Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Summary of Significant Accounting Policies

Inventories

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,
	2021		2020
Raw materials	$	-	$	-
Work-in-process		3,000		2,000
Finished goods		88,000		83,000
	$	91,000	$	85,000

Property and Equipment

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

	June 30,			December 31,
	2021			2020
Property and Equipment:
Production tooling, machinery and equipment	$	27,000		$	2,349,000
Office furniture and fixtures		88,000			425,000
Computer equipment and software		714,000			1,447,000
Construction in-progress		8,000			17,000
		837,000			4,238,000
Accumulated depreciation and amortization		(756,000	)		(4,163,000	)
Net Property and Equipment	$	81,000		$	75,000

Depreciation expense was approximately $11,000 and $32,000 in the three and six months ended June 30, 2021, respectively, and was $85,000 and $170,000 in the three and six months ended June 30, 2020, respectively.

Sales Taxes

Stock-Based Compensation

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, 2021 and 2020 no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors.

In June 2021, non-employee members of the Board of Directors received restricted stock grants totaling 5,514 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”). The shares underlying the awards were assigned a value of $8.16 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 $45,000, the shares are schedule to vest the day immediately preceding the date of the next annual shareholder meeting. The awards granted to directors in December 2020 vested in full on the day immediately preceding the date of the 2021 annual shareholder meeting, June 9, 2021.

The Company estimated the fair value of stock-based awards granted during the six months ended June 30, 2021 under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 year, expected volatility of 142.2%, dividend yield of 0% and risk-free interest rate of 0.1%.

Total stock-based compensation expense recorded for the three and six months ended June 30, 2021 was $86,000 and $141,000, respectively, and for the three and six months ended June 30, 2020 was $59,000 and $108,000, respectively.

Net Income (Loss) per Share

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, 2021 and 2020 all outstanding stock options were anti-dilutive for those periods.

Weighted average common shares outstanding for the three and six months ended June 30, 2021 and 2020 were as follows:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2021		2020		2021		2020
Denominator for basic net loss per share - weighted average shares		1,755,000		1,725,000		1,753,000		1,725,000
Effect of dilutive securities:
Stock options and restricted stock units		-		-		-		-
Denominator for diluted net loss per share - weighted average shares		1,755,000		1,725,000		1,753,000		1,725,000

Description of Business

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.

Reverse Stock Split

Reverse Stock Split. Effective December 31, 2020, the Company implemented a seven-for-one reverse stock split. All share and per-share information, including for stock options and restricted stock units, in the financial statements gives retroactive effect to the reverse stock split for all periods presented including the value of Common Stock and Additional Paid-In Capital as of December 31, 2020.

Sale of our Custom Print Business

Sale of Custom Print Business. In August 2020, the Company sold its custom print business to an existing strategic partner. This divestiture allowed the Company to focus on its core business, selling product solutions to CPGs. The custom print business was not material to operations as a whole and did not represent a strategic shift and therefore is not presented as a discontinued operation. The sale price was $300,000 resulting in a gain on the sale of $195,000. On the date of the sale, the Company received $200,000 of cash and recorded a short-term receivable of $75,000 and a long-term receivable of $25,000.

Basis of Presentation

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, 2020 included in the Company’s Annual Report on Form 10-K/A. 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.

Restricted Cash

Restricted Cash. The Company’s restricted cash consists of cash the Company is contractually obligated to maintain in accordance with the terms of its lease signed in April 2021 for headquarters space in Minneapolis. See Note 9 for further discussion.

Cash and Cash Equivalents and Restricted Cash

Cash and Cash Equivalents and Restricted Cash. The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the statement of cash flows:

	June 30,		December 31,
	2021
Cash and cash equivalents	$	5,879,000	$	7,128,000
Restricted cash		85,000
Total cash, cash equivalents and retricted cash	$	5,964,000	$	7,128,000