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10-K - FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011 - INSIGNIA SYSTEMS INC/MNinsignia116066_10k.htm
v2.4.0.6
Shareholders' Equity
12 Months Ended
Dec. 31, 2011
Shareholders' Equity [Abstract]  
Shareholders' Equity

5.

Shareholders' Equity.

 

Warrants. On July 2, 2007, the Company issued a warrant to purchase 800,000 shares of the Company's common stock to Valassis Sales and Marketing Services, Inc. ("Valassis") at a price of $4.04 for a term of five years. On September 1, 2010, the entire warrant was exercised using the cashless exercise alternative provided for in the warrant and 281,511 shares of common stock were issued to Valassis.

 

 

 

Stock-Based Compensation. The Company's stock-based compensation plans are administered by the Compensation Committee of the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

The following table summarizes the stock-based compensation expense which was recognized in the Company's Statements of Operations for the years ended December 31, 2011, 2010 and 2009:

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31

 

2011

 

2010

 

2009

 

Cost of sales

 

$

135,000

 

$

131,000

 

$

103,000

 

Selling

 

 

190,000

 

 

180,000

 

 

120,000

 

Marketing

 

 

90,000

 

 

88,000

 

 

63,000

 

General and administrative

 

 

306,000

 

 

312,000

 

 

251,000

 

 

 

$

721,000

 

$

711,000

 

$

537,000

 

The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards with the following weighted average assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

Stock Options:

 

 

 

 

 

 

 

 

 

 

Expected life (years)

 

 

4.51

 

 

3.54

 

 

3.57

 

Expected volatility

 

 

70

%

 

55

%

 

77

%

Dividend yield

 

 

0

%

 

0

%

 

0

%

Risk-free interest rate

 

 

1.60

%

 

1.28

%

 

1.31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

2009

 

Stock Purchase Plan Options:

 

 

 

 

 

 

 

 

 

 

Expected life (years)

 

 

1.0

 

 

1.0

 

 

1.0

 

Expected volatility

 

 

30

%

 

55

%

 

90

%

Dividend yield

 

 

0

%

 

0

%

 

0

%

Risk-free interest rate

 

 

0.30

%

 

0.45

%

 

0.40

%

The Company uses the straight-line attribution method to recognize expense for unvested options. The amount of share-based compensation recognized during a period is based on the value of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company will re-evaluate the forfeiture rate annually and adjust it as necessary.

As of December 31, 2011, there was $672,000 of total unrecognized compensation costs related to the outstanding stock options which is expected to be recognized over a weighted average period of 1.2 years.

Stock Options. Prior to 2003 the Company had a stock option plan (the "1990 Plan") for its employees and directors under which substantially all of the shares reserved for issuance had been issued. During May 2003, the Company's shareholders approved the 2003 Incentive Stock Option Plan (the "2003 Plan"), which replaced the 1990 Plan. In May 2011, the Company's shareholders voted to increase the common shares reserved for issuance from 2,875,000 to 3,175,000. Options granted under the 1990 Plan will remain in effect until they are exercised or expire according to their terms. All current option grants are made under the 2003 Plan.

Under the terms of the stock option plans, the Company grants incentive or non-qualified stock options to employees and directors generally at an exercise price at or above 100% of fair market value at the close of business on the date of grant. The stock options expire ten years after the date of grant and generally vest over three years. The Company issues new shares with stock options are exercised.

The following table summarizes activity under the option plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan Shares
Available for
Grant

 

Plan Options
Outstanding

 

Weighted
Average
Exercise
Price Per

 

Aggregate
Intrinsic
Value

 

Balance at January 1, 2009

 

 

264,004

 

 

2,497,711

 

$

3.50

 

 

 

 

Reserved

 

 

250,000

 

 

 

 

 

 

 

 

 

Granted

 

 

(353,500

)

 

353,500

 

 

2.88

 

 

 

 

Exercised

 

 

 

 

(51,866

)

 

2.36

 

$

103,000

 

Cancelled - 2003 Plan

 

 

1,101

 

 

(1,101

)

 

3.88

 

 

 

 

Cancelled - 1990 Plan

 

 

 

 

(150,000

)

 

8.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

 

 

161,605

 

 

2,648,244

 

$

3.17

 

 

 

 

Reserved

 

 

250,000

 

 

 

 

 

 

 

 

 

Granted

 

 

(334,500

)

 

334,500

 

 

5.49

 

 

 

 

Exercised

 

 

 

 

(350,250

)

 

2.21

 

$

1,155,000

 

Cancelled - 2003 Plan

 

 

12,700

 

 

(12,700

)

 

5.48

 

 

 

 

Cancelled - 1990 Plan

 

 

 

 

(21,870

)

 

6.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2010

 

 

89,805

 

 

2,597,924

 

$

3.55

 

 

 

 

Reserved

 

 

300,000

 

 

 

 

 

 

 

 

 

Granted

 

 

(416,450

)

 

416,450

 

 

3.85

 

 

 

 

Exercised

 

 

 

 

(1,634,671

)

 

2.31

 

$

7,094,000

 

Cancelled - 2003 Plan

 

 

26,666

 

 

(26,666

)

 

4.82

 

 

 

 

Cancelled - 1990 Plan

 

 

 

 

(118,300

)

 

7.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2011

 

 

21

 

 

1,234,737

 

$

4.87

 

 

 

 


The number of options exercisable under the option plans was:

 

 

 

 

 

December 31, 2009

 

 

1,988,202

 

December 31, 2010

 

 

1,994,945

 

December 31, 2011

 

 

562,488

 

The following table summarizes information about the stock options outstanding at December 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options Outstanding

 

Options Exercisable

 

Range of
Exercise Prices

 

Number
Outstanding

 

Weighted
Average
Remaining
Contractual

 

Weighted
Average
Exercise Price
Per Share

 

Number
Exercisable

 

Weighted
Average
Exercise Price
Per Share

 

$

1.92

$

2.80

 

 

305,055

 

 

7.23 years

 

 

$

2.46

 

 

 

175,872

 

 

$

2.37

 

 

 

3.02

 

3.79

 

 

101,299

 

 

7.58 years

 

 

 

3.48

 

 

 

49,633

 

 

 

3.75

 

 

 

 

4.22

 

 

 

 

321,750

 

 

8.83 years

 

 

 

4.22

 

 

 

20,000

 

 

 

4.22

 

 

 

 

4.66

 

 

 

 

3,333

 

 

7.94 years

 

 

 

4.66

 

 

 

1,667

 

 

 

4.66

 

 

 

 

5.49

 

 

 

 

287,000

 

 

7.83 years

 

 

 

5.49

 

 

 

99,016

 

 

 

5.49

 

 

 

5.80

 

11.36

 

 

216,300

 

 

0.58 years

 

 

 

9.05

 

 

 

216,300

 

 

 

9.05

 

 

$

1.92

$

11.36

 

 

1,234,737

 

 

6.65 years

 

 

$

4.87

 

 

 

562,488

 

 

$

5.68

 

 

Options outstanding under the Option Plans expire at various dates during the period February 2012 through December 2021. Options outstanding at December 31, 2011 had a weighted average remaining life of 6.65 years and an aggregate intrinsic value of $7,000. Options exercisable at December 31, 2011 had a weighted average remaining life of 4.60 years and an aggregate intrinsic value of $7,000. The weighted average grant-date fair value of options granted during the years ended December 31, 2011, 2010 and 2009, were $2.12, $2.23 and $1.55.

Employee Stock Purchase Plan. The Company has an Employee Stock Purchase Plan (the "Plan") that enables employees to contribute up to 10% of their base compensation toward the purchase of the Company's common stock at 85% of its market value on the first or last day of the year. During the years ended December 31, 2011, 2010 and 2009, employees purchased 39,907, 143,493 and 59,634 shares under the Plan. At December 31, 2011, 86,176 shares are reserved for future employee purchases of common stock under the Plan. For the years ended December 31, 2011, 2010 and 2009, the Company recognized $42,000, $80,000 and $77,000 of stock-based compensation expense related to the Plan.

Dividends. As of December 31, 2010, the Company had never paid a cash dividend on its common stock. On February 22, 2011, the Board declared a one-time special dividend of $2.00 per share to shareholders of record as of April 1, 2011, paid May 2, 2011. Since this special dividend exceeded 25% of the Company's stock price, in accordance with applicable NASDAQ rules, the ex-dividend date was May 3, 2011, one day following the payment date. Outside of this special dividend, the Board of Directors presently intends to retain all earnings for use in the Company's business and does not anticipate paying cash dividends in the foreseeable future.

Stock Repurchase Plan. On February 23, 2010, the Board of Directors authorized the repurchase of up to $2,000,000 of the Company's common stock on or before January 31, 2011. The plan did not obligate the Company to repurchase any particular number of shares, and may have been suspended at any time at the Company's discretion. At December 31, 2010, 85,000 shares had been repurchased under this plan.

On February 22, 2011, the Board of Directors authorized the repurchase of up to $15,000,000 of the Company's common stock on or before January 31, 2012, under a new plan. On May 25, 2011, the Board amended the plan to increase the maximum share purchase amount from $15,000,000 to $20,000,000. The plan does not obligate the Company to repurchase any particular number of shares, and may be suspended at any time at the Company's discretion. As of January 31, 2012, the Company has repurchased a total of 3,877,000 shares totaling $17,562,000.

During the year ended December 31, 2011, the Company repurchased shares of stock from certain executive officers and employees of the Company. These share repurchases qualify as related party transactions. The Company repurchased a total of approximately 738,000 shares from these individuals at a total amount of $1,590,000.