10-KT: Lendway Returns to Profitability, Eyes Growth in Tulip Market

Lendway, Inc. reports a significant return to profitability and strong revenue growth in its specialty agricultural business, Bloomia, for the six-month transition period ending June 30, 2025, despite ongoing financing needs and market risks.

Summary

• Lendway, Inc. has changed its fiscal year-end from December 31 to June 30, effective June 30, 2025, to align with the seasonality of its primary business, Bloomia.
• For the six-month transition period ended June 30, 2025, Lendway reported net income attributable to Lendway, Inc. of $1,496,000, a significant improvement from a net loss of $(1,678,000) in the comparable prior year period.
• Revenue for the six months ended June 30, 2025, increased by 43% to $35,622,000, primarily due to a full six months of Bloomia operations and stronger Mothers Day sales.
• Gross profit for the period was $9,280,000, representing a gross margin of 26.1%, up from 22.6% in the prior year period.
• The company has fully divested its legacy In-Store Marketing Business and discontinued its non-bank lending business, focusing solely on its specialty agricultural investments, primarily Bloomia, a leading producer of fresh cut tulips.
• Bloomia nurtured over 90 million tulip stems in the twelve months ended June 30, 2025, operating from locations in the U.S., Netherlands, and South Africa, with a minority interest in Chile.
• Lendway is currently seeking additional financing to support working capital needs, particularly for approximately $15 million in tulip bulb purchases due between September and December 2025.
• The company's working capital decreased to $1,098,000 at June 30, 2025, from $11,026,000 at December 31, 2024, and cash and cash equivalents decreased to $906,000 from $1,759,000 over the same period.

Sentiment

Score: 7

Explanation: The company demonstrates strong financial recovery and strategic focus on its core agricultural business, Bloomia, with significant revenue growth and a return to profitability. However, the notable decrease in working capital and cash, coupled with the explicit need to secure financing for upcoming bulb purchases, introduces a degree of uncertainty and risk regarding near-term liquidity. High customer concentration and exposure to input cost volatility also temper the overall positive sentiment.

Positives

• Achieved net income attributable to Lendway, Inc. of $1,496,000 for the six months ended June 30, 2025, a substantial turnaround from a net loss of $(1,678,000) in the prior year period.
• Reported a 43% increase in revenue, reaching $35,622,000 for the six months ended June 30, 2025, driven by a full period of Bloomia operations and strong seasonal sales.
• Improved gross profit margin to 26.1% for the six months ended June 30, 2025, up from 22.6% in the prior year, indicating better operational efficiency.
• Operating income significantly improved to $3,917,000 for the six months ended June 30, 2025, compared to an operating loss of $(1,479,000) in the prior year period.
• Successfully streamlined operations by focusing solely on the specialty agricultural business (Bloomia) after divesting the In-Store Marketing Business and discontinuing the non-bank lending venture.
• Bloomia's hydroponic growing methods and integrated supply chain provide competitive advantages, enabling year-round production, higher quality, longer shelf life, and a lower carbon footprint.
• The company was in compliance with its financial covenants under the Amended Credit Agreement as of June 30, 2025, following a waiver for a prior breach related to the Easter holiday shift.
• Management believes internal control over financial reporting was effective as of June 30, 2025, indicating improved financial oversight.

Negatives

• Working capital significantly decreased to $1,098,000 at June 30, 2025, from $11,026,000 at December 31, 2024, indicating tighter liquidity.
• Cash and cash equivalents declined to $906,000 at June 30, 2025, from $1,759,000 at December 31, 2024.
• The company has committed to approximately $15 million in tulip bulb purchases for September-December 2025 and is actively seeking financing to support these working capital needs.
• High customer concentration, with five customers accounting for approximately 65% of revenue during the six months ended June 30, 2025, poses a significant risk if any major customer reduces purchases.
• Increased cost of Dutch tulip bulbs due to poor weather conditions and tariffs (15% in fiscal year 2026), with uncertainty about passing all cost increases to customers.
• Reliance on key personnel, particularly Bloomia's CEO, Werner Jansen, creates a dependency risk.
• Exposure to fluctuations in foreign currency exchange rates, particularly between the U.S. dollar and the Euro, can negatively impact earnings.
• Restrictions in the Amended Credit Agreement limit Bloomia's ability to make distributions to Lendway, potentially constraining cash available for corporate expenses and future acquisitions.

Risks

• Intense competition in the cut floral industry from both local and foreign producers, impacting price, quality, and order fulfillment.
• High customer concentration, with a small number of mass-market retailers accounting for a significant portion of Bloomia's revenue, without long-term purchase commitments.
• Volatility in the price of Dutch tulip bulbs, which are the largest raw material purchase, due to weather conditions, tariffs (currently 15% for imports from the Netherlands), and exchange rate fluctuations.
• Inability to fully pass increased costs (e.g., tariffs, bulb prices) to customers, which could decrease profits.
• Potential for competitors to benefit from the expertise of former Bloomia executives despite non-compete agreements, if these agreements are unenforceable.
• Exposure to changes in interest rates, as the majority of debt carries floating interest rates (Term SOFR plus 3.0%).
• Adverse economic conditions and outlook in the U.S. and international markets (South Africa, South America) could reduce consumer spending on discretionary purchases like fresh cut tulips.
• Inability to secure sufficient financing for significant bulb purchase commitments ($15 million for September-December 2025), potentially leading to reduced sales, lower profits, and loss of market share.
• Lack of business diversification, with results highly dependent on Bloomia's success and a substantial portion of capital committed to this single business.
• Challenges in successfully managing future acquisitions, including integration, retention of key employees, and generating adequate cash flow.
• Restrictions imposed by the Amended Credit Agreement, such as limitations on incurring additional indebtedness, disposing of significant assets, making distributions, or paying dividends to Lendway.
• Dependence on key personnel, particularly Bloomia's CEO, Werner Jansen, whose departure could adversely affect business strategy and operations.
• Risk of failure to establish and maintain effective internal control over financial reporting, potentially affecting financial reporting accuracy and stock price, exacerbated by limited employee resources for segregation of duties.
• Operational risks associated with international operations, including foreign currency exchange rate fluctuations, adverse tax consequences, and compliance with complex foreign laws.
• Compliance risks with employment laws, including potential issues with unauthorized workers, fines, and adverse publicity.
• Inherent agricultural risks such as insects, plant diseases, quality issues with tulip bulbs (e.g., $900,000 write-off in June 2023), adverse weather conditions, and production delays.
• Increases in energy and water prices could adversely impact profit margins due to the significant usage in hydroponic greenhouse cultivation.
• Disruptions to the transportation network (e.g., ocean ports, truck availability) could delay bulb shipments and product delivery to retailers.
• Reliance on management information systems for inventory, distribution, and other key functions, making the company vulnerable to system failures, cyber-attacks, and data breaches.
• Potential for significant fluctuations in quarterly and annual operating results and stock price due to various factors, including market acceptance and general market volatility.
• Risk of being required to recognize impairment charges for intangible assets and goodwill, which could materially affect results of operations.
• Significant stockholders (Air T Inc. and affiliates, holding approximately 40% of common shares) may exert a degree of control that conflicts with the interests of other stockholders.
• Potential for the company to be deemed a 'shell company' under SEC rules, which could restrict the resale of certain shares.

Future Outlook

The company expects cash from operations, combined with funds available under the Amended Credit Facility and the related party note, to provide sufficient liquidity for its ongoing operations, debt service, capital expenditures, and working capital for at least the next twelve months. Management is actively discussing amendments to the Credit Agreement to increase borrowing capacity and adjust covenant ratios. The company anticipates continued growth in the tulip market outside of peak seasons and believes Bloomia is well-positioned to meet this demand.

Management Comments

• The company has determined to focus solely on the agricultural business, following the reexamination of its strategic position after the former CEO's resignation.
• Bloomia is well positioned to fill the growing demand for tulips outside of the traditional peak season, leveraging its year-round production capabilities.
• Operations are believed to follow all applicable environmental regulations within the jurisdictions in which the company operates.
• The relationship with employees is regarded as favorable, with objectives focused on identifying, recruiting, retaining, incenting, and integrating staff.
• Management believes internal control over financial reporting was effective as of June 30, 2025.
• Cash from operations, combined with available funds under the Amended Credit Facility and the Air T Note, is expected to provide sufficient liquidity for at least the next twelve months.

Industry Context

The U.S. cut flower market is estimated at $8 billion for 2024, with approximately 80% imported and 20% domestically produced. Tulip stems represent about 15% of overall cut flower sales. Bloomia holds an estimated 20% market share of cut tulips grown in the U.S. The industry faces high barriers to entry due to the need for high volumes and efficient operations. The market is experiencing growth outside of traditional peak seasons, which Bloomia aims to capitalize on with its year-round production capabilities and Southern Hemisphere bulb sourcing.

Comparison to Industry Standards

• Bloomia holds an estimated market share of approximately 20% of the cut tulips grown in the U.S., indicating a strong competitive position among domestic growers.
• The company's hydroponic growing methods and integrated supply chain are noted as unique infrastructure, providing a strategic advantage over competitors who primarily import tulip stems, which are subject to higher tariffs and freight costs.
• Bloomia's ability to source bulbs from both the Netherlands and the Southern Hemisphere allows for year-round production, addressing unmet demand and differentiating it from many competitors reliant on seasonal supply.

Management Changes

Corporate Governance

Legal Proceedings

• As of June 30, 2025, the company was not involved in any material claims or legal actions that, in the opinion of management, would have a material adverse effect on its consolidated financial position, results of operations, or liquidity.

Related Party Transactions

• The company entered into an unsecured Delayed Draw Term Note with Air T Inc. for up to $3,750,000. Air T Inc. beneficially owns greater than 10% of the company's outstanding common stock and is part of a group owning approximately 40%.
• Mark R. Jundt (Co-CEO, Director), Daniel C. Philp (Co-CEO, Director), and Nicholas J. Swenson (Director) also hold executive/director positions at Air T Inc.
• The Air T Inc. transaction was approved in advance by the Audit Committee and solely by independent directors with no relationship to Air T.
• The company leases its corporate headquarters in Minneapolis, Minnesota, from a related party, with monthly payments of $375 through September 30, 2025, and month-to-month thereafter.

Stakeholder Impact

• Shareholders: Potential for dilution if future capital raises involve equity offerings. The stock price is subject to fluctuations based on operating results and market conditions. Significant stockholders, including Air T Inc. and its affiliates, may exert a degree of control over corporate matters.
• Employees: The company regards its relationship with employees as favorable, focusing on identifying, recruiting, retaining, incenting, and integrating its workforce, with an emphasis on training and workplace safety.
• Customers: Well-established relationships with prominent U.S. mass-market retailers. However, high customer concentration means a significant reduction in purchases by a few key customers could materially impact revenue. Customers may also face increased product costs due to tariffs and rising bulb prices.
• Suppliers: The company has long-standing relationships with its tulip bulb suppliers, primarily from the Netherlands and the Southern Hemisphere. Dependence on these suppliers and market conditions for bulbs is a key factor.
• Creditors: Obligations under the Amended Credit Agreement are secured by Tulp 24.1's assets, with Lendway providing an unsecured guaranty. Compliance with financial covenants is critical, and a waiver was granted for a breach in Q1 2025, indicating ongoing monitoring and potential for further amendments.

Next Steps

• File quarterly reports based on the new fiscal year, beginning with the first fiscal quarter ending September 30, 2025.
• Hold the 2025 Annual Meeting of stockholders on November 19, 2025.
• Continue discussions with the lender to amend the Amended Credit Agreement to increase revolving credit facility borrowing capacity, include Netherlands inventory in the borrowing base, and temporarily adjust covenant ratios.
• Secure financing for approximately $15 million in tulip bulb purchases due between September and December 2025.

Key Dates

Recommendation

While Lendway's financial performance for the six months ended June 30, 2025, shows a strong return to profitability and significant revenue growth from its focused agricultural business, Bloomia, several factors warrant a 'Hold' recommendation. The company faces immediate liquidity challenges, evidenced by a substantial decrease in working capital and cash, and the explicit need to secure approximately $15 million in financing for upcoming bulb purchases. High customer concentration, exposure to volatile input costs (tulip bulbs, tariffs, exchange rates), and the potential for future equity dilution or restrictive debt covenants introduce considerable uncertainty. Investors should observe how the company successfully addresses its financing needs and manages these inherent risks before making further investment decisions.

Keywords

Lendway, Bloomia, tulips, specialty agriculture, SEC filing, 10-KT, financial results, profitability, revenue growth, horticulture, cut flowers, hydroponics, supply chain, capital raise, debt financing, risk factors, corporate governance, LDWY, Nasdaq