Insignia(LDWY) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's condensed financial statements and management's discussion and analysis for the period ended September 30, 2022 Item 1. Financial Statements The financial statements for the period ended September 30, 2022, show significant financial improvement, primarily driven by a $12 million litigation settlement gain Condensed Balance Sheets The balance sheet as of September 30, 2022, shows significant strengthening, with total assets nearly doubling to $20.1 million and shareholders' equity increasing to $14.1 million Condensed Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $14,168 | $3,766 | | Total Current Assets | $19,857 | $10,354 | | Total Assets | $20,067 | $10,650 | | Liabilities & Equity | | | | Total Current Liabilities | $5,857 | $6,638 | | Total Liabilities | $5,965 | $7,457 | | Accumulated deficit | $(2,342) | $(13,121) | | Total Shareholders' Equity | $14,102 | $3,193 | Condensed Statements of Operations The company achieved significant profitability in Q3 and 9M 2022, primarily due to a $12 million litigation settlement gain, reversing prior-year losses - A net gain from a litigation settlement of $12 million was recognized in the third quarter of 2022, which was the primary driver of profitability[14] Statements of Operations Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net services revenues | $4,869 | $3,493 | $14,271 | $14,975 | | Gross Profit | $838 | $545 | $2,534 | $2,682 | | Operating Income (Loss) | $11,539 | $(925) | $10,511 | $(3,537) | | Net Income (Loss) | $11,801 | $(921) | $10,779 | $(2,552) | | Diluted EPS | $6.57 | $(0.52) | $6.00 | $(1.45) | Condensed Statements of Shareholders' Equity Shareholders' equity significantly increased to $14.1 million by September 30, 2022, driven by $10.8 million in net income, reducing the accumulated deficit - The accumulated deficit was reduced from $(13.1 million) at the beginning of the year to $(2.3 million) at the end of Q3 2022, primarily due to the net income of $11.8 million in the third quarter[16] Condensed Statements of Cash Flows Operating activities generated $10.4 million in cash for the nine months ended September 30, 2022, a significant reversal from the prior year, driven by net income Cash Flow Summary (in thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $10,388 | $(3,323) | | Net cash used in investing activities | $(25) | $(65) | | Net cash provided by (used in) financing activities | $39 | $(6) | | Increase (decrease) in cash | $10,402 | $(3,394) | Notes to Financial Statements Key notes detail the $12 million litigation settlement gain, customer concentration, a shift in revenue recognition, and an income tax benefit - On July 1, 2022, the company entered into a $20 million settlement agreement with News America, resulting in net proceeds of $12 million before income tax, which was recorded as a gain[57][62] - For the nine months ended September 30, 2022, three customers accounted for 19%, 12%, and 11% of the company's total net sales, indicating significant customer concentration[62] - The company recorded a decrease of approximately $679 thousand in unrecognized tax benefits related to state income tax exposure in Q3 2022, which reduced accrued income taxes and increased the income tax benefit[54] Disaggregation of Revenue (in thousands) | Timing of Revenue Recognition | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | | Services transferred over time | $1,355 | $5,366 | | Services transferred at a point in time | $12,916 | $9,609 | | Total | $14,271 | $14,975 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved Q3 2022 results to a $12 million litigation gain, with non-POPS solutions driving revenue growth and a strong cash position supporting future operations - The company's primary focus is now on in-store solutions, having exited digital solutions, with over 90% of revenue in the first nine months of 2022 coming from recently developed non-POPS solutions[63] - A $20 million settlement agreement with News America resulted in net proceeds of $12 million, which was recorded as a gain in Q3 2022[65][81] - The company is exploring strategic options to maximize shareholder value, which could include an acquisition, merger, or other strategic transaction[66] Revenue Change by Solution Type | Period | Non-POPS Revenue Change | POPS Revenue Change | Total Net Sales Change | | :--- | :--- | :--- | :--- | | Q3 2022 vs Q3 2021 | +100.7% | -81.4% | +39.4% | | 9M 2022 vs 9M 2021 | +22.0% | -82.3% | -4.7% | - General and administrative expenses for the nine months ended September 30, 2022, decreased by 43.0% to $2.3 million, primarily due to lower litigation expenses following the settlement with News America[79] - The company's cash and cash equivalents plus restricted cash increased to $14.3 million at September 30, 2022, which management believes is sufficient to fund operations for at least the next twelve months[94] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable to the company for this reporting period - Not applicable[99] Item 4. Controls and Procedures The company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[101] - No changes occurred in the company's internal control over financial reporting during Q3 2022 that have materially affected, or are reasonably likely to materially affect, these controls[104] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section refers to Note 6 of the Notes to Condensed Financial Statements, detailing the settlement of the lawsuit against News America - Information regarding legal proceedings is contained in Note 6 of the Notes to Condensed Financial Statements[105] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes in risk factors from those disclosed in the 2021 Annual Report on Form 10-K[106] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[107] Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during the reporting period - None[108] Item 4. Mine Safety Disclosures This section is not applicable to the company - Not applicable[109] Item 5. Other Information There is no other information to report for this period - None[110] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the News America settlement and various certifications - Key exhibits filed include the Confidential Settlement Agreement with News America dated July 1, 2022, and certifications by the Principal Executive, Financial, and Accounting Officers[112]