DEF: Lendway Seeks Shareholder Approval for Capital Boost

Lendway, Inc. announces its Annual Meeting of Stockholders on November 19, 2025, seeking approval for director elections, executive compensation, auditor ratification, and a significant increase in authorized common stock.

Summary

• The Annual Meeting of Stockholders is scheduled for November 19, 2025, to vote on four key proposals.
• Proposals include the election of six directors, an advisory vote on executive compensation, ratification of Boulay PLLP as the independent auditor for the fiscal year ending June 30, 2026, and an amendment to increase authorized common stock.
• The company recently transitioned to a fiscal year ending June 30, with the current Annual Report being a Transition Report on Form 10-KT.
• As of September 24, 2025, there were 1,769,599 shares of common stock outstanding and entitled to vote.
• Net income has fluctuated, reporting a loss of $6,677,000 in FYE 2024 and a net income of $1,969,000 for the six-month Transition Period Ended June 30, 2025, down from $10,046,000 in 2022.
• Total Stockholder Return (TSR) based on a $100 investment on December 31, 2021, was $21.79 for the Transition Period Ended June 30, 2025, and $21.01 for FYE 2024, a significant decline from $33.84 in 2022.
• The Board of Directors unanimously recommends voting FOR all proposals.

Sentiment

Score: 4

Explanation: The company is undergoing a significant strategic transition, marked by a new fiscal year and the Bloomia acquisition. While governance structures appear sound with an independent board and new clawback policy, financial performance metrics (net income and TSR) have been weak, and the company is heavily reliant on related-party debt at high interest rates. The proposed increase in authorized shares, while providing flexibility, also signals potential significant dilution for existing shareholders. This indicates a challenging period with substantial capital needs and associated risks.

Positives

• The Board of Directors is majority independent, enhancing corporate governance.
• A new clawback policy for executive compensation was adopted on November 7, 2023, aligning with SEC and Nasdaq rules, reinforcing accountability.
• Executive compensation received substantial stockholder support in 2024, with approximately 95.7% approval for the Say on Pay Proposal.
• The company's Audit Committee is composed of independent directors, with Ms. Herfurth qualified as an audit committee financial expert.
• The increase in authorized common stock provides flexibility for future corporate needs, including funding potential business opportunities and strategic growth.

Negatives

• Net income has shown a declining trend, from $10,046,000 in 2022 to a loss of $6,677,000 in 2024, recovering slightly to $1,969,000 for the six-month transition period in 2025.
• Total Stockholder Return (TSR) has significantly decreased, with a $100 investment on December 31, 2021, valued at $33.84 in 2022, dropping to $19.97 in 2023, $21.01 in 2024, and $21.79 in the 2025 transition period.
• The company has engaged in multiple related-party debt transactions with Air T, Inc., AO Partners I, L.P., and Gary S. Kohler, including a $3,750,000 Delayed Draw Term Note at 8.0% interest and $4,000,000 in 2025 Notes at 13.5% interest.
• The Bridge Loan for the Bloomia acquisition, partially funded by an executive officer (Mr. Jansen), carries an initial 8% interest rate, increasing by 2% annually for four anniversaries.
• The proposed increase in authorized common stock from 5,714,285 to 10,000,000 shares could lead to significant dilution of earnings per share, book value per share, and voting rights for existing stockholders.
• Four directors (Ms. Herfurth, Mr. Johnson, Mr. Kelly, Mr. Swenson) had delinquent Section 16(a) reports related to common stock equivalents.

Risks

• Dilution: Future issuance of the additional 4,285,715 authorized common shares could dilute existing stockholders' earnings per share, book value per share, and voting rights.
• Anti-Takeover Effects: The increased authorized shares, combined with existing corporate governance provisions (limitations on calling special meetings, absence of cumulative voting), could make it more difficult for external parties to gain control or remove management.
• Related-Party Dependence: Significant reliance on related parties (Air T, Inc., AO Partners I, L.P., Gary S. Kohler, and Mr. Jansen) for financing, which may introduce conflicts of interest or less favorable terms compared to arm's-length transactions.
• High Interest Debt: The 2025 Notes carry a high fixed interest rate of 13.5% per year, increasing the company's debt servicing costs.
• Indebtedness Restrictions: The 2025 Notes restrict the company's ability to obtain additional indebtedness, potentially limiting future financing options without lender waivers.
• Operational Risks of Bloomia: The substantial debt taken to fund the Bloomia acquisition implies significant operational and integration risks associated with this new business line.

Future Outlook

The company seeks to maintain flexibility to issue shares for future corporate needs, including funding potential business opportunities, pursuing strategic objectives to enhance stockholder value, raising capital through equity offerings, entering strategic relationships, and providing equity-based compensation. The Board believes the remaining authorized common stock is insufficient for these goals.

Management Comments

• The Board believes the current leadership structure strengthens the role of the Board in fulfilling its oversight responsibility and fiduciary duties to the Company’s stockholders while recognizing the day-to-day management direction of the Company by Messrs. Jundt and Philp and other senior management.
• The non-employee directors and the GCN Committee believe that the compensation of our Named Executive Officers is reasonable and appropriate and justified by the performance of the Company in a challenging environment.
• Our Board of Directors believes that the additional shares of authorized common stock are necessary to provide our company with appropriate flexibility to utilize equity for financial purposes that our Board of Directors determines to be in our company’s best interests on a timely basis without the expense and delay of a stockholders meeting.

Industry Context

Lendway, Inc. is transitioning its business focus, as evidenced by the acquisition of Bloomia and the stated need for experience in specialty finance and lending for its board. This shift suggests a move towards higher-growth, potentially higher-risk sectors, requiring significant capital infusion. The reliance on related-party financing, while providing necessary capital, could be a sign of challenges in securing traditional financing or a strategic choice to leverage existing relationships during this transition. The decline in net income and TSR indicates that the company is navigating a challenging period, possibly due to the costs associated with this strategic pivot and integration of new businesses like Bloomia.

Management Changes

Corporate Governance

Related Party Transactions

• Delayed Draw Term Note with Air T, Inc.: Initial agreement on August 15, 2024, for up to $2,500,000 at 8.0% interest, maturing August 15, 2029 (with Air T's right to demand payment after February 15, 2026). Amended on September 27, 2024, to increase total borrowing to $3,500,000, and again on January 15, 2025, to $3,750,000. As of December 31, 2024, $3,500,000 was outstanding with $69,000 of deferred interest expense. Air T, Inc. beneficially owns greater than 10% of common stock and is part of a stockholder group owning approximately 40%. Key executives (Mark R. Jundt, Daniel C. Philp, Nicholas J. Swenson) also hold positions at Air T.
• 2025 Notes with Air T, AO Partners I, L.P., and Gary S. Kohler: Entered into on September 15, 2025, for a total of $4,000,000 at a fixed interest rate of 13.5% per year, maturing June 1, 2027. Proceeds were contributed to subsidiaries to fund Bloomia business operations. Air T, AO Partners I, L.P., and Gary S. Kohler are significant stockholders, and Mr. Swenson is managing member of AO Partners LLC (general partner of AO Partners Fund). Gary S. Kohler is also a director of Air T.
• Bridge Loan for Bloomia Acquisition: Dated February 22, 2024, for $12.1 million, with approximately $400,000 provided by Werner F. Jansen (CEO of Bloomia). Interest accrues at 8% for the first year, increasing by 2% annually for four anniversaries. As of December 31, 2024, $1,331,000 of interest expense was accrued.
• U.S. Subsidiary Ownership (Tulp 24.1, LLC): On February 22, 2024, the Company held an 81.4% ownership interest, and Mr. Jansen held an 18.6% ownership interest. On September 15, 2025, the LLC Agreement was amended to fix membership interest percentages and prioritize repayment of unreturned capital contributions in future distributions. The Company's $4 million contribution was excluded from members' pre-emptive rights.

Stakeholder Impact

• Shareholders: Potential for significant dilution of ownership, voting rights, and earnings per share due to the proposed increase in authorized common stock and future equity raises. The declining TSR indicates negative impact on shareholder value.
• Management/Directors: Executive compensation is tied to performance, and a new clawback policy increases accountability. Directors receive cash retainers and can defer compensation into stock equivalents, aligning interests.
• Creditors (Related Parties): Related parties (Air T, AO Partners, Kohler) are significant creditors, providing substantial capital but at high interest rates, indicating a potentially higher risk profile for the company.
• Employees: Participation in the Employee Stock Purchase Plan and other equity incentive plans provides opportunities for equity ownership. The Bloomia acquisition and associated funding suggest continued operational activity.

Next Steps

• Hold the Annual Meeting of Stockholders on November 19, 2025.
• Elect six directors as nominated by the Board.
• Conduct an advisory vote on executive compensation.
• Ratify the appointment of Boulay PLLP as the independent registered public accounting firm for the fiscal year ending June 30, 2026.
• If approved by stockholders, file a Certificate of Amendment with the Delaware Secretary of State to increase authorized common stock to 10,000,000 shares.
• Continue to fund Bloomia operations and manage existing related-party debt.

Key Dates

Recommendation

While the company is taking steps to improve corporate governance and secure financing for its strategic shift into specialty finance and lending (e.g., Bloomia acquisition), the financial performance metrics (declining net income and TSR) are concerning. The heavy reliance on related-party debt at high interest rates and the significant proposed increase in authorized shares, which could lead to substantial dilution, introduce considerable risk. A 'hold' recommendation is appropriate for existing investors to monitor the execution of the new strategy and the impact of future capital raises, while new investors should exercise caution given the current financial trajectory and dilution risk.

Keywords

Lendway, SEC Filing, Proxy Statement, Annual Meeting, Stockholder Vote, Authorized Shares, Common Stock, Executive Compensation, Corporate Governance, Related Party Transactions, Bloomia, Financial Performance, Dilution, Risk Management, Nasdaq, DEF 14A