Insignia(LDWY) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed financial statements, highlighting a shift to profitability in Q1 2022 despite a substantial decrease in cash Condensed Balance Sheets Total assets decreased to $8,880 thousand from $10,650 thousand, primarily due to reduced cash, while equity slightly increased Condensed Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $396 | $3,766 | | Accounts receivable, net | $7,465 | $5,247 | | Total Current Assets | $8,609 | $10,354 | | Total Assets | $8,880 | $10,650 | | Liabilities & Equity | | | | Total Current Liabilities | $4,758 | $6,638 | | Total Liabilities | $5,567 | $7,457 | | Total Shareholders' Equity | $3,313 | $3,193 | | Total Liabilities and Shareholders' Equity | $8,880 | $10,650 | Condensed Statements of Operations The company achieved a net income of $62 thousand in Q1 2022, a significant turnaround from a $737 thousand net loss in Q1 2021 Condensed Statement of Operations (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net services revenues | $6,148 | $5,386 | | Gross Profit | $1,280 | $929 | | Total Operating Expenses | $1,207 | $2,688 | | Operating Income (Loss) | $73 | ($1,759) | | Net Income (Loss) | $62 | ($737) | | Basic EPS | $0.03 | ($0.42) | | Diluted EPS | $0.03 | ($0.42) | Condensed Statements of Shareholders' Equity Shareholders' equity increased to $3,313 thousand at March 31, 2022, driven by net income and stock-based compensation - Total Shareholders' Equity increased to $3,313 thousand at March 31, 2022, from $3,193 thousand at the end of 2021, driven by net income and stock-based compensation[19] Condensed Statements of Cash Flows Cash used in operating activities totaled $3,380 thousand in Q1 2022, primarily due to a $2,206 thousand increase in accounts receivable Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,380) | ($303) | | Net cash used in investing activities | ($18) | ($13) | | Net cash provided by financing activities | $28 | $26 | | Decrease in cash and cash equivalents | ($3,370) | ($290) | - The significant cash used in operations was largely due to a $2,206 thousand increase in accounts receivable, reflecting higher sales in Q1 2022 compared to Q4 2021[22][82] Notes to Financial Statements Notes detail accounting policies, revenue recognition shifts, high customer concentration, and ongoing legal proceedings against News America Disaggregation of Revenue by Timing (in thousands) | Timing of Revenue Recognition | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Services transferred over time | $456 | $2,025 | | Services transferred at a point in time | $5,692 | $3,361 | | Total | $6,148 | $5,386 | - In Q1 2022, three customers accounted for 27%, 23%, and 11% of total net sales, respectively. At March 31, 2022, three customers represented 23%, 19%, and 17% of total accounts receivable[55] - The company is involved in an antitrust lawsuit against News America, filed in July 2019. The outcome and potential liability are currently indeterminable[54][57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift to in-store solutions, increased net sales, reduced operating expenses, and significant cash usage in Q1 2022 Company Overview Insignia has strategically shifted to in-store solutions, comprising over 95% of Q1 2022 revenue, alongside significant cost reductions and exploration of strategic alternatives - The company has strategically shifted its focus to in-store solutions, with recently developed offerings now comprising over 95% of revenue for the three months ended March 31, 2022[63] - Significant cost-cutting measures were implemented, including outsourcing printing/IT, relocating headquarters to a smaller space, and restructuring operations in December 2021[64] - The company is actively exploring strategic alternatives, which could include an acquisition, merger, or other business combination, to maximize shareholder value[65] Results of Operations Net sales increased by 14.1% to $6,148 thousand, driven by non-POPS revenue growth and a 55.1% reduction in operating expenses, leading to profitability Comparison of Operations for the Three Months Ended March 31 | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $6,148,000 | $5,386,000 | +14.1% | | Gross Profit | $1,280,000 | $929,000 | +37.8% | | Gross Margin | 20.8% | 17.2% | +3.6pp | | Selling Expenses | $342,000 | $516,000 | -33.7% | | G&A Expenses | $606,000 | $1,937,000 | -68.7% | | Operating Income (Loss) | $73,000 | ($1,759,000) | N/A | - The increase in net sales was due to a 48.0% increase in non-POPS revenue, partially offset by an 83.0% decrease in POPS solutions revenue due to competitive pressures[70] - The significant decrease in General and Administrative expenses was primarily due to lower expenses from the litigation with News America[74] Liquidity and Capital Resources Cash and cash equivalents decreased significantly by $3,370 thousand in Q1 2022, primarily due to cash used in operations driven by increased accounts receivable - Cash and cash equivalents (including restricted cash) decreased by $3,370 thousand during the quarter, from $3,851 thousand at year-end 2021 to $481 thousand at March 31, 2022[81] - Net cash used in operating activities was $3,380 thousand, largely due to a $2,206 thousand increase in accounts receivable resulting from higher sales[82] - While management believes cash is adequate for the next 12 months, they note uncertainty regarding the ability to achieve and maintain profitability and that alternative financing may be required in the longer term[84] Quantitative and Qualitative Disclosures about Market Risk This section is not applicable to the company - The company states that this item is not applicable[90] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - Based on an evaluation as of the end of the reporting period, the company's principal executive officer and principal accounting officer concluded that disclosure controls and procedures were effective[92] - There were no changes in the company's internal control over financial reporting during the first quarter of 2022 that have materially affected, or are reasonably likely to materially affect, these controls[93] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 6 of the financial statements, detailing the ongoing antitrust lawsuit against News Corporation - The company's legal proceedings are described in Note 6 of the financial statements, referencing the antitrust lawsuit against News America[95][54] Risk Factors There have been no material changes to the company's risk factors from those disclosed in its 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's 2021 Annual Report on Form 10-K[98] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[99] Defaults upon Senior Securities The company reported no defaults upon senior securities - None[100] Mine Safety Disclosures This section is not applicable to the company - Not applicable[101] Other Information The company reported no other information required to be disclosed in this section - None[102] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - Lists exhibits filed with the report, including officer certifications (31.1, 31.2, 32) and XBRL data (101, 104)[104]