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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Description of Business. Insignia Systems, Inc. (the “Company”) is a leading provider of in-store and digital advertising solutions to consumer-packaged goods (“CPG”) manufacturers, retailers, shopper marketing agencies and brokerages. The Company operates in a single reportable segment. The Company’s leadership and employees have extensive industry knowledge with direct experience in both CPG manufacturers and retailers. The Company provides marketing solutions to CPG manufacturers spanning from some of the largest multinationals to new and emerging brands.

Basis of Presentation. The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. They do not include all information and footnotes required by U.S. GAAP for complete financial statements. However, except as described herein, there has been no material change in the information disclosed in the notes to financial statements included in the Company’s financial statements as of and for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

Inventories. Inventories are primarily comprised of sign cards and hardware. Inventory is valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method, and consisted of the following as of the dates indicated:

		June 30,				December 31,
		2020				2019
Raw materials		$	43,000			$	47,000
Work-in-process			12,000				16,000
Finished goods			257,000				259,000
		$	312,000			$	322,000

Property and Equipment. Property and equipment consisted of the following as of the dates indicated:

		June 30,				December 31,
		2020				2019
Property and Equipment:
Production tooling, machinery and equipment		$	3,685,000			$	3,685,000
Office furniture and fixtures			425,000				393,000
Computer equipment and software			1,438,000				1,426,000
			5,548,000				5,504,000
Accumulated depreciation and amortization			(5,125,000	)			(4,955,000	)
Net Property and Equipment		$	423,000			$	549,000

Depreciation expense was approximately $85,000 and $170,000 in the three and six months ended June 30, 2020, respectively, and was $259,000 and $440,000 in the three and six months ended June 30, 2019, respectively.

Stock-Based Compensation. The Company measures and recognizes compensation expense for all stock-based payments at fair value. Restricted stock units and awards are valued at the closing market price of the Company’s stock as of the date of the grant. The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights. The determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s 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.

During the six-month periods ended June 30, 2020 and 2019 no equity awards were issued by the Company. During the six months ended June 30, 2020 no restricted stock units were issued by the Company.

In 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 the Company’s common stock on the date of grant, for a total grant date value of $75,000. The awards vested in full on the day immediately preceding the date of the 2020 annual shareholder meeting, July 29, 2020.

In June 2019, the Company also 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. The Company’s non-employee directors are eligible to participate in a 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.

The Company estimated the fair value of stock-based awards granted during the six months ended June 30, 2020 under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 year, expected volatility of 58.5%, dividend yield of 0% and risk-free interest rate of 1.56%.

Total stock-based compensation expense recorded for the three and six months ended June 30, 2020 was $59,000 and $108,000, respectively, and for the three and six months ended June 30, 2019 was $139,000 and $277,000, respectively.

Net Loss per Share. Basic net loss per share is computed by dividing net loss by the weighted average shares outstanding and excludes any potential dilutive effects of stock options and restricted stock units and awards. Diluted net loss per share gives effect to all diluted potential common shares outstanding during the period.

Due to the net loss incurred during the three and six months ended June 30, 2020 and 2019 all outstanding stock options were anti-dilutive for those periods.

Weighted average common shares outstanding for the three and six months ended June 30, 2020 and 2019 were as follows:

		Three Months Ended								Six Months Ended
		June 30								June 30
		2020				2019				2020				2019
Denominator for basic net loss per share - weighted average shares			12,078,000				11,888,000				12,072,000				11,872,000
Effect of dilutive securities:
Stock options and restricted stock units			—				—				—				—
Denominator for diluted net loss per share - weighted average shares			12,078,000				11,888,000				12,072,000				11,872,000