What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-27 compared with 2024-04-01 · 201 added, 116 removed, 51 unchanged (86% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the financial statements and the related notes included in this Annual Report on Form 10-K.

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

The following discussion should be read in conjunction with the Company’s consolidated financial statements and related notes included in this Annual Report on Form 10-K.

This Annual Report on Form 10-K 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 “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”).

Company Overview

The Company is a specialty agricultural company focused on making and managing its agricultural investments in the United States and internationally.

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

Bloomia produces and sells fresh cut tulips.

1 unchanged sentence

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.

Net sales (unaudited) of Bloomia for the twelve months ended December 31, 2024 and 2023 were approximately $40,000,000 and $45,000,000, 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.

mass market retailers and has grown its customer base year over year.

The Company acquired Bloomia for total consideration of $53,360,000.

Consideration was comprised of $34,919,000 of cash paid, $15,451,000 of seller bridge loans in lieu of cash, and $2,990,000 of equity issued of Bloomia which is reflected as noncontrolling interest within these consolidated financial statements.

The acquisition was funded through a combination of debt and cash on hand.

The tulip sales business tends to be seasonal with spring being the strongest sales season.

Accounts receivable and inventory balances are at their lowest levels in the summer following the strong spring sales season.

Inventory balances peak prior to the spring season.

Former Businesses

In August 2023, the Company completed the sale of its In-Store Marketing Business for gross proceeds of $3,500,000 (See Note 4 in the consolidated financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K).

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

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

In April 2023, the Company began the development of a non-bank lending business, through the hiring of a Senior Vice President of Lending, who later became our Chief Executive Officer.

The Company met with a number of prospects for loan originations and/or purchases and deals were negotiated, but none reached execution.

With the Company’s decision to allocate capital to the Bloomia acquisition, significantly less capital was available for the lending business in the near-term.

Promptly after receiving a notice of resignation from the Company’s then-serving Chief Executive Officer in June 2024, our Board of Directors reexamined the Company’s strategic position and prospects.

Primarily because the departing Chief Executive Officer represented nearly all of the Company’s knowledge and expertise relating to the purchase of existing loans and/or origination and funding of new loans, the Company has determined to focus solely on the ag business.

Because the non-bank lending business remained in development, this change did not have a significant impact on the Company’s operations or financial results.

Results of Operations

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.

The following table sets forth, for the periods indicated, certain items in our consolidated statements of operations as a percentage of total net revenue.

Increase (decrease) from 2023 to 2024

Operating expenses:

Sales and marketing

General and administrative

Total operating expenses

Cost of goods sold

Gross profit as a percent of revenue

Sales, general and administrative expenses

Operating loss

Interest income

Operating loss as a percent of revenue

Foreign exchange difference, net

Interest expense (income), net

Other income, net

Loss from continuing operations before income taxes

Income tax expense

Income tax (benefit) 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 )

Net (loss) income including noncontrolling interest

Net loss attributable to noncontrolling interest

Net (loss) income attributable to Lendway, Inc.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Revenue, Net.

Revenue, net for the year ended December 31, 2024 was $37,773,000, all of which were generated from Bloomia for the period from its acquisition on February 22, 2024 (“the acquisition date”) through December 31, 2024 (the “acquisition period”).

The first and second calendar quarters are normally the strongest sales quarters for Bloomia with the first calendar quarter benefiting from Valentine’s Day, Easter season and the start of the Spring season.

Revenue in fiscal year 2023 is included in discontinued operations.

Gross Profit.

Gross profit for the year ended December 31, 2024 was $6,509,000 or 17.2% as a percentage of revenue.

Cost of goods sold includes rent for the facilities production facility and depreciation related to production.

The one-time amortization charge related to inventory written up to fair value upon acquisition was $1,522,000 for the year ended December 31, 2024.

Gross margin percentage has historically been higher in the first and second quarters since sales are typically higher and allow better leverage of fixed costs in costs of goods sold.

Gross profit for the year ended December 31, 2023, was zero as revenue and costs are included in discontinued operations.

Operating Expenses

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, 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.

Sales, general and administrative.

Sales, general and administrative expenses for the year ended December 31, 2024 were $13,226,000 compared to $3,519,000 for the year ended December 31, 2023.

The increase was primarily due to the acquisition of Bloomia.

Fiscal year 2024 includes $1,542,000 of acquisition costs and $1,335,000 of integration related costs.

Interest Expense and Income.

Interest expense, net, for the year ended December 31, 2024, was $2,969,000 compared to interest income of $518,000 for the year ended December 31, 2023.

In connection with the Bloomia acquisition, the Company began incurring interest expenses starting February 21, 2024.

The Company did not have debt in the prior year.

The Company has not hedged the risk of its interest expense.

If the Term SOFR reference rate increases, the Company’s interest expense on its term loan and revolving credit facility will increase.

Income Taxes.

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.

For the year ended December 31, 2024, the Company recorded an income tax benefit of $2,329,000, with a corresponding effective tax rate of 25.2%, on loss from continuing operations.

For the year ended December 31, 2023, the Company recorded income tax expense of $20,000, with a corresponding effective tax rate of (0.7)%, on loss from continuing operations.

During the first quarter of 2024, the Company established deferred tax liabilities related to the acquisition in the majority ownership of Bloomia.

The Company anticipates that the deferred tax liabilities will result in future taxable income that will allow for the realization of the federal deferred tax assets.

See Note 13 to the consolidated financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Income from Discontinued Operations, Net of Tax.

For the year ended December 31, 2024, income from discontinued operations is a result of the reduction in the accrual for sales tax due to the expiration of the statute of limitations.

Income from discontinued operations, net of tax, for the year ended December 31, 2023 reflects results from operations from the legacy In-store Marketing Business and the $2,961,000 gain from the sale of that business.

Information on the sale of the In-Store Marketing Business and statement of operations and comprehensive income (loss) details of the discontinued operations are included in Note 4 to the consolidated financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Noncontrolling interest .

The 18.6% noncontrolling interest in Tulp 24.1’s loss for the acquisition period was $934,000 for the year ended December 31, 2024.

Non-GAAP Financial Measures

This report includes EBITDA which is a “non-GAAP financial measure.” EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense.

This non-GAAP financial measure, which is not calculated or presented in accordance with U.S.

generally accepted accounting principles (“GAAP”), has been provided as information supplemental and in addition to the financial measures presented in accordance with GAAP.

This non-GAAP financial measure is not a substitute for, or as an alternative to, and should be considered in conjunction with, respective GAAP financial measures.

The non-GAAP financial measure presented may differ from similarly named measures used by other companies.

We believe this non-GAAP financial measure will be useful to permit investors to evaluate the business consistent with how management evaluates the business.

Our EBITDA excludes amounts from net loss from discontinued operations that we do not consider part of our core operating results when assessing our performance.

Management has used EBITDA (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to competitors and peers;

(b) to measure operational profitability on a consistent basis;

and (d) to evaluate compliance with covenants and restricted activities under the terms of our Credit Agreement.

Included below is a reconciliation of EBITDA to net loss from continuing operations, the most directly comparable GAAP measure.

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.

Interest expense (income), net

Income tax (benefit) expense

Depreciation and amortization

Liquidity and Capital Resources

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 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 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.

The Company has financed its operations with proceeds from the sale of its In-Store Marketing Business and sales of its products, in addition to a significant payment resulting from the settlement of litigation.

To aid in funding the Bloomia acquisition, Tulp 24.1 entered a Credit Agreement that provided an $18,000,000 term loan and a revolver with borrowings of up to $6,000,000.

At December 31, 2024, the Company’s working capital (defined as current assets less current liabilities) was $11,026,000 compared to $15,525,000 at December 31, 2023.

During the year ended December 31, 2024, cash and cash equivalents decreased $14,318,000 from $16,077,000 at December 31, 2023 to $1,759,000 at December 31, 2024.

Operating Activities of Continuing Operations .

Net cash used in operating activities during the year ended December 31, 2024 was $4,120,000.

Cash from operations is greatest in the first half of the year due to the seasonality of the Bloomia business.

The Company used approximately $12,200,000 in cash in the period to purchase tulip bulbs.

Investing Activities of Continuing Operations .

Net cash used in investing activities during the year ended December 31, 2024 was $35,148,000, which primarily related to the purchase price and other expenses resulting from the acquisition of Bloomia.

Net cash used in investing activities also includes cash received from a note receivable, partially offset by cash paid for purchases of property and equipment.

Financing Activities .

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.

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

Net cash provided by financing activities during the year ended December 31, 2024 was $24,882,000, which primarily related to proceeds received from issuance of the Credit Agreement used to fund the acquisition of a majority interest in Bloomia.

On February 22, 2024, the Company acquired majority ownership in Bloomia for a total purchase price of $53,360,000.

Consideration comprised of $34,919,000 of cash paid, $15,451,000 of seller bridge loans in lieu of cash, and $2,990,000 of equity issued of Tulp 24.1 which is reflected as noncontrolling interest within these consolidated financial statements.

The acquisition was funded through a combination of debt and cash on hand.

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%.

Under the terms of the Credit Agreement, Tulp 24.1 had an $18,000,000 term loan funded.

The Credit Agreement also contains a $6,000,000 revolving credit facility, which may be used by Tulp 24.1 for general business purposes and working capital.

On October 16, 2024, the Company amended the credit agreement (Amended Credit Agreement) to, among other things, temporarily increase the borrowing capacity under the revolving credit facility to $8,000,000 through March 31, 2025.

Borrowings under the Amended 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 term loans are scheduled to 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

The obligations under the Amended 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 Amended Credit Agreement.

The Amended Credit Agreement requires 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 3.75 to 1.0 until March 31, 2025, and stepping down to 2.00 to 1.00 on December 31, 2027, until the maturity date of the Amended Credit Agreement.

The Amended 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 Amended Credit Agreement contains customary events of default, the occurrence of which would permit the lenders to terminate their commitments and accelerate loans under the Amended Credit Agreement, including failure to make payments under the credit facility, failure to comply with covenants in the Amended 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.

As of December 31, 2024, the Company was in compliance with these financial covenants and expects to be in compliance for at least the next twelve months.

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.

Notes payable for $12,750,000 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.

Notes payable for $2,700,000 were paid in full as of June 30, 2024.

On August 15, 2024, we entered into an unsecured Delayed Draw Term Note (the “Note”) with Air T Inc.

(“Air T”) pursuant to which Air T has agreed to advance from time to time until August 15, 2026, but not on a revolving basis, up to $2,500,000 to fund the Company’s operations.

Amounts outstanding under the Note will bear interest at a fixed rate of 8.0%, which may be increased by 3.0% upon certain events of default.

The entire principal amount outstanding on the Loans, together with accrued and unpaid interest thereon as set forth below, shall be due and payable in full on the earlier of (i) August 15, 2029, (ii) the Company’s receipt of a written demand by Air T delivered on or after February 15, 2026, and (iii) such earlier date as all principal owing thereunder becomes due and payable by acceleration or otherwise (the “Maturity Date”).

The Company may prepay any loan outstanding thereunder, together with accrued and unpaid interest on such Loan, at any time without prepayment or penalty.

On September 27, 2024, we entered into an Amended and Restated Delayed Draw Term Note (the “Amended Note”) with Air T pursuant to which Air T has agreed to advance up to an additional $1,000,000 from time to time until August 15, 2026, but not on a revolving basis.

The Amended Note provides for total borrowing of up to $3,500,000 to fund the Company’s operations.

The Company borrowed $3,500,000 under the note during the year ended December 31, 2024.

On January 15, 2025, the note was amended again to increase the total borrowing to $3,750,000.

As previously disclosed, amounts outstanding under the Amended Note bear interest at a fixed rate of 8.0%, which may be increased by 3.0% upon certain events of default.

The Amended Note remains scheduled to mature and all principal and accrued but unpaid interest will become due on August 15, 2029, subject to Air T’s right to demand payment on or after February 15, 2026.

No closing or origination fees will be paid to the Air T.

Air T beneficially owns greater than 10% of our outstanding Common Stock and is a member of a group of stockholders that collectively owns approximately 40% of our outstanding common stock.

Additionally, our current director and Co-Chief Executive Officer, Mark R.

Jundt serves as General Counsel and Corporate Secretary of Air T, current director and Co-Chief Executive Officer, Daniel C.

Philp serves as Senior Vice President of Corporate development at Air T, and current director Nicholas J.

Swenson serves as President and Chief Executive Officer of Air T and is himself a member of the stockholder group.

The entry into the Note was approved in advance by the Audit Committee of our Board of Directors in accordance with our Related Person Transaction Approval Policy and by a vote of solely independent directors who have no relationship with Air T.

The Company expects that cash from operations combined with funds available under the Amended Credit Facility and the Note 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.

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

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.

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 income taxes.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to business combinations, inventory, goodwill, long-lived and indefinite-lived assets, interest expense, and 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 is our critical accounting estimate used in preparation of our consolidated financial statements:

Our significant accounting policies are described in Note 2 to the consolidate financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K.

We believe our most critical accounting estimates include the following:

We coordinate with recurring customers to plan production based on anticipated demand and projections;

however, we may have to write down inventory or recognize a material impairment if our production significantly exceeds customer demand.

No write-downs occurred in fiscal year 2024.

Business Combinations.

We account for business combinations under the acquisition method of accounting.

This method requires the recording of acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition date fair values.

The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, royalty rates and asset lives, among other items.

We used the income approach to value certain intangible assets.

Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset.

The fair value of customer relationships was estimated using a discounted present value income approach.

We used the income approach known as the relief from royalty method to value the fair value of the trade name.

The relief from royalty method is based on the hypothetical royalty stream that would be received if we were to license the trade name and was based on expected revenues.

The determination of the fair value of other assets acquired and liabilities assumed involves assessing factors such as the expected future cash flows associated with individual assets and liabilities and appropriate discount rates at the date of the acquisition.

Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocation.

During this measurement period, we will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date.

All changes that do not qualify as measurement period adjustments are included in current period earnings.

If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K could result in a possible impairment of the intangible assets and goodwill or require acceleration of the amortization expense of finite-lived intangible assets.

Impairment of goodwill and indefinite-lived intangibles.

Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed.

We test goodwill and identifiable intangible assets with indefinite lives for impairment at least annually in the fourth quarter.

Impairment testing for goodwill is done at a reporting unit level and all goodwill is assigned to a reporting unit.

Our reporting unit is the same as our reporting segment.

We test goodwill for impairment by either performing a qualitative evaluation or a quantitative test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value.

The qualitative evaluation is an assessment of factors, including reporting unit specific operating results and cost factors, as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

We may elect to bypass this qualitative assessment and perform the quantitative test in accordance with ASC 350, Intangibles - Goodwill and Other .

Fair values under the quantitative test are estimated using a combination of discounted projected future earnings or cash flow methods and multiples of earnings in estimating fair value.

The estimate of the reporting unit’s fair value is determined by weighing a discounted cash flow model and a market-related model using current industry information that involve significant unobservable inputs (Level 3 inputs).

In determining the estimated future cash flow, we consider and apply certain estimates and judgments, including current and projected future levels of income based on management’s plans, business trends, prospects, market and economic conditions, and market-participant considerations.

These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts.

If we fail the quantitative assessment of goodwill impairment (“quantitative assessment”), we would be required to recognize an impairment loss equal to the amount that a reporting unit’s carrying value exceeded its fair value.

We have an indefinite-lived intangible asset for trade name of $8,570,000 from the Bloomia acquisition.

Annually in the fourth quarter, or if conditions indicate an additional review is necessary, we assess qualitative factors to determine if it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount.

We have the option to first assess qualitative factors to determine whether the fair value of a trade name is “more likely than not” less than its carrying value.

If it is more likely than not that an impairment has occurred, we then perform the quantitative impairment test.

If we perform the quantitative test, the carrying value of the asset is compared to an estimate of its fair value to identify impairment.

The fair value is determined by the relief from royalty method, which requires significant judgment.

Actual results may differ from assumed and estimated amounts utilized in the analysis.

If we conclude an impairment exists, the asset’s carrying value will be written down to its fair value.

Long-Lived Assets .

Long-lived assets, which include property and equipment, and definite-lived intangible assets, primarily customer relationships and trade name, are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable.

The impairment testing involves comparing the carrying amount of the asset to the forecasted undiscounted future cash flows generated by that asset.

These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts.

In the event the carrying amount of the asset exceeds the undiscounted future cash flows generated by that asset and the carrying amount is not considered recoverable, an impairment exists.

An impairment loss is measured as the excess of the asset’s carrying amount over its fair value and is recognized in the statements of operations and comprehensive income (loss) in the period that the impairment occurs.

The reasonableness of the useful lives of this asset and other long-lived assets is regularly evaluated.

Interest expense.

For debt with variable rate interest , interest expense is recorded based on a weighted average effective interest rate method.

The significant assumptions used in the weighted average estimate are the future debt balance and the length of time the debt will be outstanding.

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.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.

If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed, and we will recognize a tax benefit during the period in which it is determined the liability no longer applies.

Conversely, the Company records additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.

Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.

Therefore, the actual liability for U.S.

or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

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.

Certain statements made in this Annual Report on Form 10-K 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.

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, (ii) regarding the potential for growth and other opportunities for our business and (iii) the nature and timing of the Company’s intended financial reporting during its transition to a fiscal year ending June 30.

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

2 unchanged sentences

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;

(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 and operate within its restrictions, (6) economic and market conditions that may restrict or delay appropriate or desirable opportunities, (7) our ability to develop and maintain necessary processes and controls relating to our businesses (8) reliance on one or a small number of employees, (9) potential adverse classifications of our Company if we are unsuccessful in executing our business plans, (10) other economic, international, business, market, financial, competitive and/or regulatory factors affecting the Company’s businesses generally;

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

and (12) 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.

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 Annual Report on Form 10-K, and subsequent 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.

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.

The Company 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

Smaller reporting companies are not required to provide disclosure pursuant to this Item.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

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