What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-09 · 131 added, 106 removed, 36 unchanged (87% of the section changed)

2 unchanged sentences

This report contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those in such forward-looking statements as a result of many factors, including those discussed in “Forward-Looking Statements” and elsewhere in this report.

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, customize our solutions down to store level, execute with excellence and the results our solutions deliver.

Our leadership and employees have extensive industry knowledge, including direct experience through former positions at CPG manufacturers and retailers.

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

New product investments by large and emerging CPG manufacturers give us optimism that our product portfolio is relevant to our clients.

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

Our focus on portfolio diversification resulted in our 2022 non-POPS solutions revenue growing 22% versus 2021, and also resulted in our POPS signage solutions declining to approximately 5% of our total net sales for 2022, compared to 24% of our total net sales in 2021.

In 2023 we will be winding down our POPS signage solution.

We remain committed to further refining and enhancing our solutions and broadening our retailer relationships.

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.

Our actual results could differ materially from those in such forward-looking statements as a result of many factors, including those discussed in “Cautionary Statement Regarding Forward-Looking Statements” and elsewhere in this report.

The Company has evolved into a specialty agricultural and finance company focused on making and managing its agricultural investments in the United States and internationally.

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

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

The Company is seeking to build a scalable non-bank lending business to purchase existing loans or originate and fund new loans, all of which will be secured by collateral.

On August 3, 2023, the Company completed the sale of its In-Store Marketing Business.

The operations of the In-Store Marketing Business are presented as discontinued operations.

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

Related to change in strategy of the Company, on 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.

Bloomia Business

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

and its subsidiaries (“Bloomia”).

Bloomia produces and sells fresh cut tulips.

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

Bloomia is a leading producer of fresh cut tulips in the United States, nurturing over 75 million stems annually.

Net sales (unaudited) of Bloomia for the twelve months ended December 31, 2023 and 2022 were approximately $45 million and $43 million, respectively.

Bloomia was founded in the Netherlands and is now strategically positioned in the United States, Netherlands, South Africa and Chile.

Bloomia has relationships with prominent U.S.

mass market retailers.

The Company acquired Bloomia for $47.5 million.

The acquisition resulted in significantly leveraging the Company’s balance sheet.

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

The new credit facility contains financial covenants that the Company is required to meet.

See description of the credit facility below.

Non-Bank Lending Business

While the Company’s primary near-term focus will be on the Bloomia business, the Company plans to continue building a scalable non-bank lending business (our “Lending Business”) to purchase existing loans or originate and fund new loans, all of which will be secured by collateral (individually or collectively, the “Secured Loans”).

In April 2023, we launched our Lending Business, through the hiring of Randy Uglem as Senior Vice President of Lending, now CEO, 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.

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.

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.

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.

Sale of In-Store Marketing Business

On August 3, 2023, we completed the sale of our former In-Store Marketing Business for a sale price of $3.5 million to TIMIBO LLC, an affiliate of Park Printing, Inc.

(the “Buyer”), under an Asset Purchase Agreement dated May 24, 2023 (the “Purchase Agreement”).

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

The cash consideration for the sale was subject to a post-closing adjustment that depended 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.

We also incurred transaction-related severance and other separation benefits in connection with the termination of certain of our officers and employees of approximately $1,416,000, $490,000 of which was attributed to the sale of the In-Store Marketing Business, as well as retention award payouts totaling $343,000 and employee bonuses totaling $164,000, each of which were recorded as expense.

The sum of transaction-related severance, retention awards and bonuses were $1,923,000, of which $974,000 was recorded in continuing operations and $949,000 was recorded in discontinued operations in 2023.

Results of Operations

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

For the Years Ended December 31

Cost of sales

The following table sets forth, for the periods indicated, certain items from our continuing operations in our consolidated statements of operations and the percentage change year-over-year.

The Company had no revenue from continuing operations subsequent to the sale of the In-Store Marketing Business.

Increase (decrease) from 2022 to 2023

Operating expenses:

Sales and marketing

General and administrative

Total operating expenses

Gain from litigation settlement, net

Operating income (loss)

Income (loss) before taxes

Income tax (benefit) expense

Net income (loss)

Operating loss

Interest income

Loss from continuing operations before income taxes

Income tax expense

Net loss from continuing operations

Income from discontinued operations, net of tax

Gain from sale of discontinued operations, net of tax

$ (7,632,000 )

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Net sales for the year ended December 31, 2022 decreased 3.6% to $18,800,000, compared to $19,503,000 for the year ended December 31, 2021.

The decrease was due to an 81.5% decrease in POPS solutions revenue, partially offset by an increase in non-POPS revenue of 21.5%.

The increase in non-POPS revenue is due to both new client acquisition as well as repeat business from existing clients.

POPS sales for the year ended December 31, 2022 were $880,000.

Competitive pressures, including the expiration in April 2021 of our 10-year selling agreement with News America and management’s decision to prioritize resources to growth opportunities in non-POPS solutions, have resulted in decreased POPS solutions revenue for the year ended December 31, 2022 versus the year ended December 31, 2021.

We expect POPS revenue will continue to decline in 2023 in comparison to 2022.

Gross Profit.

Gross profit for the year ended December 31, 2022 increased 2.2% to $3,301,000, compared to $3,230,000 for the year ended December 31, 2021.

The increase in gross profit was primarily due to decreased fixed costs within gross margin from staff and staff related expenses.

Gross profit as a percentage of total net sales increased to 17.6% for the year ended December 31, 2022, compared to 16.5% for the year ended December 31, 2021.

The increase was primarily due to reduction of fixed expense as discussed above, partially offset by decreased net sales.

Operating Expenses

Selling expenses for the year ended December 31, 2022 decreased 31.4% to $1,325,000, compared to $1,931,000 for the year ended December 31, 2021, primarily due to decreased staff and staff related expenses.

Selling expenses as a percentage of total net sales decreased to 7.0% in 2022, compared to 9.9% in 2021, primarily due to decreased expense described above, partially offset by decreased net sales for the year ended December 31, 2022.

Marketing expenses for the year ended December 31, 2022 increased 1.7% to $1,050,000, compared to $1,032,000 for the year ended December 31, 2021.

Marketing expenses as a percentage of total net sales increased to 5.6% in 2022, compared to 5.3% in 2021, primarily due to relatively flat expense over decreased sales in 2022.

Sales and Marketing.

Sales and marketing expenses for the year ended December 31, 2023 were $196,000, consisting of a portion of our CEO’s compensation, as well as travel and entertainment, website and public relations costs.

There was no comparable expense for the year ended December 31, 2022.

General and Administrative.

General and administrative expenses for the year ended December 31, 2022 decreased 34.4% to $3,320,000, compared to $5,058,000 for the year ended December 31, 2021.

The decrease was primarily due to higher expenses incurred in the year ended December 31, 2021 as a result of litigation with News America.

Following the litigation settlement on July 1, 2022, the Company does not expect to incur further expenses related to the legal proceedings with News America.

The decrease in litigation expenses was partially offset by increase in expenses related to exploring strategic alternatives.

General and administrative expenses as a percentage of total net sales decreased to 17.7% in 2022, compared to 25.9% in 2021, primarily due to the decreases in expense as described above.

Gain from litigation settlement.

On July 1, 2022, the Company entered into the settlement agreement with News America, with net proceeds after expenses of $12,000,000, which was recorded as a gain on litigation settlement in operations in the three months ended September 30, 2022.

Other Income.

Other income for the year ended December 31, 2022 was $222,000 compared to other income of $1,299,000 for the year ended December 31, 2021.

The decrease was due to two items in 2021 that did not recur in 2022, the gain on forgiveness of debt and accrued interest of $1,062,000 from the SBA forgiving the Company of its loan pursuant to the Paycheck Protection Program, as well as a $273,000 benefit received under the Employee Retention Credit.

Other income in 2022 consisted primarily of interest income from investment in short-term treasury bills.

General and administrative expenses for the year ended December 31, 2023 increased 36.1% to $3,323,000, compared to $2,442,000 for the year ended December 31, 2022.

The increase was primarily due to transaction-related severance and other separation benefits amounting to $926,000 in connection with the termination of Kristine Glancy, our previous CEO, in addition to the comparison of reduced expense in 2022 from the Director Deferred Compensation Plan due to a reduction in our share price during the year ended December 31, 2022.

Interest Income.

Interest income for the year ended December 31, 2023 was $518,000 compared to interest income of $154,000 for the year ended December 31, 2022.

Interest income in 2023 increased over 2022 primarily due to higher invested balances in short-term treasury bills and interest-bearing savings, and the higher interest rates available on the investments.

The higher invested balances were primarily due to the net proceeds from litigation of $12 million received in July 2022, proceeds related to the sale of the In-Store Marketing Business, and collection of accounts receivable.

Income Taxes.

For the year ended December 31, 2022, the Company recorded an income tax benefit of $218,000, compared to an income expense of $42,000 for the year ended December 31, 2021.

The effective tax rate was 2.2% and (1.2)% for the years ended December 31, 2022 and 2021, respectively.

The primary differences between the Company’s 2022 effective tax rate and the statutory federal rates were the reversal of non-deductible penalties, the reversal of unrecognized tax benefits, and a change in the Company’s valuation allowance against its deferred assets of ($1,971,000).

The valuation allowance decrease in 2022 was primarily related to the utilization of the Company’s net operating loss carryforward against the Company’s taxable income.

Such utilization was limited to 80% of the Company’s taxable income for the year.

The primary differences in 2021 were due to the forgiveness of the Company’s PPP loan of $1,062,000 and a change in the Company’s valuation allowance against its deferred assets of $1,200,000.

For the year ended December 31, 2023, the Company recorded income tax expense on continuing operations of $20,000, compared to income tax expense on continuing operations of $6,000 for the year ended December 31, 2022.

The effective tax rate on continuing operations was (0.7)% and (0.3)% for the years ended December 31, 2023 and 2022, respectively.

The primary differences between the Company’s 2023 and 2022 effective tax rates and the statutory federal rates include state taxes and an increase in the Company’s valuation allowance against its deferred assets.

The effective tax rate fluctuates between periods based on the level of permanent differences and other discrete items relative to the level of pre-tax income or loss for the period.

Net Income (Loss).

For the reasons stated above including the pre-tax gain from litigation settlement in 2022, and the gain on debt forgiveness of the PPP loan and accrued interest of $1,062,000 in 2021, the net income for the year ended December 31, 2022 was $10,046,000 compared to a net loss of $3,534,000 for the year ended December 31, 2021.

Net Loss from Continuing Operations.

For the reasons stated above, net loss from continuing operations for the year ended December 31, 2023 was $3,021,000, compared to loss of $2,294,000 for the year ended December 31, 2022.

Income from Discontinued Operations, Net of Tax and Gain from Sale of Discontinued Operations, Net of Tax.

Income from discontinued operations, net of tax, was $2,474,000 for the year ended December 31, 2023 compared to $12,340,000 for the year ended December 31, 2022.

In 2022, the Company recorded a pre-tax gain of $12 million as a gain on litigation settlement.

For the year ended December 31, 2023, the Company recorded a gain from the sale of discontinued operations before tax of $3,044,000 from the sale of its In-Store Marketing Business.

Information on the sale of the In-Store Marketing Business and statement of operations details of the discontinued operations are included in Note 2 to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

Liquidity and Capital Resources

The Company has financed its operations with proceeds from stock sales and sales of its services and products.

At December 31, 2022, working capital (current assets less current liabilities) was $13,379,000 compared to $3,716,000 at December 31, 2021.

During the year ended December 31, 2022, cash and cash equivalents and restricted cash increased $10,673,000 from $3,851,000 at December 31, 2021, to $14,524,000 at December 31, 2022.

These increases were the result of the net proceeds of $12,000,000 from the litigation settlement.

The Company has invested a significant portion of its cash and cash equivalents in short-term Treasury Bills.

We have historically financed our operations with proceeds from stock sales and sales of our services and products, subject to occasional supplemental proceeds from the settlement of litigation.

The sale of the In-Store Marketing Business on August 3, 2023 generated approximately $1.6 million in cash, directly from the buyer.

On December 31, 2023, working capital (current assets less current liabilities) was $15,525,000, compared to $13,379,000 at December 31, 2022.

During the year ended December 31, 2023, cash, cash equivalents and restricted cash increased $1,553,000 from $14,524,000 at December 31, 2022, to $16,077,000 at December 31, 2023.

Operating Activities.

Net cash provided by operating activities during the year ended December 31, 2022 was $10,663,000.

Net income of $10,046,000, less non-cash adjustments of $69,000, plus changes in operating assets and liabilities of $686,000 resulted in the $10,663,000 of cash provided by operating activities.

The non-cash adjustments consisted of depreciation expense, changes in allowance for doubtful accounts, and stock-based compensation expense.

The largest component of the change in operating assets and liabilities was deferred revenue which increased $1,585,000 from December 31, 2021.

The increase was a result of an increase in prepaid revenue from our customers.

In the normal course of business, our accounts receivable, accounts payable, accrued liabilities, deferred revenue and prepaid production costs will fluctuate depending on the level of revenues and related business activity, as well as billing arrangements with customers and payment terms with retailers.

Net cash used in continuing operating activities during the year ended December 31, 2023 was $2,905,000.

Net income of $2,414,000, less income from discontinued operations of $2,474,000, less gain from the sale of discontinued operations of $2,961,000 resulted in net cash used in continuing operations before adjustments and changes in operating assets and liabilities of $65,000.

Non-cash adjustments for depreciation and stock-based compensation during the year ended December 31, 2023 was $51,000.

The largest component of the change in operating assets and liabilities was accrued liabilities, which increased $376,000 from December 31, 2022.

The increase was primarily due to $330,000 of severance related payments that remained to be paid to the Company’s prior CEO, Ms.

Investing Activities.

Net cash used in investing activities during the year ended December 31, 2022 was $29,000.

This was related to the purchase of property and equipment.

Net cash provided by investing activities from continuing operations during the year ended December 31, 2023 was $1,532,000, which was due to the proceeds from the sale of our In-Store Marketing Business.

Financing Activities.

Net cash provided by financing activities during the year ended December 31, 2022 was $39,000, which related to proceeds from the issuance of common stock under the employee stock purchase plan and exercised stock options.

Primarily as a result of the net proceeds from the litigation settlement of $12 million, cash and cash equivalents plus restricted cash at December 31, 2022 was $14.5 million.

The Company believes that based upon current business conditions and plans, its cash and cash equivalents balances will be sufficient for its cash requirements for at least the twelve-month period subsequent to the filing of this Form 10-K.

Depending on the outcome our strategic alternative process we may be required to finance this process through equity offerings or debt financings.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect the rights of our shareholders.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Net cash used in financing activities during the year ended December 31, 2023 was $473,000, which related to cash used for the repurchase of common stock, partially offset by proceeds from the issuance of shares per the Director Deferred Compensation Plan for two former non-employee directors.

On February 22, 2024, the Company acquired majority ownership in 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 facility, and notes payable of $15.5 million to the sellers.

The Company expects that the new credit facility will provide sufficient credit availability to support its ongoing operations, fund its new debt service requirements, capital expenditures and working capital for at least the next 12 months.

The credit facility described below contains ongoing financial covenants that the Company is required to meet.

As the Company grows its businesses, we may be required to obtain additional capital through equity offerings or additional debt financings.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect the rights of our stockholders.

Debt financing and preferred equity financing, if available, may involve agreements that include additional covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Additional capital may not be available when needed, on reasonable terms, or at all, and our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the U.S.

and worldwide resulting from the ongoing COVID-19 pandemic.

If we are unable to raise additional funds when needed we may not be able to complete transactions related to the strategic alternatives process.

and worldwide.

If we are unable to raise additional funds when needed we may not be able to grow our businesses, or complete transactions related to the strategy.

Credit Agreement

To finance the Bloomia acquisition, the Company entered into 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.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to Term SOFR for an interest period of one month plus 3.0%.

In addition to paying interest on the outstanding principal under the Credit Agreement, Tulp 24.1 is required to pay a commitment fee of 0.50% on the unutilized commitments under the revolving credit facility.

The term loans will be repaid in quarterly installments of $450,000, commencing on June 30, 2024.

The remaining outstanding balance will be repaid in full after five years.

The scheduled maturity of the revolving facility is February 20, 2029.

The obligations under the Credit Agreement are secured by substantially all of the personal property assets of Tulp 24.1 and its subsidiaries.

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

Commencing with the fiscal quarter ending on March 31, 2024, the Credit Agreement will require Tulp 24.1 and its subsidiaries to maintain (a) a minimum fixed charge coverage ratio of not less than 1.25 to 1.00 and (b) a maximum senior cash flow leverage ratio of 3.0 to 1.0 until September 30, 2024, and stepping down to 2.00 to 1.00 on December 31, 2027, until the maturity date of the Credit Agreement.

The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict the ability of Tulp 24.1 and its subsidiaries to incur additional indebtedness, dispose of significant assets, make distributions or pay dividends to the Company, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments, enter into sale and leaseback transactions or grant liens on its assets, subject to certain limitations.

The Credit Agreement contains customary events of default, the occurrence of which would permit the lenders to terminate their commitments and accelerate loans under the Credit Agreement, including failure to make payments under the credit facility, failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness of Tulp 24.1 or any of its subsidiaries, failure of Tulp 24.1 or any of its subsidiaries to pay or discharge material judgments, bankruptcy of Tulp 24.1 or any of its subsidiaries, and change of control of the Company.

Promissory Notes

As part of the financing of the Bloomia acquisition, Tulp 24.1 entered into notes payable with the sellers.

Notes payable for $12.8 million have a term of five years, subject to requiring principal payments based on “excess cash flow” as defined.

Interest is at 8% per annum in the first year and increases annually by 2 percentage points.

Notes payable for $2.7 million have a term of nine calendar weeks after the closing date.

Interest is at 8% per annum.

Critical Accounting Estimates

2 unchanged sentences

Critical accounting estimates are those estimates made in accordance with GAAP which involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to allowance for doubtful accounts, income taxes, sales tax, and stock-based compensation expense.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to income taxes.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances.

1 unchanged sentence

Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our financial statements.

We believe the following are our critical accounting estimates used in preparation of our financial statements:

Allowance for Doubtful Accounts .

An allowance is established for estimated uncollectible accounts receivable.

The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole and other relevant facts and circumstances.

Unexpected changes in the aforementioned factors could result in materially different amounts.

Sales Taxes .

Sales taxes are based on determination of which of the Company’s products/services are subject to sales tax, and in which of various states and other jurisdictions the tax applies.

Further, the Company must determine which of our customers are exempt from the Company charging sales tax because the customer is a reseller or self-assesses and direct pays to states and other jurisdictions on purchases the customer makes from the Company.

These determinations contain estimates and are subject to judgment and interpretation by taxing authorities in various states and other jurisdictions, which could result in recognizing materially different amounts in future periods.

We believe the following is our critical accounting estimate used in preparation of our consolidated financial statements:

Income Taxes .

6 unchanged sentences

For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Stock-Based Compensation Expense .

The Company measures and recognizes compensation expense for all stock-based payments at fair value.

Restricted stock awards and restricted stock units are valued at the closing market price of the Company’s stock on 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 fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding several 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.

The expected terms of the options and employee stock purchase plan rights are based on evaluations of historical and expected future employee exercise behavior.

The risk-free interest rate is based on the U.S.

Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date.

Volatility is based on historical volatility of the Company’s stock.

The Company has not historically issued any dividends beyond the one-time dividends declared in 2011 and 2016 and does not expect to in the future.

If factors change and the Company employs different assumptions in the valuation of grants in future periods, the compensation expense that the Company records may differ significantly from what it has recorded in the current period.

Forward-Looking Statements

Statements in this report that are not statements of historical or current facts are considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

The words “anticipates,” “believes,” “estimates,” “expects,” “future,” “likely,” “may,” “projects,” “seeks,” “will,” and similar expressions may identify forward-looking statements.

Readers are cautioned not to place undue reliance on these or any forward-looking statements, which speak only as of the date of this report.

Statements made in this report regarding, for instance, the ongoing exploration of strategic alternatives, changes in composition of retailer and CPG manufacturer networks, innovation and transformation of the Company’s business, benefits of outsourcing arrangements, are forward-looking statements.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements made in this Annual Report on Form 10-K, in the Company’s other SEC filings, in press releases and in oral statements to stockholders and securities analysts that are not statements of historical or current facts are “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of the Company to be materially different from the results or performance expressed or implied by such forward-looking statements.

The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “likely,” “may,” “plan,” “project,” “will” and similar expressions identify forward-looking statements.

Forward-looking statements include statements expressing the intent, belief or current expectations of the Company and members of our management team regarding, for instance:

(i) our belief that our cash balance, cash generated by operations and borrowings available under our Credit Agreement, will provide adequate liquidity and capital resources for at least the next twelve months, and (ii) regarding the potential for growth and other opportunities for our businesses.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

These statements are subject to the risks and uncertainties that could cause actual results to differ materially and adversely from the forward-looking statements.

These forward-looking statements are based on current information, which we have assessed and which by its nature is dynamic and subject to rapid and even abrupt changes.

As such, actual results may differ materially from the results or performance expressed or implied by such forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors, including those set forth in this report and additional risks, if any, identified in our Quarterly Reports on Form 10-Q and our Current Reports on Forms 8-K filed with the SEC.

Factors that could cause our estimates and assumptions as to future performance, and our actual results, to differ materially include the following:

(1) our ability to integrate and continue to successfully operate the newly acquired Bloomia business, (2) our ability to compete, (3) concentration of Bloomia’s historical revenue among a small number of customers, (4) changes in interest rates, (5) ability to comply with the requirements of the Credit Agreement, (6) the limited history of our Lending Business, (7) the substantial risk of loss associated with lending generally, (8) market conditions that may restrict or delay appropriate or desirable opportunities, (9) our ability to develop and maintain necessary processes and controls relating to our businesses (10) reliance on one or a small number of employees in each of our businesses, (11) potential adverse classifications of our Company if we are unsuccessful in executing our business plans, (12) other economic, business, market, financial, competitive and/or regulatory factors affecting the Company’s businesses generally;

(13) our ability to attract and retain highly qualified managerial, operational and sales personnel;

and (14) the availability of additional capital on desirable terms, if at all.

Forward-looking statements involve known and unknown risks, uncertainties and other factors, including those set forth in this report and additional risks, if any, identified in this Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K filed with the SEC.

Such forward-looking statements should be read in conjunction with the Company’s filings with the SEC.

Insignia assumes no responsibility to update the forward-looking statements contained in this report or the reasons why actual results would differ from those anticipated in any such forward-looking statement, other than as required by law.

Lendway assumes no responsibility to update the forward-looking statements contained in this report or the reasons why actual results would differ from those anticipated in any such forward-looking statement, other than as required by law.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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 7. Management’s Discussion and Analysis