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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2013
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies. Description of Business. Insignia Systems, Inc. (the “Company”) markets in-store advertising 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 advertising program, thermal sign card supplies for the Company’s SIGNright and Impulse systems, Stylus software and laser printable cardstock and label supplies. Revenue Recognition. Revenues are recognized by the Company when persuasive evidence of an arrangement exists, shipment has occurred, the price is fixed, and collectability is reasonably assured. The Company recognizes revenue from Insignia POPSigns ratably over the period of service. The Company recognizes revenue related to equipment, software and sign card sales at the time the products are shipped to customers. Revenue associated with maintenance agreements is recognized ratably over the life of the contract. Revenue that has been billed and not yet earned is reflected as deferred revenue on the balance sheet. Cash and Cash Equivalents. The Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. At December 31, 2013, $4,580,000 was invested in an overnight repurchase account and $17,000,000 was invested in certificates of deposit. At December 31, 2012, $6,831,000 was invested in an overnight repurchase account and $13,000,000 was invested in certificates of deposit. The balances in cash accounts, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Amounts held in checking accounts during the years ended December 31, 2013 and 2012, were fully insured under the Federal Deposit Insurance Corporation (“FDIC”). Amounts held in repurchase accounts during the years ended December 31, 2013 and 2012, were secured by Federal Home Loan securities and were fully insured by the FDIC. Bank certificates of deposit at December 31, 2013 and 2012, were held at various institutions with amounts at each institution at or below the $250,000 insured limit of the FDIC. Fair Value of Financial Instruments. The financial statements include the following financial instruments: cash and cash equivalents, accounts receivable, and accounts payable. The carrying value of these financial instruments approximate fair value because of the short-term nature of these instruments. Accounts Receivable. The majority of the Company’s accounts receivable is due from companies in the consumer packaged goods industry. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within 30-90 days and are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Changes in the Company’s allowance for doubtful accounts are as follows:
December 31 |  | 2013 |  | 2012 |
Beginning balance |  | $ | 22,000 |  | $ | 12,000 |
Bad debt provision |  | 101,000 |  | 11,000 |
Accounts written-off |  | (106,000 | ) | (1,000 | )
Ending balance |  | $ | 17,000 |  | $ | 22,000 |
Inventories. Inventories are primarily comprised of parts and supplies for the Impulse machine, sign cards, and roll stock. Inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method, and consists of the following:
December 31 |  | 2013 |  | 2012 |
Raw materials |  | $ | 71,000 |  | $ | 72,000 |
Work-in-process |  | 12,000 |  | 3,000 |
Finished goods |  | 224,000 |  | 235,000 |
|  | $ | 307,000 |  | $ | 310,000 |
Property and Equipment. Property and equipment is recorded at cost. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense when incurred. Depreciation is provided in amounts sufficient to relate the cost of assets to operations over their estimated useful lives. The straight-line method of depreciation is used for financial reporting purposes and accelerated methods are used for tax purposes. Estimated useful lives of the assets are as follows:
Production tooling, machinery and equipment |  | 1 - 6 years |
Office furniture and fixtures |  | 3 years |
Computer equipment and software |  | 3 years |
Web development |  | 3 years |
Leasehold improvements are amortized over the shorter of the remaining term of the lease or estimated life of the asset. Impairment of Long-Lived Assets. The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Impaired assets are then recorded at their estimated fair market value. There were no impairment losses during the years ended December 31, 2013 and 2012. Income Taxes. Income taxes are accounted for under the liability method. Deferred income taxes are provided for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment. It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Stock-Based Compensation. The Company measures and recognizes compensation expense for all stock-based payments at fair value. We use the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The expected lives of the options and employee stock purchase plan rights are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected term at grant date. Volatility is based on historical and expected future volatility of the Company’s stock. The Company has not historically issued any dividends beyond the one-time dividend in 2011 and does not expect to in the future. Forfeitures are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. If factors change and we employ different assumptions in the valuation of grants in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current periods. Advertising Costs. Advertising costs are charged to operations as incurred. Advertising expenses were approximately $14,000 and $34,000 during the years ended December 31, 2013 and 2012, respectively. 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 and warrants. Diluted net income (loss) per share gives effect to all diluted potential common shares outstanding during the year. Options to purchase approximately 901,000 shares of common stock with a weighted average exercise price of $3.60 were outstanding at December 31, 2013 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 year. Due to the net loss incurred during the year ended December 31, 2012, all common stock options were anti-dilutive. Weighted average common share outstanding for the years ended December 31, 2013 and 2012 were as follows:
Year ended December 31 |  | 2013 |  | 2012 |
Denominator for basic net income (loss) per share - weighted average shares |  | 13,324,000 |  | 13,605,000 |
Effect of dilutive securities: |  |  |  |  |
Stock options |  | 98,000 |  | — |
Denominator for diluted net income (loss) per share - weighted average shares |  | 13,422,000 |  | 13,605,000 |
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

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- Definition The entire disclosure for the business description and accounting policies concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Accounting policies describe all significant accounting policies of the reporting entity. + References No definition available. + Details
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