# Bloomia Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2010

- Company: [Bloomia Holdings, Inc.](/companies/tulp.md) (CIK 875355)
- Form: 10-Q
- Filed: 2010-08-09
- Accepted by EDGAR: Aug 9, 2010, 20:21 ET
- Period: 2010-06-30
- Accession: 0000897101-10-001591
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/875355/000089710110001591/insignia103820_10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/875355/000089710110001591/

## Management's discussion and analysis

As filed, 17,618 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 June 30 2010 | 2009 | Six Months Ended June 30 2010 | 2009 |
| --- | ---: | ---: | ---: | ---: |
| Net sales | 100.0% | 100.0% | 100.0% | 100.0% |
| Cost of sales | 47.8 | 47.6 | 48.8 | 47.8 |
| Gross profit | 52.2 | 52.4 | 51.2 | 52.2 |
| Operating expenses: |  |  |  |  |
| Selling | 21.3 | 26.1 | 24.0 | 25.2 |
| Marketing | 5.0 | 6.0 | 5.7 | 6.1 |
| General and administrative | 18.1 | 18.1 | 20.1 | 20.7 |
| Insurance settlement proceeds | — | — | — | (11.6) |
| Total operating expenses | 44.4 | 50.2 | 49.8 | 40.4 |
| Operating income | 7.8 | 2.2 | 1.4 | 11.8 |
| Other income | — | 0.3 | 0.1 | 0.4 |
| Income before taxes | 7.8 | 2.5 | 1.5 | 12.2 |
| Income tax expense | — | 0.6 | — | 0.3 |
| Net income | 7.8% | 1.9% | 1.5% | 11.9% |

10

Increased net sales in the first six months of 2010 compared to the first six months of 2009 resulted in increased gross profit for the 2010 period. This increased gross profit for the 2010 period was largely offset by increased operating expenses for the 2010 period. Also, during the first six months of 2009 the Company received proceeds of $1,387,000 as part of a settlement in the Company’s claims against one of its insurers for defense costs in the News America litigation. Net income for the first six months of 2010 was $179,000 higher than net income for the first six months of 2009 when excluding the insurance settlement proceeds for the first six months of 2009.

### Three and Six Months ended June 30, 2010 Compared to Three and Six Months Ended June 30, 2009

***Net Sales.*** Net sales for the three months ended June 30, 2010, increased 44.2% to $8,326,000 compared to $5,773,000 for the three months ended June 30, 2009. Net sales for the six months ended June 30, 2010, increased 18.8% to $14,209,000 compared to $11,959,000 for the six months ended June 30, 2009.

Service revenues from our POPSign programs for the three months ended June 30, 2010, increased 43.1% to $7,562,000 compared to $5,285,000 for the three months ended June 30, 2009, primarily due to an increase in the number of POPSign programs executed for customers (consumer packaged goods manufacturers) at stores in the Company’s retail network. Service revenues from our POPSign programs for the six months ended June 30, 2010, increased 16.3% to $12,699,000 compared to $10,916,000 for the six months ended June 30, 2009. The increase in service revenues for the six month 2010 period was due to an increase in the number of POPSign programs executed for customers and an increase in the average program price.

Product sales for the three months ended June 30, 2010, increased 56.6% to $764,000 compared to $488,000 for the three months ended June 30, 2009. Product sales for the six months ended June 30, 2010, increased 44.8% to $1,510,000 compared to $1,043,000 for the six months ended June 30, 2009. The increases in both 2010 periods were 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 June 30, 2010, increased 43.6% to $4,345,000 compared to $3,025,000 for the three months ended June 30, 2009. Gross profit for the six months ended June 30, 2010, increased 16.4% to $7,275,000 compared to $6,248,000 for the six months ended June 30, 2009. Gross profit as a percentage of total net sales decreased to 52.2% for the three months ended June 30, 2010, compared to 52.4% for the three months ended June 30, 2009. Gross profit as a percentage of total net sales decreased to 51.2% for the six months ended June 30, 2010, compared to 52.2% for the six months ended June 30, 2009.

Gross profit from our POPSign program revenues for the three months ended June 30, 2010, increased 42.5% to $4,080,000 compared to $2,863,000 for the three months ended June 30, 2009. Gross profit from our POPSign program revenues for the six months ended June 30, 2010, increased 14.7% to $6,781,000 compared to $5,911,000 for the six months ended June 30, 2009. The increases in both 2010 periods were primarily due to increased sales which were partially offset by increased retailer expenses. Gross profit as a percentage of POPSign program revenues for the three months ended June 30, 2010, decreased to 54.0% compared to 54.2% for the three months ended June 30, 2009. Gross profit as a percentage of POPSign program revenues for the six months ended June 30, 2010, decreased to 53.4% compared to 54.2% for the six months ended June 30, 2009. The decreases in gross profit as a percentage of POPSign program revenues in both 2010 periods were primarily due to the effect of increased variable retailer expenses which were partially offset by the effect of fixed costs.

Gross profit from our product sales for the three months ended June 30, 2010, increased 63.6% to $265,000 compared to $162,000 for the three months ended June 30, 2009. Gross profit from our product sales for the six months ended June 30, 2010, increased 46.6% to $494,000 compared to $337,000 for the six months ended June 30, 2009. The increases in both 2010 periods were primarily due to increased sales. Gross profit as a percentage of product sales was 34.7% for the three months ended June 30, 2010, compared to 33.2% for the three months ended June 30, 2009. Gross profit as a percentage of product sales was 32.7% for the six months ended June 30, 2010, compared to 32.3% for the six months ended June 30, 2009. The increases in both 2010 periods were due to the effect of fixed costs which more than offset the effect of significantly increased sales of lower margin products.

### Operating Expenses

***Selling.*** Selling expenses for the three months ended June 30, 2010, increased 17.5% to $1,775,000 compared to $1,511,000 for the three months ended June 30, 2009. Selling expenses for the six months ended June 30, 2010, increased 13.0% to $3,411,000 compared to $3,018,000 for the six months ended June 30, 2009. Increases in the 2010 periods were primarily due to increased sales commissions, increased staffing levels and benefits, and increased travel related expenses. The increased sales commissions were due to increased POPSign program revenues.

Selling expenses as a percentage of total net sales decreased to 21.3% for the three months ended June 30, 2010, compared to 26.1% for the three months ended June 30, 2009. Selling expenses as a percentage of total net sales decreased to 24.0% for the six months ended June 30, 2010, compared to 25.2% for the six months ended June 30, 2009. The decreases in the selling expenses as a percentage of total net sales in the 2010 periods were due to the effect of the increased costs discussed above in combination with the effect of increased sales.

***Marketing.*** Marketing expenses for the three months ended June 30, 2010, increased 19.1% to $411,000 compared to $345,000 for the three months ended June 30, 2009. Marketing expenses for the six months ended June 30, 2010, increased 9.8% to $806,000 compared to $734,000 for the six months ended June 30, 2009. Increased expenses in the 2010 periods were primarily the result of increased staffing levels, employee benefit costs and data acquisition costs.

Marketing expenses as a percentage of total net sales decreased to 5.0% for the three months ended June 30, 2010, compared to 6.0% for the three months ended June 30, 2009. Marketing expenses as a percentage of total net sales decreased to 5.7% for the six months ended June 30, 2010, compared to 6.1% for the six months ended June 30, 2009. The decreases in marketing expenses as a percentage of total net sales in the 2010 periods were primarily due to the effect of the increased costs discussed above in combination with the effect of increased sales.

***General and administrative.*** General and administrative expenses for the three months ended June 30, 2010, increased 44.4% to $1,508,000 compared to $1,044,000 for the three months ended June 30, 2009. General and administrative expenses for the six months ended June 30, 2010, increased 15.6% to $2,855,000 compared to $2,469,000 for the six months ended June 30, 2009. The increase in the second quarter 2010 period was primarily due to increased legal expense, staffing levels and travel related expenses. The increased legal expenses were related to the News America litigation. The increase in the six month 2010 period was primarily due to increased staffing levels and travel related expenses.

General and administrative expenses as a percentage of total net sales was 18.1% for both the three months ended June 30, 2010 and June 30, 2009. General and administrative expenses as percentage of total net sales decreased to 20.1% for the six months ended June 30, 2010, compared to 20.7% for the six months ended June 30, 2009. The lack of change in the second quarter 2010 period and the decrease in the six month 2010 period were primarily due to the increased costs discussed above in relation to increased sales.

Legal fees and expenses were $566,000 for the three months ended June 30, 2010, compared to $317,000 for the three months ended June 30, 2009. Legal fees and expenses were $1,089,000 for the six months ended June 30, 2010, compared to $1,059,000 for the six months ended June 30, 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 June 30, 2010, was $3,000 compared to $21,000 for the three months ended June 30, 2009. Other income for the six months ended June 30, 2010, was $16,000 compared to $49,000 for the six months ended June 30, 2009. Lower other income in the 2010 periods was primarily due to decreased interest income in the 2010 periods as a result of lower interest rates which more than offset the higher cash, cash equivalents and short-term investment balances in the 2010 periods.

***Income Taxes.*** The Company carried a full valuation allowance against its net deferred tax asset at both June 30, 2010, and June 30, 2009. The Company did not record income tax expense for the three and six months ended June 30, 2010, due to the combination of the full valuation allowance and the lack of taxable income for the period. The Company recorded income tax expense of $36,000 for the three and six months ended June 30, 2009, related to alternative minimum tax liability. 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.*** Net income for the three months ended June 30, 2010, was $654,000 compared to $110,000 for the three months ended June 30, 2009. Net income for the six months ended June 30, 2010, was $219,000 compared to $1,427,000 for the six months ended June 30, 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 June 30, 2010, working capital was $11,463,000 compared to $10,716,000 at December 31, 2009. During the six months ended June 30, 2010, cash, cash equivalents and short-term investments decreased $1,548,000 from $13,197,000 at December 31, 2009, to $11,649,000 at June 30, 2010.

Net cash used in operating activities during the six months ended June 30, 2010 was $1,513,000. Net income of $219,000 and non-cash expenses of $563,000 (depreciation and stock-based compensation expense) for the six months ended June 30, 2010, were more than offset by changes in operating assets and liabilities, primarily decreases in accrued liabilities and deferred revenue and an increase in accounts receivable. Accounts receivable increased $1,700,000 during the six months ended June 30, 2010, primarily due to higher revenue in the two months preceding June 30, 2010, as compared to the two months preceding December 31, 2009, and due to variability in customer billing arrangements and terms. The Company expects accounts receivable, accounts payable, accrued liabilities and deferred revenue to fluctuate during 2010 depending on the level of quarterly POPSign revenues and related business activity as well as billing arrangements with customers.

Net cash of $725,000 was provided by investing activities during the six months ended June 30, 2010, due to short-term investment activity and expenditures of $275,000 for property and equipment. Purchases of short-term investments of $2,600,000 and proceeds of $3,600,000 during the six months consisted entirely of purchases and redemptions of twenty-six week certificates of deposit. Capital expenditures of $275,000 during the six months consisted of digital printing related equipment and related leasehold modifications as well as information technology equipment and software. The Company expects capital expenditures of up to $150,000 for the remainder of 2010.

Net cash of $240,000 was provided by financing activities during the six months ended June 30, 2010, as a result of $714,000 of proceeds (net) from the issuance of common stock from the exercise of stock options and the employee stock purchase plan which was partially offset by $474,000 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 in the foreseeable future. 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, 1,645 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 are 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 Aug 9, 2010.
Source: SEC EDGAR, the filing index for accession 0000897101-10-001591. Last ingested by Listed: Oct 24, 2026, 14:58 ET. No prices; not investment advice.