What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-19 compared with 2024-05-21 · 100 added, 113 removed, 161 unchanged (57% of the section changed)

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Company Overview

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.

In 2023 and in the first quarter of 2024, 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 Company is a specialty agricultural company focused on making and managing its agricultural investments in the United States and internationally.

In August 2023, the Company completed the sale of its In-Store Marketing Business for gross proceeds of $3.5 million (See Note 4 in the Condensed Consolidated Financial Statements).

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.

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

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

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Bloomia produces and sells fresh cut tulips.

As a result of the Bloomia acquisition, the Company has two segments:

Bloomia (the “Bloomia Business”) and the Lending Business.

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 is not expected to have a significant adverse impact on the Company’s operations or financial results.

Bloomia Business

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

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.

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.

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.

Summary of Financial Results

The Bloomia Business was acquired on February 22, 2024, from which date, the Bloomia Business had revenue of $8,033,000 through March 31, 2024.

The income before taxes of the segment was $1,091,000, which included significant expenses related to the Acquisition.

The Bloomia business is highly seasonal with strongest sales months normally from February through May that coincides with Spring in the U.S.

and certain holidays.

For the periods ended March 31, 2024 and 2023, the Company had revenue from continuing operations of $8,033,000 and $nil, respectively.

The Lending Business had no revenue and had a net loss from continuing operations before income taxes of $325,000.

The corporate and other portion of the Company had no revenue and a net loss from continuing operations before income taxes of $2,449,000, which includes significant expenses related to the acquisition.

Adjusted EBITDA from continuing operations for the three months ended March 31, 2024 was $1,745,000.

With the Bloomia acquisition completed on February 22, 2024 for an aggregate purchase price totaling $53,360,000, cash and cash equivalents decreased by $11,064,000 from $16,077,000 at December 31, 2023, to $5,013,000 at March 31, 2024.

Working capital decreased $4,335,000 from $15,483,000 at December 31, 2023 to $11,148,000 at March 31, 2024.

At March 31, 2024, the Company has total debt under its Credit Agreement and Bridge Loans of $37,425,000.

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 Lending Business

The Company had previously planned to also develop a non-bank lending business via its wholly owned subsidiary, Farmland Credit, Inc.

(“FCI”), and FCI’s subsidiaries, Farmland Credit FR, LLC and Farmland Credit AV, LLC.

Primarily because the now departed 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 is not expected to have a significant adverse impact on the Company’s operations or financial results.

Results of Operations

The following table sets forth, certain items in our Consolidated Statements of Operations as a percentage of total net sales.

For the Three Months Ended March 31

The following table sets forth, for the periods indicated, certain items in our Consolidated Statements of Operations as a percentage of total net sales.

Three Months Ended

Six Months Ended

Cost of goods sold

Sales, general and administrative

Operating (loss) income

Other income and foreign exchange difference

Loss from continuing operations, before tax

Gross profit as a percent of sales

Sales, general and administrative expenses

Operating income (loss)

Operating loss as a percent of sales

Foreign exchange difference, net

Interest expense (income), net

Other expenses, net

Loss from continuing operations before income taxes

Income tax (benefit) expense

Net loss from continuing operations

Income from discontinued operations, net of tax

Net (loss) income

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Net (loss) income including noncontrolling interest

Net (loss) income attributable to noncontrolling interest

Net (loss) income attributable to Lendway, Inc.

$ (1,786,000 )

Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023

Revenue, Net.

Revenue, net for the three months ended March 31, 2024 were $8,033,000, all of which were from Bloomia for the period from its acquisition on February 22, 2024 (“the acquisition date”) through March 31, 2024 (the “acquisition period”).

Revenue, net for the three and six months ended June 30, 2024 was $16,780,000 and $24,813,000, respectively, all of which were from Bloomia for the period from its acquisition on February 22, 2024 (“the acquisition date”) through June 30, 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.

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Gross Profit.

Gross profit for the acquisition period ended March 31, 2024 was $1,894,000 or 23.6% as a percentage of revenue.

Gross profit for the three months ended June 30, 2024 was $3,977,000 or 23.7.0% as a percentage of revenue.

Gross margin percentage is typically higher in the first and second quarters since sales are typically higher and allow better leverage of fixed costs in costs of sales.

For purchase accounting, the inventory was written up to fair value on the acquisition date.

This write-up is amortized over the turnover of the inventory and the acquisition period included $1,360,000 of costs related to this amortization.

This write-up is amortized over the turnover of the inventory and the acquisition period included $162,000 of costs related to this amortization in the three months ended June 30, 2024.

Gross profit for the six months ended June 30, 2024, was $5,871,000.

Gross profit as a percentage of total net revenue was 23.7% for the six months ended June 30, 2024, compared.

The amortization of the inventory written up to fair value was $1,522,000 for the six months ended June 30, 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 sales.

Operating Expenses

Sales, general and administrative.

Sales, general and administrative expenses for the three months ended March 31, 2024 increased 439% to $3,388,000 compared to $628,000 for the three months ended March 31, 2023.

The increase was primarily due to $1,542,000 of one-time acquisition related expenses and expanded operations from the acquisition of Bloomia during the acquisition period.

Interest Income and Expense.

Interest expense for the three months ended March 31, 2024 was $225,000 compared to interest income of $103,000 for the three months ended March 31, 2023.

In connection with the Bloomia acquisition, the Company began incurring interest expenses starting February 21, 2024 which amounted to $352,000 during the acquisition period.

Sales, general and administrative expenses for the three months ended June 30, 2024 was $4,095,000 compared to $557,000 for the three months ended June 30, 2023.

The increase was primarily due the acquisition of Bloomia, including $652,000 of integration costs in the period.

Sales, general and administrative expenses for the six months ended June 30, 2024, was $7,483,000 compared to $1,185,000 for the six months ended June 30, 2023.

The increases for both periods was primarily due to the acquisition of Bloomia, including one-time acquisition related costs.

Interest Expense and Income.

Interest expense for the three months ended June 30, 2024, was $984,000 compared to interest income of $135,000 for the three months ended June 30, 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.

Interest expense for the six months ended June 30, 2024, was $1,209,000 compared to interest income of $238,000 for the three months ended June 30, 2023.

The increase is due to the interest on the debt associated with the acquisition of Bloomia.

Income Taxes.

For the three months ended March 31, 2024, the Company recorded an income tax benefit of 20.6% on loss from continuing operations.

For the three and six months ended June 30, 2024, the Company recorded an income tax benefit of 24.5% and 29.4%, respectively, on loss from continuing operations.

The rate differs from the federal statutory rate of 21% due to state taxes of 4.7%, valuation allowance change of 24.2% and nondeductible transaction costs and other permanent items of (20.5)%.

For the three months ended March 31, 2023, the Company recorded an income tax expense of .2% on loss from continuing operations before income taxes.

For the three and six months ended June 30, 2023, the Company recorded an income tax expense of 12.5% and 040%, respectively, on loss from continuing operations before income taxes.

The rate differs from the federal statutory rate of 21% due to state taxes of 3.8%, valuation allowance change of (24.2)% and other permanent items of (0.2)%.

For the three months ended March 31, 2024, the Company recorded an income tax benefit of $347,000 on the loss from continuing operations before income taxes and equity in net income of equity investment.

For the three and six months ended June 30, 2024, the Company recorded an income tax benefit of 201,000 and $548,000, respectively, on the loss from continuing operations before income taxes and equity in net income of equity investment.

The overall benefit of $548,000 includes a $451,000 benefit for the reversal of the valuation allowance on federal deferred tax assets.

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

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.

As of March 31, 2024, and December 31, 2023, the Company had unrecognized tax benefits totaling $42,000, including interest, which relates to state nexus issues.

As of June 30, 2024, and December 31, 2023, the Company had unrecognized tax benefits totaling $43,000, including interest, which relates to state nexus issues.

The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $43,000.

Net Loss from Continuing Operations.

For the reasons stated above, net loss from continuing operations for the three months ended March 31, 2024 was $1,336,000, compared to loss of $528,000 for the three months ended March 31, 2023.

Income from Discontinued Operations, Net of Tax.

For the three months ended March 31, 2024 the Company recognized approximately $72,000 of benefit in Sales, general and administrative expense of discontinued operations from the reduction in the accrual for sales tax due the expiration of the statute of limitations.

Income from discontinued operations, net of tax, was $2,176,000 for the three months ended March 31, 2023, reflecting the normal strong first calendar quarter of the 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 our Annual Report on Form 10-K.

For the three and six months ended June 30, 2024, income from discontinued operations is a result of the reduction in the accrual for sales tax due the expiration of the statute of limitations.

Income from discontinued operations, net of tax, three and six months ended June 30, 2023, reflects the legacy In-store Marketing Business results of operations.

Information on the sale of the In-Store Marketing Business and statement of operations details of the discontinued operations are included in Note 4 to the Consolidated Financial Statements.

Noncontrolling interest .

The 18.6% noncontrolling interest in Tulp 24.1’s loss for the acquisition period was $223,000.

For the reasons stated above, the net loss for the three months ended March 31, 2024 was $1,264,000, compared to net income of $1,648,000 for the three months ending March 31, 2023.

As discussed in the sales section, we anticipate seasonality in sales, with sales being lower in the last half of the year, resulting in an expected loss for the full year because of one-time acquisition cost and amortization expense.

The 18.6% noncontrolling interest in Tulp 24.1’s loss for the acquisition period was $70,000 and $293,000 for the three and six months ended June 30, 2024, respectively.

Non-GAAP Financial Measures

This report includes EBITDA and Adjusted EBITDA, each of 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.

Adjusted EBITDA is defined as EBITDA after additional pretax adjustments.

These non-GAAP financial measures, which are not calculated or presented in accordance with U.S.

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

Such non-GAAP financial measures are not substitutes for, or as an alternative to, and should be considered in conjunction with, respective GAAP financial measures.

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

Included below are reconciliations of EBITDA and Adjusted EBITDA to net loss from continuing operations, the most directly comparable GAAP measure.

We have included these non-GAAP performance measures as a comparable measure to eliminate the effects of non-recurring transactions that occurred during the three months ended March 31, 2024.

We believe Adjusted EBITDA provides meaningful supplemental information about our operating performance as this measure excludes amounts from net loss from continuing operations that we do not consider part of our core operating results when assessing our performance.

Items excluded from Adjusted EBITDA consist of acquisition-related costs and other costs such as the cost of inventory that was stepped up to fair value as a result of the purchase accounting related to our acquisition of a majority interest in Bloomia.

Adjusted EBITDA does not reflect our cash expenditures, the cash requirements for the replacement of depreciated and amortized assets, or changes in or cash requirements for our working capital needs.

We believe these non-GAAP financial measures will be useful to permit investors to compare results with prior periods that did not include the one-time events and the resulting accounting charges.

Management has used EBITDA and Adjusted 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 and outstanding notes, as further described in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this report.

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.

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

Reconciliation of Net Loss from Continuing Operations

to EBITDA and Adjusted EBITDA from continuing operations

Three months ended March 31,

to EBITDA from Continuing Operations

Three Months Ended

Six Months Ended

Net loss from continuing operations

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Depreciation and amortization

Acquistion-related costs

Non-operating (income) loss (1)

Adjusted EBITDA

(1) For the three months ended March 31, 2024, Other was related to (i) $1,360,000 in cost of products for cost of inventory that was stepped up to fair value during purchase accounting related to the Bloomia acquisition and (ii) $1,000 of stock-based compensation expense.

SEGMENT RESULTS OF OPERATIONS

The summary that follows provides a discussion of the results of operations of our two reportable segments (Bloomia and Lending).

We evaluate performance based on net sales and segment income and use a variety of ratios to measure performance of our reporting segments.

Segment income represents operating income from continuing operations before income taxes exclusive of intangible amortization, certain acquisition related expenses and other unusual non-operating items.

Bloomia Business

The net sales, segment income, and total assets for Bloomia were as follows:

Three months ended March 31, 2024

Income (loss) from continuing operations before income taxes

$ (1,159,000 )

The first and second calendar quarters historically have been the strongest sales quarters for Bloomia with Valentine’s Day, the Easter season and the start of the Spring season.

Lending Business

Three months ended March 31, 2024

Income (loss) from continuing operations before income taxes

With the focus on the Bloomia acquisition during the three months ended March 31, 2024, there was no revenue, and marketing efforts and related expense were reduced.

Three months ended March 31, 2024

Income (loss) from continuing operations before income taxes

Corporate consists of corporate transaction expenses, certain corporate fees and expenses, interest expense, and certain executive management compensation.

Liquidity and Capital Resources

The Company has financed its operations with proceeds from stock sales and sales of its services and products, in addition to a significant payment resulting from the settlement of litigation.

The Company has financed its operations with proceeds from the sale of its legacy 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 March 31, 2024, the Company’s working capital (defined as current assets less current liabilities) was $11,148,000 compared to $15,483,000 at December 31, 2023.

During the three months ended March 31, 2024 cash and cash equivalents decreased $11,064,000 from $16,077,000 at December 31, 2023 to $5,013,000 at March 31, 2024.

At June 30, 2024, the Company’s working capital (defined as current assets less current liabilities) was $5,817,000 compared to $15,525,000 at December 31, 2023.

During the six months ended June 30, 2024, cash and cash equivalents decreased $14,358,000 from $16,077,000 at December 31, 2023 to $1,719,000 at June 30, 2024.

Operating Activities .

Net cash provided by operating activities during the three months ended March 31, 2024 was $1,470,000, of which $86,000 was provided by operating activities of discontinued operations.

Net loss of $1,264,000 plus non-cash adjustments of $456,000 reduced by adjustments for deferred income tax benefits of $505,000, was more than offset by changes in operating assets and liabilities of $2,697,000 which resulted in the $1,470,000 of cash provided by operating activities.

The non-cash adjustments consisted of depreciation expense, changes in allowance for doubtful accounts, stock-based compensation expense, and non-cash operating lease expense as well as adjustments for deferred tax benefits recorded in net income.

The largest component of the change in operating assets and liabilities was inventories which decreased $3,322,000 from the balance acquired from Bloomia, resulting in an equivalent amount added back to net income to calculate net cash provided by operating activities.

Net cash provided by operating activities during the six months ended June 30, 2024 was $4,573,000, of which $292,000 was provided by accounts receivable related to discontinued operations collected in the year.

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

The Company used $1,700,000 in cash in the period to purchase tulips bulbs.

Investing Activities .

Net cash used in investing activities during the three months ended March 31, 2024 was $34,372,000, which primarily related to the purchase price and other expenses resulting from the acquisition of Bloomia.

Net cash used in investing activities during the six months ended June 30, 2024 was $34,243,000, 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 paid for purchases of property and equipment.

Financing Activities .

Net cash provided by financing activities during the three months ended March 31, 2024 was $21,835,000, which primarily related to proceeds received from issuance of the Credit Agreement used to fund the acquisition of a majority interest in Bloomia.

Net cash provided by financing activities during the six months ended June 30, 2024 was $15,268,000, 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.

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

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.

To finance the Bloomia acquisition, the Company entered into the Credit Agreement, together with Tulp 24.1 as the borrower.

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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.

The Company expects that the 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.

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%.

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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 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 3.0 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.

As of March 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 of June 30, 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.

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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.

The notes payable for $2.7 million were paid in full after the end of the quarter, in April 2024.

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

After the end of the quarter, 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 $2.5 million 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) Borrow’s receipt of a written demand by the Lender delivered on or after February 15, 2026, and (iii) such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise (the “ Maturity Date ”).

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

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 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.

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

Income taxes .

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.

I ncome taxes .

Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws.

21 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, (6) 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 in each of our businesses, (9) potential adverse classifications of our Company if we are unsuccessful in executing our business plans, (10) other economic, 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 our Annual Report on Form 10-K, this 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.

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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-Q

Item 2. Management’s Discussion and Analysis