UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment
No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2019
|
Commission
File Number 1-13471
|
INSIGNIA SYSTEMS,
INC.
|
(Exact
name of registrant as specified in its charter)
|
Minnesota
|
41-1656308
|
(State
or other jurisdiction of incorporation or
organization)
|
(IRS
Employer Identification No.)
|
8799
Brooklyn Blvd., Minneapolis, MN 55445
|
(Address
of principal executive offices; zip code)
|
(763)
392-6200
|
(Registrant’s
telephone number, including area code)
|
Securities
Registered Pursuant to Section 12(b) of the Act:
Title of each class
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
Common
Stock, $0.01 par value
|
|
ISIG
|
|
The
Nasdaq Stock Market LLC
|
Securities
Registered Pursuant to Section 12(g) of the Act: None
_____________________________________________________________________
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ☐ No
☑
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
☑ No ☐
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes
☑ No ☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer ☐ Accelerated filer ☐ Non-accelerated
filer ☐ Smaller reporting company ☑ Emerging growth
company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ☐ No ☑
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant as of the last business
day of the registrant’s most recently completed second fiscal
quarter (June 30, 2019) was approximately $6,744,000 based upon the
price of the registrant’s Common Stock on such
date.
Number
of shares outstanding of Common Stock, $.01 par value, as of March
9, 2020 was 12,106,689.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this “Amendment”)
amends the Annual Report on Form 10-K of Insignia Systems, Inc. for
the year ended December 31, 2019 that was originally filed with the
Securities and Exchange Commission (the “SEC”)
on March 10, 2020 (the “Original Filing”) and is
being filed primarily to provide the information required by
Items 10, 11, 12, 13, and 14 of Part III. This information was
previously omitted from the Original Filing in reliance on General
Instruction G(3) to Form 10-K, which permits the information
in the above referenced items to be incorporated in the
Form 10-K by reference from a definitive proxy statement if
such statement is filed no later than 120 days after our fiscal
year end. We are filing this Amendment to include Part III
information in our Form 10-K because we do not expect to file
a definitive proxy statement on or before that date. The reference
on the cover of the Original Filing to the incorporation by
reference to portions of our definitive proxy statement into Part
III of the Original Filing has been deleted. This Amendment does
not amend or otherwise update any other information in the Original
Filing. Accordingly, this Amendment should be read in conjunction
with the Original Filing and with our filings with the SEC made
after the Original Filing.
TABLE OF CONTENTS
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|
Page
|
PART III.
|
|
|
Item
10.
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Directors,
Executive Officers and Corporate Governance
|
3
|
Item
11.
|
Executive
Compensation
|
6
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
10
|
Item
13.
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Certain
Relationships and Related Transactions and Director
Independence
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11
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Item
14.
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Principal
Accountant Fees and Services
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13
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|
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PART IV.
|
|
|
Item
15.
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Exhibits
and Financial Statement Schedules
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13
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SIGNATURES
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14
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PART III.
Item 10. Directors, Executive Officers and Corporate
Governance
Information about our Directors
All
directors of the Company hold office until the next annual meeting
of the shareholders or until their successors have been elected and
qualified. Our Bylaws, as amended, provide that our Board of
Directors (the “Board”) shall consist of between two
and no more than nine members, as designated by resolution of the
Board from time to time.
Cooperation Agreement
The
Company is party to a Cooperation Agreement, dated May 17, 2018
(the “Cooperation Agreement”), with Air T, Inc.
(“Air T”), Groveland Capital LLC
(“Groveland”), and Nicholas J. Swenson (collectively
the “Shareholder Group”), which required that the
Company include two designees, including Mr. Unterseher, in its
slate of nominees for election at the annual meeting held in 2019
and to solicit proxies with a recommendation that shareholders vote
in favor of the designees’ election at such meeting.
Additionally, on February 27, 2020, our Board appointed Chad B.
Johnson to serve as an additional director to fill a vacancy on the
Board pursuant to the nomination and evaluation procedures for
substitute nominees set forth in the Cooperation
Agreement.
Current Directors
The
following individuals are our current directors:
Director & Nominee
|
|
Age
|
|
Position
|
|
Director Since
|
Jacob
J. Berning
|
|
47
|
|
Director,
Chairman of the Board
|
|
June
2017(1)
|
Kristine
A. Glancy
|
|
42
|
|
Director,
President, Chief Executive Officer & Secretary
|
|
June
2017
|
Chad B.
Johnson
|
|
49
|
|
Director
|
|
February
2020
|
Loren
A. Unterseher
|
|
55
|
|
Director
|
|
May
2018
|
Rachael
B. Vegas
|
|
44
|
|
Director
|
|
June
2017
|
___________________________
(1) Mr.
Berning also served as a director of the Company from December 2014
to June 2016.
Jacob J. Berning has served as Chairman of the Board since
May 2018 and has served as President of Food Service at The
Schwan Company since September 2018. Prior to that role, Mr.
Berning has held several positions since he joined The Schwan
Company in 2014. Mr. Berning has extensive leadership experience
across a diverse set of businesses and teams in the
consumer-packaged goods industry. His 20 years of marketing
experience working with a variety of different brands also includes
time as Marketing Director of WhiteWave Foods Company from
July 2011 to September 2014 and Marketing Manager at
General Mills, Inc. from September 2003 to July 2011.
These experiences provide knowledge and understanding of the
industry representing the majority of our customer base. He has a
BA degree from the University of Minnesota and an MBA from New York
University.
Kristine A. Glancy has served as our
President and Chief Executive Officer since May 2016. Prior to
joining the Company, Ms. Glancy served in various roles at The
Kraft Heinz Company from 1999 to 2016, most recently as Customer
Vice President from May 2013 to April 2016. She held the
positions of Director of Sales from June 2012 to May 2013
and National Customer Manager from November 2010 to
June 2012. Her more than 17 years as a sales and marketing
executive provide the necessary skills to the Board and Company in
the areas of Sales, Product Strategy, Customer Relations, Business
and Brand Development. Ms. Glancy
holds a Bachelor of Arts degree in Marketing and International
Business from Saint Mary’s University and an MBA from Fordham
University, New York City.
Chad B. Johnson is the Director of Marketing of C.H.
Robinson Inc., a third-party logistics and supply chain management
provider, which he has held since July 2018. Prior to that role,
Mr. Johnson was a Business Unit Director for General Mills Inc.
from July 2000 to July 2018. Mr. Johnson has extensive marketing
and leadership experience in the consumer-packaged goods industry.
These experiences provide knowledge and understanding of the
industry representing the majority of our customer base. He holds a
Bachelor of Arts degree in Economics and Chemistry from St. Olaf
College and an MBA – Marketing and Finance from the
University of Minnesota - Carlson School.
Loren A. Unterseher is a Managing Director of Oxbow
Industries, LLC, a holding company investing in middle-market
private companies, which he has held since 2004. Over his career,
Mr. Unterseher has completed over $2.5 billion in corporate finance
transactions. Prior to Oxbow Industries, Mr. Unterseher was a
Principal/Shareholder & Director of Mergers and Acquisitions
for Craig-Hallum Capital Group. Prior to Craig-Hallum, he was
Director of Private Equity for Lazard Middle Market (f/k/a
Goldsmith Agio Helms). Mr. Unterseher started his investment
banking career as a Vice-President in Mergers and Acquisitions at
RBC (f/k/a Dain Rauscher). He began his professional career as an
attorney and was a Partner at Stinson Leonard Street (f/k/a
Leonard, Street & Deinard), a major Minneapolis based law firm.
Mr. Unterseher is currently Chairman of the Board of Inno-flex,
LLC, a private company (a director since 2016), and serves on the
boards of SkyWater Technology Foundry, Inc. (since 2017), SixSpeed,
LLC (since 2016) and Town & Country Fence, LLC (since 2017),
each of which is a private company. Mr. Unterseher has served on
several private company and not for profit boards of directors. We
believe Mr. Unterseher’s investment, mergers and
acquisitions, and finance experience will benefit the Board. He
holds a Bachelor of Business Administration degree in Finance from
the University of Iowa and a J.D. from the University of North
Dakota.
Rachael B. Vegas has served as Senior Vice President of
Merchandising at H-E-B, LP since August 2019. Prior to that, she
was the Chief Merchant at Brandless, Inc. from March 2016
through July 2019. She previously served in various roles at Target
Corporation, Food Lion and Hannaford Supermarkets from 1997 to
2016. Most recently, from February 2014 to February 2016
as Vice President, General Merchandising Manager; Center Store,
Grocery; from February 2013 to February 2014 as Vice
President Merchandising Manager; Dry Grocery, Snacks, Candy; from
February 2011 to February 2013 as Vice President
Merchandising Manager; Snacks, Beverages, Pet Care, Candy and
Liquor. Ms. Vegas’ experience in retail and consumer packaged
goods industries are valuable to the Company. Ms. Vegas holds
Bachelor of Arts degree in International Relations from Tufts
University and an MBA from Kenan-Flagler Business School,
University of North Carolina.
Information about our Executive Officers
The
following individuals are our current executive
officers:
Name
|
|
Age
|
|
Position
|
Kristine
A. Glancy
|
|
42
|
|
Director,
President, Chief Executive Officer and Secretary
|
Jeffrey
A. Jagerson
|
|
53
|
|
Vice
President of Finance, Chief Financial Officer and
Treasurer
|
Adam D.
May
|
|
36
|
|
Chief
Growth Officer
|
Kristine A. Glancy’s background information is
disclosed above under “Information about our
Directors.”
Jeffrey A. Jagerson has been
our Vice President of Finance, Chief Financial Officer and
Treasurer since July 2017. Prior to joining the Company, Mr.
Jagerson served as Chief Financial Officer at Christensen Farms
from March 2014 to March 2017. He previously served as Vice
President of Finance and Accounting at Digital River from July 2009
to March 2014 and served as the Corporate Controller from February
2008 to July 2009. Mr. Jagerson also served in various executive
and financial roles at ADC Telecommunications from May 1995 to
February 2008 and Honeywell from June 1988 to May 1995. His more
than 30 years as an Accounting and Finance professional and
executive provides the necessary skills to the Board and Company in
the areas public company financial reporting, tax, audit, and
treasury management. Mr. Jagerson holds a Bachelor of Science
degree in Accounting from Minnesota State University, Mankato and
an MBA from the Carlson School of Business at the University of
Minnesota.
Adam D. May, has been our Chief
Growth Officer since December 2019. He served as our Senior Vice
President of Sales from July 2017 to December 2019. Prior to
joining the Company, Mr. May was the Associate Director of Sales at
The Kraft Heinz Company from September 2016 to July 2017. He held
several Customer Business Lead roles at The Kraft Heinz Company
from November 2012 to September 2016. Before joining The Kraft
Heinz Company, Mr. May held several Sales positions at Mars Petcare
from March 2008 to November 2012. His 10 plus years of CPG Sales
and business development experience provides necessary skills to
the Company in the areas of Sales, Sales Strategy and Business
Development. Mr. May holds a Bachelor of Science in Business
Administration and Management from Indiana
University.
There
are no family relationships among any of the executive officers and
directors of the Company.
Committees of the Board of Directors
The
current membership of the Board’s standing committees is set
forth in the following table. The Nominating and Corporate
Governance Committee was chartered in April 2018.
Director
|
|
Audit
|
|
Governance, Compensation and Nominating
|
|
Independent Director
|
Jacob
J. Berning
|
|
Member
|
|
Member
|
|
✓
|
Kristine
A. Glancy
|
|
|
|
|
|
|
Chad B.
Johnson
|
|
Member
|
|
|
|
✓
|
Loren
A. Unterseher
|
|
Chair
|
|
|
|
✓
|
Rachael
B. Vegas
|
|
|
|
Chair
|
|
✓
|
Audit Committee Financial Expert
Mr.
Unterseher has been designated by the Board as an “audit
committee financial expert,” as that term is defined by the
rules of the SEC. Through his extensive experience he has acquired
the attributes necessary to qualify him as an “audit
committee financial expert,” as that term is defined by the
rules of the SEC. The determination for Mr. Unterseher was based
primarily on experience analyzing and evaluating financial
statements and financial performance of companies as Director of
Mergers and Acquisitions for Craig-Hallum and in similar roles at
Lazard Middle Market and RBC. He possesses: (i) an understanding of
generally accepted accounting principles and financial statements;
(ii) the ability to assess the general application of such
principles in connection with the accounting for estimates,
accruals and reserves; (iii) experience preparing, auditing,
analyzing or evaluating financial statements with a breadth and
level of complexity commensurate with those presented by the
Company’s financial statements; (iv) an understanding of
internal control over financial reporting; and (v) an understanding
of audit committee functions.
Delinquent Section 16(a) Reports
Section
16(a) of the Securities and Exchange Act of 1934 requires that our
directors and executive officers file initial reports of ownership
and reports of changes in ownership with the SEC. Directors and
executive officers are required to furnish us with copies of all
Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to us and written representations
from our directors and executive officers, all Section 16(a) filing
requirements were met for 2019 except for one report by each of Mr.
Berning, Mr. Unterseher, Ms. Vegas and Mr. Zenz relating to common
stock equivalents issued pursuant to their participation in the
Deferred Compensation Plan for Directors.
Code
of Ethics/Code of Conduct
We have
in place a “code of ethics” within the meaning of Rule
406 of Regulation S-K, which is applicable to our senior financial
management, including specifically our principal executive officer
and principal financial officer. A copy of the Code of Ethics is
available on our website (www.insigniasystems.com)
under the “Investor Relations - Corporate Governance”
caption. We intend to satisfy our disclosure obligations regarding
any amendment to, or a waiver from, a provision of this code of
ethics by posting such information on the same
website.
Item
11. Executive Compensation
Summary Compensation Table
The
following table sets forth information about all compensation (cash
and non-cash) awarded to, earned by or paid to our Chief Executive
Officer and the two other executive officers serving at the end of
fiscal 2019 (collectively, our “Named Executive
Officers”) for the fiscal years ended December 31, 2019 and
2018.
Name and Position
|
|
Year
|
|
|
|
|
Non-Equity Incentive Plan
Compensation(3)
|
|
|
Kristine A.
Glancy
|
|
2019
|
$314,600
|
$–
|
$–
|
$–
|
$–
|
$–
|
$314,600
|
President, Chief Executive Officer and
Secretary
|
|
2018
|
$306,350
|
$–
|
$193,771(4)
|
$56,090(2)
|
$258,601
|
$–
|
$814,812
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A.
Jagerson
|
|
2019
|
$246,750
|
$–
|
$–
|
$–
|
$–
|
$–
|
$246,750
|
Vice President of Finance, Chief Financial Officer and
Treasurer
|
|
2018
|
$243,361
|
$–
|
$65,402(5)
|
$14,099(2)
|
$202,830
|
$–
|
$525,692
|
|
|
|
|
|
|
|
|
|
|
Adam
D. May(6)
|
|
2019
|
$182,631
|
$47,394
|
$–
|
$–
|
$–
|
$14,282(7)
|
$244,307
|
Chief Growth
Officer
|
|
|
|
|
|
|
|
|
|
______________________________
(1)
Amounts
shown in the Stock Awards column represent the aggregate grant date
fair value of restricted stock and restricted stock unit awards
granted during the applicable year. Grant date fair values are
computed in accordance with ASC Topic 718 using assumptions
discussed in Note 8 to the financial statements for the fiscal year
ended December 31, 2019 included in the Original
Filing.
(2)
The Option Awards
granted in 2018 were granted pursuant to the 2018 Equity Incentive
Plan (the “2018 Plan”) and are scheduled to vest in
three substantially equal increments on the second, third and
fourth anniversaries of the date of grant. The dollar value of the
options shown represents the estimated grant date fair value in
accordance with Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC)
Topic 718, Compensation—Stock Compensation (“ASC
718”)
pursuant to the Black-Scholes option pricing model, which requires
several significant judgments and assumptions.
(3)
Represents
payments pursuant to the Executive Incentive Plan for the years
indicated, which were paid in the following year.
(4)
Consists
of 50,000 restricted stock units granted on June 13, 2018 (based on
a closing stock price of $1.77 on the date of grant and scheduled
to vest in three substantially equal increments on the first,
second, and third anniversaries of the date of grant) and 53,985
restricted stock units granted on August 10, 2018 (based on a
closing stock price of $1.95 on the date of grant and scheduled to
vest and settle in three substantially equal increments on the
second, third and fourth anniversaries of the date of
grant).
(5)
Consists
of 22,000 restricted stock units granted on June 13, 2018 (based on
a closing stock price of $1.77 on the date of grant and scheduled
to vest in three substantially equal increments on the first,
second, and third anniversaries of the date of grant) and 13,570
restricted stock units granted on August 10, 2018 (based on a
closing stock price of $1.95 on the date of grant and scheduled to
vest and settle in three substantially equal increments on the
second, third and fourth anniversaries of the date of
grant).
(6)
Mr.
May became an executive officer in December 2019.
(7)
Amount
represents annual car allowance and company 401K contribution
match.
Executive
Compensation
The
principal components of compensation for the Named Executive
Officers are: (i) base salary; (ii) non-equity incentive
compensation in the form of an annual cash bonus under the
Executive Incentive Plan; and (iii) long-term, equity-based
incentive compensation in the form of restricted stock units. These
components of compensation are summarized below, followed by a
description of each Named Executive Officer’s individual
agreements with the Company and the compensation received
thereunder.
Executive Incentive Plan
In January 2019, the Board, as recommended by its Governance,
Compensation and Nominating Committee (the “GCN
Committee”), approved the 2019 Executive Cash Incentive Plan
(the “2019 Cash Plan”). Members of the Company’s
senior management, including all three of the Company’s
executive officers, Ms. Glancy, Mr. Jagerson and Mr. May
participated in the 2019 Cash Plan.
The 2019 Cash Plan provided that for each of the
participants, (a) 100% of the bonus potential was allocated to the
Company’s performance against target operating income (loss),
inclusive of all compensation expenses. The total target bonuses
under the 2019 Cash Plan was equal to 50% of each participant’s
respective base salary and payouts, if any, could have ranged from
25% to 180% of each
participant’s base salary. Similar to 2018, the 2019 Cash
Plan provided for a potential revenue-based multiplier of between
110% and 120% based on Company performance against target operating
income (loss) and total net sales.
All bonus calculations under the 2019 Cash Plan were subject to
review and final approval by the GCN Committee prior to
payment.
Company Performance-Based Payment
For
2019, the GCN Committee established a target operating income of
$1,000 and approved the following schedule of potential payments
under the Executive Incentive Plan:
Pre-Bonus Income Level
|
|
Operating Income (Loss)
|
|
Percent of Target Variable Compensation
|
<$307,246
|
|
<($0)
|
|
0%
|
$307,247
- $581,863
|
|
$1
|
|
25% -
49.99%
|
$581,864
- $1,021,251
|
|
$1
|
|
50% -
89.99%
|
$1,021,252
- $1,296,097
|
|
$1 -
$164,999
|
|
90% -
99.99%
|
$1,296,098
- $2,157,529
|
|
$165,000
- $429,999
|
|
100% -
139.99%
|
$2,157,530
- $2,554,680
|
|
$430,000
- $649,999
|
|
140% -
149.99%
|
≥
$2,554,681
|
|
≥
$650,000
|
|
150%
|
Based
on an actual operating loss of $5,629,000 for the year ended 2019,
as reported in Part II, Item 8, of the Company’s Annual
Report on Form 10-K, the GCN Committee determined that no
incentives were earned as part of the 2019 Cash Plan and no payouts
were made to the Named Executive Officers.
Actions Relating to Fiscal 2020 Executive Compensation
In
December 2019, the non-employee directors, as recommended by the
GCN Committee, appointed Mr. May as the Chief Growth Officer and
revised his annual base salaries to $220,000 and target annual cash
incentive of $126,000. Additionally, the non-employee directors, as
recommended by the GCN Committee, approved, the 2020 Executive Cash
Incentive Plan (the “2020 Cash Plan”). The only
employees currently eligible to participate in the 2020 Cash Plan
are the Company’s three executive officers: Ms. Glancy, Mr.
Jagerson and Mr. May. The 2020 Cash Plan provides that Ms. Glancy
and Mr. Jagerson are eligible to receive a potential payout based
solely on the Company’s performance against target operating
income/loss, inclusive of all compensation expenses. Mr. May is
eligible to receive a potential payout based 50% on the
Company’s performance against target operating income/loss
and 50% based on the Company’s performance against target net
revenue. The total target cash payments under the 2020 Cash Plan
for Ms. Glancy and Mr. Jagerson are equal to 50% of each
participant’s respective base salary and payouts, if any,
would range from 10% to 150% of each participant’s base
salary. The total target cash payments under the 2020 Cash Plan for
Mr. May based on his respective base salary and payouts, in any,
would range from 17% to 89% of his base pay. Similar to 2019, the
2020 Cash Plan provides for a potential revenue-based multiplier of
between 110% and 120% based on Company performance against target
net operating income and threshold net revenue. All bonus
calculations under the 2020 Cash Plan will be subject to review and
final approval by the GCN Committee prior to payment.
Long-term, Equity-Based Incentive Compensation
The GCN
Committee has determined that a combination of common stock options
and restricted stock units are each appropriate under certain
circumstances, based upon factors including market practices and
our overall compensation philosophy. Historically, options have a
ten-year term and bear an exercise price equal to the fair market
value of a share of our common stock on the date of grant,
determined in accordance with the applicable equity plan. Each
restricted stock unit generally represents a contingent right to
receive one share of our common
stock
upon vesting. The GCN Committee did not grant any long-term,
Equity-Based Incentive Compensation to the executive officers in
2019.
Severance and Change in Control Arrangements with Named Executive
Officers
The
Company entered into an Employment
Agreement and a Change in Control Agreement with Ms. Glancy in
connection with the commencement of her employment as President and
Chief Executive Officer, each effective as of May 9,
2016.
The
Company also entered into an Employment Agreement and a Change in
Control Agreement with Mr. Jagerson in connection with the
commencement of his employment as Chief Financial Officer of the
Company, each effective as of
July 17, 2017.
The Company also entered into an Employment Agreement and a Change
in Control Agreement with Mr. May in connection with the
commencement of his appointment as Chief Growth Officer of the
Company, each effective as of December 20, 2019.
Each Employment Agreement provides that the employee will receive
an established annual base salary, subject to increase from time to
time, target incentive compensation awards, and participation in
customary benefit plans and programs. In addition, in the event of
the employee’s involuntary termination without cause or
voluntary termination with good reason, she or he will be eligible
to receive accrued and unpaid compensation as well as the following
severance pay and benefits: (1) the annual incentive compensation
they would have been entitled to receive for the year in which
their termination occurs as if they had continued until the end of
that fiscal year, determined based on the Company’s actual
performance for that year relative to any applicable performance
goals, prorated for the number of days in the fiscal year through
the termination date and generally payable in a cash lump sum at
the time such incentive awards are payable to other participants;
(2) a percentage (100% for Ms. Glancy; 50% for Mr. Jagerson; 50%
for Mr. May) of their annual base salary as in effect at the time
of termination, payable in a single lump sum payment no later than
60 days following the termination date; and (3) welfare benefit
continuation for four months for Ms. Glancy and for three months
for Mr. Jagerson and Mr. May following termination. In the event of
death, disability, involuntary termination for cause or voluntary
termination without good reason, each will be entitled to accrued
and unpaid compensation as provided in the Employment
Agreement.
“Cause” is defined in each Employment Agreement as
(a) the deliberate and continued failure to substantially
perform the duties and responsibilities; (b) the criminal felony
conviction of, or a plea of guilty or nolo contendere; (c) the
material violation of Company policy; (d) the act of fraud or
dishonesty resulting or intended to result in personal enrichment
at the expense of the Company; (e) the gross misconduct in
performance of duties that results in material economic harm to the
Company; or (f) the material breach of the Employment Agreement by
the employee. “Good reason” includes demotion,
reduction in salary or benefits, and certain other
events.
Under their respective Change in Control Agreements, as amended,
upon a qualifying termination, employee would be eligible to
receive the following, subject to offset by the amount of any
severance previously paid to her under any employment agreement
with the Company: (1) a lump sum severance payment equal to a
percentage (200% for Ms. Glancy; 75% for Mr. Jagerson and for Mr.
May) of their annual base salary, (2) cash payment equal to
the sum of (x) unpaid incentive compensation that has been
allocated or awarded to them for a completed fiscal year preceding
the date of the qualifying termination which is contingent only
upon the continued employment to a subsequent date plus (y) a pro
rata portion to the date of the qualifying termination of her
target bonus for the year calculated through the date of the
qualifying termination, (3) welfare benefit continuation for a
specified period (12 months for Ms. Glancy; 6 months for
Mr. Jagerson and for Mr. May), (4) certain post-retirement health
care or life insurance benefits if they would have become eligible
for such benefits during the 24 months after the date of
termination, (5) a lump sum payment equal to all earned but unused
paid time off days, and (6) outplacement fees not to exceed
$5,000.
Each of the Change in Control Agreements defines
“qualifying termination” as a termination by the
Company without cause or a termination by the employee with good
reason, in each case either concurrent with or within
24 months following a change in control or a termination by
the Company without cause within six months prior to a change
in control if termination is in connection with or in anticipation
of the change in control. “Change
in
Control” is defined as a sale of all or substantially all of
the assets of the Company, a merger in which the shareholders of
the Company own less than 50% of the surviving entity, the
acquisition of 40% or more of the Company’s outstanding stock
by a single person or a group, or the election of a majority of the
Company’s directors who consist of persons who were not
nominated by the Company’s prior Board.
“Cause” is defined in the
Change in Control Agreements as (i) the deliberate and continued
failure to devote substantially all business time and best efforts
to the performance of the his or her duties after demand for
substantial performance is delivered to the employee by the Board
which the demand specifically identifies the manner in which the
employee has not substantially performed such duties; (ii) the
deliberate engaging in gross misconduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise; or
(iii) conviction of, or plea of guilty or nolo contendere to, a
felony or any criminal charge involving moral
turpitude.
All of the Employment Agreements and Change in Control Agreements
define “good reason” to include demotion, reduction in
salary or benefits, and certain other events.
Compensation of Non-Employee Directors
The
following table summarizes the compensation paid to our
non-employee directors for 2019.
Name
|
Fees Earned
or
Paid
Cash(1)
|
|
|
Jacob J.
Berning
|
$22,000
|
$30,000
|
$52,000
|
Suzanne L.
Clarridge
|
$17,000
|
$15,000
|
$32,000
|
Loren A.
Unterseher
|
$19,917
|
$15,000
|
$34,917
|
Rachael B.
Vegas
|
$22,000
|
$15,000
|
$37,000
|
Steven R.
Zenz(3)
|
$9,167
|
$–
|
$9,167
|
(1)
Reflects annual
board retainer and fees for attending Board, committee and
conference call meetings earned during 2019 inclusive of amounts
related to the Deferred Compensation Plan for Directors. As of
December 31, 2019, the following director held shares under the
plan: Mr. Berning held 34,382 shares, Ms. Vegas held 11,053 shares
and Mr. Unterseher held 20,434 shares.
(2)
On June 6, 2019,
each non-employee director received restricted stock unit grants
pursuant to the 2018 Plan worth $15,000 for directors and $30,000
for Chairman based on the closing price of the Company’s
common stock on the date of grant.
(3)
Mr. Zenz ceased
service as a director on June 5, 2019.
In
2019, non-employee directors received an annual cash retainer of
$17,000 per year of service and the Chairman of the Board and each
Committee Chair were eligible to receive an additional annual cash
retainer of $5,000. Each such retainer is allocated to a director
for the portion of the year served in each role.
In
2019, each non-employee director received a restricted stock unit
grant of shares of common stock based on a target grant date fair
value of $15,000, with the Board Chair receiving a target fair
value of $30,000. These restricted stock grants were made on June
6, 2019 pursuant to the 2018 Plan. Each non-employee director was
granted 14,151 restricted stock units, and the Board Chair was
granted 28,302 restricted stock units, each based on a closing
price of $1.06 for a share of the Company’s common stock on
the date of grant as reported by The Nasdaq Stock Market. The
restricted stock units are scheduled to vest and settle in a share
of common stock for each unit on the day immediately preceding the
date of the 2020 Annual Meeting of Shareholders.
Director Deferred Compensation
Each of
our non-employee directors is eligible to participate in our
director deferred compensation plan (the “Director Deferred
Compensation Plan”), which allows a director to make
voluntary deferrals of up to 100% of their annual cash retainer and
any additional committee chair cash retainer. The Company does not
match any contributions to the Director Deferred Compensation Plan.
Deferred cash retainer amounts, if any, are deemed to be invested
in common stock equivalents having a value equal to the deferred
cash retainer amounts based on the fair market value of a share of
our common stock on the dates such amount would have otherwise been
paid to the participant. Dividends, if any, accrued on such commons
stock equivalents are deemed to be similarly deferred and credited
to the director’s deferred stock account. A participating
director will receive a distribution of their deferred stock
account, consisting of one share of stock for each common stock
equivalent credited to their deferred stock
account as of the
date of distribution, as soon as practicable following the
director’s separation from service as a director of the
Company.
Outstanding Equity Awards at Fiscal Year End
The
following table sets forth summary information regarding the
outstanding equity awards held by our Named Executive Officers at
December 31, 2019. The market value of restricted stock units that
had not vested equals $0.7301, which was the closing price of a
share of our common stock on that date.
|
|
|
|
|
Name
|
|
Grant
Date
|
Number of
Securities Underlying Unexercised Options Exercisable
|
Number of
Securities Underlying Unexercised Options
Unexercisable
|
|
Option
Expiration Date
|
Number of Units
of Stock That Have Not Vested
|
Market Value of
Units of Stock That Have Not Vested
|
Kristine A.
Glancy
|
|
5/13/2016
|
|
|
|
|
40,000(1)
|
$29,204
|
|
|
6/13/2018
|
|
|
|
|
33,333(1)
|
$24,336
|
|
|
8/10/2018
|
|
|
|
|
53,985(2)
|
$39,414
|
|
|
8/10/2018
|
–
|
53,985(2)
|
$1.95
|
8/10/2028
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A.
Jagerson
|
|
6/13/2018
|
|
|
|
|
14,666(1)
|
$10,708
|
|
|
8/10/2018
|
|
|
|
|
13,570(2)
|
$18,586
|
|
|
8/10/2018
|
–
|
13,570(2)
|
$1.95
|
8/10/2028
|
|
|
|
|
|
|
|
|
|
|
|
Adam A. May
|
|
6/13/2018
|
|
|
|
|
14,666(1)
|
$10,708
|
|
|
8/10/2018
|
|
|
|
|
13,570(2)
|
$18,586
|
|
|
8/10/2018
|
–
|
13,570(2)
|
$1.95
|
8/10/2028
|
|
|
___________________________________
(1)
Remainder scheduled
to vest in two equal annual installments on each of the next two
anniversaries of the grant date.
(2)
Scheduled to vest
in three equal installments on each of the next three years
starting on the 2nd anniversary of the
grant date.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The
following table presents certain information regarding our equity
compensation plans, the 2003 Stock Plan (the “2003
Plan”), the 2013
Omnibus Stock and Incentive Plan (the “2013
Plan”), the 2018 Plan and our Employee Stock Purchase
Plan, as of December 31, 2019.
Plan
Category
|
Number of
Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
|
Number of
Securities Remaining Available for Future Issuance under Equity
Compensation Plans
|
Equity compensation
plans approved by security holders
|
612,561(1)
|
$2.38
|
1,069,466(2)
|
Equity compensation
plans not approved by security holders
|
–
|
–
|
–
|
Total
|
612,561
|
$2.38
|
1,069,466
|
____________________________________
|
|
|
|
(1)
Includes 282,645
awards under the 2018 Plan, 197,404 awards under the 2013 Plan and
132,512 awards under the 2003 Plan. We ceased issuing awards under
the 2003 Plan upon approval of the 2013 Plan in 2013, and we ceased
issuing awards under the 2013 Plan upon approval of the 2018 Plan
in 2018.
(2)
Includes 245,909
shares available for issuance under our Employee Stock Purchase
Plan and 823,557 shares available for issuance pursuant to future
awards under the 2018 Plan. The Company maintains the Employee
Stock Purchase Plan, pursuant to which eligible employees,
including named executive officers, can contribute up to ten
percent of their base pay per year to purchase shares of Common
Stock. The shares are issued by the Company at a price per share
equal to 85% of market value on the first day of the offering
period or the last day of the plan year, whichever is
lower.
Security Ownership of Certain Beneficial Owners and
Management
The
following table presents information provided to the Company as to
the beneficial ownership of common stock as of April 27, 2020,
by: (i) persons known to the Company to hold 5% or more of such
stock; (ii) each of the directors of the Company; (iii) each of the
Named Executive Officers; and (iv) by all directors and current
executive officers as a group. The address of each director and
executive officer is 8799 Brooklyn Boulevard, Minneapolis,
Minnesota 55445. Beneficial ownership includes shares available for
purchase under options and subject to settlement under restricted
stock units within 60 days after April 27, 2020. Unless
otherwise indicated, each person had sole voting power and sole
investment power for all such shares beneficially
held.
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership(1)
|
|
Shareholders / Shareholder Groups
|
|
|
Air
T, Inc., et al.
|
3,850,282(2)
|
31.8%
|
3524
Airport Road
|
|
|
Maiden,
NC 28650
|
|
|
|
|
|
Cable
Car Capital LLC
|
1,518,767(3)
|
11.0%
|
1449
Washington Street #6
|
|
|
San
Francisco, CA 94109
|
|
|
|
|
|
Renaissance
Technologies LLC
|
759,484(4)
|
6.3%
|
800
Third Avenue
|
|
|
New
York, NY 10022
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
Kristine
A. Glancy
|
244,823
|
2.0%
|
Jeffrey
A. Jagerson
|
84,818
|
*
|
Adam
D. May
|
74,567
|
*
|
Jacob
J. Berning
|
63,428
|
*
|
Loren
A. Unterseher
|
41,303
|
*
|
Rachael
B. Vegas
|
36,266
|
*
|
Chad
B. Johnson
|
*
|
*
|
|
|
|
All
current directors and executive officers as a group (7
persons)
|
545,205
|
4.5%
|
__________________________
|
|
|
(1)
Does not include
34,382, 20,434 and 11,053 common stock equivalents held by Mr.
Berning, Mr. Unterseher and Ms. Vegas, respectively, under the
Insignia Systems Inc. Deferred Compensation Plan for Directors.
These common stock equivalents carry no voting rights and the
recipient does not have the right to acquire any underlying shares
within 60 days of April 27, 2020.
(2)
Based on Amendment
No. 12 to Schedule 13D filed with the SEC on May 22, 2018 by Air
T., Groveland, and Nicholas J. Swenson, reporting ownership as of
May 21, 2018. Mr. Swenson is the Chief Executive Officer and a
director of Air T, Inc. Air T, Inc. has sole dispositive and voting
power over 3,416,114 shares and disclaims beneficial ownership of
the securities held by Groveland. Groveland owns 422,000 shares and
each of Groveland and Mr. Swenson share dispositive and voting
power over all 422,000 shares. Mr. Swenson personally owns 12,168
shares of common stock. Groveland disclaims beneficial ownership of
the securities held by Air T. Mr. Swenson disclaims beneficial
ownership of the securities held by Air T and Groveland except to
the extent of his pecuniary interest therein.
(3)
Based on Amendment
No. 10 to Schedule 13D filed with the SEC on March 19, 2020 as
updated by Form 4 filed with the SEC on April 16, 2020 by The
Funicular Fund, LP and Cable Car Capital LLC. Cable Car Capital LLC serves as investment
adviser with full discretionary authority for The Funicular Fund,
LP. Mr. Jacob Ma-Weaver is the Managing Member and investment
advisor of Cable Car Capital LLC. Cable Car Capital LLC owns 25,000
shares and The Funicular Fund, LP owns 1,493,767
shares.
(4)
Based on Amendment
No. 3 to Schedule 13G filed with the SEC on February 13, 2020 by
Renaissance Technologies LLC and Renaissance Technologies Holdings
Corporation, reporting ownership as of December 31, 2019.
Shares are beneficially owned by Renaissance Technologies Holdings
Corporation, which is a majority owner of Renaissance Technologies
LLC.
Item
13. Certain Relationships and Related Transactions, and Director
Independence
The SEC
has specific disclosure requirements covering certain types of
transactions that we engage in with our directors, executive
officers or other specified parties. The Company receives an
informational questionnaire from each director, nominee for
director, executive officer, and greater than five percent
shareholder which contains information about related-party
transactions between them and the Company. The Company’s
Audit Committee Charter assigns to the Audit Committee the
responsibility to review and approve all related-party
transactions. The
Audit
Committee reviews each related-party transaction to determine that
it is fair and reasonable to the Company, and that the price and
other terms included in any transaction are comparable to the terms
that would be included in an arms-length transaction between the
Company and an unrelated third party.
The
Company entered into the Cooperation Agreement with the Shareholder
Group on May 17, 2018. To the Company’s knowledge, as of
April 27, 2020, the Shareholder Group collectively beneficially
owned approximately 31.8% of the Company’s common stock.
Prior to the execution of the Cooperation Agreement, on
March 23, 2018, the Company received a letter from Air T
containing proposals for certain governance changes, including
changes to the composition of the Board. In response, members of
the Board, on behalf of the Company, commenced increased engagement
with representatives of Air T, including Mr. Swenson and its legal
counsel. On April 6, 2018, the Company received from the
Shareholder Group written notice of the nomination of five director
candidates, including Ms. Clarridge and Mr. Unterseher, for
election at the 2018 Annual Meeting. After substantial and
continuous engagement among representatives of the Company and
representatives of the Shareholder Group, the Company entered into
the Cooperation Agreement on May 17, 2018, to, among other
things, minimize reputational damage to the Company as a result of
a distracting and expensive potential contested proxy solicitation
and to ensure that the majority of the Board is representative of
all shareholders.
Pursuant
to the terms of the Cooperation Agreement, the Company promptly
(i) increased the size of the Board to six and
(ii) appointed Suzanne Clarridge and Mr. Unterseher to serve
as additional directors. The Cooperation Agreement resulted in Air
T’s withdrawal of its prior nomination of five director
candidates. It also required the Company to include Ms. Clarridge
and Mr. Unterseher in its slate of nominees for election at the
Company’s 2018 and 2019 Annual Meetings of Shareholders and
to solicit proxies with a recommendation that shareholders vote in
favor of their election at each such meeting. Also pursuant to the
Cooperation Agreement, our former director, Peter Zaballos retired
from the Board and all committees. Mr. Zenz retired from the Board
as of June 5, 2019.
With
respect to the annual meetings held in 2018 and 2019, the
Shareholder Group agreed to, among other things, vote in favor of
the Company’s director nominees and in accordance with the
Board’s recommendation on all other proposals. The
Shareholder Group also agreed to certain customary standstill
provisions, effective as of the date of the Cooperation Agreement
through 60 days prior to the expiration of the applicable notice
period specified in the Company’s Bylaws related to the
nominations of directors at its 2020 annual meeting of
shareholders.
During
fiscal years 2018 and 2019, the Company did not engage in any other
transaction, or series of similar transactions, to which it was a
party, in which the amount involved exceeded the lesser of $120,000
or one percent of the average of our total assets at year-end for
the last two completed fiscal years in which any of our directors,
executive officers, nominees for election as a director, beneficial
owners of more than 5% of our common stock or members of their
immediate family had a direct or indirect material interest. We do
not have any currently proposed transaction or series of similar
transactions.
Corporate Governance and Board Matters
The
business and affairs of the Company are conducted under the
direction of the Board in accordance with the Company’s
Articles of Incorporation and Bylaws, the Minnesota Business
Corporations Act, federal securities laws and regulations,
applicable Nasdaq Rules, Board committee charters and the
Company’s Code of Ethics. Members of the Board are informed
of the Company’s business through discussions with
management, by reviewing Board meeting materials provided to them
and by participating in meetings of the Board and its committees,
among other activities. Our corporate governance practices are
summarized below.
Election
to the Board of Directors
All of
the Company’s directors are elected annually. Our Bylaws, as
amended, provide that the Board shall consist of between two and no
more than nine members, as designated by resolution of the Board
from time to time.
Majority
Independent Board
The
listing rules of the Nasdaq Stock Market (“Nasdaq
Rules”) require that a majority of our Board be
“independent directors” as that term is defined in the
Nasdaq Rules. Our Board has determined that each of
Mr. Berning, Mr. Johnson, Ms. Vegas and
Mr. Unterseher are “independent
directors.”
Item 14. Principal Accountant Fees and Services
Fees Paid to Independent Registered Public Accounting
Firm
The
following table shows the fees for services rendered by our
independent registered public accounting firm, Baker Tilly Virchow
Krause, LLP, for the years ended December 31, 2019 and
2018.
|
|
|
Audit
Fees(1)
|
$144,000
|
$164,000
|
|
–
|
6,000
|
Total
|
$144,000
|
$170,000
|
________________________________________
(1)
Audit fees
represent fees for professional services provided in connection
with the audit of the Company’s financial statements and
review of quarterly financial statements.
(2)
Audit-related fees
represent fees for services relating to registration statement
filings.
Audit Committee Pre-Approval Policy
The
Company’s Audit Committee Charter states that before the
principal accountant is engaged by the Company to render audit or
non-audit services in any year, the engagement will be approved by
the Company’s Audit Committee. All of the fees paid in 2019
and 2018 were pre-approved by the Company’s Audit
Committee.
PART
IV.
Item 15. Exhibits and Financial Statement Schedules
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
|
|
Certification of
Principal Executive Officer pursuant to Section 302 of the Sarbanes
Oxley Act of 2002
|
|
|
|
Certification of
Principal Financial Officer pursuant to Section 302 of the Sarbanes
Oxley Act of 2002
|
|
+ Filed
herewith.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment
No. 1 to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
Insignia Systems,
Inc.
|
|
|
|
|
|
Dated: April
29, 2020
|
By:
|
/s/ Kristine A.
Glancy
|
|
|
|
Kristine A.
Glancy
|
|
|
|
President and Chief
Executive Officer
|
|