BLOOMIA HOLDINGS, INC. 10-Q

Item 1. Financial Statements Insignia Systems, Inc. CONDENSED BALANCE SHEETS March 31, 2023 December 31, (Unaudited) 2022 ASSETS Current Assets: Cash and cash equivalents $ 10,595,000 $ 14,439,000 Restricted cash 85,000 85,000 Accounts receivable, net 9,307,000 5,557,000 Inventories 24,000 29,000 Income tax receivable 26,000 28,000 Prepaid production costs 1,390,000 535,000 Other prepaid expense 309,000 80,000 Total Current Assets 21,736,000 20,753,000 Other Assets: Property and equipment, net 64,000 71,000 Operating lease right-of-use assets 131,000 144,000 Total Assets $ 21,931,000 $ 20,968,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable 2,214,000 2,653,000 Accrued liabilities: Compensation 602,000 962,000 Sales tax 921,000 717,000 Other 624,000 611,000 Current portion of operating lease liabilities 3,000 4,000 Deferred revenue 2,301,000 2,427,000 Total Current Liabilities 6,665,000 7,374,000 Long-Term Liabilities: Accrued income taxes 54,000 53,000 Operating lease liabilities 133,000 140,000 Total Long-Term Liabilities 187,000 193,000 Commitments and Contingencies — — Shareholders' Equity: Common stock, par value $.01: Authorized shares - 5,714,000 Issued and outstanding shares - 1,798,000 at March 31, 2023 and 1,797,000 December 31, 2022 18,000 18,000 Additional paid-in capital 16,488,000 16,458,000 Accumulated deficit ( 1,427,000 ) ( 3,075,000 ) Total Shareholders' Equity 15,079,000 13,401,000 Total Liabilities and Shareholders' Equity $ 21,931,000 $ 20,968,000 See accompanying notes to the condensed financial statements. 3 Table of Contents Insignia Systems, Inc. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31 2023 2022 Net services revenues $ 12,831,000 $ 6,148,000 Cost of services 9,911,000 4,868,000 Gross Profit 2,920,000 1,280,000 Operating Expenses: Selling 364,000 342,000 Marketing 296,000 259,000 General and administrative 721,000 606,000 Total Operating Expenses 1,381,000 1,207,000 Operating Income 1,539,000 73,000 Other Income (Expense) Other income (expense) 112,000 ( 3,000 ) Total Other Income (Expense) 112,000 ( 3,000 ) Income Before Taxes 1,651,000 70,000 Income tax expense 3,000 8,000 Net Income $ 1,648,000 $ 62,000 Net income per share: Basic $ 0.92 $ 0.03 Diluted $ 0.91 $ 0.03 Shares used in calculation of net income per share: Basic 1,798,000 1,786,000 Diluted 1,802,000 1,794,000 See accompanying notes to the condensed financial statements. 4 Table of Contents Insignia Systems, Inc. CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Total Balance at December 31, 2022 1,797,000 $ 18,000 $ 16,458,000 $ ( 3,075,000 ) $ 13,401,000 Issuance of common stock, net 1,000 — 8,000 — 8,000 Value of stock-based compensation — — 22,000 — 22,000 Net income — — — 1,648,000 1,648,000 Balance at March 31, 2023 1,798,000 $ 18,000 $ 16,488,000 $ ( 1,427,000 ) $ 15,079,000 Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Total Balance at December 31, 2021 1,782,000 $ 18,000 $ 16,296,000 $ ( 13,121,000 ) $ 3,193,000 Issuance of common stock, net 4,000 — 28,000 — 28,000 Value of stock-based compensation — — 30,000 — 30,000 Net income — — — 62,000 62,000 Balance at March 31, 2022 1,786,000 $ 18,000 $ 16,354,000 $ ( 13,059,000 ) $ 3,313,000 See accompanying notes to the condensed financial statements. 5 Table of Contents Insignia Systems, Inc. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31 2023 2022 Operating Activities: Net income $ 1,648,000 $ 62,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 14,000 16,000 Changes in allowance for doubtful accounts 20,000 ( 12,000 ) Stock-based compensation expense 22,000 30,000 Changes in operating assets and liabilities: Accounts receivable ( 3,770,000 ) ( 2,206,000 ) Inventories 5,000 ( 12,000 ) Income tax receivable 2,000 ( 1,000 ) Prepaid expenses and other ( 1,084,000 ) 606,000 Accounts payable ( 440,000 ) ( 654,000 ) Accrued liabilities ( 138,000 ) ( 774,000 ) Accured income taxes 1,000 10,000 Deferred revenue ( 126,000 ) ( 445,000 ) Net cash used in operating activities ( 3,846,000 ) ( 3,380,000 ) Investing Activities: Purchases of property and equipment ( 6,000 ) ( 18,000 ) Net cash used in investing activities ( 6,000 ) ( 18,000 ) Financing Activities: Proceeds from issuance of common stock 8,000 28,000 Net cash provided by financing activities 8,000 28,000 Decrease in cash and cash equivalents and restricted cash ( 3,844,000 ) ( 3,370,000 ) Cash and cash equivalents and restricted cash at beginning of period 14,524,000 3,851,000 Cash and cash equivalents and restricted cash at end of period $ 10,680,000 $ 481,000 Non-cash financing activity: Purchase of property and equiment included in accounts payable $ - $ 5,000 See accompanying notes to the condensed financial statements. 6 Table of Contents Insignia Systems, Inc. Notes To Condensed Financial Statements (Unaudited) 1. Summary of Significant Accounting Policies. Description of Business . Insignia Systems, Inc. (the “Company”) is a leading provider of in-store solutions to consumer-packaged goods (“CPG”) manufacturers, retailers, shopper marketing agencies and brokerages. The Company operates in a single reportable segment. The Company’s leadership and employees have extensive industry knowledge with direct experience in both CPG manufacturers and retailers. The Company provides marketing solutions to CPG manufacturers spanning from some of the largest multinationals to new and emerging brands. The Company’s primary solutions are merchandising solutions, on-pack solutions and signage. On April 7, 2023, Insignia announced the launch of the Company’s non-bank lending platform. Basis of Presentation . The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. They do not include all information and footnotes required by U.S. GAAP for complete financial statements. However, except as described herein, there has been no material change in the information disclosed in the notes to financial statements included in the Company’s financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2023 (the Form 10-K). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. Due to sales cycles within the retailers that our display and on-pack solutions execute we anticipate seasonality in sales, with those sales being relatively stronger in the first quarter of the year. We expect the remaining quarters in 2023 to have significantly less revenue than this first quarter and also expect operating losses in the remaining quarters of the year. The accompanying condensed balance sheet as of December 31, 2022 has been derived from the audited balance sheet as of December 31, 2022 contained in the Form 10-K. Cash and Cash Equivalents and Restricted Cash. The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the statement of cash flows: March 31, December 31, 2023 2022 Cash and cash equivalents $ 10,595,000 $ 14,439,000 Restricted cash 85,000 85,000 Total cash, cash equivalents and restricted cash $ 10,680,000 $ 14,524,000 Inventories . Inventories are primarily comprised of sign cards and hardware. Inventory is valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. Property and Equipment . Property and equipment consisted of the following as of the dates indicated: March 31, December 31, 2023 2022 Property and Equipment: Production tooling, machinery and equipment $ 14,000 $ 27,000 Office furniture and fixtures 94,000 95,000 Computer equipment and software 580,000 771,000 Leasehold improvements 19,000 19,000 Construction in-progress 6,000 3,000 713,000 915,000 Accumulated depreciation and amortization ( 649,000 ) ( 844,000 ) Net Property and Equipment $ 64,000 $ 71,000 7 Table of Contents Depreciation expense was approximately $ 14,000 and $ 16,000 in the three months ended March 31, 2023 and 2022, respectively. Stock-Based Compensation . The Company measures and recognizes compensation expense for all stock-based payments at fair value. Restricted stock units and awards are valued at the closing market price of the Company’s stock as of the date of the grant. The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options and employee stock purchase plan rights. The determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as by assumptions regarding a number of 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. During the three months ended March 31, 2023 and 2022, no stock options or restricted stock were issued by the Company. The Company estimated the fair value of stock-based awards granted during the three months ended March 31, 2023, under the Company’s employee stock purchase plan using the following weighted average assumptions: expected life of 1.0 year, expected volatility of 95.2 %, dividend yield of 0 % and risk-free interest rate of 4.7 %. The Company recorded total stock-based compensation expense of $ 22,000 and $ 30,000 for the three months ended March 31, 2023 and 2022, respectively. Net Income per Share . Basic net income per share is computed by dividing net income by the weighted average shares outstanding and excludes any potential dilutive effects of stock options and restricted stock units and awards. Diluted net income per share gives effect to all dilutive potential common shares outstanding during the period. Options to purchase approximately 14,000 shares of common stock with a weighted average exercise price of $ 11.95 , were outstanding at March 31, 2023 and were not included in the computation of common stock equivalents for the three months ended March 31, 2023 because their exercise prices were higher than the average fair market value of the common stock during the reporting period. Options to purchase approximately 14,000 shares of common stock with a weighted average exercise price of $ 12.60 , were outstanding at March 31, 2022 and were not included in the computation of common stock equivalents for the three months ended March 31, 2022 because their exercise prices were higher than the average fair market value of the common stock during the reporting period. Weighted average common shares outstanding for the three months ended March 31, 2023 and 2022 were as follows: Three months ended March 31 2023 2022 Denominator for basic net income per share - weighted average shares 1,798,000 1,786,000 Effect of dilutive securities: Stock options, restricted stock and restricted stock units 4,000 8,000 Denominator for diluted net income per share - weighted average shares 1,802,000 1,794,000 2. Revenue Recognition. Under Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“Topic 606”), revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to a customer and significant financing components. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, as further described below under “ Performance Obligations .” Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting. 8 Table of Contents The Company includes shipping and handling fees in revenues. Shipping and handling costs associated with outbound freight after control over a product has been passed to a customer are accounted for as a fulfillment cost and are included in cost of goods sold. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The following is a description of the Company’s performance obligations included in its primary revenue streams and the timing or method of revenue recognition for each: Display, On-Pack, and Non-POPS Signage Solutions . The Company supplies CPG manufacturers with retailer approved promotional services, such as display, on-pack, and signage solutions. These services are more customized than POPS, consisting of variable durations and variable specifications. Due to the variable nature of these services, revenue recognition is primarily at a point-in-time recognition. POPS Signage Solution Services. The Company provides a service of displaying promotional signs in close proximity to the CPG manufacturer’s product in participating stores, which the Company maintains in two-to-four-week cycle increments. Each of the individual activities under the Company’s services, including production activities, are inputs to an integrated sign display service. Customers receive and consume the benefits from the promotional displays over the duration of the contracted display cycle. Additionally, the display of the signs does not have an alternative use to the Company and the Company has an enforceable right to payment for services performed to date. As a result, the Company recognizes the transaction price for service performance obligations as revenue over time. Given the nature of the Company’s performance obligations is to provide a display service over the duration of a specified period or periods, the Company recognizes revenue on a straight-line basis over the display service period as it best reflects the timing of transfer of its sign solutions. Disaggregation of Revenue In the following table, revenue is disaggregated by timing of revenue recognition. Three months ended March 31 2023 2022 Timing of revenue recognition: Services transferred over time $ 263,000 $ 456,000 Services transferred at a point in time 12,568,000 5,692,000 Total $ 12,831,000 $ 6,148,000 Contract Costs Sales commissions paid to internal or external sales representatives are eligible for capitalization because they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company is applying the practical expedient in Accounting Standards Codification 340-40-25-4 that allows the incremental costs of obtaining a contract to be recorded as an expense when incurred when the amortization period of the asset that would have otherwise been recognized is one year or less. These costs are included in selling expenses. 9 Table of Contents Deferred Revenue Deferred revenues represent amounts collected from customers in advance of the satisfaction of performance obligations. Significant changes in deferred revenue during the period are as follows: Balance at December 31, 2022 $ 2,427,000 Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied ( 2,062,000 ) Cash received in advance and not recognized as revenue 1,936,000 Balance at March 31, 2023 $ 2,301,000 Transaction Price Allocated to Remaining Performance Obligations The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, which reflect the majority of its performance obligations. This practical expedient is being applied to arrangements for certain incomplete services and unshipped custom signage materials. Among our contracts with an expected duration of greater than one year, we anticipate that revenue of $ 30,000 related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2023 will be recognized during the remainder of fiscal 2023. 3. Leases. As of March 31, 2023, the Company leases space under a non-cancelable operating lease for its corporate headquarters, which has been renewed through December 31, 2026. The Company also had a lease for warehouse space which expired March 31, 2023. The warehouse lease has been extended on a month-to-month basis effective April 1, 2023. The corporate headquarters lease has escalating lease payment terms but does not contain a contingent rent provision. The leases for both the Company’s corporate headquarters and its warehouse include both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. The headquarters lease required the Company to provide a letter of credit, which is supported by $ 85,000 reflected as restricted cash on the balance sheet. In December 2022, the Company decided to exercise the lease renewal option for its corporate headquarters, extending the lease term through December 31, 2026. The Company used its incremental borrowing rate of approximately 7.0 % in determining the present value of the extended lease payments. The cost components of the Company’s operating leases were as follows for the periods ended March 31, 2023 and 2022: Three months ended March 31, 2023 Corporate Operating Headquarters Warehouse Leases Operating lease cost $ 10,000 $ 4,000 $ 14,000 Variable lease cost 5,000 4,000 9,000 Total $ 15,000 $ 8,000 $ 23,000 Three months ended March 31, 2022 Corporate Operating Headquarters Warehouse Leases Operating lease cost $ 17,000 $ 4,000 $ 21,000 Variable lease cost 10,000 3,000 13,000 Total $ 27,000 $ 7,000 $ 34,000 Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs which are paid based on actual costs incurred by the lessor. 10 Table of Contents Maturities of the Company’s lease liabilities for its corporate headquarters and its warehouse operating leases are as follows as of March 31, 2023: 2023 - 2024 52,000 2025 53,000 2026 55,000 Total lease payments $ 160,000 Less: Interest 24,000 Present value of lease liabilities $ 136,000 The remaining lease term as of March 31, 2023 for the Company’s corporate headquarters lease was 3.75 years. The cash outflows for operating leases for the three months ended March 31, 2023 and March 31, 2022 were $ 10,000 and $ 21,000 , respectively. 4. Income Taxes. For the three months ended March 31, 2023, the Company recorded income tax expense of $ 3,000 , or 0.2 % of income before taxes. For the three months ended March 31, 2022, the Company recorded income tax expense of $ 8,000 , or 11.4 % of income before taxes. The income tax expense for the three months ended March 31, 2023 and 2022 is comprised of federal and state taxes. The Company reassesses its effective rate each reporting period and adjusts the annual effective rate if deemed necessary, based on projected annual taxable income (loss). The actual tax expense attributable to income before taxes differs from the expected tax expense computed by applying the U.S. federal corporate income tax rate of 21.0 % as follows: Three months ended March 31, 2023 2022 Federal statutory rate 21.0 % 21.0 % Stock-based awards ( 2.5 ) ( 0.7 ) State taxes 3.6 3.5 Impact of uncertain tax positions 0.1 11.7 Valuation allowance ( 22.6 ) ( 24.8 ) Other 0.6 0.7 Effective federal income tax rate 0.2 % 11.4 % Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of enacted tax laws. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which it operates, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustment 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. As of March 31, 2023, and December 31, 2022, the Company had unrecognized tax benefits totaling $ 54,000 and $ 53,000 , respectively, including interest, which relates to state nexus issues. The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $ 54,000 . At December 31, 2022, the Company had Federal net operating loss (NOL) to carry forward of approximately $ 2,900,000 . As of March 31, 2023, the Company estimates remaining Federal NOL carryforwards to be approximately $ 1,200,000 . Federal NOL utilization is limited to 80 % of estimated taxable income. The estimated NOL carry forward will be adjusted at year end for actual results. 5. Concentrations. During the three months ended March 31, 2023, three customers accounted for 20 %, 17 % and 13 %, respectively, of the Company’s total net sales. During the three months ended March 31, 2022, three customers accounted for 27 %, 23 % and 11 %, respectively, of the Company’s total net sales. At March 31, 2023, two customers accounted for 47 % and 19 %, respectively, of the Company’s total accounts receivable. At December 31, 2022, three customers represented 20 %, 19 % and 11 %, respectively, of the Company’s total accounts receivable. 6. Legal Proceedings. The Company is subject to various legal matters in the normal course of business. The outcome of these matters is not expected to have a material effect on the Company’s financial position or results of operations. In July 2019, the Company filed suit against News Corporation, News America Marketing FSI L.L.C., and News America Marketing In-Store Services L.L.C. (collectively, “News America”) in the U.S. District Court in Minnesota, alleging violations of federal and state antitrust and tort laws by News America. On July 1, 2022, the Company entered into a $ 20 million settlement agreement with News America. The agreement memorializes the amicable settlement of the Company’s outstanding lawsuit against News America. The agreement resulted in net proceeds before income tax of $ 12,000,000 for the Company, which was recorded as a gain on litigation settlement in operations during the three months ended September 30, 2022. 11 Table of Contents