10-K: Lendway, Inc. Reports FY2024 Results, Navigates Transition to Agribusiness Focus

Lendway, Inc. reports a net loss for FY2024, driven by the acquisition of Bloomia B.V. and a shift towards its specialty agricultural business.

Summary

• Lendway, Inc. reported its financial results for the fiscal year ended December 31, 2024.
• The company has transitioned to a specialty agricultural company, primarily focused on its investment in Bloomia B.V., a fresh cut tulip producer.
• On February 22, 2024, Lendway acquired Bloomia B.V. for $47.5 million, financed through a combination of cash, a new credit facility, and promissory notes.
• The company sold its legacy In-Store Marketing Business for $3.5 million, with its operations presented as discontinued.
• Net sales for Bloomia from February 22, 2024, to December 31, 2024, were approximately $37.773 million.
• The company reported a net loss attributable to Lendway, Inc. of $5.743 million for the year ended December 31, 2024, compared to a net income of $2.414 million in the prior year.
• The company incurred $1.542 million in acquisition costs and $1.335 million in integration-related costs.
• The company has an $18 million term loan and a $6 million revolving credit facility to finance the Bloomia acquisition.
• The company is changing its fiscal year end from December 31 to June 30 and will file a transition report for the six-month period ending June 30, 2025.
• The company expects cash from operations, the credit facility, and a note with Air T Inc. will provide sufficient liquidity for the next 12 months.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company is strategically shifting to a new business focus and has made a significant acquisition, it also reports a net loss and faces several risks and challenges. The sentiment is neutral as the company is in a transition phase.

Positives

• The company has established relationships with prominent U.S. mass-market retailers.
• Bloomia has a strong competitive position amongst U.S. growers through hydroponics and an integrated supply chain.
• Bloomia sources tulip bulbs from both the Netherlands and the Southern Hemisphere, enabling year-round production.
• The company expects cash from operations, the credit facility, and a note with Air T Inc. will provide sufficient credit availability for the next 12 months.
• The company has well established customer relationships.

Negatives

• The company reported a net loss attributable to Lendway, Inc. of $5.743 million for FY2024.
• Bloomia's net sales decreased from $45 million in 2023 to $40 million in 2024.
• The company incurred $1.542 million of acquisition costs and $1.335 million of integration-related costs.
• Three customers account for approximately 65% of Bloomia's revenue, creating customer concentration risk.
• The Credit Agreement restricts Tulp 24.1's ability to make distributions to Lendway, potentially constraining cash available for corporate expenses.

Risks

• The company's results are highly dependent on Bloomia's success.
• The company faces competition in the cut tulip and broader cut floral industry.
• Changes in interest rates could increase the company's interest expense.
• Adverse economic conditions could reduce consumer spending on fresh cut tulips.
• Restrictions in the Credit Agreement could adversely affect the Bloomia business.
• The company's success depends on key personnel, particularly Bloomia's CEO.
• Failure to establish and maintain effective internal control over financial reporting could adversely affect the company.
• Bloomia's international operations involve additional market and operational risks.
• Exchange rate fluctuations between the U.S. dollar and the Euro may negatively affect earnings.
• Failure to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines and penalties.
• Compliance with employment laws may adversely affect Bloomia's business.
• The company is subject to risks inherent in the operation of an agricultural business, such as insects, plant diseases, and government regulations.
• Energy and water price increases could adversely impact profit margins.
• Inclement weather and other disruptions to the transportation network could adversely impact the distribution system and demand for products.
• The company relies on its management information systems for inventory management, distribution, and other key functions, and system failures could adversely affect the business.
• The company's results of operations have been and may be subject to significant fluctuations.
• The company may need to raise additional capital, which might not be available or might be available only on terms unfavorable to the company or its investors.
• The company may be required to recognize impairment charges that could materially affect its results of operations.
• Certain significant stockholders of the company may exert a degree of control in a manner that conflicts with the interests of other stockholders.
• The company could be deemed to have been a shell company after completion of the August 2023 asset sale, and as such, the company and its stockholders could be restricted in reliance on certain rules or forms.

Future Outlook

The company expects that cash from operations combined with funds available under the Amended Credit Facility and the Note will provide sufficient credit availability to support its ongoing operations, fund its new debt service requirements, capital expenditures and working capital for at least the next 12 months.

Management Comments

• The company's primary focus in the near-term will be on the Bloomia business.
• The company has determined to focus solely on the ag business.

Industry Context

The estimated market for cut flowers in the United States for 2024 is approximately $8 billion, of which approximately 80% is imported and around 20% is produced within the U.S. Of overall cut flowers sales, approximately 15% is represented by tulip stems. Bloomia believes it has a market share of approximately 20% of the cut tulips grown in the U.S.

Comparison to Industry Standards

• Bloomia competes with both local (U.S.) producers and foreign producers who import cut tulips, primarily from the Netherlands.
• Bloomia has carved out a strong competitive position amongst U.S. growers by developing unique infrastructure through the combination of hydroponics and an integrated supply chain.
• Growing tulips in a greenhouse using hydroponics enables year-round production and requires less water and nutrients to grow the stems, and results in tulips that are better quality and have a longer shelf life.
• By sourcing tulip bulbs from both the Netherlands and the Southern Hemisphere, Bloomia is able to offer quality fresh cut tulips year-round, meeting unmet demand.

Management Changes

Legal Proceedings

• As of December 31, 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.

Related Party Transactions

• On August 15, 2024, the Company entered into an unsecured Delayed Draw Term Note with Air T Inc. for up to $3.75 million.
• Our acquisition of Bloomia B.V. (Bloomia) in February 2024 through our subsidiary, Tulp 24.1, LLC (the U.S. Subsidiary), was funded in part by $12.1 million cash proceeds pursuant to a bridge loan agreement, dated February 22, 2024 (the Bridge Loan Agreement), of which approximately $400,000 was provided by Mr. Jansen, who became an executive officer of the Company in connection with the closing of the acquisition.

Stakeholder Impact

• The company's transition to a specialty agricultural business and the acquisition of Bloomia B.V. will impact shareholders, employees, customers, and suppliers.
• The company's financial performance and ability to execute its business strategy will affect shareholder value.
• The company's relationship with employees will be governed by various federal and state labor laws.
• The company's ability to maintain customer relationships and provide quality products will impact customer satisfaction.
• The company's supply chain management and relationships with suppliers will be critical to its success.

Next Steps

• The company intends to file a transition report on Form 10-K for the six-month transition period starting January 1, 2025 and ending June 30, 2025.
• The company expects to file quarterly reports based on the new fiscal year beginning with the first fiscal quarter ending September 30, 2025.

Key Dates

Keywords

Bloomia, tulips, agricultural, acquisition, Lendway, credit facility, financial results, cut flowers, greenhouse, hydroponics