# Bloomia Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2010

- Company: [Bloomia Holdings, Inc.](/companies/tulp.md) (CIK 875355)
- Form: 10-Q
- Filed: 2010-05-17
- Accepted by EDGAR: May 17, 2010, 15:20 ET
- Period: 2010-03-31
- Accession: 0000897101-10-001064
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/875355/000089710110001064/insignia102435_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/875355/000089710110001064/

## Management's discussion and analysis

As filed, 12,453 characters.

### Overview

Insignia Systems, Inc. markets in-store advertising programs, services and products to retailers and consumer packaged goods manufacturers. The Company’s services and products include the Insignia Point-of-Purchase Services (POPS) in-store advertising program, thermal sign card supplies for the Company’s SIGNright and Impulse systems, Stylus software and laser printable cardstock and label supplies.

### Results of Operations

The following table sets forth, for the periods indicated, certain items in the Company’s Statements of Operations as a percentage of total net sales.

|  | Three Months Ended March 31 2010 | 2009 |
| --- | ---: | ---: |
| Net sales | 100.0% | 100.0% |
| Cost of sales | 50.2 | 47.9 |
| Gross profit | 49.8 | 52.1 |
| Operating expenses: |  |  |
| Selling | 27.8 | 24.4 |
| Marketing | 6.7 | 6.3 |
| General and administrative | 22.9 | 23.0 |
| General and administrative (insurance settlement proceeds) | — | (22.4) |
| Total operating expenses | 57.4 | 31.3 |
| Operating income (loss) | (7.6) | 20.8 |
| Other income | 0.2 | 0.5 |
| Net income (loss) | (7.4)% | 21.3% |

Decreased net sales in the first three months of 2010 compared to the first three months of 2009, combined with the effect of fixed costs in the costs of sales, resulted in a decrease in gross profit in the 2010 period. This decreased gross profit in the 2010 period, combined with higher operating expenses in the 2010 period and the insurance settlement proceeds present only in the 2009 period, resulted in a net loss in the first quarter of 2010 as compared to net income in the first quarter of 2009.

### Three Months ended March 31, 2010 Compared to Three Months Ended March 31, 2009

***Net Sales.*** Net sales for the three months ended March 31, 2010 decreased 4.9% to $5,883,000 compared to $6,186,000 for the three months ended March 31, 2009.

Service revenues from our POPSign programs for the three months ended March 31, 2010 decreased 8.8% to $5,137,000 compared to $5,631,000 for the three months ended March 31, 2009. The decrease was due to a decrease in the number of POPS signs displayed for customers (consumer packaged goods manufacturers) at stores in the Company’s retail network which was partially offset by an increase in the average price per sign.

Product sales for the three months ended March 31, 2010 increased 34.4% to $746,000 compared to $555,000 for the three months ended March 31, 2009. This was primarily due to higher sales of laser printer supplies based on increased demand for those products from one of our customers.

***Gross Profit.*** Gross profit for the three months ended March 31, 2010 decreased 9.1% to $2,930,000 compared to $3,223,000 for the three months ended March 31, 2009. Gross profit as a percentage of total net sales decreased to 49.8% for 2010 compared to 52.1% for 2009.

Gross profit from our POPSign program revenues for the three months ended March 31, 2010 decreased 11.4% to $2,701,000 compared to $3,048,000 for the three months ended March 31, 2009. The decrease was primarily due to decreased sales in 2010 combined with the effect of fixed costs. Gross profit as a percentage of POPSign program revenues decreased to 52.6% for 2010 compared to 54.1% for 2009, primarily due to the effect of fixed costs against decreased revenues.

Gross profit from our product sales for the three months ended March 31, 2010 increased 30.9% to $229,000 compared to $175,000 for the three months ended March 31, 2009. The increase was primarily due to increased sales combined with fixed costs. Gross profit as a percentage of product sales decreased to 30.7% for 2010 compared to 31.5% for 2009, primarily due to a change in the product mix towards lower margin products.

### Operating Expenses

***Selling.*** Selling expenses for the three months ended March 31, 2010 increased 8.6% to $1,636,000 compared to $1,507,000 for the three months ended March 31, 2009, primarily due to increased sales staffing levels and increased travel related expenses which were partially offset by decreased sales commissions in 2010 due to decreased sales. Selling expenses as a percentage of total net sales increased to 27.8% in 2010 compared to 24.4% in 2009, due to the increased costs discussed above in combination with the effect of decreased sales.

***Marketing.*** Marketing expenses for the three months ended March 31, 2010 increased 1.5% to $395,000 compared to $389,000 for the three months ended March 31, 2009. Marketing expenses as a percentage of total net sales increased to 6.7% in 2010 compared to 6.3% in 2009, due to the slightly increased costs combined with the effect of decreased sales.

***General and administrative.*** General and administrative expenses for the three months ended March 31, 2010 decreased 5.5% to $1,347,000 compared to $1,425,000 for the three months ended March 31, 2009, primarily due to decreased legal expense which more than offset increased staff levels and increased travel related expenses. General and administrative expenses as a percentage of total net sales decreased to 22.9% in 2010 compared to 23.0% in 2009, due to the factors described above in combination with decreased sales in 2010. Legal fees were $523,000 for the three months ended March 31, 2010, compared to $742,000 for the three months ended March 31, 2009. The legal fees in each quarter were incurred primarily in connection with the News America lawsuit described in Note 2 to the financial statements. We currently expect the amount of additional legal fees that will be incurred in connection with the ongoing lawsuit to be significant throughout the remainder of 2010 and into 2011 as trial preparation continues and as the trial is conducted. A negative outcome of this litigation could affect long-term competitive aspects of the Company’s business.

***Insurance settlement proceeds.*** The Company received a payment of $1,387,000 in the first quarter of 2009 from an insurer as part of a settlement of the Company’s claim that the insurer owed the Company defense costs for claims asserted against the Company and one of its officers in the News America litigation.

***Other Income.*** Other income for the three months ended March 31, 2010 was $13,000 compared to $28,000 for the three months ended March 31, 2009. The difference was due primarily to decreased interest income in the 2010 period as a result of lower interest rates which more than offset the higher cash, cash equivalents and short-term investment balances in the 2010 period.

***Income Taxes.*** The Company carried a full valuation allowance against its net deferred tax asset at both March 31, 2010 and March 31, 2009. The Company did not record income tax expense for the three months ended March 31, 2010, due to the net loss for the period. The Company did not record income tax expense for the three months ended March 31, 2009 due to tax losses which resulted in the elimination of any federal alternative minimum tax and state income taxes. The valuation allowance has been established due to uncertainties regarding the realization of deferred tax assets. The Company updates its deferred tax asset and valuation allowance analysis quarterly to confirm the appropriateness of its valuation allowance.

***Net Income (Loss).*** Our net loss for the three months ended March 31, 2010 was $(435,000) compared to net income of $1,317,000 for the three months ended March 31, 2009.

### Liquidity and Capital Resources

The Company has financed its operations with proceeds from public and private stock sales and sales of its services and products. At March 31, 2010, working capital was $10,501,000 compared to $10,716,000 at December 31, 2009. During the three months ended March 31, 2010, cash and cash equivalents decreased $2,164,000 from $8,797,000 at December 31, 2009 to $6,633,000 at March 31, 2010.

Net cash used in operating activities during the three months ended March 31, 2010, was $2,292,000. The decrease in cash and cash equivalents from operating activities primarily resulted from the net loss of $(435,000) and the $(2,049,000) impact of changes in operating assets and liabilities which were partially offset by the $192,000 noncash impact of depreciation and stock-based compensation included in the net loss. Accrued liabilities decreased by $1,223,000 from December 31, 2009 to March 31, 2010, primarily as the result of accrued retailer payments which had accrued during 2009 and which were payable after December 31, 2009.

Net cash of $98,000 was used in investing activities during the three months ended March 31, 2010, due to short-term investment activity and $198,000 of expenditures for property and equipment. Purchases of short-term investments of $1,300,000 and proceeds of $1,400,000 during the quarter consisted entirely of purchases and redemptions of twenty-six week certificates of deposit. Capital expenditures of $198,000 during the quarter consisted of digital printing related equipment and related leasehold modifications as well as information technology equipment and software. The Company expects to make capital expenditures of up to $200,000 for the remainder of 2010.

Net cash of $226,000 was provided by financing activities during the three months ended March 31, 2010 as a result of $638,000 of proceeds from the issuance of common stock from the exercise of employee stock options and the employee stock purchase plan which was partially offset by $412,000 of stock repurchased by the Company pursuant to a plan adopted on February 23, 2010. The stock repurchase plan allows for the repurchase of up to $2,000,000 of the Company’s common stock on or before January 31, 2011.

The Company believes that based upon current business conditions, its existing cash balance and future cash from operations will be sufficient for its cash requirements for the remainder of 2010. However, there can be no assurances that this will occur or that the Company will be able to secure additional financing from public or private stock sales or from other financing agreements if needed.

### Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 to the annual financial statements as of and for the year ended December 31, 2009, included in our Form 10-K filed with the Securities and Exchange Commission on March 31, 2010. We believe our most critical accounting policies and estimates include the following:

- revenue recognition;
- allowance for doubtful accounts;
- accounting for deferred income taxes; and
- stock-based compensation.

### Cautionary Statement Regarding Forward Looking Information

Statements made in this quarterly report on Form 10-Q, in the Company’s other SEC filings, in press releases and in oral statements to shareholders and securities analysts, which are not statements of historical or current facts, are “forward looking statements.” Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from the results or performance expressed or implied by such forward looking statements. The words “believes,” “expects,” “anticipates,” “seeks” and similar expressions identify forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statement was made. These statements are subject to the risks and uncertainties that could cause actual results to differ materially and adversely from the forward looking statements. These risks and uncertainties include, but are not limited to, the risks presented in our Annual Report on Form 10-K for the year ended December 31, 2009, and updated in Part II, Item 1A of this Quarterly Report on Form 10-Q.

## Controls and procedures

As filed, 1,646 characters.

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. Disclosure controls and procedures ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to the Company’s management, including its Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosures.

(b) Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed May 17, 2010.
Source: SEC EDGAR, the filing index for accession 0000897101-10-001064. Last ingested by Listed: Nov 12, 2026, 22:21 ET. No prices; not investment advice.