June 30, 2018 Services Revenues Products Revenue Total Revenue Services Revenues Products Revenue Total Revenue Timing of revenue recognition: Products and services transferred over time $ 7,868,000 $ - $ 7,868,000 $ 14,894,000 $ - $ 14,894,000 Products and services transferred at a point in time - 377,000 377,000 - 770,000 770,000 Total $ 7,868,000 $ 377,000 $ 8,245,000 $ 14,894,000 $ 770,000 $ 15,664,000 |
Schedule of Changes in Deferred Revenue | Balance at December 31, 2018 $ 302,000 Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied (301,000 ) Cash received in advance and not recognized as revenue 435,000 Balance at June 30, 2019 $ 436,000 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Components of our operating leases | Three months ended June 30, 2019 Six months ended June 30, 2019 Corporate Additional Operating Corporate Additional Operating Headquarters Office Space Leases Headquarters Office Space Leases Operating lease cost $ 38,000 $ - $ 38,000 $ 75,000 $ - $ 75,000 Variable lease cost 26,000 - 26,000 54,000 - 54,000 Short-term lease cost - 9,000 9,000 - 19,000 19,000 Total $ 64,000 $ 9,000 $ 73,000 $ 129,000 $ 19,000 $ 148,000 |
Maturities of our lease liabilities | Maturity of Lease Liabilities Operating Leases 2019 $ 108,000 2020 222,000 2021 57,000 Total lease payments $ 387,000 Less: Interest 20,000 Present value of lease liabilities $ 367,000 2019 $ 217,000 2020 $ 222,000 2021 $ 57,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Inventories | ||
Raw materials | $ 64,000 | $ 80,000 |
Work-in-process | 35,000 | 12,000 |
Finished goods | 262,000 | 261,000 |
Inventories | $ 361,000 | $ 353,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Gross property and equipment | $ 8,877,000 | $ 8,578,000 |
Accumulated depreciation and amortization | (5,751,000) | (5,310,000) |
Net property and equipment | 3,126,000 | 3,268,000 |
Production tooling, machinery and equipment [Member] | ||
Gross property and equipment | 3,728,000 | 3,694,000 |
Office furniture and fixtures [Member] | ||
Gross property and equipment | 385,000 | 385,000 |
Computer equipment and software [Member] | ||
Gross property and equipment | 4,187,000 | 2,743,000 |
Leasehold improvements [Member] | ||
Gross property and equipment | 577,000 | 577,000 |
Construction in-progress [Member] | ||
Gross property and equipment | $ 0 | $ 1,179,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Accounting Policies [Abstract] | ||||
Denominator for basic net income (loss) per share - weighted average shares | 11,888,000 | 11,804,000 | 11,872,000 | 11,812,000 |
Effect of dilutive securities: Stock options and restricted stock units and awards | $ 0 | $ 272,000 | $ 0 | $ 228,000 |
Denominator for diluted net income (loss) per share - weighted average shares | 11,888,000 | 12,076,000 | 11,872,000 | 12,040,000 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Accounting Policies [Abstract] | ||||
Depreciation expense | $ 259,000 | $ 181,000 | $ 440,000 | $ 367,000 |
Restricted stock units (in shares) | 178,000 | |||
Weighted average exercise price (in dollars per share) | $ 1.77 | |||
Vesting period | 3 years | |||
Stock-based awards granted, estimated life | 1 year | |||
Stock-based awards granted, expected volatility | 57.00% | |||
Stock-based awards granted, dividend yield | 0.00% | |||
Stock-based awards granted, risk-free interest rate | 2.60% | |||
Stock-based compensation expense | $ 139,000 | $ 82,000 | $ 277,000 | $ 149,000 |
Shares excluded from the computation of earnings per share | 245,000 | 245,000 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Services revenues | $ 5,435,000 | $ 7,868,000 | $ 10,074,000 | $ 14,894,000 |
Products revenues | 407,000 | 377,000 | 908,000 | 770,000 |
Total Net Sales | 5,842,000 | 8,245,000 | 10,982,000 | 15,664,000 |
Products and services transferred over time | ||||
Services revenues | 4,144,000 | 7,868,000 | 7,699,000 | 14,894,000 |
Products revenues | 0 | 0 | 0 | 0 |
Total Net Sales | 4,144,000 | 7,868,000 | 7,699,000 | 14,894,000 |
Products and services transferred at a point in time | ||||
Services revenues | 1,291,000 | 0 | 2,375,000 | 0 |
Products revenues | 407,000 | 377,000 | 908,000 | 770,000 |
Total Net Sales | $ 1,698,000 | $ 377,000 | $ 3,283,000 | $ 770,000 |
Revenue Recognition (Details 1)
Revenue Recognition (Details 1) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Revenue Recognition [Abstract] | |
Deferred revenue, beginning | $ 302,000 |
Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied | (301,000) |
Cash received in advance and not recognized as revenue | 435,000 |
Deferred revenue, ending | $ 436,000 |
Revenue Recognition (Details Na
Revenue Recognition (Details Narrative) | Jun. 30, 2019USD ($) |
2019 | |
Performance obligation revenue to be recognized | $ 775,000 |
2020 | |
Performance obligation revenue to be recognized | $ 2,000,000 |
Selling Arrangement (Details Na
Selling Arrangement (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Selling Arrangement | ||||
Payments for arrangements to sell signs | $ 4,000,000 | |||
Term of arrangement | 10 years | |||
Amortization expense | $ 150,000 | $ 100,000 | $ 300,000 | $ 200,000 |
2019 | 600,000 | 600,000 | ||
2020 | 262,000 | 262,000 | ||
2021 | $ 55,000 | $ 55,000 |
Leases (Details)
Leases (Details) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Corporate Headquarters | ||
Operating lease cost | $ 38,000 | $ 75,000 |
Variable lease cost | 26,000 | 54,000 |
Short-term lease cost | 0 | 0 |
Total | 64,000 | 129,000 |
Additional Office Space | ||
Operating lease cost | 0 | 0 |
Variable lease cost | 0 | 0 |
Short-term lease cost | 9,000 | 19,000 |
Total | 9,000 | 19,000 |
Operating Leases | ||
Operating lease cost | 38,000 | 75,000 |
Variable lease cost | 26,000 | 54,000 |
Short-term lease cost | 9,000 | 19,000 |
Total | $ 73,000 | $ 148,000 |
Leases (Details 1)
Leases (Details 1) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
2019 | $ 108,000 | $ 217,000 |
2020 | 222,000 | 222,000 |
2021 | 57,000 | $ 57,000 |
Total lease payments | 387,000 | |
Less: Interest | 20,000 | |
Present value of lease liabilities | $ 367,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |||||
Income tax expense (benefit) | $ (165,000) | $ 76,000 | $ (369,000) | $ 149,000 | |
Income tax rate, percentage | 25.30% | 29.20% | 18.90% | 30.00% | |
Deferred tax asset valuation allowance | $ 99,000 | $ 99,000 | $ 79,000 | ||
Unrecognized tax benefits | $ 628,000 | $ 628,000 | $ 613,000 |
Concentrations (Details Narrati
Concentrations (Details Narrative) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Sales Revenue Net [Member] | Customer One [Member] | |||
Customer's concentration risk percentage | 15.00% | 25.00% | |
Sales Revenue Net [Member] | Customer Two [Member] | |||
Customer's concentration risk percentage | 12.00% | 24.00% | |
Accounts Receivable [Member] | Customer One [Member] | |||
Customer's concentration risk percentage | 18.00% | 31.00% | |
Accounts Receivable [Member] | Customer Two [Member] | |||
Customer's concentration risk percentage | 16.00% | 16.00% |