# Bloomia Holdings, Inc.: Form 10-K for the period ended Dec 31, 2014

- Company: [Bloomia Holdings, Inc.](/companies/tulp.md) (CIK 875355)
- Form: 10-K
- Filed: 2015-03-04
- Accepted by EDGAR: Mar 4, 2015, 20:57 ET
- Period: 2014-12-31
- Accession: 0001104659-15-016689
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/875355/000110465915016689/a14-26544_110k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/875355/000110465915016689/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2014-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2014-10-01 to 2014-12-31 | $6.0m | us-gaap:SalesRevenueNet |
| Revenue | 12 months, 2014-01-01 to 2014-12-31 | $26.3m | us-gaap:SalesRevenueNet |
| Cost of revenue | 12 months, 2014-01-01 to 2014-12-31 | $14.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2014-10-01 to 2014-12-31 | $2.5m | us-gaap:GrossProfit |
| Gross profit | 12 months, 2014-01-01 to 2014-12-31 | $11.8m | us-gaap:GrossProfit |
| Operating income | 12 months, 2014-01-01 to 2014-12-31 | $467.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 12 months, 2014-01-01 to 2014-12-31 | $298.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2014-10-01 to 2014-12-31 | −$398.0k | us-gaap:NetIncomeLoss |
| Net income | 12 months, 2014-01-01 to 2014-12-31 | $211.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2014-10-01 to 2014-12-31 | −$0.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 12 months, 2014-01-01 to 2014-12-31 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2014-10-01 to 2014-12-31 | −$0.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 12 months, 2014-01-01 to 2014-12-31 | $0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2014-01-01 to 2014-12-31 | 12,873,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2014-01-01 to 2014-12-31 | −$1.6m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 12 months, 2014-01-01 to 2014-12-31 | $427.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 12 months, 2014-01-01 to 2014-12-31 | $2.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2014-12-31 | $7.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2014-12-31 | $26.0m | us-gaap:AssetsCurrent |
| Total assets | at 2014-12-31 | $30.5m | us-gaap:Assets |
| Current liabilities | at 2014-12-31 | $5.3m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2014-12-31 | $24.6m | us-gaap:StockholdersEquity |

## Business

As filed, 11,479 characters.

### General

Insignia Systems, Inc. (referred to in this Annual Report on Form 10-K as “Insignia,” “we,” “us,” “our” and the “Company”) is a developer and marketer of innovative in-store products, programs, and services that help consumer goods manufacturers and retail partners drive sales at the point of purchase. The Company was incorporated in 1990, and since 1998, the Company focuses on managing a retail network; now made up of over 23,000 store locations, for the primary purpose of providing turn-key at-shelf market access for consumer packaged goods (“CPG”) manufacturers’ marketing programs. Insignia provides participating retailers with benefits including incremental revenue, incremental sales opportunities, increased shopper engagement in-store, and custom creative development and other in-kind services.

Insignia’s primary product is the Point-Of-Purchase Services (POPS®) in-store marketing program. Insignia POPS® program is a national, account-specific, shelf-edge advertising and promotion tactic. Internal testing has indicated the program can deliver significant sales impact for the featured brand. The program allows manufacturers to deliver vital product information to consumers at the point-of-purchase, and to leverage the local retailer brand and store-specific prices to provide a unique “call to action” that draws attention to the featured brand and triggers a purchase decision. CPG customers benefit from Insignia’s nimble operational capabilities, which include short lead times, in-house graphic design capabilities, post-program analytics, and micro-marketing capabilities such as variable or bilingual messaging.

In October 2014, the Company announced the introduction of a new product, The Like MachineTM, which is an innovative new media that harnesses the power of social media, consumer engagement, and word-of-mouth recommendation at the point of purchase. We expect to more fully roll out this product during 2015. The Company licenses this product from TLM Holdings, LLC, a company in which Insignia’s Chief Sales and Marketing Officer, Tim Halfmann, serves as a non-operating principal.

The Company’s internet address is www.insigniasystems.com. The Company has made all of the reports it files with the SEC available free of charge on its Web site. The Company’s Web site is not incorporated by reference into this Report on Form 10-K. Copies of reports can also be obtained free of charge by requesting them from Insignia Systems, Inc., 8799 Brooklyn Boulevard, Minneapolis, Minnesota 55445; Attention: CFO; telephone 763-392-6200.

### Industry and Market Background

In 2013, Point-Of-Purchase Advertising International (POPAI), an industry non-profit trade association, conducted a Shopper Engagement Study that showed more than 76% of brand purchase decisions are made in-store. As a result, product manufacturers seek access to in-store vehicles that prompt consumers to consider, and remind them to buy, their brand. Insignia is usually engaged as part of an overall, mixed-media, brand marketing campaign. Our programs offer manufacturers the unique benefit of helping to “close the sale” at the point of purchase, within the brick-and-mortar retail environment.

### Company Products

### Insignia’s POPSign Program and Brand-Equity Signage

Insignia’s POPSign program is an in-store, shelf-edge, point-of-purchase advertising and promotion tactic designed to assist CPG manufacturers in achieving marketing objectives. Depending on the design and format, Insignia POPSigns can deliver information from manufacturers such as product uses and features, nutritional information, advertising taglines, product images, or usage photos. The differentiating feature of Insignia POPSigns is that store-specific prices from the retailer, and each retailer’s unique logo, are combined on the sign. Signs are installed in close proximity to the manufacturer’s product in participating stores, and are maintained in two-week cycle increments. The Company’s POPSign program offers special features and enhancements, such as ShapePOPS®, which is an enhancement to its Color POPSigns that were developed in 2011.

In addition to POPSigns, Insignia offers a brand-equity signage program (without featured price or retailer logo) in a subset of managed retailers. This program offers CPG customers expanded market access for their advertising objectives.

Manufacturers pay program rates based upon the directed number of cycles and retailer/store count. The Company collects and organizes data from the manufacturer as well as the participating retailers, designs and prints the signage, and delivers signage. Depending on the agreement with the retailer, either a third-party professional installer or store personnel use placement instructions to install the correct signage at the shelf during the correct timeframe.

### Legacy Products

Insignia offers custom design, printing and store signage programs directly to retailers that seek effective ways to communicate with their shoppers in store. Products include adhesive and non-adhesive supplies in a variety of colors, sizes and weights. Prior to 1996, the Company’s primary product offering was the Impulse Retail System, a system developed by an independent product design and development firm. The Company continues to sell cardstock, maintenance agreements and supplies related to the Impulse Retail System to U.S. and international customers. Cardstock for the Impulse Retail System is sold by the Company in a variety of sizes and colors that can be customized to include pre-printed custom artwork, such as a retailer’s logo. Approximately 7% of 2014 revenues came from the sale of these legacy products. The Company expects this percentage to be comparable in 2015.

### Marketing and Sales

The Company primarily markets and sells its programs to CPG manufacturers through a direct sales force. Insignia has direct relationships with many of the top 100 CPG manufacturers. Marketing support include customized sales pitches, selling tools such as rich media presentations, and online marketing efforts. The Company also maintains direct relationships with retailers in the network, through a direct field force as well as an in-house support team that enables retailer operations.

The participating retailer network is managed and maintained through direct relationships, and also through contracts with Valassis Sales and Marketing Services, Inc. (Valassis) and News America Marketing In-Store, LLC (News America).

As of December 31, 2013, the Company and Valassis were parties to an Exclusive Reseller Agreement, as amended, which defined a strategic alliance between the companies and was set to remain effective through December 31, 2017. In February 2014, the Company and Valassis entered into a new Retail Access and Distribution Agreement that replaced all prior agreements. As a result of the new agreement, Valassis is no longer the exclusive reseller of the Company’s POPSigns and the Company has access to all CPG manufacturers for the sale of POPSigns, in exchange for total consideration of $250,000, which was paid in 2014.

During 2014 and 2013, foreign sales accounted for less than 1% of total net sales each year. The Company expects sales to foreign distributors will be less than 1% of total net sales in 2015.

### Competition

The Insignia POPSign program provided over 93% of the Company’s total net sales for 2014. The POPSign program faces intense competition for the marketing expenditures of branded product manufacturers for at-shelf advertising-related signage. In particular, the Company faces significant competition from News America, which also provides at-shelf advertising and promotional signage. Although settlement of prior litigation with News America resulted in a 10-year agreement through 2021 that provides the Company with additional opportunities to compete by offering signs with price in specific parts of News America’s retail network, the Company will continue to compete for advertising dollars with News America’s other at-shelf advertising and promotional signage offerings.

The Company believes the main strengths of the Insignia POPSign program in relation to its competitors are:

- Depending on manufacturers’ objectives, benefits to the brand that range from sales lift, awareness building, program ROI, new tier generation, or support of retailer programs
- Managing and providing turn-key access to a broad network of retailers in support of objectives listed above; including smaller regional or independent retailers, which tend to be under-served and difficult to aggregate at the national level
- Variable messaging capabilities including bi-lingual targeting
- Shorter lead times on program execution

### Intellectual Property: Patents and Trademarks

The Company has developed and uses a number of trademarks, service marks, slogans, logos and other commercial symbols to advertise and sell its products. The Company owns U.S. registered trademarks for Insignia Systems, Inc.® (and Design), Insignia POPS®, Insignia POPSign®, Insignia ShelfPOPS®, Stylus®, SIGNright®, Impulse®, DuraSign®, I-Care®, Color POPSign®, BannerPOPS®, BrandPOPS®, EquityPOPS®, CategoryPOPS®, and ShapePOPS®.

The Company licenses the right to use a patented barcode on the sign cards for the Company’s Impulse Retail System. Revenues from this product line and royalties paid under the license agreement are not material in the aggregate.

Certain employees are required to enter into nondisclosure and invention assignment agreements. Customers, vendors and other third parties also must agree to nondisclosure restrictions to prevent unauthorized disclosure of our trade secrets or other confidential or proprietary information.

### Product Development

Product and services enhancements are developed internally and externally and include proprietary data management, operations systems, and design guidance.

### Customers

During the year ended December 31, 2014, two customers accounted for 33% and 10% of the Company’s total net sales. At December 31, 2014, one customer represented 48% of the Company’s total accounts receivable. During the year ended December 31, 2013, one customer accounted for 31% of the Company’s total net sales. At December 31, 2013, this customer represented 47% of the Company’s total accounts receivable. Additionally, another customer accounted for 14% of the Company’s total accounts receivable as of December 31, 2013.

The Company’s results of operations fluctuate from quarter to quarter as a result of:

- Promotional timing chosen by CPG customers;
- Underlying performance and quality of featured product chosen by CPG customers;
- CPG customer budget fluctuations and amount allocated to in-store tactics vs. other tactics;
- Quantity and quality of retailers maintained through the Company’s network;
- Sales incentives to sales staff and strategic partners; and
- Minimum program level commitments to retailers.

### Environmental Matters

We believe our operations are in compliance with all applicable environmental regulations within the jurisdictions in which we operate. The costs of compliance with these regulations are not deemed material.

### Employees

As of February 27, 2015, the Company had 65 employees, including 62 full-time and three part-time employees. We believe relations with our employees are good.

### Segment Reporting

The Company operates in a single reportable segment.

## Risk factors

As filed, 7,442 characters.

### Forward-Looking Statements

Statements made in this Annual Report on Form 10-K, in the Company’s other SEC filings, in press releases and in oral statements to shareholders and securities analysts that 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 that 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 described below.

Our business faces significant risks, including the risks described below. If any of the events or circumstances described in the following risks occurs, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline.

### Our Results Are Dependent on Our Manufacturing Partners’ Continued Use of Our POPS Program

We are largely dependent on our POPS program, which represents approximately 93% and 94% of the total net sales for fiscal 2014 and 2013, respectively. The POPS program is sold primarily to CPG manufacturers. During fiscal 2014, two customers accounted for approximately 33% and 10% of our total net sales and during fiscal 2013, one customer accounted for approximately 31% of our total net sales. Additionally, changes in economic conditions could result in reductions in advertising and promotional expenditures by branded product manufacturers, which may result in decreased spending for the in-store advertising services we offer. Should these manufacturers no longer perceive sufficient value in the POPS program, or if our POPS program does not continue to result in product sales increases, our business and results of operations would be adversely affected due to our heavy dependence on this program.

### We Are Dependent on Our Contracts with Retailers and Our Ability to Renew Those Contracts When They Expire

On an ongoing basis, we negotiate renewals of various retailer contracts that allow us access to place signs at shelf in their stores. Some of our retailer contracts require us to guarantee minimum payments. If we are unable to offer guarantees at the required levels in the new contracts, and the contracts are not renewed because of that reason or because of other reasons, it will have a material adverse effect on our operations and financial condition.

Our POPS business and results of operations could be adversely affected if the number of retailer partners decreases significantly or if the retailer partners fail to continue to maintain POPSigns at the shelf in their stores.

### Our Results Are Dependent on the Success of Our Business Relationship with News America

Our results depend, in part, on the success of our sales and marketing efforts as News America’s exclusive agent for signs with price into the News America network of retailers and upon our ability to successfully sell programs into this network. Additionally, if disputes with News America arise in the future regarding the operational aspects of our agreement, it could have an adverse effect on the Company.

### We Face Significant Competition

We face significant competition from News America, who also provides at-shelf advertising and promotional signage. Although the settlement with News America resulted in a 10-year agreement through 2021 that provides us additional opportunities to compete by offering signs with price in News America’s network, we will continue to compete for advertising dollars with News America’s other at-shelf advertising and promotional signage offerings. News America has significantly greater financial resources that can be used to develop and market their products. Should our competition succeed in obtaining more of the at-shelf advertising business from our current customers, our revenues and related operations would be adversely affected.

### We Have Been Involved In Major Litigation

We had been involved in major litigation with News America for several years. During 2011, the Company and News America entered into a settlement agreement to resolve the antitrust and false advertising lawsuit that had been outstanding for several years. Although the Company obtained a significant settlement in 2011, if future disputes with News America, or other companies arise, it could have a material adverse effect on our Company.

### Our Customers and Retailers May Be Susceptible To Changes in Economic Conditions

Our revenues are affected by our customers’ marketing and advertising spending and our revenues and results of operations may be subject to fluctuations based upon general economic conditions. Another economic downturn may reduce demand for our products and services or depress pricing of those products and services and have an adverse effect on our results of operations. Retailers may be impacted by changes in consumer spending as well, which may adversely impact our ability to renew contracts with our existing retailers as well as contract with new retailers on terms that are acceptable to us. In addition, if we are unable to successfully anticipate changing economic conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.

### Our Results of Operations May Be Subject To Significant Fluctuations

Our quarterly and annual operating results have fluctuated in the past and may vary in the future due to a wide variety of factors including:

- the addition or loss of contracts with retailers;
- the loss of customers or reduction our customers’ spending with us;
- the timing of seasonal events for customers;
- the timing of new retail stores being added;
- costs of evaluating and developing new products;
- the timing of additional selling, marketing and general and administrative expenses; and
- competitive conditions in our industry.

Due to these factors, our quarterly and annual net sales, expenses and results of operations could vary significantly in the future and this could adversely affect the market price of our common stock.

### Investment in Our Stock Could Result in Fluctuating Returns

During 2014, the sale prices of our common stock as reported by the NASDAQ Stock Market ranged from a low of $2.67 to a high of $4.45. We believe factors such as the fluctuations in our quarterly and annual operating results described above, the market’s acceptance of our services and products, the performance of our business relative to market expectations, as well as general volatility in the securities markets, could cause the market price of our common stock to fluctuate substantially. In addition, the stock markets have experienced price and volume fluctuations, resulting in changes in the market prices of the stock of many companies, which may not have been directly related to the operating performance of those companies.

## Properties

As filed, 492 characters.

The Company currently leases approximately 41,000 square feet of office and warehouse space in suburban Minneapolis, Minnesota, through February 29, 2016. The Company believes that its currently leased space will meet the Company’s foreseeable needs.

Effective in December 2014, the Company abandoned a portion of its office space for the remaining lease term, which resulted in an expense of approximately $118,000, all of which was recorded as an accrued liability as of December 31, 2014.

## Legal proceedings

As filed, 165 characters.

From time to time, the Company is subject to various legal matters in the normal course of business. The Company currently has no material pending legal proceedings.

## Management's discussion and analysis

As filed, 15,450 characters.

The following discussion should be read in conjunction with the financial statements and the related notes included in this Annual Report. This Annual Report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those in such forward-looking statements as a result of many factors, including those discussed in “Forward-Looking Statements” and elsewhere in this Annual Report.

### Results of Operations

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

| For the Years Ended December 31 | 2014 | 2013 |
| --- | ---: | ---: |
| Net sales | 100.0% | 100.0% |
| Cost of sales | 55.2 | 54.1 |
| Gross profit | 44.8 | 45.9 |
| Operating expenses: |  |  |
| Selling | 22.1 | 19.8 |
| Marketing | 5.8 | 3.1 |
| General and administrative | 15.1 | 14.4 |
| Total operating expenses | 43.0 | 37.3 |
| Operating income | 1.8 | 8.6 |
| Other income | 0.2 | 0.1 |
| Income before taxes | 2.0 | 8.7 |
| Income tax expense | 1.2 | 3.7 |
| Net income | 0.8% | 5.0% |

### Fiscal 2014 Compared to Fiscal 2013

***Net Sales.*** Net sales for the year ended December 31, 2014 decreased 5.2% to $26,305,000 compared to $27,755,000 for the year ended December 31, 2013.

Service revenues from our POPSign program for the year ended December 31, 2014 decreased 6.3% to $24,473,000 compared to $26,128,000 for the year ended December 31, 2013. The decrease was primarily due to cuts in spending by two of the Company’s larger CPG customers, partially offset by increases in revenue driven by new customers.

Product sales for the year ended December 31, 2014 increased 12.6% to $1,832,000 compared to $1,627,000 for the year ended December 31, 2013. The increase was primarily due to higher sales of laser sign card supplies.

***Gross Profit.*** Gross profit for the year ended December 31, 2014 decreased 7.6% to $11,782,000 compared to $12,746,000 for the year ended December 31, 2013. Gross profit as a percentage of total net sales decreased to 44.8% for 2014 compared to 45.9% for 2013.

Gross profit from our POPSign program revenues for the year ended December 31, 2014 decreased 8.9% to $11,212,000 compared to $12,302,000 for the year ended December 31, 2013. The decrease in gross profit from our POPSign programs was primarily due to decreased revenues and the effect of fixed costs being spread over lower sales. Gross profit as a percentage of POPSign program revenues decreased to 45.8% for 2014 compared to 47.1% for 2013, due primarily to the factors described above.

Gross profit from our product sales for the year ended December 31, 2014 increased 28.4% to $570,000 compared to $444,000 for the year ended December 31, 2013. Gross profit as a percentage of product sales increased to 31.1% for 2014 compared to 27.3% for 2013. The increases were primarily due to increased sales and the effect of fixed costs being spread over higher sales.

### Operating Expenses

***Selling.*** Selling expenses for the year ended December 31, 2014 increased 5.8% to $5,822,000 compared to $5,505,000 for the year ended December 31, 2013, primarily due to increased staffing throughout the 2014 period, as well as increased travel costs. Selling expenses as a percentage of total net sales increased to 22.1% in 2014 compared to 19.8% in 2013, primarily due to decreased revenues and factors described above.

***Marketing.*** Marketing expenses for the year ended December 31, 2014 increased 78.4% to $1,527,000 compared to $856,000 for the year ended December 31, 2013. Increased marketing expense was primarily the result of increased staffing, new product introductions and other marketing initiatives. Marketing expenses as a percentage of total net sales increased to 5.8% in 2014 compared to 3.1% in 2013, primarily due to decreased revenues and the factors described above.

***General and Administrative.*** General and administrative expenses for the year ended December 31, 2014 decreased 0.6% to $3,966,000 compared to $3,988,000 for the year ended December 31, 2013. General and administrative expenses as a percentage of total net sales increased to 15.1% in 2014 compared to 14.4% in 2013, primarily due to decreased revenues.

***Other Income.*** Other income for the year ended December 31, 2014 was $42,000 compared $28,000 for the year ended December 31, 2013. Other income is comprised of interest earned on cash and cash equivalents balances and returns generated from available for sale investments.

***Income Taxes.*** During the year ended December 31, 2014, the Company recorded an income tax expense of $298,000, compared to $1,046,000 for the year ended December 31, 2013. The primary differences between the Company’s December 31, 2014 and 2013 effective tax rates and the statutory federal rates are expenses related to equity compensation and nondeductible meals and entertainment. Our effective tax rate fluctuates between periods based on the level of permanent differences and other discrete items relative to the level of pre-tax income (loss) for the period.

***Net Income.*** For the reasons stated above, the net income for the year ended December 31, 2014 was $211,000 compared to $1,379,000 for the year ended December 31, 2013.

***Other Comprehensive Income.*** Other comprehensive income is comprised of unrealized gains and losses, net of tax, from available for sale investments.

### Liquidity and Capital Resources

During the year ended December 31, 2014, cash and cash equivalents decreased $14,526,000 from $21,763,000 at December 31, 2013 to $7,237,000 at December 31, 2014, with available for sale investments of $9,698,000 as of December 31, 2014.

Operating Activities: Net cash used in operating activities during the year ended December 31, 2014 was $1,648,000. Net income of $211,000, plus non-cash adjustments of $1,686,000, less changes in operating assets and liabilities of $3,545,000 resulted in the $1,648,000 of cash used in operating activities. The non-cash adjustments consisted of depreciation and amortization expense, changes in allowance for doubtful accounts, deferred income tax expense, stock-based compensation expense, and gain on the sale of property and equipment. The largest component of the change in operating assets and liabilities was accounts receivable, which increased by $3,277,000 as a result of the timing of collections. In the normal course of business, our accounts receivable, accounts payable, accrued liabilities and deferred revenue will fluctuate depending on the level of revenues and related business activity, as well as billing arrangements with customers and payment terms with retailers.

Investing Activities: Net cash used in investing activities during the year ended December 31, 2014 was $10,664,000. This was primarily related to the net purchase of available for sale investments of $9,709,000, the acquisition of selling rights and acquisition of other business arrangements of $542,000, and purchases of property and equipment of $427,000, partially offset by proceeds received from the sale of property and equipment of $14,000.

Financing Activities: Net cash used in financing activities during the year ended December 31, 2014 was $2,214,000, which related to the repurchase of common stock under the Company’s share repurchase plan of $2,450,000, partially offset by proceeds received from the issuance of common stock under our employee stock purchase plan and stock option exercises of $216,000, as well as an excess tax benefit from stock options of $20,000.

The Company believes that based upon current business conditions and plans, its existing cash balance and future cash generated from operations will be sufficient for its cash requirements for at least the next twelve months. In the event additional financing is needed, the Company has a $7,500,000 line of credit in place, collateralized by its available for sale investments. Amounts borrowed, if any, would bear interest at the 30-day LIBOR rate plus 2% (effective rate of 2.17% as of December 31, 2014). There were no amounts outstanding on this line of credit at any point during the year ended December 31, 2014.

### Critical Accounting Policies

Our discussion of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. During the preparation of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts, impairment of long-lived assets, income taxes, and stock-based compensation expense. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our financial statements.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

***Revenue Recognition***. The Company recognizes revenue from Insignia POPSigns ratably over the period of service, which is typically a two-week display cycle. We recognize revenue related to equipment and sign card sales at the time the products are shipped to customers. Revenue associated with maintenance agreements is recognized ratably over the life of the contract. Revenue that has been billed and not yet recognized is reflected as deferred revenue on our balance sheet.

***Allowance for Doubtful Accounts.*** An allowance is established for estimated uncollectible accounts receivable. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole and other relevant facts and circumstances. Unexpected changes in the aforementioned factors could result in materially different amounts.

***Impairment of Long-Lived Assets.*** The Company periodically evaluates the carrying value of its long-lived assets for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the assets in relation to the future cash flows of the underlying assets to assess recoverability of the assets. The estimates of these future cash flows are based on assumptions and projections believed by management to be reasonable and supportable. They require management’s subjective judgments and take into account assumptions about revenue and expense growth rates. Impaired assets are then recorded at their estimated fair market value.

***Income Taxes***. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

***Stock-Based Compensation.*** We measure and recognize compensation expense for all stock-based payments at fair value. We use the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Restricted stock units are valued at the closing market price of the Company’s stock on the date of the grant.

The expected terms of the options and employee stock purchase plan rights are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on historical volatility of the Company’s stock. The Company has not historically issued any dividends beyond the one-time dividend in 2011 and does not expect to in the future. Forfeitures are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates.

If factors change and we employ different assumptions in the valuation of grants in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period.

### New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance creating Accounting Standards Codification (“ASC”) Section 606, “Revenue from Contracts with Customers.” The new section will replace Section 605, “Revenue Recognition” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The section is intended to conform revenue accounting principles with a concurrently issued International Financial Reporting Standards with previously differing treatment between United States practice and those of much of the rest of the world, as well as, to enhance disclosures related to disaggregated revenue information. The updated guidance is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods. The Company will adopt the new provisions of this accounting standard at the beginning of fiscal year 2017, given that early adoption is not an option. The Company will further study the implications of this statement in order to evaluate the expected impact on the financial statements.

### Off-Balance Sheet Transactions

None.

## Controls and procedures

As filed, 2,823 characters.

### 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 (principal executive officer) and the Company’s Chief Financial Officer (principal 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 December 31, 2014, 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 as of December 31, 2014 were effective. Disclosure controls and procedures ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and are designed to ensure that information required to be disclosed by us in these reports is accumulated and communicated to our management, as appropriate to allow timely decisions regarding disclosures.

### Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014. In conducting its evaluation, our management used the criteria set forth by the framework in the 1992 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management believes our internal control over financial reporting was effective as of December 31, 2014.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

### Changes in Internal Control Over Financial Reporting

No changes in the Company’s internal control over financial reporting have occurred during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Mar 4, 2015.
Source: SEC EDGAR, the filing index for accession 0001104659-15-016689. Last ingested by Listed: Oct 24, 2026, 14:58 ET. No prices; not investment advice.