Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies

Summary Of Significant Accounting Policies

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.

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).

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.