As filed with the Securities and Exchange Commission on April 7, 2003
Registration No. 333-82626
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INSIGNIA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1656308
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
6470 Sycamore Court North
Maple Grove, MN 55369-6032
(763) 392-6200
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
Scott F. Drill
President, Chief Executive Officer
Insignia Systems, Inc.
6470 Sycamore Court North
Maple Grove, MN 55369-6032
(763) 392-6200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
James C. Diracles, Esq.
Best & Flanagan LLP
225 South Sixth Street
Suite 4000
Minneapolis, MN 55402
(612) 339-7121
Approximate date of commencement of proposed sale to public: From time to time
after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
============================================================================================
Proposed
Maximum Proposed
Offering Maximum Amount of
Title of Each Class of Amount to be Price Aggregate Registration
Securities to be Registered Registered Per Unit Offering Price Fee
--------------------------------------------------------------------------------------------
Common Stock, $.01 par value 1,101,732(1)(2) $9.925(3) $10,934,690.10(3) $1,005.99(4)
--------------------------------------------------------------------------------------------
(1) Includes 816,100 shares of common stock sold to purchasers in a private
placement we completed on December 18, 2002; 244,827 shares of common stock
issuable upon the exercise of warrants issued to purchasers in the private
placement; and 40,805 shares issuable upon exercise of a warrant issued to the
placement agent for the private placement.
(2) Pursuant to Rule 416 under the Securities Act of 1933, as amended, the
registrant is also registering such indeterminate number of shares of common
stock as may be issued from time to time pursuant to the anti-dilution
provisions in the above warrants.
(3) Estimated solely for purposes of calculating the filing fee pursuant to Rule
457(c) under the Securities Act of 1933, based on the average of the high and
low prices per share reported on the Nasdaq National Market on January 9, 2003.
(4) Paid previously.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT A SOLICITATION TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL __, 2003
INSIGNIA SYSTEMS, INC.
1,101,732 SHARES OF
COMMON STOCK
The selling shareholders listed on page 6 of this prospectus may sell from time
to time all of the 816,100 shares sold to them in a private placement on
December 18, 2002, and up to 285,632 shares issuable upon exercise of warrants
issued to them in the private placement, for a total of 1,101,732 shares.
The selling shareholders may sell or distribute the shares through underwriters,
dealers, brokers or other agents, or directly to one or more purchasers. The
price may be the market price prevailing at the time or a price privately
negotiated.
We will not receive any of the proceeds from the sale of the shares. However, we
will pay substantially all expenses incident to the registration of the shares.
Our common stock is listed on the Nasdaq National Market under the symbol
"ISIG". The reported last sale price of the common stock on April ____, 2003,
was $_______ per share.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is April ____, 2003.
1
In this prospectus, "Insignia" "we," "us," and "our" refer to Insignia Systems,
Inc., a Minnesota corporation.
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................3
FORWARD-LOOKING STATEMENTS.....................................................4
RISK FACTORS...................................................................4
SELLING SHAREHOLDERS...........................................................9
PLAN OF DISTRIBUTION...........................................................9
USE OF PROCEEDS...............................................................10
DESCRIPTION OF CAPITAL STOCK..................................................11
INDEMNIFICATION...............................................................11
LEGAL MATTERS.................................................................12
EXPERTS.......................................................................12
WHERE YOU CAN FIND INFORMATION................................................12
INFORMATION NOT REQUIRED IN PROSPECTUS......................................II-1
CONSENT OF INDEPENDENT AUDITORS.............................................II-6
2
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS THE MATERIAL INFORMATION CONTAINED IN THIS
PROSPECTUS. IT IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN DOCUMENTS
INCORPORATED HEREIN BY REFERENCE.
ABOUT INSIGNIA
Insignia markets in-store promotional programs and services to retailers and
manufacturers. Since its inception in 1990, Insignia has marketed
point-of-purchase merchandising systems and resources to merchants in over 30
classes of retail trade. Insignia started with simple standalone printers,
trade-named Impulse(R) and SIGNright!(R) , and later developed a fully featured
ODBC (Open Database Connectivity) compliant software application, trade-named
Stylus(R) . This PC-based software is used by retail chains to produce signs,
labels and posters, and is currently marketed directly. Insignia continues to
make these products available and supports the supply and service needs of
domestic clients. Insignia actively markets these products internationally
through independent distributors.
In 1998, Insignia formally launched Insignia Point-Of-Purchase Services
(POPS(R)), an in-store, shelf-edge sign promotion program that was developed by
combining our expertise in signage and in-store merchandising with its Stylus
software products. Funded by consumer goods manufacturers, the account- and
product-specific program combines vital product selling information and graphics
from manufacturers with the retailer's logo and current store price on a sign
designed to fit each participating retailer's decor and merchandising theme.
Insignia management has been investing our primary resources and energies in the
development of the Insignia POPS(R) program for the last five years.
Additionally, on December 23, 2002, Insignia acquired substantially all of the
assets comprising the ValuStix(R) business, a proprietary system for attaching
coupons and other promotional materials to products sold at grocery stores and
other retail locations, which allows Insignia to expand its offerings in its
Insignia POPS(R) program.
Insignia was incorporated in 1990 under the laws of the State of Minnesota. Our
principal executive offices are located at 6470 Sycamore Court North, Maple
Grove, MN 55369-6032 and our telephone number is (763) 392-6200.
THE OFFERING
The selling shareholders are offering 816,100 shares of common stock sold to
them in a private placement that closed on December 18, 2002, 244,827 shares of
common stock issuable upon the exercise of warrants issued to the purchasers in
the private placement, and 40,805 shares issuable upon exercise of a warrant
issued to the placement agent in the private placement, for a total of 1,101,732
shares. We are registering the resale of these shares to permit the selling
shareholders to resell the shares in the public market.
Common stock offered by the selling shareholders...............1,101,732
Common stock outstanding as of April 7, 2003..................12,167,748
Nasdaq National Market Symbol.......................................ISIG
USE OF PROCEEDS
Insignia Systems will not receive any proceeds from the sale of the common
stock, except for proceeds received from the exercise of warrants issued to the
selling shareholders, which will be used for general working capital purposes.
See "USE OF PROCEEDS."
3
RISK FACTORS
This offering involves certain investment risks. See "RISK FACTORS."
FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this prospectus are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are subject to the safe harbor
provisions of the Reform Act. Such forward-looking statements are contained
principally in the section entitled "Risk Factors" and include our statements
about:
* our growth strategy;
* our ability to develop business relationships with clients;
and
* other statements that are not historical facts.
When used in this prospectus, the words "will," "believe," "anticipate,"
"intend," "estimate," "expect," "project" and similar expressions are intended
to identify forward-looking statements, although not all forward-looking
statements contain these identifying words. We cannot guarantee future results,
levels of activity, performance or achievements and you should not place undue
reliance on our forward-looking statements. Because such forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results, performance or achievements to differ materially
from those expressed or implied by such forward-looking statements, including:
* results of acquisitions;
* declines in annual financial results;
* collectibility of receivables;
* changes in economic and business conditions;
* unpredictability of government regulations;
* ability to keep up with changing trends in our industry;
* changes in business strategies; and
* other factors discussed under "Risk Factors."
Also, these forward-looking statements represent our estimates and assumptions
only as of the date of this prospectus or the date of the document from which
they are incorporated by reference. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE MAKING AN INVESTMENT
DECISION. OUR BUSINESS, OPERATING RESULTS OR FINANCIAL CONDITION COULD BE
MATERIALLY ADVERSELY AFFECTED BY ANY OF THE FOLLOWING RISKS. THE TRADING PRICE
OF OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE
ALL OR PART OF YOUR INVESTMENT. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION
INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, INCLUDING OUR
FINANCIAL STATEMENTS AND RELATED NOTES.
4
WE HAVE HISTORICALLY NOT ACHIEVED SIGNIFICANT EARNINGS
We sustained net losses for eight consecutive years through December 31, 2000
and had an accumulated deficit of $(14,551,726) as of December 31, 2002.
Although we generated net earnings during the year ended December 31, 2002 and
2001 of $332,698 and $120,830, respectively, there can be no assurance we will
be profitable in the future.
OUR RESULTS OF OPERATIONS MAY BE SUBJECT TO SIGNIFICANT FLUCTUATIONS WHICH MAY
RESULT IN A DECREASE IN OUR STOCK PRICE
Our quarterly and annual operating results have fluctuated in the past and may
vary in the future due to a wide variety of factors including:
* the seasonal nature of the POPS(R)business;
* the timing of adding new stores;
* the timing of additional sales, marketing and general and
administrative expenses;
* the effect of acquisitions; and
* competitive conditions in our industry.
Due to these factors, our quarterly net sales, expenses and results of
operations could vary significantly in the future. You should take these factors
into account when evaluating past periods and, because of the potential
variability in our quarterly results, you should not rely upon results of past
periods as an indication of our future performance. In addition, because our
operating results may vary significantly from quarter to quarter, results may
not meet the expectations of securities analysts and investors, and this could
adversely affect the market price of our common stock.
WE HAVE SIGNIFICANT COMPETITORS
We face significant competition from other providers of at-shelf advertising or
promotional signage. Some of these competitors have significantly greater
financial resources that can be used to market their products. Should our
competitors succeed in obtaining more of the at-shelf advertising business from
our current customers, our revenues and related operations would be adversely
affected.
OUR RESULTS ARE DEPENDENT ON THE SUCCESS OF OUR INSIGNIA POPS(R) PROGRAM WHICH
REPRESENTS A VERY SIGNIFICANT PART OF OUR BUSINESS
Our company is largely dependent on our POPS(R) program, which represented
approximately 81% and 73% of total net sales for fiscal 2002 and 2001. We expect
the POPS(R) program will represent a higher percentage in fiscal 2003 and future
periods. Should brand manufacturers no longer perceive value in the POPS(R)
program, our business and results of operations would be adversely affected due
to our heavy dependence on this program.
EXPANSION OF THE POPS(R) PROGRAM TO THE RETAIL DRUG INDUSTRY
We have recently expanded our POPS(R) business to include drug retailers as well
as grocery retailers. Our ability to rapidly grow our net sales will depend on
our ability to effectively expand the distribution channel to drug retailers as
well as grocery retailers. Should we be unsuccessful in expending the
distribution channel, our ability to increase net sales could be adversely
affected.
5
REDUCTIONS IN ADVERTISING AND PROMOTIONAL EXPENDITURES BY BRANDED PRODUCT
MANUFACTURERS
Changes in economic conditions could result in reductions in advertising and
promotional expenditures by branded product manufacturers. Should these
reductions occur, our revenues and related results of operations would be
adversely affected.
WE ARE DEPENDENT ON THE NUMBER OF SUCCESSFUL RELATIONSHIPS WITH RETAILER
PARTNERS AND THEIR RELATED PERFORMANCE
Our POPS(R) business and results of operations could be adversely affected if
the number of retailer partners decreased significantly or if the retailer
partners failed to continue to provide good service.
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY, WHICH COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS
We have experienced rapid growth over the past several years and currently plan
to continue a high rate of growth. Our net sales for fiscal 2002 were 25% more
than fiscal 2001 and fiscal 2001 were 55% more than fiscal 2000.
Rapid growth places a significant demand on our management, operations and
resources. Our future performance and profitability will depend on our ability
to:
* effectively manage the growth of our POPS(R) program;
* maintain good relationships with our retailer and manufacturer
partners; and
* successfully integrate any acquired businesses.
If we are unable to manage our growth successfully, our expense levels could
grow more rapidly than our revenue increases, which would reduce our net income
or result in losses.
OUR RESULTS ARE DEPENDENT ON OUR MANUFACTURER PARTNERS CONTINUING TO ACHIEVE
SALES INCREASES
Our product manufacturer customers use our POPS(R) program to motivate consumers
to buy their branded products. Use of our POPS(R) program has historically
resulted in sales increases for that particular product. If our POPS(R) program
does not continue to result in these product sales increases, our marketing
efforts and sales levels could be adversely affected.
WE RECENTLY MADE OUR FIRST BUSINESS ACQUISITION AND MAY ACQUIRE OTHER BUSINESSES
We recently acquired the ValuStix(R) business for $3,000,000 plus a five-year
royalty based upon annual net sales over a threshold amount. This is the first
business acquisition for our company and management team. Our ability to
successfully integrate the ValuStix(R) business into our existing company will
depend on a number of factors.
ValuStix had total assets of $29,717 at September 30, 2002. During the year
ended December 31, 2001 and the nine months ended September 30, 2002, ValuStix
had sales of $113,621 and $29,292, respectively, and net losses of $(1,011,827)
and $(709,474), respectively.
6
We may consider acquisitions of other businesses. Any acquisition involves a
number of risks that could cause an acquired business to fail to meet our
expectations and adversely affect our profitability. For example:
* an acquired business may not achieve expected results;
* we may incur substantial, unanticipated costs, delays or other
operational or financial problems when integrating an acquired
business;
* we may not be able to retain key personnel of an acquired
business;
* our management's attention may be diverted; or
* our management may not be able to manage the combined entity
effectively or to make acquisitions and grow our business
internally at the same time.
If these problems arise we may not realize the expected benefits of an
acquisition.
OUR BUSINESS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS OF OUR
MANAGEMENT TEAM
We believe our success depends to a significant degree upon the continued
contributions of our executive officers and other key personnel, both
individually and as a group. Our future performance will be dependent on our
ability to retain them. Competition for management in our industry is intense
and we may not be successful in retaining key management personnel. The loss of
the services of any of our executive officers, particularly Scott Drill, our
Chief Executive Officer, or Gary Vars, our President of the Insignia POPS(R)
division, could prevent us from executing our business strategy which would
adversely impact our financial results.
THE MARKET FOR OUR STOCK COULD BE HURT BY THE SALE OF THE SHARES OFFERED IN THIS
PROSPECTUS AND SHARES COVERED BY OTHER WARRANTS AND OPTIONS
The selling shareholders may sell 816,100 shares offered by this prospectus in
the public market from time to time, and upon the exercise of all of the
currently outstanding warrants, the selling shareholders may sell up to an
additional 285,632 shares offered by this prospectus from time to time. There is
a limited market for our common stock, and the resale (or availability for
resale) of the 1,101,732 shares covered by this prospectus, plus an additional
1,484,240 shares covered by other warrants and options currently outstanding,
which in the aggregate represented approximately 19% of our outstanding common
stock as of March 3, 2003, may depress the price of the stock. Selling a large
number of our shares at one time may be difficult because smaller quantities of
our shares are typically bought and sold and security analysts' coverage and
news media coverage is generally limited. These factors could result in lower
prices and larger spreads between the bid and ask prices for our shares.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE
The market price of our common stock has been and may continue to be volatile
and may be significantly affected by:
* actual or anticipated fluctuations in our operating results;
* announcements of new services by us or our competitors;
* developments with respect to conditions and trends in our
industry or in the industries we serve;
7
* general market conditions; and
* other factors, many of which are beyond our control.
In addition, recently and from time to time, the stock market has experienced
significant price and volume fluctuations that have adversely affected the
market prices of securities of companies without regard to their operating
performances. Fluctuations or decreases in the trading price of our common stock
may adversely affect your ability to trade your shares.
8
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Insignia common stock by the selling shareholders as of
March 3, 2003:
Common Stock Number of
Beneficially Shares of Owned After
Owned Prior to Common Stock Offering
Selling Shareholder(1) Offering Offered(2)(3) Number(4) Percent
------------------- -------------- ------------- ----------- -------
Deephaven Small Cap Growth Fund LLC 282,915 282,915 0 *
Craig Hallum Partners LP 35,363 35,363 0 *
Constable Capital 141,456 141,456 0 *
Kohler, Gary 21,218 21,218 0 *
Redleaf, Andy 14,145 14,145 0 *
SF Capital Partners Ltd. 282,915 282,915 0 *
WBL Limited Partnership 389,815 282,915 106,900 *
Craig Hallum Capital Group, LLC(5) 40,805 40,805 0 *
TOTAL SHARES OFFERED 1,208,632 1,101,732 106,900
----------------------
* Less than 1%.
(1) The selling shareholders who are not individuals or public entities are
controlled by the following persons: Deephaven Small Cap Growth Fund LLC - Colin
Smith; Craig Hallum Partners and Craig Hallum Capital Group, LLC - John Flood,
Bradley Baker, and Kevin Harris; Constable Capital - Donald Constable; SF
Capital Partners Ltd. - Michael A. Roth and Brian Stark through Staro Asset
Mgt., LLC; WBL Limited Partnership - Jeffrey Sowada.
(2) Includes shares owned directly and shares underlying warrants. Each holder
of warrants is prohibited, among other things, from using them to acquire shares
of our common stock to the extent that the acquisition would result in such
holder, together with any affiliate thereof, beneficially owning in excess of
4.999% of the outstanding shares of our common stock following the acquisition,
unless we are provided at least 61 days' prior notice of the acquisition. The
warrants are exercisable at $12.44 per share through December 18, 2007.
(3) Represents the maximum number of shares that may be sold by each selling
shareholder pursuant to this prospectus; provided, however, that pursuant to
Rule 416 under the Securities Act of 1933, as amended, the Registration
Statement of which this prospectus is a part shall also cover any additional
shares of common stock which become issuable in connection with the shares
registered for sale hereby by reason of (i) anti-dilution provisions in the
warrants, or (ii) any stock dividend, stock split, recapitalization or other
transaction effected without the receipt of consideration which results in an
increase in the number of outstanding shares of our common stock.
(4) Assumes the sale of all shares offered hereby to unaffiliated third parties.
The selling shareholders may sell all or part of their respective shares.
(5) Includes shares underlying warrants issued to Craig Hallum Capital Group,
LLC as placement agent for the private placement.
PLAN OF DISTRIBUTION
The selling shareholders may use any one or more of the following methods when
selling shares:
* ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
9
* block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
* an exchange distribution in accordance with the rules of the
applicable exchange;
* privately negotiated transactions;
* short sales not against the box;
* sales by broker-dealers pursuant to agreements with the
selling shareholders to sell a specified number of such shares
at a stipulated price per share;
* combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
Selling shareholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus. Broker-dealers engaged by
the selling shareholders may arrange for other brokers-dealers to participate in
sales. Broker-dealers may receive commissions or discounts from the selling
shareholders (or, if any broker-dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The selling
shareholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.
Selling shareholders may from time to time pledge or grant a security interest
in some or all of the shares or warrants owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling shareholders to include the pledgee, transferee or other successors in
interest as selling shareholders under this prospectus.
The selling shareholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
The selling shareholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Each of the selling shareholders has represented to Insignia that he or it was
purchasing the shares in the ordinary course of business and without any
agreement or understanding, directly or indirectly, with any persons to
distribute the shares.
Insignia is required to pay all fees and expenses incident to the registration
of the shares. Insignia has agreed to indemnify the selling shareholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered in this
prospectus by the selling shareholders, except proceeds from the exercise of
warrants issued to the selling shareholders, which will be used for general
working capital purposes. If all of the warrants are exercised, we will receive
proceeds of $3,553,262.
10
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
common stock, par value $.01 per share. As of April 7, 2003, there were
12,167,748 shares of common stock outstanding. No share of common stock is
entitled to any preference over any other share. The holders of common stock are
entitled to one vote for each share held of record on each matter submitted to a
vote of shareholders. Shareholders have no cumulative voting rights, which means
that the holders of shares entitled to exercise more than 50% of the voting
rights are able to elect all of the directors. Dividends may be paid to holders
of common stock when, as and if declared by the Board of Directors out of funds
legally available for payment of dividends. Upon liquidation, dissolution or
winding up of the Company, after payment to creditors, the assets of the Company
will be divided pro rata on a per-share basis among the holders of the common
stock. The Bylaws of the Company require that only a majority of the issued and
outstanding shares of common stock of the Company need be present to constitute
a quorum and to transact business at a shareholders' meeting. The holders of
common stock are not entitled to any sinking fund, preemptive, subscription,
redemption or conversion rights. All outstanding shares of common stock are
fully paid and nonassessable.
DIVIDEND POLICY
The payment by the Company of dividends, if any, in the future rests within the
discretion of the Board of Directors and will depend, among other things, upon
the Company's earnings, its capital requirements, its financial conditions, any
restrictions under credit agreements and other relevant factors. The Company has
never paid or declared any cash dividends and does not contemplate paying any
dividends in the foreseeable future.
TRANSFER AGENT
The transfer agent and registrar for the common stock is Wells Fargo Bank.
INDEMNIFICATION
Minnesota law and our Articles of Incorporation eliminate or limit certain
liabilities of our directors. Minnesota law and our Bylaws require us to
indemnify our directors, officers and employees in certain instances. Insofar as
exculpation of, or indemnification for, liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
Insignia pursuant to the foregoing provisions, we have been informed that in the
opinion of the Securities and Exchange Commission, such exculpation or
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
11
LEGAL MATTERS
Our outside general counsel, Best & Flanagan LLP of Minneapolis, Minnesota, has
issued an opinion about the legality of the shares for the selling shareholders
and us.
EXPERTS
The financial statements and schedules of Insignia incorporated by reference in
this registration statement have been audited by Ernst & Young, LLP, independent
auditors, as set forth in their report included therein, and are incorporated by
reference herein in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing.
WHERE YOU CAN FIND INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, DC, New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until the selling shareholders sell all the shares. This prospectus is part of a
registration statement we filed with the SEC.
* Current Report on Form 8-K/A filed February 27, 2003;
* Current Report on Form 8-K filed April 1, 2003;
* Current Report on Form 8-K/A filed April 7, 2003; and
* Annual Report on Form 10-K/A for the fiscal year ended December 31,
2002, filed April 7, 2003.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Insignia Systems, Inc.
Attention: Chief Financial Officer
6470 Sycamore Court North
Maple Grove, MN 55369-6032
(763) 392-6200
We have not authorized anyone to provide you with any information other than the
information provided in this prospectus or any supplement, or incorporated by
reference in this prospectus or any supplement, or included in the Form S-3
Registration Statement of which the prospectus is a part.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
SEC registration fee $ 1,006
Nasdaq listing fee 8,161
Accounting fees and expenses 10,000
Legal fees and expenses 15,000
Printing expenses 2,000
Blue Sky fees and expenses 0
Transfer agent and registrar fees 500
Miscellaneous 1,333
-----------
Total $ 38,000
---------------------------
*Except for the SEC registration fee and Nasdaq listing fee, all of the
foregoing expenses have been estimated.
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of Minnesota Statutes requires the Registrant to indemnify a
person made or threatened to be made a party to a proceeding by reason of the
former or present official capacity of the person with respect to the
Registrant, against judgments, penalties, fines, including reasonable expenses,
if such person (1) has not been indemnified by another organization or employee
benefit plan for the same judgments, penalties, fines, including, without
limitation, excise taxes assessed against the person with respect to an employee
benefit plan, settlements, and reasonable expenses, including attorneys' fees
and disbursements, incurred by the person in connection with the proceeding with
respect to the same acts or omissions; (2) acted in good faith; (3) received no
improper personal benefit, and statutory procedure has been followed in the case
of any conflict of interest by a director; (4) in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and (5)
in the case of acts or omissions occurring in the person's performance in the
official capacity of director or, for a person not a director, in the official
capacity of officer, committee member or employee, reasonably believed that the
conduct was in the best interests of the Registrant, or, in the case of
performance by a director, officer or employee of the Registrant as a director,
officer, partner, trustee, employee or agent of another organization or employee
benefit plan, reasonably believed that the conduct was not opposed to the best
interests of the Registrant. In addition, Section 302A.521, subd. 3, requires
payment by the Registrant, upon written request, of reasonable expenses in
advance of final disposition in certain instances. A decision as to required
indemnification is made by a disinterested majority of the Board of Directors
present at a meeting at which a disinterested quorum is present, or by a
designated committee of the Board, by special legal counsel, by the shareholders
or by a court. The Registrant's Bylaws provide for indemnification of officers,
directors, employees, and agents to the fullest extent provided by Section
302A.521. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
provisions referenced in Item 15 of this Registration Statement or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
13
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
Our bylaws provide in general that we shall indemnify our officers and directors
to the fullest extent permitted by law. Our bylaws authorize us to purchase and
maintain insurance to insure our indemnification obligations, whether arising
under the bylaws or otherwise. We may create a fund or otherwise to secure our
indemnification obligations which arise under our bylaws, our articles of
incorporation, by agreement, vote of shareholders or directors, or otherwise. We
have purchased directors' and officers' liability insurance.
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ITEM 16. EXHIBITS
Exhibit No. Description
----------- -----------
* 5.1 Opinion and Consent of Best & Flanagan LLP, counsel to the Company
23.1 Consent of Ernst & Young, LLP, independent public accountants
(filed herewith)
* 23.2 Consent of Best & Flanagan LLP
* 24 Powers of Attorney (included on original signature page)
*Included in original Registration Statement.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes, in accordance with Item 512 of
Regulation S-K:
(a)(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
to the information in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total dollar
value of the securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that clauses (1)(i)and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering;
(b) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(e) To deliver or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 and Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth in the
prospectus, to deliver, or cause to be delivered to each person to
II-3
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(h) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing a Form S-3 and has duly caused this Amendment No. 2 to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Maple Grove, State of Minnesota, on April 7,
2003.
INSIGNIA SYSTEMS, INC.
BY /S/ SCOTT F. DRILL
---------------------------------
SCOTT F. DRILL, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2
to registration statement has been signed by the following persons on April 7,
2003 in the capacities indicated.
SIGNATURE TITLE
-------- ------
/S/ GARY VARS* CHAIRMAN AND DIRECTOR
----------------------
GARY VARS
/S/ SCOTT F. DRILL PRESIDENT, CHIEF EXECUTIVE
---------------------- OFFICER AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)
SCOTT F. DRILL
/S/ DENNI J. LESTER CHIEF FINANCIAL OFFICER AND TREASURER
---------------------- (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
DENNI J. LESTER
/S/ W. ROBERT RAMSDELL* DIRECTOR
----------------------
W. ROBERT RAMSDELL
/S/ ERWIN A. KELEN* DIRECTOR
----------------------
ERWIN A. KELEN
/S/ GORDON F. STOFER* DIRECTOR
----------------------
GORDON F. STOFER
/S/ FRANK D. TRESTMAN* DIRECTOR
----------------------
FRANK D. TRESTMAN
/S/ DONALD J. KRAMER* DIRECTOR
----------------------
DONALD J. KRAMER
* BY /S/ SCOTT F. DRILL
-------------------------------------------------
SCOTT F. DRILL, PURSUANT TO POWER OF ATTORNEY
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