Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2024, for Lendway, Inc. (LDWY). The Company has fundamentally shifted its strategy to focus solely on its agricultural business following the acquisition of Bloomia B.V. on February 22, 2024. Bloomia is a significant producer of fresh-cut tulips with operations in the U.S., Netherlands, and South Africa. Concurrently, the Company abandoned its planned non-bank lending business following the resignation of its former CEO in June 2024. The legacy In-Store Marketing Business was sold in August 2023 and is reported as discontinued operations.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 |
|---|---|---|
| Revenue, Net | $16,780,000 | $24,813,000 |
| Gross Profit | $3,977,000 (23.7% margin) | $5,871,000 (23.7% margin) |
| Operating Loss | $(118,000) | $(1,612,000) |
| Net Loss (Continuing Ops) | $(881,000) | $(2,217,000) |
| Net Loss Attributable to Lendway | $(745,000) | $(1,786,000) |
| Cash and Equivalents (End of Period) | $1,721,000 | |
| Total Debt (Gross) | $31,771,000 | |
| Working Capital | $5,817,000 |
Material Changes vs. Prior Period
- Revenue Transformation: Revenue increased from $0 in the prior year periods to $16.8M (Q2) and $24.8M (YTD) due to the inclusion of Bloomia operations post-acquisition. Prior year revenue was $0 as the legacy business was classified as discontinued.
- Expense Surge: SG&A expenses rose significantly to $4.1M (Q2) and $7.5M (YTD) compared to $0.6M and $1.2M in the prior year, driven by the integration of Bloomia and one-time acquisition costs.
- Interest Expense: Interest expense increased to $964,000 (Q2) and $1.19M (YTD) from interest income of $135,000 and $238,000 in the prior year, reflecting new debt incurred to finance the Bloomia acquisition.
- Balance Sheet Expansion: Total assets grew from $16.7M (Dec 31, 2023) to $95.9M (June 30, 2024), primarily due to the recognition of goodwill ($10.2M), intangible assets ($26.3M), and property/equipment ($11.4M) from the acquisition.
- Cash Position: Cash and cash equivalents decreased by approximately $14.4M during the six-month period, largely due to the cash portion of the acquisition purchase price.
Guidance, Outlook, and Risks
Outlook and Liquidity: Management expects cash from operations, combined with the $18M term loan and $6M revolving credit facility, to provide sufficient liquidity for at least the next 12 months. The tulip business is seasonal, with Q1 and Q2 being the strongest sales periods.
Debt Structure: The Company is subject to financial covenants, including a minimum fixed charge coverage ratio of 1.25:1.00 and a maximum senior cash flow leverage ratio of 3.0:1.00 (stepping down to 2.0:1.00 by Dec 31, 2027). The Company was in compliance as of June 30, 2024.
Risks and Contingencies:
- Key Personnel: Success depends heavily on Bloomia CEO Werner Jansen.
- Customer Concentration: Two customers accounted for approximately 64% of revenue for the six months ended June 30, 2024.
- Internal Controls: The Company experienced delays in Q1 2024 filings due to integration issues. While controls were deemed effective as of June 30, 2024, the Company is integrating Bloomia's controls and has elected to exclude Bloomia from SOX 404 evaluation for one year post-acquisition.
- Subsequent Event: On August 15, 2024, the Company entered into a $2.5M unsecured Delayed Draw Term Note with Air T Inc. (a related party) to fund operations.
Investor Verification Checklist
- Acquisition Integration: Verify the timeline for finalizing the purchase price allocation and the impact of inventory write-ups on future gross margins.
- Debt Covenants: Monitor compliance with the fixed charge coverage and leverage ratios, particularly given the seasonal nature of cash flows.
- Customer Concentration: Assess the risk associated with the top two customers representing nearly two-thirds of revenue.
- Related Party Transaction: Review the terms and necessity of the $2.5M note with Air T Inc. entered into in August 2024.
- Internal Controls: Track the progress of integrating Bloomia's financial reporting systems to ensure timely future SEC filings.