What changed in this filing

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Item 1. Financial Statements

2024-11-19 compared with 2024-08-19 · 301 added, 157 removed, 517 unchanged (47% of the section changed)

4 unchanged sentences

Values are rounded to the nearest thousand dollar and thousand share

September 30,

Current assets:

4 unchanged sentences

Prepaid expenses and other current assets

Note receivable

Other current assets related to discontinued operations

6 unchanged sentences

Long-term receivable

$ 102,459,000

Liabilities and Stockholders' equity

13 unchanged sentences

Long-term debt, net

Related party note payable

Deferred tax liabilities, net

4 unchanged sentences

Authorized shares - 5,714,000

Issued and outstanding shares - 1,770,000 at June 30, 2024 and 1,743,000 at December 31, 2023

Issued and outstanding shares - 1,770,000 and 1,743,000 at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

6 unchanged sentences

Total Liabilities and Stockholders' equity

$ 102,459,000

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Values are rounded to the nearest thousand dollar and thousand share

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of goods sold

Sales, general and administrative expenses

Operating income (loss)

Operating loss

( 1,351,000 )

( 1,633,000 )

( 2,829,000 )

( 2,983,000 )

Foreign exchange difference, net

4 unchanged sentences

( 1,522,000 )

Income tax (benefit) expense

( 4,825,000 )

( 2,658,000 )

Income tax benefit

( 1,284,000 )

Net loss from continuing operations

( 1,458,000 )

Income from discontinued operations, net of tax

( 1,511,000 )

( 3,541,000 )

( 2,654,000 )

Income (loss) from discontinued operations, net of tax

Gain from sale of discontinued operations, net of tax

Net (loss) income including noncontrolling interest

( 1,392,000 )

Net (loss) income attributable to noncontrolling interest

( 3,339,000 )

Net loss attributable to noncontrolling interest

Net (loss) income attributable to Lendway, Inc.

( 1,125,000 )

Net (loss) income including noncontrolling interest

( 2,803,000 )

Other comprehensive income (foreign currency translation)

Comprehensive (loss) income including noncontrolling interest

( 1,124,000 )

( 2,756,000 )

Comprehensive loss income attributable to noncontrolling interest

2 unchanged sentences

$ ( 2,765,000 )

Net (loss) income per basic share attributable to Lendway, Inc.:

Continuing operations

Discontinued operations

Basic earnings per share

Net (loss) income per diluted share attributable to Lendway, Inc.:

Net (loss) income per basic and diluted share attributable to Lendway, Inc.:

Continuing operations

Discontinued operations

Diluted earnings per share

Shares used in calculation of net (loss) income per share:

Basic and diluted earnings per share

Weighted average shares used in calculation of net (loss) income per share:

Basic and diluted

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Accumulated Other

Values are rounded to the nearest thousand dollar and thousand share

Total Lendway

18 unchanged sentences

$ ( 2,339,000 )

Value of stock-based compensation

( 1,125,000 )

( 1,392,000 )

Other comprehensive income

BALANCE AT SEPTEMBER 30, 2024

$ ( 3,464,000 )

BALANCE DECEMBER 31, 2022

4 unchanged sentences

$ ( 1,427,000 )

Issuance of common stock, net

Value of stock-based compensation

1 unchanged sentence

( 1,463,000 )

Repurchase of common stock

Issuance of common stock, net

Issuance of common stock upon vesting of

restricted stock units

Value of stock-based compensation

BALANCE AT SEPTEMBER 30, 2023

$ ( 337,000 )

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Values are rounded to the nearest thousand dollar

Nine Months Ended September 30,

Operating Activities

Net income (loss)

Net (loss) income including noncontrolling interest

$ ( 3,339,000 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Gain from sale of discontinued operations, net of tax

( 2,970,000 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

4 unchanged sentences

Noncash operating lease expense

Deferred income tax (benefit) expense

Deferred income tax benefit

( 1,542,000 )

5 unchanged sentences

Accounts payable

( 1,336,000 )

Accrued compensation

2 unchanged sentences

Accrued income taxes

Deferred revenue

Net cash used in operating activities of continuing operations

( 2,663,000 )

Net cash provided by (used in) operating activities

( 2,325,000 )

Net cash provided by operating activities of discontinued operations

Net cash used in operating activities

( 2,573,000 )

Investing Activities

Proceeds from sale of business

Purchases of property and equipment

1 unchanged sentence

( 34,178,000 )

Receipts from note receivable

Net cash used in investing activities

Receipt of escrow receivable

Net cash (used in) provided by investing activities of continuing operations

( 34,682,000 )

Net cash used in investing activities of discontinued operations

Net cash (used in) provided by investing activities

( 34,682,000 )

Financing Activities

1 unchanged sentence

Proceeds from revolving debt

Proceeds from related party note

Proceeds from machinery financing loan

Repayments of long-term debt

6 unchanged sentences

Proceeds from issuances of common stock

Net cash provided by financing activities

Repurchase of common stock, net

Net cash provided by (used in) financing activities

Effect of exchange rate changes

1 unchanged sentence

( 14,744,000 )

( 3,020,000 )

Cash and cash equivalents, beginning of period

5 unchanged sentences

Noncash purchase consideration - Seller notes

Non-cash investing and financing activities

Purchase of property and equipment included in accounts payable

Non-cash financing activities

Common stock issued for accrued liabilities

See accompanying notes to the condensed consolidated financial statements.

11 unchanged sentences

with a presence in the Netherlands and South Africa.

As part of consideration for the business combination, the Company issued units of Tulp 24.1 to the continuing CEO of Bloomia, which amounted to 18.6% and is presented as noncontrolling interest in these condensed consolidated financial statements.

The remaining 81.4% equity interest of Tulp 24.1 is owned by the Company and the Company is and maintains control of Tulp 24.1 as its sole managing member.

14 unchanged sentences

However, except as described herein, there has been no material change in the information disclosed in the notes to financial statements included in the Company’s consolidated financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024 (the Form 10-K).

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included.

In the opinion of management, all adjustments (consisting of normal recurring accruals and other-than-normal adjustments as disclosed in Note 15 herein) considered necessary for a fair statement have been included.

The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited balance sheet as of December 31, 2023 contained in the Form 10-K;

1 unchanged sentence

Reclassifications had no material effect on prior year net income, net income (loss) per share, or stockholders’ equity.

The unaudited condensed consolidated results of operations and comprehensive loss for the three and six months ended June 30, 2024, are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2024, nor for any other future annual or interim period.

The condensed consolidated results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2024, nor for any other future annual or interim period.

The tulip sales business tends to be seasonal with first and second quarter being the strongest sales season.

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

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

Inventory balances peak in the first quarter ahead of the primary selling season.

12 unchanged sentences

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

The key estimates made by management include the determination of fair values in conjunction with the acquisition of our majority interest in Bloomia, and the carrying value of inventories, right-of-use assets and lease liabilities, useful lives for property and equipment and intangible assets, and value of income taxes.

Actual results could differ from these estimates.

8 unchanged sentences

At each balance sheet date, monetary items denominated in foreign currencies are translated at exchange rates in effect at the balance sheet date, while income and expenses are translated at average exchange rates for the periods presented.

All exchange gains and losses from the remeasurement mentioned above are reflected in the condensed consolidated statement of operations as foreign exchange expenses or income, as appropriate.

All exchange gains and losses from the remeasurement mentioned above are reflected in the condensed consolidated statements of operations as foreign exchange expenses or income, as appropriate.

For subsidiaries whose functional currency has been determined to be other than the U.S.

dollar, assets and liabilities are translated at year-end exchange rates, and condensed consolidated statement of operations items are translated at average exchange rates prevailing during the year, and equity is translated at blended historical rates.

dollar, assets and liabilities are translated at year-end exchange rates, and condensed consolidated statements of operations items are translated at average exchange rates prevailing during the year, and equity is translated at blended historical rates.

Resulting translation differences are recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity.

1 unchanged sentence

Accounts receivable are presented in the balance sheets at their outstanding balances net of the allowance for credit losses.

These receivables are generally trade receivables due in one year or less or expected to be billed and collected in one year.

The Company estimates credit losses on accounts receivables in accordance with ASC 326 Financial Instruments - Credit Losses .

These receivables are generally trade receivables due in one year or less or expected to be billed and collected within one year.

The Company estimates credit losses on accounts receivable in accordance with ASC 326 Financial Instruments - Credit Losses .

The Company measures the allowance for credit losses on trade receivables on a collective (pool) basis when similar risk characteristics exist.

1 unchanged sentence

Management considers qualitative factors such as change in economic factors, regulatory matters, and industry trends to determine if an allowance should be further adjusted.

At June 30, 2024, the Company’s allowance for credit losses is immaterial.

At September 30, 2024, the Company’s allowance for credit losses is immaterial.

Raw materials consist primarily of tulip bulbs, including freight and packaging supplies.

22 unchanged sentences

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

During the three and six months ended June 30, 2024, and 2023, no impairment losses were identified.

During the three and nine months ended September 30, 2024, and 2023, no impairment losses were identified.

Goodwill and Indefinite-lived Assets .

4 unchanged sentences

The fair value of each reporting unit is estimated using a discounted cash flow model.

Where available, and as appropriate, comparable market multiples also used to corroborate the results of the discounted cash flow models.

Where available, and as appropriate, comparable market multiples are also used to corroborate the results of the discounted cash flow models.

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

If the estimated fair value of the reporting to unit is less than the carrying value, a goodwill impairment loss is recorded for the difference, up the amount of the total goodwill.

During the three and six months ended June 30, 2024, no impairment losses were identified.

During the three and nine months ended September 30, 2024, no impairment losses were identified.

Further, the Company recognized a trade name associated with the Bloomia acquisition that was determined to be an indefinite-lived intangible asset.

6 unchanged sentences

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

During the three and six months ended June 30, 2024, no impairment losses were identified.

During the three and nine months ended September 30, 2024, no impairment losses were identified.

Equity-Method Investments.

Investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over the investee.

Under the equity method of accounting, the Company records its investments in equity-method investees in the consolidated balance sheets as equity-method investments and its share of investees’ earnings or losses together with other-than-temporary impairments in value, basis differences between the carrying amount and our ownership interest in the underly net assets of the investee, and any gain or loss from the sale of an equity method investment as gain or loss on sale of equity investment in net income of unconsolidated investments in the statements of operations.

Under the equity method of accounting, the Company records its investments in equity-method investees in the consolidated balance sheets as equity-method investments and its share of investees’ earnings or losses together with other-than-temporary impairments in value, basis differences between the carrying amount and our ownership interest in the underlying net assets of the investee, and any gain or loss from the sale of an equity method investment as gain or loss on sale of equity investment in net income of unconsolidated investments in the consolidated statements of operations.

The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired.

8 unchanged sentences

Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of certain financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other financial working capital items approximate their fair values at June 30, 2024 and December 31, 2023 due to their short-term nature and management’s belief that their carrying amounts approximate the amount for which the assets could be sold or the liabilities could be settled.

The carrying amounts of certain financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other financial working capital items approximate their fair values at September 30, 2024 and December 31, 2023 due to their short-term nature and management’s belief that their carrying amounts approximate the amount for which the assets could be sold or the liabilities could be settled.

The carrying amount of debt approximates fair value due to the debt’s variable market interest rate.

17 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2024

During the six months ended June 30, 2024, the Company had two customers that account for 10% or more of the total revenues.

These two customers accounted for approximately 47% and 17% of revenues, respectively, for the six months ended June 30, 2024.

As of June 30, 2024, approximately $ 1.4 million was due from these two customers.

Nine Months Ended

September 30, 2024

During the nine months ended September 30, 2024, the Company had two customers that account for 10% or more of the total revenues.

These two customers accounted for approximately 38% and 19% of revenues, respectively, for the nine months ended September 30, 2024.

As of September 30, 2024, approximately $ 0.9 million was due from these two customers.

The loss of a major customer could adversely affect the Company’s operating results and financial condition.

4 unchanged sentences

The Company’s shipping and handling costs include costs incurred with third-party carriers to transport products to customers.

The costs of outbound freight are included in the cost of goods sold in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

For the three and six months ended June 30, 2024, the costs of out-bound freight were approximately $ 905,000 and $ 1,451,000 , respectively.

The costs of outbound freight are included in the cost of goods sold in the condensed consolidated statements of operations and comprehensive income (loss).

For the three and nine months ended September 30, 2024, the costs of out-bound freight were approximately $ 421,000 and $ 1,872,000 , respectively.

Advertising Costs.

1 unchanged sentence

These costs are included within sales, general and administrative expenses in the condensed consolidated statement of operations and comprehensive income (loss).

Total advertising expense was approximately $ 7,000 and $ 9,000 for the three and six months ended June 30, 2024, respectively.

Total advertising expense was approximately $ 18,000 and $ 27,000 for the three and nine months ended September 30, 2024, respectively.

Interest expense.

1 unchanged sentence

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

Paid in kind interest is not paid in cash and included in the long-term debt, net in the unaudited condensed consolidated balance sheets.

Financing costs incurred as part of the acquisition of Bloomia are amortized and expense in interest expense in the unaudited condensed consolidated statements of operations.

Income Taxes .

22 unchanged sentences

These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

During the six months ended June 30, 2024, the Company issued 27,000 shares of restricted stock under the 2018 Equity Incentive Plan.

The shares underlying the awards were assigned a value of $5.64 per share, based on the stock price on the date of grant, and are scheduled to vest over three years.

During the six months ended June 30, 2023, no stock options or restricted stock were issued by the Company.

The Company recorded total stock-based compensation expense of $ 14,000 and $ 36,000 for the six months ended June 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2024, the Company issued 27,000 shares of restricted stock under the 2018 Equity Incentive Plan.

The shares underlying the awards were assigned a grant date fair value of $5.64 per share, based on the stock price on the date of grant, and are scheduled to vest over three years.

During the nine months ended September 30, 2023, no stock options or restricted stock were issued by the Company.

The Company recorded total stock-based compensation expense of $ 36,000 and $ 43,000 for the nine months ended September 30, 2024 and 2023, respectively.

Net Income (Loss) per Share.

2 unchanged sentences

In determining diluted net income (loss) per share, the Company considers whether the result of the incremental shares would be antidilutive.

During the period ended June 30, 2024, the Company was in a net loss position and the result of the potentially dilutive securities was determined to be antidilutive and therefore, no incremental shares are included in any of the per share calculations.

For the period ended June 30, 2024, no options were outstanding.

At June 30, 2023 options to purchase 14,000 shares of common stock with a weighted average exercise price of $ 11.74 were outstanding and determined to be antidilutive.

Weighted average common shares outstanding for the three and six months ended June 30, 2024, and 2023 were as follows:

During the three and nine month period ended September 30, 2024, the Company was in a net loss position and the result of the potentially dilutive securities was determined to be antidilutive and therefore, no incremental shares are included in any of the per share calculations.

At September 30, 2024, no options were outstanding.

At September 30, 2023, options to purchase 14,086 shares of common stock with a weighted average exercise price of $ 14.17 were outstanding and determined to be antidilutive.

Weighted average common shares outstanding for the three and nine months ended September 30, 2024, and 2023 were as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Denominator for basic net income (loss) per share - weighted average shares

54 unchanged sentences

The issued equity of the subsidiary, now reflected as noncontrolling interest was valued considering the total value of the acquired company and comparing that to the rollover value of the shares being converted.

Revenue, net and net income for Bloomia since the date of acquisition included in the condensed consolidated statement of operations were approximately $ 16,780,000 and $ 1,599,000 for three months ended June 30, 2024, respectively, and $ 24,813,000 and $ 2,690,000 for the six months ended June 30, 2024, respectively.

Revenue, net and net loss before taxes for Bloomia since the date of acquisition included in the condensed consolidated statements of operations were approximately $ 6,628,000 and $ 910,000 , respectively for three months ended September 30, 2024.

Revenue, net and net income before taxes for Bloomia since the date of acquisition included in the condensed consolidated statements of operations were approximately $ 31,581,000 and $ 1,745,000 for the nine months ended September 30, 2024, respectively.

Unaudited pro forma information has been prepared as if the acquisition had taken place on January 1, 2023.

1 unchanged sentence

The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisitions.

In accordance with ASC 250-10, the Company is unable to provide unaudited pro forma information for revenue and net earnings for the three and six months ended June 30, 2023 due to lack of available information during the period prior to ownership.

Unaudited pro forma information for the three and six months ended June 30, 2024 is as follows:

In accordance with ASC 270-10, the Company is unable to provide unaudited pro forma information for revenue and net earnings for the three and nine months ended September 30, 2023 due to lack of available information during the period prior to ownership.

Unaudited pro forma information for the three and nine months ended September 30, 2024, excluding the impact of debt and intangible asset amortization, is as follows:

Three Months Ended

Six Months Ended

June 30, 2024

The Company incurred approximately $ 1,542,000 of acquisition-related costs that were expensed during the three months ended March 31, 2024.

Nine Months Ended

September 30, 2024

Net loss attributable to Lendway

( 1,125,000 )

( 2,552,000 )

The Company incurred approximately $ 1,542,000 of acquisition-related costs that were expensed during the three months ended March 31, 2024 and an additional $ 542,000 in integrations costs that were expensed in the nine months ended September 30, 2024.

These costs are included in sales, general and administrative expenses in the condensed consolidated statements of operations.

Sale of In-Store Marketing Business and Presentation as Discontinued Operations.

On August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s In-Store Marketing Business for a price of $3.5 million to TIMIBO LLC, an affiliate of Park Printing, Inc.

On August 3, 2023, the Company completed the sale of certain assets and certain liabilities relating to the Company’s In-Store Marketing Business for a price of $3,500,000 to TIMIBO LLC, an affiliate of Park Printing, Inc.

(the “Buyer”) under an Asset Purchase Agreement (the “Purchase Agreement”).

1 unchanged sentence

The cash consideration for the sale was subject to a post-closing adjustment.

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 and is included in Accounts receivable, net on the Consolidated Balance Sheets The results of the In-Store Marketing Business have been presented as discontinued operations and the related assets and liabilities have been classified as related to discontinued operations, for all periods presented.

The carrying amounts of major classes of assets and liabilities that were reclassified as related to discontinued operations on the Consolidated Balance Sheets were as follows:

June 30, 2024

The final purchase adjustment for the net balance was to reduce the cash consideration by $ 1,500,000 , with the Company retaining an equal amount of cash that had been received for unexecuted programs.

The results of the In-Store Marketing Business have been presented as discontinued operations and the related assets and liabilities have been classified as related to discontinued operations, for all periods presented.

The carrying amounts of major classes of assets and liabilities that were reclassified as related to discontinued operations on the condensed consolidated balance sheets were as follows:

September 30, 2024

December 31, 2023

7 unchanged sentences

Current liabilities related to discontinued operations

Results of discontinued operations are summarized below:

Three Months Ended

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023

Net service revenues

4 unchanged sentences

Operating (Loss) Income

Income from discontinued operations before income taxes

Income tax benefit

Income from discontinued operations, net of tax

For the three and six months ended June 30, 2024, the Company recognized approximately $ 64,000 and $ 136,000 , respectively, of benefit in sales, general and administrative expense of discontinued operations from the reduction in the accrual for sales tax due to the expiration of the statute of limitations.

For the three and six months ended June 30, 2024, the Company generated $ 292,000 of cash from discontinued operations.

Inventories at June 30, 2024 consisted of the following:

June 30, 2024

$ ( 354,000 )

(Loss) Income from discontinued operations

$ ( 333,000 )

Gain from sale of discontinued operations before income taxes

Income tax expense

Gain from the sale of discontinued operations, net of tax

Results of discontinued operations are summarized below:

For the three and nine months ended September 30, 2024, the Company recognized approximately $ 66,000 and $ 202,000 , respectively, of benefit in sales, general and administrative expense of discontinued operations from the reduction in the accrual for sales tax due to the expiration of the statute of limitations.

For the nine months ended September 30, 2024, the Company generated $ 292,000 of cash from discontinued operations.

Inventories consisted of the following at:

September 30, 2024

Finished goods

1 unchanged sentence

Raw materials and packaging supplies

Total inventories

Inventories, net

Property and Equipment.

Property and equipment at June 30, 2024 consisted of the following:

Property and equipment, net consisted of the following at:

September 30, 2024

Machinery and equipment

5 unchanged sentences

Property and equipment, net

At June 30, 2024, property and equipment, net of $ 758,000 were located outside of the U.S.

Depreciation expense was $ 424,000 and $ 569,000 for the three and six months ended June 30, 2024.

Depreciation of $ 378,000 and $ 46,000 were recorded within cost of sales and sales, general and administrative expenses, respectively, for the three months ended June 30, 2024.

Depreciation of $ 500,000 and $ 66,000 were recorded within cost of sales and sales, general and administrative expenses, respectively, for the six months ended June 30, 2024.

Depreciation expense for the three and six months ended June 30, 2023 was $ 12,000 and $ 26,000 , respectively, which was recorded in sales, general and administrative expenses.

At September 30, 2024, property and equipment, net of $ 925,000 were located outside of the U.S.

Included in machinery and equipment is $ 55,000 of equipment funded by a financing lease.

The financing lease is included in financing leases on the condensed consolidated balance sheet.

Also included in machinery and equipment is $ 100,000 of spare parts that are not currently in use and not being depreciated.

Depreciation expense was $ 436,000 and $ 1,002,000 for the three and nine months ended September 30, 2024.

Depreciation of $ 408,000 and $ 28,000 were recorded within cost of sales and sales, general and administrative expenses, respectively, for the three months ended September 30, 2024.

Depreciation of $ 908,000 and $ 94,000 were recorded within cost of sales and sales, general and administrative expenses, respectively, for the nine months ended September 30, 2024.

Depreciation expense for the three and nine months ended September 30, 2023 was $ 10,000 and $ 36,000 , respectively, which was recorded in sales, general and administrative expenses.

Equity Method Investment.

1 unchanged sentence

Araucanía has two other shareholders that hold 70% of its aggregate issued and outstanding shares.

At June 30, 2024, the Company had a 30% equity interest in Araucania with a carrying amount of approximately $ 167,000 .

For the period ended June 30, 2024, the equity in net income of Araucania was approximately $nil.

As of June 30, 2024, the Company had a note receivable from Araucanía with a balance of $ 165,000 which is included in Prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet.

At September 30, 2024, the Company had a 30% equity interest in Araucania with a carrying amount of approximately $ 167,000 .

For the period ended September 30, 2024, the equity in net income of Araucania was approximately $nil.

As of September 30, 2024, the Company had a note receivable from Araucanía with a balance of $ 369,000 which is included in long-term receivable in the accompanying condensed consolidated balance sheet.

Bloomia had a 50% ownership interest in Horti-Group USA LLC (“Horti-Group”).

3 unchanged sentences

The sale price was seller-financed via the issuance of an interest-free loan from Fresh Tulips to V-Maxx with an original principal amount $ 2,500,000 .

The loan to V-Maxx is to be repaid in 17 monthly instalments of $150,000 for the first 16 months and $100,000 for the last month, with the first payment on April 1, 2023, and the last payment on August 1, 2024.

The loan to V-Maxx is to be repaid in 17 monthly installments of $150,000 for the first 16 months and $100,000 for the last month, with the first payment on April 1, 2023, and the last payment on August 1, 2024.

The Company does not receive cash from V-Maxx, instead the $ 150,000 per month is applied to the rent owed to Horti-Group and is reflected in Noncash operating lease expense as an add back to net loss in the condensed consolidated statement of cash flows.

At June 30, 2024, the balance of the loan was $ 250,000 .

At September 30, 2024, the balance of the loan was zero.

Goodwill and Other Intangible Assets.

3 unchanged sentences

Measurement period adjustment

Balance as of June 30, 2024

During the three and six months ended June 30, 2024, the Company recorded a measurement period adjustment which increased goodwill by $ 50,000 .

This measurement period adjustment resulted from a remeasurement of acquired payroll taxes payable.

Other intangible assets and related amortization are as follows at June 30, 2024:

Cross Carrying

Balance as of September 30, 2024

During the nine months ended September 30, 2024, the Company recorded a measurement period adjustment which increased goodwill by $ 352,000 .

This measurement period adjustment resulted from a remeasurement of acquired payroll taxes payable, other accruals, inventory and property and equipment.

Other intangible assets and related amortization are as follows at September 30, 2024:

Customer relationships

For the three and six months ended June 30, 2024 amortization of intangible assets expensed to operations was $ 381,000 and $ 539,000 , respectively.

The weighted average remaining amortization period for intangible assets as of June 30, 2024 is approximately 11.6 years.

Remaining estimated aggregate annual amortization expense is as follows:

June 30, 2024

For the three and nine months ended September 30, 2024, amortization of intangible assets expensed to operations was $ 381,000 and $ 920,000 , respectively.

The weighted average remaining amortization period for intangible assets as of September 30, 2024 is approximately 11.4 years.

Remaining estimated aggregate annual amortization expense is as follows at:

September 30, 2024

Remainder of 2024

The components of debt at June 30, 2024 consisted of the following:

June 30, 2024

Long-term d ebt, net.

The components of debt consisted of the following at:

September 30, 2024

Credit Agreement - term loan

1 unchanged sentence

Credit Agreement - revolving credit facility

Paid in kind interest

Paid in kind interest (PIK)

Machinery financing loan (1)

unamortized debt issuance costs

$ ( 355,000 )

PIK included in accrued expenses and other current liabilities

Less current maturities

1 unchanged sentence

Long term debt, net of current maturities

In the three months ended September 30, 2024, the Company entered into a financing arrangement to finance the purchase of machinery.

This transaction represented a failed sale leaseback with the associated equipment recorded in property and equipment, net and the proceeds received recorded as debt on the Company’s condensed consolidated balance sheet.

To finance the Bloomia acquisition, the Company entered into a revolving credit and term loan agreement (the “Credit Agreement”), with Tulp 24.1 as the borrower (the “Borrower”) for a $ 18,000,000 term loan and a $ 6,000,000 revolving credit facility.

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 .

The revolving credit facility may be used by the Company for general business purposes and working capital, subject to availability under a borrowing base consisting of 80% of eligible accounts receivable and generally 50% of eligible inventory.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to Term ( Secured Overnight Financing Rate) SOFR for an interest period of one month plus 3.0%.

In addition to paying interest on the outstanding principal under the Credit Agreement, the Borrower is required to pay a commitment fee of 0.50% on the unutilized commitments under the revolving credit facility.

The obligations under the Credit Agreement are secured by substantially all of the personal property of the Borrower and its subsidiaries.

The Company provided an unsecured guaranty of the obligations of the Borrower under the Credit Agreement.

The Credit Agreement requires the Borrower 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, stepping down to 2.00 to 1.00 on December 31, 2027, until the maturity date of the Credit Agreement.

As of June 30, 2024, the Company was in compliance with these financial covenants.

The Credit Agreement contains other customary affirmative and negative covenants, including covenants that restrict the ability of the Borrower and its subsidiaries to incur additional indebtedness, dispose of significant assets, make distributions or pay dividends, 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 also 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 the Borrower or any of its subsidiaries, failure of the Borrower or any of its subsidiaries to pay or discharge material judgments, bankruptcy of the Borrower or any of its subsidiaries, and change of control of the Company.

Borrowings under the Amended Credit Agreement bear interest at a rate per annum equal to Term (Secured Overnight Financing Rate) SOFR for an interest period of one month plus 3.0%.

In addition to paying interest on the outstanding principal under the Amended Credit Agreement, the Borrower is required to pay a commitment fee of 0.50% on the unutilized commitments under the revolving credit facility.

The obligations under the Amended Credit Agreement are secured by substantially all of the personal property of the Borrower and its subsidiaries.

The Company provided an unsecured guaranty of the obligations of the Borrower under the Amended Credit Agreement.

The Amended Credit Agreement requires the Borrower 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 September 30, 2024, stepping down to 2.00 to 1.00 on December 31, 2027, until the maturity date of the Amended Credit Agreement.

As of September 30, 2024, the Company was in compliance with these financial covenants.

The Amended Credit Agreement contains other customary affirmative and negative covenants, including covenants that restrict the ability of the Borrower and its subsidiaries to incur additional indebtedness, dispose of significant assets, make distributions or pay dividends, 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 also 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 the Borrower or any of its subsidiaries, failure of the Borrower or any of its subsidiaries to pay or discharge material judgments, bankruptcy of the Borrower or any of its subsidiaries, and change of control of the Company.

The term loan is scheduled to be repaid in quarterly installments of $ 450,000 , commencing on June 30, 2024 with a scheduled maturity date of February 20, 2029 .

5 unchanged sentences

The notes payable initially bear interest at 8 % per annum for the first year that increase annually by 2 percentage points.

Interest on loans made under the notes payable is payable “in kind” (“PIK”) Interest that is payable “in-kind” is added to the aggregate principal amount on the applicable interest payment date.

Interest on loans made under the notes payable is payable “in kind” (“PIK”).

Interest that is payable “in-kind” is added to the aggregate principal amount on the applicable interest payment date.

Additionally, the Company entered into short-term notes payable with the sellers.

The short-term notes payable of $ 2,700,000 was paid in full as of June 30, 2024.

As of June 30, 2024, there was $ 355,000 of debt issuance costs related to the term loan, net of amortization of $ 30,000 which has been presented as a direct deduction from long-term debt in the accompanying consolidated balance sheet.

As of June 30, 2024, there was $ 119,000 of deferred financing costs related to the revolving credit facility, net of amortization of $ 9,000 , which has been presented within prepaid expenses and other current assets in the accompanying consolidated balance sheet.

The Company incurred $ 464,000 of interest expense on the term loans and revolving facility and incurred non-cash paid-in-kind interest of $ 536,000 on the seller notes which are included in interest expense (income), net on the condensed consolidated statements of operations and comprehensive income (loss).

The combined aggregate amount of maturities for each of the five years following June 30, 2024, are as follows:

As of September 30, 2024, there was $ 334,000 of debt issuance costs related to the term loan, net of amortization of $ 51,000 which has been presented as a direct deduction from long-term debt in the accompanying condensed consolidated balance sheet.

As of September 30, 2024, there was $ 113,000 of deferred financing costs related to the revolving credit facility, net of amortization of $ 15,000 , which has been presented within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet.

The Company incurred $ 419,000 and $ 883,000 of interest expense on the term loans and revolving facility in the three and nine months ended September 30, 2024, respectively.

The Company incurred non-cash paid-in-kind interest of $ 392,000 and $ 928,000 on the seller notes facility in the three and nine months ended September 30, 2024, respectively.

Term loan, revolving credit facility and paid-in-kind interest are included in interest expense (income), net on the condensed consolidated statements of operations and comprehensive income (loss).

The combined aggregate maturities for each of the five years following September 30, 2024 are as follows:

Remainder of 2024 (1)

The September 2024 installment of the term loan was paid in October 2024 and is included in the current portion of long-term debt on the condensed consolidated balance sheet.

Related Party Note Payable

On August 15, 2024, the Company 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.

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 .

As of September 30, 2024, the Company had $ 2,000,000 outstanding under the Note and had incurred $ 8,000 of interest.

Amounts outstanding under the Note 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) Borrower’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.

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 $ 1.0 million from time to time until August 15, 2026, but not on a revolving basis.

The Amended Note provides for total borrowing of up to $ 3.5 million to fund the Company’s operations.

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.

The Company is party to leasing contracts in which the Company is the lessee.

5 unchanged sentences

Because most of the Company’s leases do not provide an implicit rate of return, the discount rate is based on the collateralized borrowing rate of the Company, on a portfolio basis.

The weighted average remaining lease term and weighted average discount rate is as follows:

The weighted average remaining lease term and weighted average discount rate is as follows at:

September 30, 2024

Weighted average remaining lease term (years)

5 unchanged sentences

The components of lease expense from continuing operations are as follows within our condensed consolidated statements of operations and comprehensive income (loss):

Three months ended June 30, 2024

Six months ended June 30, 2024

Three Months Ended September 30, 2024

Nine Months Ended

September 2024

Operating lease expense:

Operating lease cost

$ 1,055,000 $ 1,504,000

Short-term and variable lease cost

258,000 344,000

Short-term variable lease cost (1)

Finance lease expense:

1 unchanged sentence

Total lease expense

$ 1,316,000 $ 1,851,000

Three months ended June 30, 2023

Six months ended June 30, 2023

In the Form 10-Q for the second quarter, management incorrectly disclosed the short-term variable lease expense for the six months ended June 30, 2024.

Management corrected the disclosure above.

There was no impact on the condensed consolidated statement of operations in either period.

Three Months Ended

Nine Months Ended

September 30, 2023

September 2023

Operating lease expense:

Operating lease cost

Short-term and variable lease cost

Related party lease

Total lease expense

1 unchanged sentence

Supplemental cash flow information related to leases where the Company is the lessee is as follows:

Three months ended June 30, 2024

Six months ended June 30, 2024

Three Months Ended

Nine Months Ended

September 30, 2024

September 2024

Operating cash flows from operating leases

Financing cash flows from finance leases

Leased assets obtained in exchange for operating lease liabilities

Leased assets obtained in exchanged for operating lease liabilities

Leased assets obtained in exchange for finance lease liabilities

Operating cash flows from operating leases during the three and six months ended June 30, 2023 were $ 0 and $ 10,000 , respectively.

As of June 30, 2024, the maturities of the operating and finance lease liabilities are as follows:

As of September 30, 2024, the maturities of the operating and finance lease liabilities are as follows:

Year ending December 31,

7 unchanged sentences

Income Taxes.

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.

For the three and nine months ended September 30, 2024, the Company recorded an income tax benefit of 33.5 % and 26.6 %, respectively on loss from continuing operations.

The rates differ from the federal statutory rate of 21 % due to state taxes of 4.7 %, valuation allowance change of 9.3 % and nondeductible transaction costs and other permanent items of ( 8.4 )%.

For the three and six months ended June 30, 2023, the Company recorded an income tax expense of 12.5 % and 0.4 % on loss from continuing operations before income taxes.

For the three and nine months ended September 30, 2023, the Company recorded an income tax expense of 0.6 % and 0.1 % on loss from continuing operations before income taxes.

The rate differs from the federal statutory rate of 21 % due to state taxes of 3.5 %, valuation allowance change of ( 24.5 )% and other permanent items of 0.1 %.

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

For the three and nine months ended September 30, 2024, the Company recorded an income tax benefit of $ 736,000 and $ 1,284,000 on the loss from continuing operations before income taxes.

The overall benefit of $ 1,284,000 includes a $ 451,000 benefit for the reversal of the valuation allowance on federal deferred tax assets.

1 unchanged sentence

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

As of September 30, 2024, and December 31, 2023, the Company had unrecognized tax benefits totaling $ 35,000 and $ 42,000 , respectively, 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 $35,000.

3 unchanged sentences

In the ordinary course of the business, the Company is subject to periodic legal or administrative proceedings.

As of June 30, 2024, the Company was not involved in any material claims or legal actions which, in the opinion of management, the ultimate disposition would have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

As of September 30, 2024, the Company was not involved in any material claims or legal actions which, in the opinion of management, the ultimate disposition would have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or liquidity.

Purchase Obligation.

6 unchanged sentences

Defined contributions are expensed in the year in which the related employee services are rendered.

The Company makes contributions on behalf of all Dutch employees of which $ 22,000 and $ 30,000 were made and expensed for the three and six months ended June 30, 2024, respectively.

Subsequent Events.

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) Borrower’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.

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 makes contributions on behalf of all Dutch employees of which $ 21,000 and $ 51,000 were made and expensed for the three and nine months ended September 30, 2024, respectively.

Revision of first and second quarter 2024 unaudited results:

During the third quarter ended September 30, 2024, the Company identified certain misstatements in the first and second quarter consolidated financial statements.

The Company assessed the applicable guidance issued by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) and concluded these misstatements were not material, individually or in the aggregate, to the Company’s unaudited condensed consolidated financial statements for the aforementioned interim periods.

However, to facilitate comparisons among periods, the Company has decided to revise its previously issued first and second quarter unaudited condensed consolidated financial information.

The following tables present the impact of the errors on the previously reported condensed consolidated financial statements:

Three Months Ended March 31, 2024

As Previously Reported

Cost of goods sold (1)

Loss from continuing operations before income taxes

( 1,683,000 )

( 1,833,000 )

Net loss from continuing operations

( 1,336,000 )

( 1,486,000 )

Net (loss) income including noncontrolling interest

( 1,264,000 )

( 1,414,000 )

Net (loss) income attributable to Lendway, Inc.

( 1,041,000 )

( 1,163,000 )

Net (loss) income attributable to noncontrolling interest

Comprehensive (loss) income attributable to Lendway, Inc.

( 1,038,000 )

( 1,160,000 )

Net (loss) income per basic and diluted share attributable to Lendway, Inc.

Note receivable

$ ( 150,000 )

Three Months Ended June 30, 2024

As Previously Reported

Cost of goods sold (3)

Selling, general and administrative expenses (4)

Loss from continuing operations before income taxes

( 1,082,000 )

Net loss from continuing operations

Net (loss) income including noncontrolling interest

Net (loss) income attributable to Lendway, Inc.

Net (loss) income attributable to noncontrolling interest

Comprehensive (loss) income including noncontrolling interest

Comprehensive (loss) income attributable to Lendway, Inc.

Net (loss) income per basic and diluted share attributable to Lendway, Inc.

Accounts receivable, net

Inventories, net

Accrued expenses and other current liabilities

Note receivable (5)

Six Months Ended June 30, 2024

As Previously Reported

Cost of goods sold (3)

Selling, general and administrative expenses (4)

Loss from continuing operations before income taxes

( 2,765,000 )

( 2,632,000 )

Net loss from continuing operations

( 2,217,000 )

( 2,084,000 )

Net (loss) income including noncontrolling interest

( 2,081,000 )

( 1,948,000 )

Net (loss) income attributable to Lendway, Inc.

( 1,786,000 )

( 1,678,000 )

Net (loss) income attributable to noncontrolling interest

Comprehensive (loss) income including noncontrolling interest

( 1,740,000 )

( 1,607,000 )

Comprehensive (loss) income attributable to Lendway, Inc.

( 1,749,000 )

( 1,641,000 )

Net (loss) income per basic and diluted share attributable to Lendway, Inc.

The Company did not record non-cash rent expense for the month of March 2024.

This adjustment impacts the three months ended March 31, 2024 and the six months ended June 30, 2024.

The Company identified a timing issue whereby product received by the customer before June 30, 2024 was recorded in July 2024, resulting in an understatement of revenue and cost of good sold in the three and six months ended June 30, 2024.

Based on an inventory count performed in the third quarter of 2024, management noted the inventory balance at June 30, 2024 was overstated, which results in cost of goods sold being understated.

Management over accrued for certain expenses resulting in an overstatement of selling, general and administrative costs in the three and six months ended June 30, 2024.

Rent expense was properly stated in the three months ended June 30, 2024, but the note was overstated as of June 30, 2024 due to non-cash rent not being recorded in March 2024.

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 1. Financial Statements