What changed in this filing

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Item 1. Business

2023-03-09 compared with 2022-03-09 · 60 added, 58 removed, 101 unchanged (54% of the section changed)

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We are a leading provider of in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages (“clients”).

We believe our products and services are attractive to our clients because of our ability to navigate the complex retail landscape, to customize our solutions down to store level, to execute with excellence and the results our solutions deliver.

We believe our products and services are attractive to our clients because of our ability to navigate the complex retail landscape, to customize our solutions for both our brand and retail partners, to execute with excellence and the results our solutions deliver.

Our leadership and employees have extensive industry knowledge, including direct experience through former positions at consumer-packaged goods (“CPG”) manufacturers and retailers.

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The Insignia POPS solution is a national, account-specific, shelf-edge advertising and promotion tactic.

Primarily as a result of competitive pressures and most recently due to COVID-19, our in-store signage business has declined and become less of a focus in our growth.

Beginning in 2018 we began developing and offering an expanded portfolio of solutions including on-pack, merchandising and digital solutions in addition to our core business.

Our expanded portfolio allows us to meet the needs of brands, retailers and their agents as their business strategies evolve behind an ever-changing retail landscape.

Over the course of 2021 based on client feedback, business results and expanded team capabilities our primary focus is now on in-store solutions, resulting in our decision to exit digital solutions in addition to right-sizing our in-store signage portfolio.

With our diversification of business, we recognized over 75% of our revenue from these recently developed solutions in 2021.

In the last half of 2020 we outsourced most of our printing and IT operations.

In 2021 we relocated our headquarters and operations, both to smaller, more efficient leased spaces.

These changes have allowed us to not only significantly reduce lease expense but also adapt to a hybrid work environment due to COVID-19 and move closer in proximity to multiple clients and vendor partners.

The new office spaces also enhance our ability to recruit top talent based on the overall proximity and appeal of our locations.

Primarily because of competitive pressures, market contraction and reduced spending post the COVID-19 pandemic, our POPS business has declined and will be wound down in 2023.

Beginning in 2018 we began developing and offering an expanded portfolio of solutions including on-pack and displays in addition to what was our core business of Insignia POPS.

Our expanded portfolio now allows us to meet the needs of brands, retailers and their agents as their business strategies evolve behind an ever-changing retail landscape.

Since expanding our portfolio of solutions in 2018, our business results, investments and overall team capabilities are primarily focused on our display and on-pack solutions.

With our diversification of business, we now recognized over 90% of our revenue from these recently developed solutions in 2022 and expect this percentage to grow in 2023.

Over the last two years we have significantly reduced operating costs and retailer commitments.

In 2021 we relocated our headquarters and operations, both to smaller, more efficient leased spaces, and also restructured operations in December 2021.

These changes contributed to reduced expenses in 2022 compared to 2021.

On July 1, 2022, we entered into a $20 million settlement agreement with News Corporation, News America Marketing FSI L.L.C., and News America Marketing In-Store Services L.L.C.

(collectively, “News America”).

The agreement memorializes the amicable settlement of our outstanding lawsuit against News America.

The agreement resulted in net proceeds before income tax of $12,000,000, which was recorded as a net pretax gain from litigation settlement in operations.

We are also continuing to explore strategic options to maximize shareholder value.

Potential strategic alternatives that may be evaluated include, but are not limited to, an acquisition, merger, business combination, in-licensing, start-up of new business or other strategic transaction.

There can be no assurance that this process will result in any transaction or other changes.

Our internet address is www.insigniasystems.com.

The Company makes all the reports it files with the Securities and Exchange Commission (SEC) available free of charge on its website.

The Company’s website is not incorporated by reference into this Annual Report on Form 10-K.

We make all reports we file with the Securities and Exchange Commission (SEC), including our annual reports on Form 10-K;

quarterly reports on Form 10-Q;

current reports on Form 8-K;

and amendments to those reports, if any, available free of charge on its website, as soon as reasonably practicable after electronically filing such materials with, or furnishing them to the SEC.

Our website is not incorporated by reference into this Annual Report on Form 10-K.

Copies of reports can also be obtained free of charge by requesting them from Insignia Systems, Inc.

Our mailing address is 7308 Aspen Lane North, Suite 153, Minneapolis, Minnesota 55428;

Our mailing address is 212 Third Avenue N, Suite 356, Minneapolis, MN 55401;

telephone 763-392-6200.

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The rise of surrogate shopper services, drive-up pick-up services or pick-up in store have put the shopper in the driver seat to shop when, where and how they want.

Retailers are competing on convenience more than ever and brands are increasingly fighting to stand out from their competition.

Brand Fragmentation:

Consumer loyalty is shifting from established to emerging brands, who often are launching in retail for the first time and are looking for solutions to help them be discovered.

As a result retailers are competing on convenience more than ever.

They are also struggling to manage overall labor needs as a result of the shoppers’ various ways of shopping.

Brand Crossover:

While the number of e-commerce and social media led brands has skyrocketed, many of these brands are also fighting for space at retail.

Retailers are leveraging these brands as exclusive offerings to stand out from the competition and give shoppers a reason to continue coming back.

Financial Justification:

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We believe emerging brands are looking for ways to get discovered and tell shoppers their story.

These trends along with new developments in shopper analytics are opening opportunities for innovative companies to develop new products and new ways of helping retailers and brands connect with shoppers.

These trends are opening opportunities for innovative companies to develop new products and new ways of helping retailers and brands connect with shoppers.

Product Solutions

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Historically, our core product has been in-store signage solutions, namely the Insignia Point-of Purchase Services (POPS®).

Over the past several years, our net sales from sign solutions have declined primarily due to competitive pressures while our non-POPS solutions have significantly expanded as we have developed our portfolio to meet the needs of our clients and execution partners more holistically.

For example, our in-store signage solutions represented approximately 25% of our total net sales for 2021, compared to 44% of our total net sales in 2020.

Our Merchandising Solutions are designed to help brands get discovered, build awareness and drive impulse purchases via a secondary or often permanent placement of their products.

Our merchandising solutions include a variety of fully customized temporary, semi-permanent and permanent displays, that brands leverage to grow their sales.

Over the past several years, our net sales from sign solutions have declined primarily due to competitive pressures, market contraction and reduced spending post the COVID-19 pandemic while our non-POPS solutions have significantly expanded as we have developed our portfolio to meet the needs of our clients and execution partners more holistically.

Due to the shift away from signage our POPS business will be wound down in 2023, we will still have the ability to sell signs into certain retailers in the Mass Merchant and Grocery Channel.

Our Display Solutions are designed to help brands get discovered, build awareness and drive impulse purchases via a secondary or often permanent placement of their products.

Our display solutions include a variety of fully customized temporary, semi-permanent and permanent displays, that brands leverage to grow their sales.

Our On-Pack Solutions appear on the individual product package and are designed to drive awareness, impulse purchases, and capture market share within a very short period.

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The in-store signage solutions are placed perpendicular to the shelf and are designed to attract the attention of the shopper even before they arrive in front of the shelf to consider the purchase of a product.

Marketing and Sales

Our highly skilled direct sales and marketing teams are a major asset for the organization with their deep knowledge of brands and retailers.

Sales and Design

Our highly skilled sales and design teams are a major asset for the organization with their deep knowledge of the industry.

Our Sales team is focused on:

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Increasing overall sales pipeline and revenue;

Continued retail and brand expertise.

Our marketing team is focused on the following:

Increasing awareness of our corporate brand;

Analyzing the effectiveness of executed offerings;

Developing and commercializing new and existing solutions.

Expanding our retail footprint.

Our Design team is focused on the following:

Creating innovative stand-out solutions for our brands;

Designing concepts that are fully executable in-stores;

Collaborating with our production partners to bring their designs to life.

Our in-store signage solutions are available for sale into a network of retailers that is managed and maintained through direct relationships or can be sold to certain retailers in the Mass Merchant and Grocery Channel.

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We expect sales to foreign distributors will remain less than 1% of total net sales in 2023.

As we have diversified our portfolio, our competition has as well.

As we have diversified our portfolio, our competition has become more diverse as well.

Historically on our in-store signage business, we had one main competitor, News America (which has been sold to Neptune Retail Solutions).

We observed increased competition in growing and maintaining our network of retailers into which we are authorized to sell solutions as a result of our competitor continuing to purchase new exclusive arrangements or extend existing exclusive arrangements with retailers for that purpose.

We are currently party to legal proceedings involving News Corporation, News America Marketing FSI L.L.C., and News America Marketing In-Store Services L.L.C.

(collectively, “News America”).

In short, the Company alleges that News America has monopolized the national market for third-party in-store advertising and promotion products and services through various wrongful acts designed to harm the Company, its last significant competitor.

The lawsuit is described further in Item 3 of Part I of this report.

With our expanded merchandising and on-pack solutions, the competitive landscape is much more diverse and broad and our results vary based on what the client’s priority is whether that is price, design or execution.

With our expanded display and on-pack solutions, the competitive landscape is much more diverse and broad and our sales results vary based on what the client’s priority is whether that is price, design or execution.

We believe our primary competitive strengths include:

Best-in-class execution across our portfolio of product solutions;

Broad client-base of brands inclusive of large Fortune 500 companies, and emerging start-ups;

Managing and providing turn-key access to a national network of retailers;

Best-in-class execution results across our portfolio of product solutions;

Broad client-base of brands inclusive of large Fortune 500 companies, e-commerce, and emerging start-ups;

Imagination, responsiveness, and hunger to help move our clients’ business forward;

Our extensive broad retail and brand expertise;

Innovative retailer specific design and creative;

Seamless end-to-end project management.

Intellectual Property:

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The Company owns U.S.

registered trademarks for Insignia ® , Insignia POPS ® , Insignia POPSign ® , Insignia ShelfPOPS ® , Stylus ® , freshADS ® , DuraSign ® , I-Care ® , BannerPOPS ® , BrandPOPS ® , EquityPOPS ® , ShapePOPS ® , and Boxtalk TM .

registered trademarks for Insignia ® , Insignia POPS ® , Insignia POPSign ® , Insignia ShelfPOPS ® , Stylus ® , freshADS ® , DuraSign ® , I-Care ® , BannerPOPS ® , EquityPOPS ® , ShapePOPS ® , and Boxtalk TM .

Certain employees are required to enter into nondisclosure and invention assignment agreements.

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Service and Solution Development

New services, solutions and enhancements to existing offerings are developed either internally or externally and may include proprietary data management, operations systems, and design guidance.

New services, solutions and enhancements to existing offerings are developed either internally or externally and may include proprietary data management and design guidance.

Over the past several years, we have significantly expanded our offered solutions and have developed a portfolio designed to meet the needs of our clients and execution partners more holistically.

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Enhance internal capabilities for added client benefit.

Continue to invest in design and creative resources in order to bring our clients the most innovative concepts.

Grow On-Pack .

Increase overall product offerings via innovation.

Broaden overall market reach with strategic partners and clients.

Streamline Signage .

Optimize sales with targeted outreach and strategic clients.

Continue to streamline overall day-to-day operations with outsourced manufacturing partners and execution process.

Collaborate with retail partners with an optimized investment approach.

Continue to provide turnkey product offerings that fit both brand and retailer needs.

Increase overall market potential with increased outreach and leveraging strategic partners.

Executional Excellence .

Partner with industry leading merchandising partners in order to deliver superior results to our clients.

Invest in our Future .

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Many of these brands are fast moving with products that would be found in grocery, mass and drug channels.

During 2022, three CPG manufacturers accounted for 19%, 11% and 11% of our total net sales, respectively.

During 2021, two CPG manufacturers accounted for 15% and 12% of our total net sales, respectively.

During 2020, one CPG manufacturer accounted for 14% of our total net sales.

At December 31, 2021, two CPG manufacturers represented 25% and 19% of the Company’s total accounts receivable, respectively.

At December 31, 2022, three CPG manufacturers represented 20%, 19% and 11% of the Company’s total accounts receivable, respectively.

At December 31, 2021, two CPG manufacturers represented 25% and 19% of the Company’s total accounts receivable, respectively.

Our sales historically have fluctuated from period to period, primarily because of:

Sales cycles within the retailers that our display solutions execute;

Brand determinations to purchase solutions from us versus competitor solutions;

Promotional timing and new product launches by brands;

Brand budget fluctuations and amounts allocated to in-store or digital tactics versus other tactics;

Quantity and quality of retailer locations into which we are authorized to execute our in-store solutions;

Changes in the salability and breadth of our retailer network;

Brand budget fluctuations and amounts allocated to in-store tactics versus other tactics;

Category seasonality of in-store executions.

These factors have historically resulted in our first quarter being our largest revenue quarter.

Environmental Matters

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Employee Engagement.

We believe in regular engagement with our full team, whether that is starting off our week together in our Monday Huddle meetings, celebrating nominated employees for quarterly recognition or enjoying events our Employee Engagement committee plans.

We believe in regular engagement with our full team, whether that is starting off our week together in our Monday Huddle meetings or enjoying events our Employee Engagement committee plans.

We believe in providing our employees a flexible work environment that allows them to work where they feel they can get their best work done.

We also take employees’ feedback and concerns to heart and leverage this to help enhance our employee experience.

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In 2022, 9% of our employees advanced their careers with earned promotions based on their development and performance.

Based on our employees’ needs, we can provide them a wide range of both formal and informal development opportunities.

As an example, in 2021, we invested in new software for our design and creative team to further enhance our capabilities and output to our clients.

Focus on Safety.

The safety of our employees is a priority.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, that included giving many of our employees the flexibility to work from home.

Based on our employees’ needs, we can provide them with a wide range of both formal and informal development opportunities.

Diversity, Equity and Inclusion.

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In 2022, we reemphasized our focus when we were recognized by Minnesota Census of Women in Corporate Leadership for diversity in both our boardroom and executive leadership teams.

In addition, we selected Strive Publishing, a local publisher whose mission is to inspire community collaboration in publishing stories to heal, teach, learn, and earn while building an ecosystem that embodies a rich Black culture and heritage for a donation around Juneteenth.

Compensation and Benefits.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business