BLOOMIA HOLDINGS, INC. 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements The following are included on the pages indicated: Report of Independent Registered Public Accounting Firm (PCAOB ID 542 ) F-2 Report of Independent Registered Public Accounting Firm (PCAOB ID 23) F-3 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-4 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023 and 2022 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents Boulay PLLP Boulay PLLP Minneapolis, Minnesota F-2 Table of Contents F-3 Table of Contents Lendway, Inc., and Subsidiaries (formerly Insignia Systems, Inc.) CONSOLIDATED BALANCE SHEETS As of December 31 2023 2022 ASSETS Current Assets: Cash and cash equivalents $ 16,077,000 $ 14,439,000 Restricted cash — 85,000 Receivable from escrow account 200,000 — Income tax receivable 14,000 28,000 Prepaid expense 38,000 30,000 Other current assets related to discontinued operations 292,000 6,171,000 Total Current Assets 16,621,000 20,753,000 Other Assets: Property and equipment, net 35,000 — Operating lease right-of-use assets 7,000 — Other, net 10,000 — Non-current assets related to discontinued operations — 215,000 Total Other Assets 52,000 215,000 Total Assets $ 16,673,000 $ 20,968,000 LIABILITIES AND STOCKHOLDER'S' EQUITY Current Liabilities: Accounts payable $ 32,000 $ 138,000 Accrued liabilities: Compensation 635,000 264,000 Other 168,000 306,000 Current portion of operating lease liabilities 4,000 — Current liabilities related to discontinued operations 257,000 6,666,000 Total Current Liabilities 1,096,000 7,374,000 Long-Term Liabilities: Accrued income taxes 42,000 53,000 Operating lease liabilities 3,000 — Non-current liabilities related to discontinued operations — 140,000 Total Long-Term Liabilities 45,000 193,000 Commitments and Contingencies — — Stockholders' Equity: Common stock, par value $.01: Authorized shares - 5,714,000 Issued and outstanding shares - 1,743,000 and 1,797,000 at December 31, 2023 and 2022, respectively 17,000 18,000 Additional paid-in capital 16,176,000 16,458,000 Accumulated deficit ( 661,000 ) ( 3,075,000 ) Total Stockholders' Equity 15,532,000 13,401,000 Total Liabilities and Stockholders' Equity $ 16,673,000 $ 20,968,000 See accompanying notes to consolidated financial statements. F-4 Table of Contents Lendway, Inc., and Subsidiaries (formerly Insignia Systems, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31 2023 2022 Operating Expenses: Sales and marketing $ 196,000 $ - General and administrative 3,323,000 2,442,000 Total Operating Expenses 3,519,000 2,442,000 Operating Loss ( 3,519,000 ) ( 2,442,000 ) Interest income 518,000 154,000 Loss from continuing operations before income taxes ( 3,001,000 ) ( 2,288,000 ) Income tax expense 20,000 6,000 Net loss from continuing operations ( 3,021,000 ) ( 2,294,000 ) Income from discontinued operations, net of tax 2,474,000 12,340,000 Gain from sale of discontinued operations, net of tax 2,961,000 - Net Income $ 2,414,000 $ 10,046,000 Net income (loss) per basic and diluted share: Continuing operations $ ( 1.70 ) $ ( 1.28 ) Discontinued operations 3.06 6.89 Basic and diluted earnings per share $ 1.36 $ 5.61 Shares used in calculation of net income (loss) per share: Basic and diluted 1,781,000 1,791,000 See accompanying notes to consolidated financial statements. F-5 Table of Contents Lendway, Inc., and Subsidiaries (formerly Insignia Systems, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-In Accumulated Shares Amount Capital Deficit Total Balance at January 1, 2022 1,782,000 $ 18,000 $ 16,296,000 $ ( 13,121,000 ) $ 3,193,000 Issuance of common stock, net 6,000 — 39,000 — 39,000 Issuance of common stock upon vesting of restricted stock units 9,000 — — — — Value of stock-based compensation — — 123,000 — 123,000 Net income — — — 10,046,000 10,046,000 Balance at December 31, 2022 1,797,000 $ 18,000 $ 16,458,000 $ ( 3,075,000 ) $ 13,401,000 Repurchase of common stock ( 84,000 ) ( 1,000 ) ( 481,000 ) — ( 482,000 ) Issuance of common stock, net 24,000 — 155,000 — 155,000 Issuance of common stock upon vesting of restricted stock units 6,000 — — — — Value of stock-based compensation — — 44,000 — 44,000 Net income — — — 2,414,000 2,414,000 Balance at December 31, 2023 1,743,000 $ 17,000 $ 16,176,000 $ ( 661,000 ) $ 15,532,000 See accompanying notes to consolidated financial statements. F-6 Table of Contents Lendway, Inc., and Subsidiaries (formerly Insignia Systems, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31 2023 2022 Operating Activities: Net income $ 2,414,000 $ 10,046,000 Income from discontinued operations, net of tax ( 2,474,000 ) ( 12,340,000 ) Gain from sale of discontinued operations, net of tax ( 2,961,000 ) - Net loss from continuing operations ( 3,021,000 ) ( 2,294,000 ) Adjustments to reconcile net loss from continuing operations to net cash used in operating activities of continuing operations: Depreciation and amortization 7,000 - Stock-based compensation expense 44,000 123,000 Changes in operating assets and liabilities: Receivable from escrow account ( 200,000 ) - Income tax receivable 14,000 ( 24,000 ) Prepaid expenses and other ( 8,000 ) 151,000 Accounts payable ( 106,000 ) 52,000 Accrued liabilities 376,000 ( 187,000 ) Accrued income taxes ( 11,000 ) ( 658,000 ) Net cash used in operating activities of continuing operations ( 2,905,000 ) ( 2,837,000 ) Net cash provided by operating activities of discontinued operations 3,423,000 13,500,000 Net cash provided by operating activities 518,000 10,663,000 Investing Activities: Proceeds from sale of business 1,581,000 - Purchase of other long-term assets ( 10,000 ) - Purchases of property and equipment ( 39,000 ) - Net cash provided by investing activities of continuing operations 1,532,000 - Net cash used in investing activities of discontinued operations ( 24,000 ) ( 29,000 ) Net cash provided by (used in) investing activities 1,508,000 ( 29,000 ) Financing Activities: Proceeds from issuance of common stock, net 9,000 39,000 Repurchase of common stock, net ( 482,000 ) - Net cash (used in) provided by financing activities ( 473,000 ) 39,000 Increase in cash, cash equivalents and restricted cash 1,553,000 10,673,000 Cash, cash equivalents and restricted cash at beginning of period 14,524,000 3,851,000 Cash, cash equivalents and restricted cash at end of period $ 16,077,000 $ 14,524,000 Supplemental disclosures for cash flow information: Cash paid during the period for income taxes $ 88,000 $ 464,000 Non-cash investing and financing activity: Operating lease right-of-use asset obtained in exchange for lease obligations $ 8,000 $ 38,000 Purchase of property and equipment included in accrued liabilities $ 3,000 $ 1,000 Common stock issued for settlement of accrued liabilities $ 146,000 $ - See accompanying notes to consolidated financial statements. F-7 Table of Contents Lendway, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies . Description of Business. The consolidated financial statements include the accounts of Lendway, Inc. (the “Company”), its wholly owned subsidiary, Farmland Credit, Inc., a Minnesota corporation (“FCI”), and FCI’s wholly owned subsidiaries, Farmland Credit FR, LLC and Farmland Credit AV, LLC. All significant inter-company balances and transactions have been eliminated. The Company has evolved into a specialty agricultural and finance company with operational focus on its agricultural investments. 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 (the “Lending Business”) to purchase existing loans or originate and fund new loans, all of which will be secured by collateral. As described further 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”). 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. As described further in Note 9, on February 22, 2024, the Company acquired majority ownership in Bloomia B.V. and its affiliated entities (“Bloomia”) for a price of $ 47.5 million financed with Company cash, a new credit facility and a note payable to the sellers. Bloomia produces fresh cut tulip stems. Bloomia purchases tulip bulbs, hydroponically grows tulips from the bulbs, and sells the stems to retail stores. Cash and Cash Equivalents . The Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. Cash and cash equivalents of $ 15,859,000 and $ 14,227,000 were in interest-bearing investments such as an insured sweep account, U.S. Treasury bills and a money market account at December 31, 2023 and 2022, respectively. The balances in cash accounts, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Amounts held in checking accounts and in insured cash sweep accounts during the years ended December 31, 2023 and 2022 were fully insured under the Federal Deposit Insurance Corporation. December 31 2023 2021 Cash and cash equivalents $ 16,077,000 $ 14,439,000 Restricted cash - 85,000 Total cash, cash equivalents and restricted cash $ 16,077,000 $ 14,524,000 Restricted Cash. The Company’s restricted cash consists of cash the Company was contractually obligated to maintain in accordance with the terms of the lease for its headquarters space in Minneapolis. Fair Value of Financial Instruments . Fair value is defined as the exit price, or the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants as of the measurement date. Accounting Standards Codification (“ASC”) 820-10 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect management’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. F-8 Table of Contents The hierarchy is divided into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As of December 31, 2023 and 2022, the Company had no financial assets or liabilities measured at a fair value on a recurring basis. The Company records certain financial assets and liabilities at their carrying amounts that approximate fair value, based on their short-term nature. These financial assets and liabilities included cash and cash equivalents, other current assets related to discontinued operations, and accounts payable. Property and Equipment . Property and equipment are recorded at cost. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense when incurred. Expenditures are capitalized for development activities, while expenditures related to planning, training, and maintenance are expensed. Depreciation is provided in amounts sufficient to relate the cost of assets to operations over their estimated useful lives. The straight-line method of depreciation is used for financial reporting purposes and accelerated methods are used for tax purposes. Estimated useful lives of the assets are as follows: Office furniture and fixtures 1 – 3 years Computer equipment and software 3 – 5 years Leasehold improvements 12 – 18 months Leases. The Company determines if an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, the current portion of operating lease liabilities, and the operating lease liabilities on the balance sheets. The ROU assets represent our right to control the use of an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date and date of any lease modification based on the present value of lease payments over the lease term. The operating lease ROU assets also include any prepaid lease payments made and exclude lease incentives. Lease expense is recognized on a straight-line basis over the lease term. The Company has elected the practical expedient to exclude short-term leases (one year or less) from our ROU assets and lease liabilities. Impairment of Long-Lived Assets . The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Impaired assets are then recorded at their estimated fair value. Restructuring. In connection with the change in the Company’s strategy to the specialty agricultural and finance company, 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. Glancy. As of December 31, 2023, $ 305,000 remained to be paid to Ms. Glancy and was included in accrued compensation. Subsequent to December 31, 2023 this amount was paid to Ms. Glancy. Income Taxes . Income taxes are accounted for under the liability method. Deferred income taxes are provided for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment. It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense (benefit). F-9 Table of Contents Stock-Based Compensation . The Company measures and recognizes compensation expense for all stock-based awards at fair value. Restricted stock units and awards 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 lives 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 term at grant date. Volatility is based on historical and expected future volatility of the Company’s stock. The Company has not historically issued any dividends beyond one-time dividends declared in 2011 and 2016 and does not expect to in the future. Net Income (Loss) Per Share . Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding and excludes any dilutive effects of stock options and restricted stock units and awards. Diluted net income (loss) per share gives effect to all diluted potential common shares outstanding during the year. 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. Due to the net loss from continuing operations incurred during the year ended December 31, 2023 and 2022, all outstanding stock awards were considered anti-dilutive for those periods. Options to purchase approximately 1,000 shares of common stock with a weighted average exercise price of $ 15.54 were outstanding at December 31, 2023. Options to purchase approximately 53,000 shares of common stock with a weighted average exercise price of $ 11.69 were outstanding at December 31, 2022. Weighted average common shares outstanding for the years ended December 31, 2023 and 2022 were as follows: Year ended December 31 2023 2022 Denominator for basic net income (loss) per share - weighted average shares 1,781,000 1,791,000 Effect of dilutive securities: Stock options, restricted stock units and restricted stock awards - - Denominator for diluted net income (loss) per share - weighted average shares 1,781,000 1,791,000 Use of Estimates . The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. F-10 Table of Contents 2. 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 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 gain on sale (before income taxes) of the In-Store Marketing Business was determined as follows: Gross sale price $ 3,500,000 Adjustments per Purchase Agreement ( 1,555,000 ) Adjusted Price 1,945,000 Liabilities assumed in excess of assets 1,308,000 Transaction costs not previously expensed ( 209,000 ) Gain on sale of In-Store Marketing Business $ 3,044,000 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 year ended December 31, 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. F-11 Table of Contents The carrying amounts of major classes of assets and liabilities that were reclassified as related to discontinued operations on the Consolidated Balance Sheets were as follows: December 31, December 31, 2023 2022 Current Assets: Accounts receivable $ 292,000 $ 5,557,000 Inventories - 29,000 Prepaid production costs - 535,000 Other prepaid expense - 50,000 Current assets related to discontinued operations $ 292,000 $ 6,171,000 Other Assets: Property and equipment, net $ - $ 71,000 Operating lease right-of-use assets - 144,000 Non-current assets related to discontinued operations $ - $ 215,000 Current Liabilities: Accounts payable $ 7,000 $ 2,515,000 Sales tax 169,000 717,000 Accrued liabilities 81,000 1,003,000 Current portion of operating lease liabilities - 4,000 Deferred revenue - 2,427,000 Current liabilities related to discontinued operations $ 257,000 $ 6,666,000 Long-Term Liabilities: Operating lease liabilities $ - $ 140,000 Non-current liabilities related to discontinued operations $ - $ 140,000 F-12 Table of Contents Results of discontinued operations are summarized below: Years Ended December 31 2023 2022 Net services revenues $ 21,078,000 $ 18,800,000 Cost of services 16,087,000 15,499,000 Gross Profit 4,991,000 3,301,000 Operating Expenses: Selling 1,136,000 1,325,000 Marketing 805,000 1,050,000 General and administrative 679,000 878,000 Total Operating Expenses 2,620,000 3,253,000 Gain from litigation settlement, net - 12,000,000 Operating Income 2,371,000 12,048,000 Other income 91,000 68,000 Income from discontinued operations before income taxes 2,462,000 12,116,000 Income tax benefit ( 12,000 ) ( 224,000 ) Income from discontinued operations, net of tax $ 2,474,000 $ 12,340,000 Gain from sale of discontinued operations before income taxes $ 3,044,000 $ - Income tax expense 83,000 - Gain from sale of discontinued operations, net of tax $ 2,961,000 $ - 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 for the year ended December 31, 2022. 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. 3. Leases. As of December 31, 2023, the Company leased space from a related party under a non-cancelable operating lease for its corporate headquarters. The lease has monthly payments of $ 375 through September 30, 2025. The lease does not include a renewal option. F-13 Table of Contents The amounts included in “Other” below relate to an office lease that was terminated on September 30, 2023. The cost components in continuing operations of the Company’s operating leases were as follows: Year ended December 31, 2023 Year ended December 31, 2022 Corporate Headquarters Other Total Operating Leases - Other Operating lease cost $ 1,000 $ 4,000 $ 5,000 $ 14,000 Short-term lease costs 2,000 10,000 12,000 - Total $ 3,000 $ 14,000 $ 17,000 $ 14,000 Maturities of the Company’s lease liabilities for its corporate headquarters and its warehouse operating leases were as follows as of December 31, 2023: 2024 $ 5,000 2025 3,000 Total lease payments $ 8,000 Less: Interest ( 1,000 ) Present value of lease liabilities $ 7,000 The Company used its incremental borrowing rate of approximately 6.0 % in determining the present value of the lease payments based on the information available at the lease commencement date. The remaining lease term as of December 31, 2023 for the Company’s corporate headquarters is 1.8 years. The cash outflow for operating leases including discontinued operations for the years ended December 31, 2023 and 2022 were $ 28,000 and $ 28,000 , respectively. 4. Commitments and Contingencies. Legal . The Company is subject to various legal matters in the normal course of business. The outcome of these matters is not expected to have a material effect on the Company’s financial position or results of operations. 5. Stockholders’ Equity . Stock-Based Compensation . The Company’s stock-based compensation plans are administered by the Compensation Committee of the Board of Directors, which, subject to approval by the Board of Directors, selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award. Stock-based compensation expense that was recognized in the continuing operations of the Company’s consolidated statements of operations for the years ended December 31, 2023 and 2022 was $ 39,000 and $ 91,000 , respectively. Stock based compensation for discontinued operations for the years ended December 31, 2023 and 2022 was $ 5,000 and $ 32,000 , respectively The Company uses the Black-Scholes option pricing model to estimate fair value of stock-based awards with the following weighted-average assumptions: 2023 2022 Employee Stock Purchase Plan: Expected life (years) 1 .0 1 .0 Expected volatility 95 % 169 % Dividend yield 0 % 0 % Risk-free interest rate 4.7 % 0.4 % F-14 Table of Contents The Company uses the graded attribution method to recognize expense for unvested stock-based awards. Forfeitures are recognized as incurred. Stock Options, Restricted Stock, Restricted Stock Units, and Other Stock-Based Compensation Awards . The Company maintains stock and incentive plans (the “Plans). Under the terms of the Plans, the Company may grant awards in a variety of instruments including stock options, restricted stock and restricted stock units to employees, consultants and directors generally at an exercise price at or above 100% of fair market value at the close of business on the date of grant. Stock options expire 10 years after the date of grant and generally vest over three years. The Company issues new shares of common stock upon grant of restricted stock, when stock options are exercised, and when restricted stock units are vested and/or settled. The following table summarizes activity under the Plans: Plan Shares Available for Grant Plan Options Outstanding Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Balance at January 1, 2022 97,648 19,122 $ 13.23 Restricted stock units and awards granted ( 6,248 ) — Stock options exercised — ( 1,300 ) 8.26 $ 2,422 Cancelled or forfeited options 1,462 ( 3,736 ) 11.41 Balance at December 31, 2022 92,862 14,086 14.17 Cancelled or forfeited options 12,623 ( 12,623 ) 14.02 Balance at December 31, 2023 105,485 1,463 15.54 The following table summarizes information about the stock options outstanding at December 31, 2023: Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Per Share Number Exercisable Weighted Average Exercise Price Per Share $ 15.54 1,463 0.39 years $ 15.54 1,463 $ 15.54 Options outstanding under the Plans expire in May 2024. Options outstanding at December 31, 2023 and 2022 had no intrinsic value. Options exercisable at December 31, 2022 had a weighted average remaining life of 4.44 years and no intrinsic value. During the year ended December 31, 2023 and 2022, no equity awards were issued by the Company except for the following awards to non-employee members of the Board of Directors. In August 2022, non-employee members of the Board of Directors received restricted stock grants totaling 6,248 shares. 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 July 26, 2023. Restricted stock and restricted stock unit transactions during the years ended December 31, 2023 and 2022 are summarized as follows: F-15 Table of Contents As of December 31, 2023, there was no unrecognized compensation costs related to outstanding stock options or restricted stock. Number of Shares Weighted average grant date fair value Unvested shares at January 1, 2022 8,531 $ 10.01 Granted 6,248 9.60 Vested ( 8,910 ) 10.25 Unvested shares at December 31, 2022 5,869 $ 9.21 Granted — Vested ( 5,869 ) 7.66 Unvested shares at December 31, 2023 — — Employee Stock Purchase Plan. The Company has an Employee Stock Purchase Plan (the “ESPP”) that enables employees to contribute up to 10% of their base compensation toward the purchase of the Company’s common stock at 85% of its market value on the first or last day of the year. During the years ended December 31, 2023 and 2022, respectively, participants purchased 338 and 1,153 shares under the ESPP. At December 31, 2023, 22,945 shares were reserved for future employee purchases of common stock under the ESPP. For the years ended December 31, 2023 and 2022, the Company recognized $ 7,000 and $ 32,000 , respectively, of stock-based compensation expense related to the ESPP that was recognized in the continuing operations. Dividends. The Company has not historically paid dividends, other than one-time dividends declared in 2011 and 2016. The Company intends to retain earnings from operations for use in advancing our business strategy; however, the Company may consider special dividends in the future. 6. Income Taxes . Income tax expense from continuing operations consists of the following: Year Ended December 31 2023 2022 Current taxes - Federal $ - $ - Current taxes - State 20,000 6,000 Income tax expense $ 20,000 $ 6,000 The actual tax (expense) benefit attributable to income (loss) from continuing operations before taxes differs from the expected tax benefit (expense) computed by applying the U.S. federal corporate income tax rate of 21% as follows: Year Ended December 31 2023 2022 Federal statutory rate 21.0 % 21.0 % Stock-based awards ( 0.5 ) ( 0.7 ) State benefit 3.1 2.7 Valuation allowance ( 24.6 ) ( 24.6 ) Other 0.3 1.3 Effective federal income tax rate ( 0.7 )% ( 0.3 )% F-16 Table of Contents Components of resulting noncurrent deferred tax assets (liabilities) are as follows: As of December 31 2023 2022 Deferred tax assets Accrued expenses $ 117,000 $ 231,000 Inventory reserve - 23,000 Stock-based awards 9,000 24,000 Reserve for bad debts 2,000 26,000 Net operating loss and credit carryforwards 529,000 824,000 Other 2,000 23,000 Depreciation - 43,000 Valuation allowance ( 645,000 ) ( 1,175,000 ) Total deferred tax assets $ 14,000 $ 19,000 Deferred tax liabilities Depreciation $ ( 5,000 ) $ - Prepaid expenses ( 9,000 ) ( 19,000 ) Total deferred tax liabilities ( 14,000 ) ( 19,000 ) Net deferred income tax $ - $ - As of December 31, 2023, the Company had a Federal pre-tax net operating loss (NOL) to carry forward of approximately $ 1,607,000 and state pre-tax NOLs of approximately $ 2,914,000 to carry forward. The Federal NOLs can be carried forward indefinitely. The expiration of state NOLs carried forward varies by taxing jurisdiction. Future utilization of NOLs carried forward may be subject to certain limitations under Section 382 of the Internal Revenue Code. The Company evaluates all significant available positive and negative evidence, including the existence of losses in prior years and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and take into consideration the Company’s recent performance. The change in the valuation allowance for the years ended December 31, 2023 and 2022 was a decrease of $ 530,000 and $ 1,970,000 , respectively. The valuation allowance decreases in 2023 and 2022 were primarily related to the utilization of the Company’s net operating losses carried forward against the Company’s taxable income. Such utilization was limited to 80 % of the Company’s taxable income for the year. The Company has recorded a liability of $ 42,000 and $ 53,000 for uncertain tax positions taken on tax returns in previous years as of December 31, 2023 and 2022, respectively. This liability is reflected as accrued income taxes on the Company’s balance sheets. The Company files income tax returns in the United States and numerous state and local tax jurisdictions. Tax years 2020 and forward are open for examination and assessment by the Internal Revenue Service. With limited exceptions, tax years prior to 2020 are no longer open in major state and local tax jurisdictions. The Company has recorded a decrease of approximately $ 16,000 in unrecognized tax benefits related to state exposure in the third quarter of 2023, which reduced accrued income taxes and increased the current income tax benefit. The Company determined it was no longer more likely than not that the Company would realize the tax expense. F-17 Table of Contents A reconciliation of the beginning and ending amount of the liability for uncertain tax positions is as follows: Balance at January 1, 2022 $ 711,000 Decrease due to state tax expense ( 678,000 ) Increases due to interest and state tax 20,000 Balance at December 31, 2022 $ 53,000 Decrease due to state tax expense $ ( 16,000 ) Increases due to interest and state tax 5,000 Balance at December 31, 2023 $ 42,000 7. Employee Benefit Plans . The Company sponsors a Retirement Profit Sharing and Savings Plan under Section 401(k) of the Internal Revenue Code. The plan allows employees to defer up to 50 % of their wages, subject to Federal limitations, on a pre-tax basis through contributions to the plan. During the years ended December 31, 2023 and 2022, the Company’s expense in continuing operations for matching contributions was $ 13,000 and $ 8,000 , respectively. 8. Stock Repurchases. On August 23, 2023, the Company’s Board of Directors authorized the repurchase of up to 400,000 shares of the Company’s common stock. The authorization allows the purchases to be made in the open market or in privately negotiated transactions. The authorization does not obligate the Company to repurchase any particular number of shares; and may be suspended anytime at the Company’s discretion. During the year ended December 31, 2023, the Company repurchased 84,028 shares for $ 482,000 . 9. Subsequent Events Acquisition of Bloomia On February 22, 2024, the Company acquired majority ownership in Bloomia B.V. and its subsidiaries for a price of $ 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. Bloomia purchases tulip bulbs, hydroponically grows tulips from the bulbs, and sells the stems to retail stores. Lendway owns a significant majority and is the managing member of Tulp 24.1, LLC, which holds the Bloomia enitities. Bloomia’s continuing CEO owns the remaining approximately 18.6 % of Tulp 24.1, LLC. The acquisition will be accounted for as a business combination using the acquisition method of accounting. The acquisition method of accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Due to the limited amount of time since the acquisition date and the complexity of Bloomia’s financial records prepated under Dutch GAAP, the preliminary acquisition valuation for the business combination is incomplete at this time. As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill. The unaudited pro forma net sales of the combined entity for the twelve months ended December 31, 2023 are approximately $ 45 million. The unaudited pro forma net sales of the combined entity are based on historical net sales from continuing operations from Lendway and the net sales for Bloomia. The unaudited pro forma net sales values are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of 2023 or that may be obtained in the future. Because the initial accounting for the business combination is incomplete at this time, the Company is unable to provide pro forma net earnings of the combined entity. F-18 Table of Contents Credit Agreement To finance the Bloomia acquisition, the Company 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, the Company 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 the Company 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. Notes Payable to Sellers 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 increase 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 %. F-19 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures On November 20, 2023, the Audit Committee (the “Committee”) of the Board of Directors of the Company approved the dismissal of Baker Tilly US, LLP (“Baker Tilly”) as the Company’s independent registered public accounting firm, effective immediately. On November 20, 2023, the Committee approved the appointment of Boulay PLLP as the Company’s independent registered public accounting firm to perform independent audit services, including the audit of the Company’s consolidated financial statements for the fiscal year ending December 31, 2023. Our independent registered public accounting firms’ reports on our consolidated financial statements for each of the past two years did not contain adverse opinions or disclaimers of opinions, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audit of the Company’s financial statements for the fiscal years ended December 31, 2022, and the subsequent interim period through September 30, 2023, (i) there were no disagreements with Baker Tilly on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Baker Tilly’s satisfaction, would have caused Baker Tilly to make reference, in connection with its opinion, to the subject matter of such disagreements and (ii) there was no “reportable event” as defined in Item 304(a)(1)(v) of Regulation S-K.