Business Context and Reporting Period
Company: Lendway, Inc. (operating primarily through its subsidiary Bloomia, a producer of fresh-cut tulips).
Reporting Period: Three months ended September 30, 2025 (First Quarter of Fiscal Year 2026).
Business Overview: The Company operates greenhouses in the U.S., Netherlands, and South Africa. The business is highly seasonal, with peak sales in the spring. The Company recently changed its fiscal year-end from December 31 to June 30.
Key Financial Metrics
| Metric | Q1 FY2026 (Sep 30, 2025) | Q1 FY2025 (Sep 30, 2024) |
|---|---|---|
| Revenue, Net | $5,153,000 | $6,628,000 |
| Gross Profit (Loss) | $(60,000) | $1,440,000 |
| Gross Margin | (1.2)% | 21.7% |
| Operating Loss | $(3,043,000) | $(1,351,000) |
| Net Loss (Attributable to Lendway) | $(2,854,000) | $(1,125,000) |
| EBITDA | $(2,390,000) | $(574,000) |
| Cash and Equivalents | $1,840,000 | $1,333,000 |
| Working Capital | $11,264,000 | $1,098,000 (Jun 30, 2025) |
| Total Debt (Gross) | $39,298,000 | $30,796,000 |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 22% to $5.15 million. Management attributes this to a strategic decision to accelerate tulip growth earlier in the year to meet Mother's Day demand, resulting in fewer stems available for sale in Q1. Additionally, fewer Dutch bulbs were purchased in the prior year, limiting supply.
- Gross Margin Compression: The Company moved from a 21.7% gross margin to a 1.2% gross loss. This was driven by lower sales volume failing to cover fixed costs (rent), increased bulb prices, tariffs, and higher freight costs.
- Inventory Build-up: Inventory increased significantly from $6.7 million to $18.8 million, primarily due to the purchase of approximately $11 million in Dutch tulip bulbs to prepare for the upcoming spring season.
- Debt Expansion: Total debt increased by approximately $8.5 million. The Company drew $8.575 million on its revolving credit facility and secured $4 million in new related-party notes to fund bulb purchases and operations.
- Foreign Currency Impact: Foreign currency transaction losses increased to $253,000 from $46,000, reflecting the impact of the Euro exchange rate on bulb purchases.
Guidance, Outlook, and Risks
- Outlook: Management expects revenue and gross margins to improve in the remaining quarters of Fiscal Year 2026 as the newly purchased bulbs are grown into stems for the peak spring selling season.
- Liquidity: The Company expects cash from operations and available credit facilities to support operations for at least the next 12 months. Working capital improved to $11.3 million due to inventory financing.
- Key Risks:
- Seasonal Labor: A federal government shutdown (as of Oct 1, 2025) has halted H-2A visa processing, potentially impacting the ability to secure seasonal workers for the peak growing season (Jan-May).
- Customer Concentration: A small number of mass-market retailers historically account for over 99% of annual sales. Three customers accounted for 69% of Q1 revenue.
- Debt Covenants: The Company must maintain compliance with senior cash flow leverage ratios under its Amended Credit Agreement.
Investor Verification Checklist
- Seasonal Labor Availability: Verify if the Company has secured alternative labor sources or if H-2A processing resumes in time for the peak season.
- Inventory Realization: Monitor the conversion of the $18.8 million inventory into revenue during the spring season to ensure the strategic timing decision yields expected margins.
- Debt Service Capacity: Review the Company's ability to service the increased debt load ($39.3M total), particularly the $4M in new related-party notes carrying a 13.5% interest rate.
- Customer Concentration: Assess the risk associated with reliance on a few major retailers, especially given the recent revenue decline.
- Foreign Exchange Exposure: Evaluate the impact of continued Euro volatility on the cost of Dutch bulbs, which are priced in Euros.