What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 146 added, 230 removed, 186 unchanged (67% of the section changed)

2 unchanged sentences

and Subsidiaries

(formerly Insignia Systems, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

1 unchanged sentence

Restricted cash

Accounts receivable, net

Receivable from escrow account

Income tax receivable

Prepaid production costs

Other prepaid expense

Prepaid expense

Other current assets related to discontinued operations

Total Current Assets

1 unchanged sentence

Property and equipment, net

Operating lease right-of-use assets

Non-current related to discontinued operations

Total Other Assets

LIABILITIES AND SHAREHOLDERS' EQUITY

2 unchanged sentences

Accrued liabilities:

Current portion of operating lease liabilities

Deferred revenue

Current liabilities related to discontinued operations

Total Current Liabilities

1 unchanged sentence

Accrued income taxes

Operating lease liabilities

Non-current liabilities related to discontinued operations

Total Long-Term Liabilities

3 unchanged sentences

Authorized shares - 5,714,000

Issued and outstanding shares - 1,798,000 at June 30, 2023 and 1,797,000 at December 31, 2022, respectively

Issued and outstanding shares - 1,751,000 at September 30, 2023 and 1,797,000 at December 31, 2022, respectively

Additional paid-in capital

1 unchanged sentence

( 3,075,000 )

Total Shareholders' Equity

3 unchanged sentences

and Subsidiaries

(formerly Insignia Sytems, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Six Months Ended

Net services revenues

Cost of services

Nine Months Ended

Operating Expenses:

Sales and marketing

General and administrative

Total Operating Expenses

Operating (Loss) Income

Operating Loss

( 1,633,000 )

( 2,983,000 )

( 1,663,000 )

Interest income

(Loss) Income before Taxes

Loss from continuing operations before income taxes

( 1,522,000 )

( 2,658,000 )

Income tax expense

Net (Loss) Income

( 1,608,000 )

Income tax (benefit) expense

Net loss from continuing operations

( 1,511,000 )

Net (loss) income per share:

( 2,654,000 )

( 1,613,000 )

(Loss) Income from discontinued operations, net of tax

Gain from sale of discontinued operations, net of tax

Net (loss) income per basic and diluted share:

Continuing operations

Discontinued operations

Basic and diluted earnings per share

Shares used in calculation of net (loss) income per share:

Basic and diluted

See accompanying notes to condensed consolidated financial statements.

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

and Subsidaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

9 unchanged sentences

$ ( 1,463,000 )

Repurchase of common stock

Issuance of common stock, net

Issuance of common stock upon vesting of restricted stock units

Value of stock-based compensation

Balance at September 30, 2023

$ ( 337,000 )

Additional Paid-In

12 unchanged sentences

$ ( 14,143,000 )

Value of stock-based compensation

Issuance of common stock upon vesting of restricted stock units

Balance at September 30, 2022

$ ( 2,342,000 )

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

and Subsidiaries

(formerly Insignia Systems, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30

Nine Months Ended September 30

Operating Activities:

Net income (loss)

Income from discontinued operations, net of tax

( 2,422,000 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Changes in allowance for doubtful accounts

( 12,392,000 )

Gain from sale of discontinued operations, net of tax

( 2,970,000 )

Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities of continuing operations:

Depreciation and amortization

Stock-based compensation expense

Changes in operating assets and liabilities:

Accounts receivable

( 2,037,000 )

Receivable from escrow account

Income tax receivable

1 unchanged sentence

Accounts payable

( 1,336,000 )

( 1,208,000 )

Accrued liabilities

( 1,170,000 )

Accrued income taxes

Deferred revenue

( 1,273,000 )

Net cash used in operating activities

Net cash used in operating activities of continuing operations

( 2,325,000 )

( 2,142,000 )

Net cash provided by operating activities of discontinued operations

Net cash (used in) provided by operating activities

Investing Activities:

Proceeds from sale of business

Purchases of property and equipment

Net cash used in investing activities

Net cash provided by investing activities of continuing operations

Net cash used in investing activities of discontinued operations

Net cash provided by (used in) investing activities

Financing Activities:

Proceeds from issuance of common stock, net

Net cash provided by financing activities

Decrease in cash and cash equivalents and restricted cash

( 3,020,000 )

( 1,464,000 )

Repurchase of common stock, net

Net cash (used in) provided by financing activities

Increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

4 unchanged sentences

Purchase of property and equipment included in accounts payable

Common stock issued for accrued liabilities

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

and Subsidiaries

(formerly Insignia Systems, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

Description of Business .

Lendway, Inc., a Delaware corporation (the “Company), is building a scalable non-bank lending business to purchase existing loans or originate and fund new loans, all of which will be secured by collateral.

Lendway, Inc., a Delaware corporation (the “Company), is building a scalable non-bank lending business (the “Lending Business”) to purchase existing loans or originate and fund new loans, all of which will be secured by collateral.

On August 4, 2023, the Company changed its name from “Insignia Systems, Inc.” and reincorporated from Minnesota to Delaware.

As part of the name change, the Company’s common stock now trades under the symbol “LDWY” on The Nasdaq Stock Market LLC.

As described in Note 2, on August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s business of providing in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages (the “Legacy Business”) for a price of $3.5 million, subject to escrows and a post-closing adjustment.

As described in Note 2, on August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s legacy business of providing in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages (the “In-Store Marketing Business”) for a price of $3.5 million, subject to escrows and a post-closing adjustment.

Basis of Presentation .

6 unchanged sentences

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.

The operations of the In-Store Marketing Business are presented as discontinued operations beginning with this Quarterly Report on Form 10-Q for the three months ended September 30, 2023, the period in which the sale of the In-Store Marketing Business met the criteria as discontinued operations.

All prior periods presented have been restated to present the In-Store Marketing Business as discontinued operations.

The condensed consolidated financial statements include the accounts of the Company, its subsidiary, Farmland Credit, Inc., a Minnesota corporation (“FCI”), and FCI’s subsidiaries, Farmland Credit FR, LLC and Farmland Credit AV, LLC.

The operations of the Legacy Business will be presented as discontinued operations beginning with the Quarterly Report on Form 10-Q for the three months ended September 30, 2023, the period in which the sale of the Legacy Business met the criteria as a discontinued operation.

On August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s Legacy Business for a price of $ 3.5 million to TIMIBO LLC, an affiliate of Park Printing, Inc.

Sale of In-Store Marketing Business and Presentation as Discontinued Operations.

On August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s In-Store Marketing Business for a price of $ 3.5 million to TIMIBO LLC, an affiliate of Park Printing, Inc.

(the “Buyer”), under an Asset Purchase Agreement (the “Purchase Agreement”).

The Company retained accounts receivable, as well as cash, cash equivalents and marketable securities.

The purchase price is subject to a post-closing adjustment depending on the net balance of (i) cash received by the Company for programs that remained unexecuted as of August 3, 2023, minus (ii) the payments made by the Company to vendors for unexecuted programs.

The Company received significant cash payments between July 1 and August 3, 2023 for unexecuted programs, which the Company will retain, but which will reduce the purchase price.

The cash consideration for the sale was subject to a post-closing adjustment depending on the net balance of (i) cash received by the Company for programs that remained unexecuted as of August 3, 2023, minus (ii) the payments made by the Company to vendors for unexecuted programs.

The final purchase adjustment for the net balance was to reduce the cash consideration by $ 1.5 million, with the Company retaining an equal amount of cash that had been received for unexecuted programs.

Under the Purchase Agreement, $ 200,000 was escrowed for a twelve-month period for any future claims, as defined in the Purchase Agreement, by the Buyer against the Company.

The Company incurred approximately $ 350,000 of transaction-related costs that had not previously been expensed.

The Company also incurred transaction-related severance and other separation benefits in connection with the termination of certain officers and employees of the Company of approximately $ 1,537,000 , as well as retention award payouts totaling $ 143,000 and employee bonuses totaling $ 164,000 , each of which will be recorded as expense in the three months ended September 30, 2023.

The operations of the Legacy Business will be presented as discontinued operations beginning with the Quarterly Report on Form 10-Q for the three months ended September 30, 2023.

The Company is presenting unaudited pro forma condensed consolidated information on a discontinued operations basis to illustrate the significant impact of the sale of the Legacy Business on the Company’s balance sheet and statement of operations.

The Company is presenting the pro forma information for the three months ended June 30, 2023, as that is the period in which the non-bank lending business began.

No impact from the sale proceeds and related costs are included in the pro forma information.

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma condensed consolidated balance sheet illustrates the impact at June 30, 2023 had discontinued operations presentation been used (unaudited).

The amounts held for sale represent the assets that will be purchased by the Buyer and liabilities which will be assumed by the Buyer:

Discontinued Operations Adjustments

The gain on sale of the In-Store Marketing Business before income taxes was determined as follows:

Carrying value of assets sold, less liablities

Transaction costs not previously expensed

Gain on sale of In-Store Marketing Business

The Company incurred transaction-related severance and other separation benefits in connection with the termination of certain officers and employees of the discontinued operations of approximately $ 490,000 , as well as retention award payouts totaling $ 343,000 , of which $ 48,000 was included in continuing operations, and employee bonuses totaling $ 164,000 , each of which was recorded as expense in the three months ended September 30, 2023.

The results of the In-Store Marketing Business have been presented as discontinued operations and the related assets and liabilities have been classified as related to discontinued operations for all periods presented.

The carrying amounts of major classes of assets and liabilities that were reclassified as related to discontinued operations on the Condensed Consolidated Balance Sheet were as follows:

Current Assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Income tax receivable

Accounts receivable

Prepaid production costs

Other prepaid expense

Current assets held for sale

Total Current Assets

Current assets related to discontinued operations

Other Assets:

1 unchanged sentence

Operating lease right-of-use assets

Non-current assets held for sale

LIABILITIES AND SHAREHOLDERS' EQUITY

Non-current assets related to discontinued operations

Current Liabilities:

3 unchanged sentences

Deferred revenue

( 1,154,000 )

Current liabilities held for sale

Total Current Liabilities

Current liabilities related to discontinued operations

Long-Term Liabilities:

Accrued income taxes

Operating lease liabilities

Non-current liabilities held for sale

Total Long-Term Liabilities

Commitments and Contingencies

Shareholders' Equity:

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

Non-current liabilities related to discontinued operations

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma condensed consolidated statement of operations for the three months ended June 30, 2023 illustrates the impact for that period had discontinued operations presentation been used (unaudited).

The discontinued operations adjustments represent amounts that relate to the Legacy Business, with no allocation of general overhead to the Legacy Business:

Discontinued Operations Adjustments

Pro Forma Continuing Operations

Results of discontinued operations are summarized below:

Three Months Ended

Nine Months Ended

Net services revenues

$ ( 6,211,000 )

Cost of services

( 4,588,000 )

( 1,623,000 )

Operating Expenses:

1 unchanged sentence

Total Operating Expenses

( 1,233,000 )

Gain from litigation settlement, net

Operating Income (Loss)

Interest income

Income (Loss) from Operations Before Taxes

Income tax expense

Net Income (Loss) from Continuing Operations

$ ( 426,000 )

Net (Income) Loss from Discontinued Operations

(Loss) income from discontinued operations before income taxes

Income tax benefit

(Loss) income from discontinued operations, net of tax

$ ( 333,000 )

Net Income (Loss)

Net income (loss) per share, basic and diluted:

Continuing operations

Discontinued operations

Weighted average shares outstanding:

Basic and diluted

Gain from sale of discontinued operations before income taxes

Income tax expense

Gain from sale of discontinued operations, net of tax

The accounting policies for the discontinued In-Store Marketing Business, including for revenue recognition, are disclosed in the notes to financial statements included in the Company’s Annual Report on Form 10-K.

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”), 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 resulted in net proceeds before income tax of $ 12,000,000 for the Company, which was recorded as a gain on litigation settlement in the discontinued operations of the In-Store Marketing Business during the three months ended September 30, 2022.

For the three and nine months ended September 30, 2023, the Company recorded income tax expense on discontinued operations of $ 74,000 and $ 74,000 , respectively.

For the three and nine months ended September 30, 2022, the Company recorded income tax benefit from discontinued operations of $ 191,000 and $ 173,000 respectively.

The income tax benefit for 2022 included a decrease of approximately $ 678,000 in unrecognized tax benefits related to state exposure in the third quarter of 2022, which reduced accrued income taxes and increased the current tax benefit.

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the statement of cash flows:

September 30,

Cash and cash equivalents

1 unchanged sentence

Total cash, cash equivalents and restricted cash

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 .

During the six months ended June 30,2023, fully depreciated property and equipment in the aggregate amount of $ 268,000 was written off.

Property and equipment consisted of the following as of the dates indicated:

Property and Equipment:

Production tooling, machinery and equipment

Office furniture and fixtures

Computer equipment and software

Leasehold improvements

Construction in-progress

Accumulated depreciation and amortization

Net Property and Equipment

Depreciation expense was approximately $ 12,000 and $ 26,000 in the three and six months ended June 30, 2023, respectively, and was $ 15,000 and $ 31,000 in the three and six months ended June 30, 2022, respectively.

Subsequent to September 30, 2023 the restriction on the cash was released back to the Company, as it was related to a lease that transferred to the Buyer of the In-Store Marketing Business.

Stock-Based Compensation .

4 unchanged sentences

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 six-month periods ended June 30, 2023 and 2022 no equity awards were issued by the Company.

During the nine-month periods ended September 30, 2023 and 2022 no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors in August 2022.

In August 2022, non-employee members of the Board of Directors received restricted stock grants totaling 6,248 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”).

The shares underlying the awards were assigned a value of $ 9.60 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $ 60,000 .

The shares vested on July 26, 2023.

In June 2021, non-employee members of the Board of Directors received restricted stock grants totaling 5,514 shares pursuant to the 2018 Equity Incentive Plan.

1 unchanged sentence

The shares vested on June 1, 2022.

The Company estimated the fair value of stock-based awards granted during the three and six months ended June 30, 2023, under the Company’s employee stock purchase plan using the following weighted average assumptions:

The Company estimated the fair value of stock-based awards granted during the three and nine months ended September 30, 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 %.

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

Notes To Condensed Consolidated Financial Statements

Total stock-based compensation expense recorded for the three and six months ended June 30, 2023 was $ 14,000 and $ 36,000 , respectively, and for the three and six months ended June 30, 2022 was $ 29,000 and $ 59,000 , respectively.

Due to the sale of the In-Store Marketing Business, the plan year for the Company’s employee stock purchase plan was amended to end on July 31, 2023.

At July 31, 2023 participants purchased 338 shares.

During the three months ended September 30, 2023, the Company issued 22,382 shares of common stock in settlement of $ 148,000 of total deferred fees due to two non-employee director’s departure from the Board of Directors.

Total stock-based compensation expense recorded for the three and nine months ended September 30, 2023 was $ 7,000 and $ 43,000 , respectively, and for the three and nine months ended September 30, 2022 was $ 32,000 and $ 91,000 , respectively.

Net (Loss) Income per Share .

1 unchanged sentence

Diluted net (loss) income per share gives effect to all dilutive potential common shares outstanding during the period.

Due to the net loss incurred during the three months ended June 30, 2023 all outstanding stock awards were anti-dilutive for that periods.

For the six months ended June 30, 2023 options to purchase approximately 14,000 shares of common stock with a weighted average exercise price of $ 11.74 were outstanding and were not included in the computation of common stock equivalents for the six months ended June 30, 2023 because their exercise prices were higher than the average fair market value of the common stock during the reporting period.

Due to the net loss incurred during the three and six months ended June 30, 2022 all outstanding stock awards were anti-dilutive for those periods.

As of June 30, 2022, the Company had 14,086 options and 3,396 restricted units outstanding.

Weighted average common shares outstanding for the three and six months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

Six Months Ended

Denominator for basic net loss per share - weighted average shares

Effect of dilutive securities:

Stock options and restricted stock units

Denominator for diluted net loss per share - weighted average shares

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.

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:

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

Notes To Condensed Consolidated Financial Statements

Display, On-Pack, and Non-POPS Signage Solutions .

The Legacy Business supplied CPG manufacturers with retailer approved promotional services, such as display, on-pack, and signage solutions.

These services were 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 Legacy Business provided a service of displaying promotional signs in close proximity to the CPG manufacturer’s product in participating stores, which the Company maintained in two-to-four-week cycle increments.

Each of the individual activities under the Legacy Business’ 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 had an enforceable right to payment for services performed through the closing of the sale of the Legacy Business.

As a result, the Company has recognized the transaction price for service performance obligations as revenue over time.

Given the nature of the Legacy Business’ 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 June 30

Six months ended June 30

Timing of revenue recognition:

Services transferred over time

Services transferred at a point in time

Contract Costs

Sales commissions that were paid to internal or external sales representatives are eligible for capitalization as 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.

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

Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied

( 2,066,000 )

Cash received in advance and not recognized as revenue

Balance at June 30, 2023

In determining diluted net income (loss) per share, whether net income from continuing operations is positive or negative controls whether dilutive shares are included in the determination.

For all periods presented, net income from continuing operations is negative, a net loss.

Accordingly, since including dilutive shares would dilute the loss from continuing operations, no dilutive shares are included in any of the per share calculations.

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Contracts that had an expected duration of greater than one year were insignificant at June 30, 2023.

As of June 30, 2023, the Company leased space under a non-cancelable operating lease for its corporate headquarters, which had been renewed through December 31, 2026.

The Company also had a lease for warehouse space which expired March 31, 2023.

The warehouse lease was extended on a month-to-month basis effective April 1, 2023.

The corporate headquarters lease had escalating lease payment terms but did not contain a contingent rent provision.

The leases for both the Company’s corporate headquarters and its warehouse included 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 was supported by $ 85,000 reflected as restricted cash on the consolidated balance sheet.

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 three and six month periods ended June 30, 2023 and 2022:

Three months ended June 30, 2023

Six months ended June 30, 2023

Operating lease cost

Variable lease cost

Short-term lease cost

Three months ended June 30, 2022

Six months ended June 30, 2022

Operating lease cost

Variable lease cost

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.

Maturities of the Company’s lease liabilities for its corporate headquarters operating lease are as follows as of June 30, 2023:

Total lease payments

Present value of lease liabilities

Due to the net loss from continuing operations incurred during the three and nine months ended September 30, 2023 and 2022, all outstanding stock awards were considered anti-dilutive for those periods.

At September 30, 2022 and 2023 options to purchase 14,086 shares of common stock with a weighted average exercise price of $ 14.17 , were outstanding.

Weighted average common shares outstanding for the three and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended

Nine Months Ended

Denominator for basic net income (loss) per share - weighted average shares

Effect of dilutive securities:

Stock options and restricted stock units

Denominator for diluted net income (loss) per share - weighted average shares

Restructuring.

In connection with the change in the Company’s strategy to the Lending Business, the Company’s prior CEO, Kristine A.

Glancy, departed on August 31, 2023.

Included in general and administrative expense of continuing operations is expense of $ 926,000 relating to change of control and other severance related payments and benefits to Ms.

As of September 30, 2023, $ 650,000 remains to be paid to Ms.

Glancy and is included in accrued compensation .

At September 30, 2023, the Company has a month-to-month operating lease with a related party with monthly payments of $ 375 .

As part of the sale of the in-store marketing business, the headquarters lease was assigned to the Buyer as a part of the sale of the In-Store Marketing Business, and the other significant lease was terminated.

The amounts included in “Other” below relate to an office lease that was terminated effective September 30, 2023.

The cost components in continuing operations of the Company’s operating leases were as follows for the three and nine month periods ended September 30, 2023 and 2022:

Three months ended September 30

Nine months ended September 30

Related party lease

Income Taxes.

For the three and nine months ended September 30, 2023, the Company recorded income tax (benefit) of $( 11,000 ) and $( 4,000 ), respectively, or 0.6 % and 0.1 % of loss from continuing operations before taxes, respectively.

For the three and nine months ended September 30, 2022, the Company recorded income tax expense of $ 1,000 and $ 5,000 respectively, or ( 0.2 )% and ( 0.3 )% of loss from continuing operations before taxes, respectively.

The income tax expense (benefit) for the three and nine months ended September 30, 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 income (loss).

The actual tax expense attributable to from continuing operations income before taxes differs from the expected tax expense computed by applying the U.S.

federal corporate income tax rate of 21 % as follows:

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The remaining lease terms as of June 30, 2023 for the Company’s corporate headquarters lease was 3.5 years.

The cash outflows for operating leases were $ 0 and $ 10,000 for the three and six months ended June 30, 2022, respectively, and were $ 20,000 and $ 41,000 for the three and six months ended June 30, 2022, respectively.

Subsequent to June 30, 2023, the headquarters lease was assigned to the Buyer as a part of the sale of the Legacy Business.

Income Taxes.

For the three and six months ended June 30, 2023, the Company recorded income tax expense of $ 4,000 and $ 7,000 , respectively, or 12.5 % and 0.4 % of loss (income) before taxes, respectively.

For the three and six months ended June 30, 2022, the Company recorded income tax expense of $ 14,000 and $ 22,000 , respectively, or 1.3 % and 2.2 % of loss before taxes, respectively.

The income tax expense for the three and six months ended June 30, 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:

Six months ended June 30,

Nine months ended September 30,

Federal statutory rate

7 unchanged sentences

Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria.

As of June 30, 2023, and December 31, 2022, the Company had unrecognized tax benefits totaling $ 55,000 and $ 53,000 , respectively, including interest, which relates to state nexus issues.

As of September 30, 2023, and December 31, 2022, the Company had unrecognized tax benefits totaling $ 41,000 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 $ 41,000 .

The Company recorded a decrease of $ 16,000 in unrecognized tax benefits related to state income tax exposure in the third quarter of 2023 which reduced accrued income taxes and increased income tax benefit.

At December 31, 2022, the Company had Federal net operating loss (NOL) to carry forward of approximately $ 2,900,000 .

As of June 30, 2023, the Company estimates remaining Federal NOL carryforwards to be approximately $ 1,300,000 .

As of September 30, 2023, the Company estimates remaining Federal NOL carryforwards to be approximately $ 1,390,000 .

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.

Concentrations.

During the six months ended June 30, 2023, two customers accounted for 27 % and 18 %, respectively of the Legacy Business’ total net sales.

During the six months ended June 30, 2022, three customers accounted for 22 %, 15 % and 10 %, respectively of the Legacy Business’ total net sales.

At June 30, 2023, one customer represented 70 % of the Legacy Business’ total accounts receivable.

At December 31, 2022, three customers represented 20 %, 19 % and 11 %, respectively, of the Company’s total accounts receivable.

Lendway, Inc.

and Subsidiaries

(formerly Insignia Systems, Inc.)

Notes To Condensed Consolidated Financial Statements

Stock Repurchase Plan.

On August 28, 2023, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of the Company’s common stock.

The plan allows the purchases to be made in the open market or in privately negotiated transactions.

The plan does not obligate the Company to repurchase any particular number of shares;

and may be suspended anytime at the Company’s discretion.

For the three months ended September 30, 2023 the Company repurchased 75,345 shares for $ 437,000 .

Legal Proceedings.

1 unchanged sentence

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.

Subsequent Event.

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements except for the events described in Note 2 related to the sale of the Legacy Business and the incurring of severance and other separation benefits.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements