8-K: Lendway Secures $14M Financing, Amends Credit Terms

Lendway, Inc. announced a significant financial restructuring, including a $4 million unsecured loan and a temporary increase in its revolving credit facility to $10 million, to bolster its Bloomia business operations.

Summary

• Lendway, Inc. (the Company) amended its Credit Agreement on September 15, 2025, temporarily increasing its revolving facility capacity from $6 million to $10 million until April 30, 2026.
• The amendment also revised senior cash flow leverage ratio covenants, starting at 4.75 to 1.00 on September 30, 2025, and gradually decreasing to 2.25 to 1.00 by December 31, 2028.
• Interest rates for loans under the facility will be based on a term SOFR rate plus an applicable margin ranging from 3.00% to 4.00%, effective September 30, 2025.
• As of September 18, 2025, the Company had an outstanding balance of $6.1 million under the revolving facility.
• The Company entered into $4.0 million in unsecured Promissory Notes on September 15, 2025, with Air T, Inc. ($1,100,156), AO Partners I, L.P. ($1,699,844), and Gary S. Kohler ($1,200,000).
• Proceeds from the notes are intended to fund the operation of the Bloomia business and bear a fixed interest rate of 13.5% per year, maturing on June 1, 2027.
• The Promissory Notes include restrictions on the Company's ability to incur additional indebtedness, subject to waiver by majority lenders.
• An Amended and Restated LLC Agreement for Tulp 24.1, LLC was also entered into, fixing membership interest percentages, prioritizing unreturned capital contributions in distributions, and excluding the Company's expected $4 million contribution from members' pre-emptive rights.
• Lendway is required to make a permanent cash equity contribution of not less than $4,000,000 to Tulp 24.1, LLC by September 30, 2025.

Sentiment

Score: 5

Explanation: The filing presents a mixed financial picture. While the company successfully secured additional funding and increased its credit facility, the high 13.5% interest rate on the $4 million promissory notes and the related-party nature of this debt are significant concerns. The financing addresses immediate operational needs for the Bloomia business but comes with substantial costs and restrictive covenants, indicating a challenging financial environment.

Positives

• Increased liquidity through a temporary $4 million boost in the revolving credit facility, raising it to $10 million until April 30, 2026.
• Secured $4 million in additional funding via unsecured promissory notes, specifically earmarked for the operation of the Bloomia business.
• The definition of eligible inventory for the revolving facility now includes inventory in the Netherlands, expanding the borrowing base.

Negatives

• The $4 million unsecured promissory notes carry a high fixed interest rate of 13.5% per year, which will increase the Company's interest expense.
• The promissory notes restrict the Company's ability to obtain additional indebtedness, potentially limiting future financing flexibility.
• A significant portion of the promissory notes are from related parties (Air T, AO Partners I, L.P., and Gary S. Kohler), raising potential conflict of interest concerns, despite Audit Committee approval.

Risks

• Ability to maintain and integrate the acquired Bloomia business successfully.
• Changes in competition or price pressure resulting from public announcement of the acquisition.
• Changes in demand and customer requirements for products.
• Delays or interruptions in production resulting from hazards, transportation limitations, or other extraordinary events outside the Company's control.
• Risks associated with international operations, including import regulations.
• High interest expense from the 13.5% promissory notes could strain profitability and cash flow.
• Restrictive covenants on additional indebtedness in the promissory notes could limit future financing options.
• Failure to meet the revised senior cash flow leverage ratio covenants could trigger a default under the credit agreement.
• The requirement to make a $4 million permanent cash equity contribution to Tulp 24.1, LLC by September 30, 2025, represents a significant cash outflow.

Future Outlook

The Company expects to use the proceeds from the promissory notes to fund the operation of its Bloomia business. Future borrowing capacity under the amended credit agreement is anticipated. However, the Company cautions that actual results may differ materially due to risks such as the ability to integrate acquired businesses, competitive pressures, changes in demand, production delays, and international operational risks.

Management Comments

• Management expects to use the proceeds from the promissory notes to fund the operation of the Bloomia business.
• The entry into the Promissory Notes was pre-approved by the Audit Committee of our Board of Directors in accordance with our Related Person Transaction Approval Policy.

Industry Context

The financing arrangements are primarily aimed at supporting the Bloomia business, which involves sourcing tulip bulbs and operating greenhouses for hydroponic tulip cultivation and sales in the U.S., South Africa, and Latin America. This indicates a focus on the specialized horticulture and floriculture industry, where capital for operational expansion and supply chain management (e.g., inventory in the Netherlands) is crucial.

Corporate Governance

Related Party Transactions

• Lendway, Inc. entered into $4.0 million in unsecured Promissory Notes with Air T, Inc., AO Partners I, L.P., and Gary S. Kohler.
• Air T, Inc. beneficially owns greater than 10% of Lendway's outstanding common stock and, with AO Partners Fund, is part of a group owning approximately 40% of common stock.
• Mark R. Jundt, Lendway's current director and Co-Chief Executive Officer, serves as General Counsel and Corporate Secretary of Air T, Inc.
• Daniel C. Philp, Lendway's current director and Co-Chief Executive Officer, serves as Senior Vice President of Corporate Development at Air T, Inc.
• Nicholas J. Swenson, Lendway's current director, serves as President and Chief Executive Officer of Air T, Inc. and is a member of the stockholder group.
• AO Partners I, L.P. and Gary S. Kohler each beneficially own greater than 5% of Lendway's outstanding common stock.
• Gary S. Kohler is also a member of the board of directors of Air T, Inc.
• The transaction was pre-approved by the Audit Committee of Lendway's Board of Directors.

Stakeholder Impact

• **Shareholders**: Potential for increased interest expense from high-rate debt could impact profitability. The $4 million equity contribution to a subsidiary could be seen as a commitment to the Bloomia business. Related-party debt raises governance questions, though approved by the Audit Committee.
• **Lenders (Associated Bank, N.A.)**: The revolving facility capacity increase provides more exposure but also potentially more interest income. Revised leverage covenants set clear financial performance targets.
• **Promissory Note Lenders (Air T, AO Partners, Kohler)**: Will receive a high fixed interest rate of 13.5% on their $4 million loan, providing a significant return on investment.
• **Bloomia Business**: The $4 million in promissory notes and the required $4 million equity contribution are specifically for funding its operations, indicating continued strategic support and investment.
• **Management**: Faces the challenge of managing increased debt, adhering to new financial covenants, and successfully integrating and operating the Bloomia business.

Next Steps

• Lendway, Inc. must make a permanent cash equity contribution of not less than $4,000,000 to Tulp 24.1, LLC by September 30, 2025.
• The new interest rate structure for the credit facility, based on Term SOFR plus an applicable margin, will commence on September 30, 2025.
• The revised senior cash flow leverage ratio covenants will become effective starting September 30, 2025, with progressively tighter limits through December 31, 2028.
• The $4.0 million Promissory Notes are scheduled to mature on June 1, 2027.

Key Dates

Recommendation

The company has secured critical funding for its Bloomia business, which is a positive for operational continuity and strategic execution. The temporary increase in the revolving credit facility also provides necessary liquidity. However, the $4 million unsecured promissory notes come with a very high 13.5% fixed interest rate, which will significantly increase interest expenses and could pressure profitability. The related-party nature of this debt, while approved by the Audit Committee, may still be viewed with caution by some investors. The new debt also includes restrictive covenants on future borrowing. Investors should monitor the company's ability to generate sufficient cash flow to service this high-cost debt and meet the progressively tighter leverage ratio covenants, as well as the successful integration and performance of the Bloomia business.

Keywords

Lendway, LDWY, SEC Filing, 8-K, Credit Agreement, Promissory Notes, Revolving Facility, Debt Financing, Bloomia, Tulp 24.1 LLC, Corporate Governance, Related Party Transaction, Financial Restructuring, Capital Raise, Leverage Ratio, SOFR Rate, Unsecured Debt