What changed in this filing

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Item 1. Business

2024-04-01 compared with 2023-03-09 · 170 added, 148 removed, 13 unchanged (96% of the section changed)

Insignia Systems, Inc.

(“Insignia,” “we,” “us,” “our” and the “Company”) was incorporated in Minnesota in 1990.

We are a leading provider of in-store advertising solutions to brands, retailers, shopper marketing agencies and brokerages (“clients”).

We believe our products and services are attractive to our clients because of our ability to navigate the complex retail landscape, to customize our solutions for both our brand and retail partners, to execute with excellence and the results our solutions deliver.

Our leadership and employees have extensive industry knowledge, including direct experience through former positions at consumer-packaged goods (“CPG”) manufacturers and retailers.

We provide marketing solutions to brands spanning from some of the largest multinationals to new and emerging brands.

For retailers and brands working in an environment that is tighter, more competitive, and more complex every day, Insignia positions itself as the shopper marketing ally that combines best-in-class execution with imagination, responsiveness, and hunger to help move business forward.

We take the relationships we have with our clients and vendor partnerships very seriously by having our team stretch the extra mile to ensure flawless execution.

We sincerely approach our projects with the same passion as our clients do.

These relationships are built with our brand-led, retailer centric mindset, our ability to be nimble and flexible to the ever-changing industry landscape and our delivery of superior customer service that our clients deserve.

Our in-store solutions are executed in retailers spanning from some of the largest national retailers to regional US wholesalers and independents who are leaders in their respective channels and geographies.

Up until 2020, our primary solution had been in-store signage, specifically Point-Of-Purchase Services (POPS®).

The Insignia POPS solution is a national, account-specific, shelf-edge advertising and promotion tactic.

Primarily because of competitive pressures, market contraction and reduced spending post the COVID-19 pandemic, our POPS business has declined and will be wound down in 2023.

Beginning in 2018 we began developing and offering an expanded portfolio of solutions including on-pack and displays in addition to what was our core business of Insignia POPS.

Our expanded portfolio now allows us to meet the needs of brands, retailers and their agents as their business strategies evolve behind an ever-changing retail landscape.

Since expanding our portfolio of solutions in 2018, our business results, investments and overall team capabilities are primarily focused on our display and on-pack solutions.

With our diversification of business, we now recognized over 90% of our revenue from these recently developed solutions in 2022 and expect this percentage to grow in 2023.

Over the last two years we have significantly reduced operating costs and retailer commitments.

In 2021 we relocated our headquarters and operations, both to smaller, more efficient leased spaces, and also restructured operations in December 2021.

These changes contributed to reduced expenses in 2022 compared to 2021.

On July 1, 2022, we entered into a $20 million settlement agreement with News Corporation, News America Marketing FSI L.L.C., and News America Marketing In-Store Services L.L.C.

(collectively, “News America”).

The agreement memorializes the amicable settlement of our outstanding lawsuit against News America.

The agreement resulted in net proceeds before income tax of $12,000,000, which was recorded as a net pretax gain from litigation settlement in operations.

We are also continuing to explore strategic options to maximize shareholder value.

Potential strategic alternatives that may be evaluated include, but are not limited to, an acquisition, merger, business combination, in-licensing, start-up of new business or other strategic transaction.

There can be no assurance that this process will result in any transaction or other changes.

Our internet address is www.insigniasystems.com.

This Annual Report on Form 10-K is being filed by the registrant, Lendway, Inc.

(“Lendway,” “we,” “us,” “our” and the “Company”), a Delaware corporation.

Effective August 4, 2023, we changed our name from “Insignia Systems, Inc.” and reincorporated from Minnesota to Delaware.

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

The Company has evolved into a specialty agricultural (“ag”) and finance company focused on making and managing its ag investments in the United States (“U.S.”) and internationally.

The Company is the majority owner of Bloomia B.V.

and its affiliated entities, representing a significant producer of fresh cut tulips (“stems”) in the U.S.

The Company also fully owns and operates FarmlandCredit.com, a non-bank lending business that seeks to purchase existing loans and/or originate and fund new loans domestically.

During the past twelve months, the Company took three major steps in its evolution.

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

Initially, we intend to focus on loans secured by real estate, primarily for agricultural purposes.

We expect to expand our product offerings over time as we identify needs and opportunities in the marketplace for loans generally.

Our plan, therefore, is to build a portfolio of well-secured loans, with a portion of the credit risk being participated to third parties in most cases, to maintain a low net loss experience and to charge fully compensatory rates and fees.

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.

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

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

See Note 2 to the Consolidated Financial Statements appearing in Part II, Item 8, of this Annual Report on Form 10-K for a further description of the impact of the sale of the In-Store Marketing Business on the consolidated financial statements.

On February 22, 2024, the Company acquired Bloomia B.V.

(“Bloomia”) for a price of $47.5 million financed with Company cash, a new credit facility and promissory notes payable to the sellers.

Bloomia is one of the largest producers of fresh cut tulips in the United States, nurturing over 75 million stems annually.

Bloomia purchases tulip bulbs, hydroponically grows tulips from the bulbs, and sells the stems to retail stores.

The Company’s primary focus in the near-term will be on the Bloomia business.

Our internet address is www.lendway.com.

We make all reports we file with the Securities and Exchange Commission (“SEC”), including our annual reports on Form 10-K;

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Our website is not incorporated by reference into this Annual Report on Form 10-K.

Copies of reports can also be obtained free of charge by requesting them from Insignia Systems, Inc.

Our mailing address is 212 Third Avenue N, Suite 356, Minneapolis, MN 55401;

Copies of reports can also be obtained free of charge by requesting them from Lendway, Inc.

Our mailing address is 5000 West 36th Street, Suite 220, Minneapolis, MN 55416;

telephone 763-392-6200.

Industry and Market Background

Our industry continues to rapidly evolve in several ways:

Shopper Behavior:

Even prior to the start of the pandemic, shopper behavior was evolving.

The rise of surrogate shopper services, drive-up pick-up services or pick-up in store have put the shopper in the driver seat to shop when, where and how they want.

As a result retailers are competing on convenience more than ever.

They are also struggling to manage overall labor needs as a result of the shoppers’ various ways of shopping.

Brand Crossover:

While the number of e-commerce and social media led brands has skyrocketed, many of these brands are also fighting for space at retail.

Retailers are leveraging these brands as exclusive offerings to stand out from the competition and give shoppers a reason to continue coming back.

Financial Justification:

Brands remain diligently focused on top and bottom-line financial metrics, which drives increased pressure to deliver not only breakthrough design and creativity but also at a competitive price that delivers the return on their investment.

Supply Chain Disruptions and Commodity Price Increases:

Primarily because of COVID-19 our clients and vendor partners have experienced longer than normal lead-times on shipping and fulfillment as well as overall cost increases on raw materials for inputs.

We expect these trends to continue in 2023.

Despite continued rapid growth in e-commerce, both retailers and brands are actively seeking to grow their brands in physical stores.

We continue to execute programs for brands who started as direct-to-consumer (DTC) brands and are launching in physical stores, as well as brands launching for the first time.

On the retail side, many of the top US retailers have recently renovated their stores to deliver a multi-service approach, whether their shoppers are coming in-store to shop traditionally, picking up in-store or waiting in the parking lot for their order.

Driving traffic to stores and giving shoppers a reason to come into their stores and shop are extremely important.

Retailers are seeking companies with our capabilities and experience to help build in-store solutions that inspire, educate and ultimately convert active shoppers while they are shopping.

Retailers are continuing to seek ways to connect their online strategies with their in-store strategies to build shopper loyalty and to develop solutions to enhance the shopper’s in-store experience.

Brands are increasingly looking for opportunities to reinforce their brand equity as close as possible to the point of purchase or to expand the number of locations where they are offered in store to ensure they are selected over competition.

We believe emerging brands are looking for ways to get discovered and tell shoppers their story.

These trends are opening opportunities for innovative companies to develop new products and new ways of helping retailers and brands connect with shoppers.

Product Solutions

Since the Company’s inception in 1990, we have worked closely with our clients to understand their evolving needs and introduce solutions that help them achieve their business strategies.

Historically, our core product has been in-store signage solutions, namely the Insignia Point-of Purchase Services (POPS®).

Over the past several years, our net sales from sign solutions have declined primarily due to competitive pressures, market contraction and reduced spending post the COVID-19 pandemic while our non-POPS solutions have significantly expanded as we have developed our portfolio to meet the needs of our clients and execution partners more holistically.

Due to the shift away from signage our POPS business will be wound down in 2023, we will still have the ability to sell signs into certain retailers in the Mass Merchant and Grocery Channel.

Our Display Solutions are designed to help brands get discovered, build awareness and drive impulse purchases via a secondary or often permanent placement of their products.

Our display solutions include a variety of fully customized temporary, semi-permanent and permanent displays, that brands leverage to grow their sales.

Our On-Pack Solutions appear on the individual product package and are designed to drive awareness, impulse purchases, and capture market share within a very short period.

On-pack solutions include BoxTalk TM , coupons, recipes, and cross-promotions.

Our In-Store Signage Solutions , which include POPS signs, help brands achieve a variety of objectives that include awareness and sales lift.

The in-store signage solutions are placed perpendicular to the shelf and are designed to attract the attention of the shopper even before they arrive in front of the shelf to consider the purchase of a product.

Sales and Design

Our highly skilled sales and design teams are a major asset for the organization with their deep knowledge of the industry.

Our Sales team is focused on:

Building and sustaining client relationships;

Increasing overall sales pipeline and revenue;

Expanding our retail footprint.

Our Design team is focused on the following:

Creating innovative stand-out solutions for our brands;

Designing concepts that are fully executable in-stores;

Collaborating with our production partners to bring their designs to life.

Our in-store signage solutions are available for sale into a network of retailers that is managed and maintained through direct relationships or can be sold to certain retailers in the Mass Merchant and Grocery Channel.

During each of the last two most recently completed fiscal years, foreign sales accounted for less than 1% of total net sales each year.

We expect sales to foreign distributors will remain less than 1% of total net sales in 2023.

As we have diversified our portfolio, our competition has become more diverse as well.

Historically on our in-store signage business, we had one main competitor, News America (which has been sold to Neptune Retail Solutions).

With our expanded display and on-pack solutions, the competitive landscape is much more diverse and broad and our sales results vary based on what the client’s priority is whether that is price, design or execution.

We believe our primary competitive strengths include:

Best-in-class execution results across our portfolio of product solutions;

Broad client-base of brands inclusive of large Fortune 500 companies, e-commerce, and emerging start-ups;

Imagination, responsiveness, and hunger to help move our clients’ business forward;

Our extensive broad retail and brand expertise;

Innovative retailer specific design and creative;

Seamless end-to-end project management.

Recent Acquisitions

On February 22, 2024, we completed the acquisition of Bloomia B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands (“Bloomia”).

The Acquisition was completed through Tulp 24.1, LLC, a Delaware limited liability company ( “Tulp 24.1”) and Tulipa Acquisitie Holding B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands and a wholly owned subsidiary of Tulp 24.1 ( “Tulipa”, together with Tulp 24.1, the “Purchasers”), pursuant to an Agreement for the Sale and Purchase of Shares (the “Purchase Agreement”) by and among Tulp 24.1, Tulipa, Botman Bloembollen B.V.

(“Botman”), W.F.

Jansen, who has continued to serve as chief executive officer of Bloomia (“Jansen”), and H.J.

Strengers (“Strengers”, together with Botman and Jansen, the “Sellers”) and Lendway, as the Guarantor.

Following the Acquisition, Tulp 24.1 became the holder of 100% of the ownership interests of Bloomia.

As a result of the acquisition, Lendway holds an 81.4% ownership interest in Tulp 24.1 and Jansen owns the remaining 18.6% ownership interest.

We acquired Bloomia for $47.5 million.

The acquisition price was paid with $9.2 million of the Company’s cash, $22.8 million of proceeds from a new credit agreement, and promissory notes payable to the sellers totaling $15.5 million.

We entered into a revolving credit and term loan agreement (the “Credit Agreement”), together with Tulp 24.1 as the borrower.

Under the terms of the Credit Agreement, Tulp 24.1 had an $18.0 million term loan funded.

The Credit Agreement also contains a $6.0 million revolving credit facility, which may be used by Tulp 24.1 for general business purposes and working capital.

The Credit Agreement contains ongoing affirmative and negative covenants that Tulp 24.1 is required to comply with.

The Company provided an unsecured guaranty of the obligations of Tulp 24.1 under the Credit Agreement.

The Company acquired Farmland Credit, Inc., a Minnesota corporation (“FCI”), and FCI’s subsidiaries, Farmland Credit FR, LLC and Farmland Credit AV, LLC for a nominal amount from a related party, Air T, Inc., a member of the group that holds 38.9% of Lendway’s outstanding shares.

This transaction was part of starting the non-bank lending business discussed below.

The following summarizes the current entity structure of the Company:

With the February 2024 acquisition of Bloomia, we operate in two industry segments:

Specialty Ag, consisting of the Bloomia business

Non-bank Lending, consisting of the Lending Business

Our Specialty Ag segment consists of Bloomia’s operations.

Bloomia was founded in the Netherlands and has grown to become a leader in the fresh cut tulip industry in the U.S.

Bloomia nurtured over 75 million stems annually in 2023 and 2022.

Bloomia operates from three strategically positioned locations in the United States, the Netherlands and South Africa, and also has a 30% interest in a greenhouse business in Chile.

Bloomia operates greenhouses to hydroponically grow tulips at its United States and South Africa locations.

Bloomia has invested in automation in its U.S.

greenhouse in recent years that has increased production efficiency.

Bloomia has historically sourced tulip bulbs from producers in the Netherlands, Chile, and New Zealand, which provides for year-round supply.

Bulbs from the Southern Hemisphere are generally used from the end of August to early December, with the Northern Hemisphere produced bulbs used the remainder of the year.

Bloomia has established business relationships with prominent retailers.

A small number of mass-market retailers in the U.S.

have historically accounted for more than 99% of Bloomia’s total annual sales.

Revenues are mainly generated on the East Coast, leaving potential for growth on the West Coast.

Bloomia aims to offer premium tulip stems, the result of sourcing larger bulbs, that have a longer shelf life than imported stems.

Growing bulbs domestically also allows for higher margins because the freight costs for importing bulbs by sea have been substantially less than the costs associated with importing stems by air.

In the Netherlands, Bloomia’s office facilitates the sourcing of bulbs, conditioning to prepare bulbs for planting, and shipping of bulbs to its United States and South Africa facilities.

In South Africa, Bloomia’s wholly owned subsidiary operates a greenhouse that has produced an average of approximately 3.5 million tulip stems per year over the last five years.

The facility is capable of growing tulips hydroponically year-round.

In Chile, Bloomia has a minority ownership interest in Araucania Flowers S.A.

(“Araucania”).

The operation grows tulips hydroponically year-round.

Its growing and production complex consists of about 8,600 square feet of greenhouse, 7,000 cubic feet of cold storage, and more than 2,400 square feet of processing space.

Araucania traditionally sells to retailers located in Chile, Bolivia, and Peru.

Bloomia has well established customer relationships.

In the U.S., Bloomia sells stems to some of the largest mass-market retailers.

During 2023, Bloomia had approximately 15 customers in the U.S.

Of those customers, three individually represented greater than 10% of Bloomia’s revenue, accounting for 37.7%, 16.2%, and 10.4% of its U.S.

revenue during the 12 months ended December 31, 2023.

The estimated market for cut flowers in the United States for 2023 is approximately $8 billion, of which approximately 80% is imported and around 20% is produced within the U.S.

Of overall cut flowers sales, approximately 15% is represented by tulip stems.

Bloomia believes it has a market share of approximately 20% of the cut tulips grown in the U.S.

Barriers to entry are considered high due to the need for high volumes and efficient operations to generate significant profitability.

In the U.S., the tulip industry has historically been highly seasonal due to peak demand between January to May, supported by the Valentine’s Day, Easter, and Mother’s Day holidays, and also because of the tulip bulbs’ growing season in traditional sourcing areas.

The tulip market is growing outside of the peak season, as demand increases for other events such as birthdays and weddings.

As one of only a few tulip producers in the U.S.

with sourcing of bulbs from the Southern Hemisphere, we believe Bloomia is well positioned to fill this growing demand.

Bloomia competes with both local (U.S.) producers and foreign producers who import cut tulips, primarily from the Netherlands.

Bloomia has carved out a strong competitive position amongst U.S.

growers by developing unique infrastructure through the combination of hydroponics and an integrated supply chain.

Growing tulips in a greenhouse using hydroponics enables year-round production and requires less water and nutrients to grow the stems, and results in tulips that are better quality and have a longer shelf life.

By sourcing tulip bulbs from both the Netherlands and the Southern Hemisphere, Bloomia is able to offer quality fresh cut tulips year-round, meeting unmet demand.

The supply chain steps for U.S.

operations are detailed below:

Procure bulbs:

Purchase bulbs from established suppliers in the Netherlands or Southern Hemisphere.

Buffer storage:

Bulbs kept in cooled storage in the Netherlands.

Shipping to U.S.:

Bulbs are shipped via ocean containers.

Bulbs are prepared for growing.

Bulbs are moved into the greenhouse.

Tulips are cut and wrapped.

Stems are stored in a cooled warehouse to prevent spoilage.

Stems are transported to retailer’s distribution centers.

Consumer sales at mass-market retailers.

During 2023 Bloomia sourced bulbs to grow around 75 million stems.

The Netherlands has around 1,500 bulb suppliers, who jointly export over 2.5 billion tulip bulbs each year.

Over the past five years, Bloomia has sourced from the 10 largest producers, 20 medium-sized producers, as well as from smaller producers.

The Netherlands’ large-scale production of tulip bulbs has created an efficient marketplace for Bloomia to source bulbs.

The large majority of Bloomia’s contracts for purchase of bulbs from growers in the Netherlands are short term;

however, Bloomia has a long history with most of its suppliers.

Bulb contracts obligate Bloomia only to buy an agreed upon volume of bulbs;

bulb price is established through market pricing.

To help facilitate year-round growing, Bloomia has routinely sourced bulbs from Chile and more recently began sourcing bulbs from New Zealand.

Chile and New Zealand are currently the only countries in the Southern Hemisphere with bulb production at volume.

By sourcing bulbs from around the world, Bloomia has bulbs that are ready for planting year-round, limiting its reliance on importing stems.

Year-round production results in Bloomia being less exposed to higher logistics costs that result from importing stems.

Bloomia has also made investments to automate its greenhouse.

The automation of the greenhouse allows Bloomia to:

scale production faster if needed to meet demand;

increase greenhouse efficiency resulting in higher margins, and;

reduce its dependence on seasonal labor.

Bloomia and its customers conduct regular purchase planning meetings, enabling Bloomia to fine-tune its planning for delivery volume and timing.

Bloomia is also a member of three trade associations;

providing import/export logistics support, marketing support, and support for conducting business with wholesalers.

Non-Bank Lending Segment

We are building a scalable Lending Business to purchase existing loans or originate and fund new loans, all of which will be secured by collateral (individually or collectively, “Secured Loans”).

In April 2023, we launched our Lending Business, through the hiring of a Senior Vice President of Lending with over 20 years of experience in credit and lending.

Initially, we intend to focus on loans secured by real estate, primarily for agricultural purposes.

We expect to expand our product offerings over time as we identify needs and opportunities in the marketplace for loans generally.

We are building our strategy and long-term growth initiatives through development of customized niche products to support identified customer needs and opportunities in the marketplace, and effective funding structures to maximize returns.

We face competition from other entities that originate, purchase, securitize, or provide financing for Secured Loans.

These entities include commercial and investment banks, insurance companies, Farm Credit System institutions, and financial funds.

We plan to compete through development of niche products and effective fundings structures, while controlling overhead costs.

The relative competitiveness and our ability to grow loan volume will be affected by many factors, including demand for the lending products we offer, availability of capital, and liquidity and cost of funds from third-party funding sources.

Activity to Date

The Company met with a number of prospects for loan originations and/or purchases since the start of the lending business.

Deals were negotiated, but ultimately did not close.

With the Company’s decision to allocate capital to the Bloomia acquisition, capital available for the lending business will be significantly constrained in the near term.

Accordingly, we anticipate minimal revenue and operating losses from the lending business during the remainder of 2024.

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 ® , Insignia POPS ® , Insignia POPSign ® , Insignia ShelfPOPS ® , Stylus ® , freshADS ® , DuraSign ® , I-Care ® , BannerPOPS ® , EquityPOPS ® , ShapePOPS ® , and Boxtalk TM .

Bloomia holds a trademark on its name and logo.

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 the Company’s trade secrets or other confidential or proprietary information.

Service and Solution Development

New services, solutions and enhancements to existing offerings are developed either internally or externally and may include proprietary data management and design guidance.

Over the past several years, we have significantly expanded our offered solutions and have developed a portfolio designed to meet the needs of our clients and execution partners more holistically.

Business Plan

Our strategic plan, seeks to differentiate Insignia from our competition, situate Insignia for growth within our industry and better protect Insignia from competitive response through our overall portfolio diversification.

The strategic plan consists of:

Accelerate Display .

Double down on our display capabilities and offerings.

Strategically expand overall market outreach aligned with our capabilities and knowledge.

Enhance internal capabilities for added client benefit.

Continue to invest in design and creative resources in order to bring our clients the most innovative concepts.

Grow On-Pack .

Continue to provide turnkey product offerings that fit both brand and retailer needs.

Increase overall market potential with increased outreach and leveraging strategic partners.

Executional Excellence .

Partner with industry leading merchandising partners in order to deliver superior results to our clients.

Invest in our Future .

Continue to recruit and retain top talent.

Thoughtfully invest in strategic resources that result in employee development, customer satisfaction and increased revenues.

Our strategic plan acknowledges the challenges and opportunities we face within our industry and given the rapid change in retail in the current environment, we continue to be faced with risk of short-to-intermediate term volatility in our operating and financial performance.

We are a leading provider of in-store advertising solutions to our clients.

These solutions help our clients connect, engage, and build better relationships with their consumers to increase awareness, trial, sales and loyalty.

Many of these brands are fast moving with products that would be found in grocery, mass and drug channels.

During 2022, three CPG manufacturers accounted for 19%, 11% and 11% of our total net sales, respectively.

During 2021, two CPG manufacturers accounted for 15% and 12% of our total net sales, respectively.

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

At December 31, 2021, two CPG manufacturers represented 25% and 19% of the Company’s total accounts receivable, respectively.

Our sales historically have fluctuated from period to period, primarily because of:

Sales cycles within the retailers that our display solutions execute;

Brand determinations to purchase solutions from us versus competitor solutions;

Promotional timing and new product launches by brands;

Brand budget fluctuations and amounts allocated to in-store tactics versus other tactics;

Category seasonality of in-store executions.

These factors have historically resulted in our first quarter being our largest revenue quarter.

Environmental Matters

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The costs and effects of compliance with these regulations have not been and are not expected to become material.

Human Capital Resources and Management

We had 31 employees, of which 30 were full-time employees, as of March 7, 2023.

We believe relationships are our focus and our future, and that begins with our own team.

We believe in creating an environment where our employees have opportunities to grow and develop professionally.

We also strive to create a work environment that employees are proud to be a part of.

Employee Engagement.

We believe in regular engagement with our full team, whether that is starting off our week together in our Monday Huddle meetings or enjoying events our Employee Engagement committee plans.

We believe in providing our employees a flexible work environment that allows them to work where they feel they can get their best work done.

We also take employees’ feedback and concerns to heart and leverage this to help enhance our employee experience.

Ultimately, this promotes retention and the overall success of our organization.

Talent Development.

We have all our employees participate in annual development plans where we focus on both employee strengths and opportunities.

In 2022, 9% of our employees advanced their careers with earned promotions based on their development and performance.

Based on our employees’ needs, we can provide them with a wide range of both formal and informal development opportunities.

Diversity, Equity and Inclusion.

We recognize that our best performance comes when we have a team built off of diversity, equity and inclusion.

In 2022, we reemphasized our focus when we were recognized by Minnesota Census of Women in Corporate Leadership for diversity in both our boardroom and executive leadership teams.

Compensation and Benefits.

We provide robust compensation and benefits.

In addition to salaries, these programs, can include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption and surrogacy assistance, employee assistance programs, and on-site services.

Segment Reporting

The Company operates in a single reportable segment.

Importers of cut flowers air ship stems to the U.S., while Bloomia ships bulbs via sea containers.

Bloomia’s business model (shipping bulbs for local production) lowers its carbon footprint compared to importers of cut flowers.

Hydroponic farming method is free of pesticides, requires less water and has fewer diseases, and requires substantially fewer import shipments.

Governmental Regulation

The Company and its subsidiaries are subject to regulation by various governmental agencies.

Bloomia has an import permit from the USDA for shipments of tulip bulbs.

For import of bulbs from the Netherlands to the U.S., Bloomia participates in a pre-clearance program with the USDA where the climate-controlled tulip bulb shipments are inspected in the Netherlands, and the containers are sealed in the Netherlands.

While there is a process for random inspection by the USDA once the shipment arrives on U.S.

shores, receiving of the shipment is generally expedited.

Chile has a similar process through the USDA.

The European Union regulations may impact aspects of the growing of tulip bulbs in the Netherlands.

Farmland Credit FR, LLC has a money broker’s license in North Dakota.

Employee and Human Capital Resources

As of March 1, 2024, the Company and its subsidiaries had 156 employees, of which 5 were part-time employees.

None of the employees are represented by labor unions.

During 2023, approximately 50% of our hourly workers were hired for seasonal support during January through the end of May.

As of March 1, 2024, 54 employees were seasonal.

We employ temporary foreign agricultural workers (H2A employees).

We regard our relationship with our employees as favorable.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incenting, and integrating our employees.

Our human capital department also requests quarterly feedback through surveys and focus groups to continuously improve the workplace and employee relations.

As it relates to our employees:

Oversight and Management

Our executive officers are tasked with leading our organization and managing employment-related matters, including recruiting, hiring, onboarding, training, compensation planning, talent management and development.

We are committed to providing team members with the training and resources necessary to continually strengthen their skills both inside and outside the workplace.

In 2023, Bloomia added to its Human Capital and Human Resources team, to take on initiatives such as employee wellness programs and continuing education.

Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices.

Management periodically reports to the Board regarding our human capital measures and results that guide how we attract, retain, and develop a workforce to enable our business strategies.

Workplace Safety and Health

A vital part of our business is providing our workforce with a safe, healthy, and sustainable working environment.

We focus on implementing change through workforce observation and feedback channels to recognize risk and continuously improve our processes.

Our team continues to also focus on improving our educational materials for employees to be informed of the best safety practices based on OSHA guidelines and workplace observations.

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-K

Item 1. Business