[Overview and Management Commentary](index=1&type=section&id=Overview%20and%20Management%20Commentary) Lendway reported strong Q1 2025 financial performance driven by a robust spring tulip season and Bloomia's full-quarter contribution, with a fiscal year-end change to June 30 - Strong financial performance in Q1 2025 is attributed to a successful spring tulip season, with expectations for these positive trends to continue due to upcoming holiday sales[3](index=3&type=chunk) - The upcoming quarter will be the first to provide a direct year-over-year comparison of Bloomia's operations under Lendway's ownership, without the distortion of acquisition-related costs and partial quarter results[3](index=3&type=chunk) - The company's board of directors has approved a change in the fiscal year-end from December 31 to June 30, with a six-month transition period ending June 30, 2025[3](index=3&type=chunk) [Quarterly Financial Performance](index=1&type=section&id=Quarterly%20Financial%20Performance) The company achieved a significant financial turnaround in Q1 2025, driven by Bloomia's full contribution and improved margins, shifting to profitability Q1 2025 vs. Q1 2024 Key Financial Highlights | Financial Metric | Q1 2025 (million $) | Q1 2024 (million $) | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $12.4 | $8.0 | +55.0% | | Gross Profit | $3.9 | $1.7 | +129.4% | | Gross Margin | 31.3% | 21.7% | +9.6 p.p. | | Operating Income (Loss) | $1.4 | ($1.6) | Turnaround to Profit | | Net Income (Loss) Attributable to Lendway | $0.4 | ($1.2) | Turnaround to Profit | | EPS (basic and diluted) | $0.25 | ($0.67) | Turnaround to Profit | | Adjusted EBITDA | $2.6 | $1.6 | +62.5% | [Net Revenue](index=1&type=section&id=Net%20Revenue) Net revenue increased to $12.4 million in Q1 2025, primarily due to a full quarter of Bloomia's revenue contribution Net Revenue Comparison | Period | Net Revenue (million $) | | :--- | :--- | | Q1 2025 | $12.4 | | Q1 2024 | $8.0 | - All revenue was generated by Bloomia. The year-over-year increase reflects three full months of revenue in 2025 compared to about six weeks in 2024[4](index=4&type=chunk) [Gross Profit](index=2&type=section&id=Gross%20profit) Gross profit rose significantly to $3.9 million (31.3% margin) in Q1 2025, driven by higher sales efficiency and no prior-year amortization costs Gross Profit and Margin Comparison | Period | Gross Profit (million $) | Gross Margin | | :--- | :--- | :--- | | Q1 2025 | $3.9 | 31.3% | | Q1 2024 | $1.7 | 21.7% | - The 2024 period included **$1.4 million** of amortization costs from an inventory write-up to fair value related to the Bloomia acquisition, which negatively impacted the gross margin in that quarter[6](index=6&type=chunk) [Operating Income (Loss)](index=2&type=section&id=Operating%20income%20%28loss%29) Operating income reached $1.4 million in Q1 2025, a turnaround from a $1.6 million loss, due to Bloomia's full contribution and no prior-year acquisition costs Operating Income (Loss) Comparison | Period | Operating Income (Loss) (million $) | | :--- | :--- | | Q1 2025 | $1.4 | | Q1 2024 | ($1.6) | [Net Income (Loss) Attributable to Lendway](index=2&type=section&id=Net%20income%20%28loss%29%20attributable%20to%20Lendway) Net income attributable to Lendway was $0.4 million ($0.25 per share) in Q1 2025, a recovery from a $1.2 million loss, driven by Bloomia and reduced transaction costs Net Income (Loss) and EPS Comparison | Metric | Q1 2025 (million $) | Q1 2024 (million $) | | :--- | :--- | :--- | | Net Income (Loss) Attributable to Lendway | $0.4 | ($1.2) | | EPS (basic and diluted) | $0.25 | ($0.67) | [Adjusted EBITDA](index=2&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA increased to $2.6 million in Q1 2025, primarily due to a full quarter of Bloomia's operating income Adjusted EBITDA Comparison | Period | Adjusted EBITDA (million $) | | :--- | :--- | | Q1 2025 | $2.6 | | Q1 2024 | $1.6 | - Bloomia generated **$3.0 million** of adjusted EBITDA in Q1 2025, compared to **$2.2 million** from its acquisition date through March 31, 2024[11](index=11&type=chunk) [Balance Sheet Summary](index=2&type=section&id=Balance%20Sheet%20Summary) As of March 31, 2025, Lendway reported $1.3 million in cash, $6.3 million in working capital, and reduced total debt to $40.6 million Selected Balance Sheet Data | Account | March 31, 2025 (million $) | December 31, 2024 (million $) | | :--- | :--- | :--- | | Cash and cash equivalents | $1.3 | $1.8 | | Working capital | $6.3 | $11.0 | | Total debt | $40.6 | $42.1 | | Total assets | $100.5 | $100.0 | | Stockholders' equity | $12.6 | $11.9 | - The decrease in cash and total debt during the quarter was primarily due to debt repayments[12](index=12&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the unaudited Condensed Consolidated Statements of Operations and selected balance sheet data for the specified periods [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The consolidated statement of operations shows a shift to net income in Q1 2025, with $12.4 million net revenue and $0.4 million net income, contrasting with Q1 2024's loss Condensed Consolidated Statement of Operations (in thousands) | Line Item | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Revenue, net | $12,443 | $8,033 | | Gross profit | $3,889 | $1,744 | | Operating income (loss) | $1,432 | ($1,644) | | Net income (loss) from continuing operations | $617 | ($1,486) | | Net income (loss) attributable to Lendway, Inc. | $449 | ($1,163) | | Basic and diluted earnings per share | $0.25 | ($0.67) | [Selected Balance Sheet Data](index=5&type=section&id=Selected%20Balance%20Sheet%20Data) The balance sheet as of March 31, 2025, shows total assets of $100.5 million, with reduced cash, working capital, and total debt compared to year-end 2024 Balance Sheet Data Summary (in thousands) | Line Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,308 | $1,759 | | Working capital | $6,274 | $11,026 | | Total assets | $100,514 | $99,985 | | Total debt | $40,562 | $42,090 | [Non-GAAP Reconciliations](index=5&type=section&id=Non-GAAP%20Reconciliations) Lendway provides non-GAAP reconciliations for Adjusted EBITDA and Bloomia Adjusted EBITDA, offering a clearer view of core operating performance by excluding non-recurring items - The company uses non-GAAP measures like Adjusted EBITDA to eliminate the effects of non-recurring transactions and provide supplemental information about core operating performance[19](index=19&type=chunk)[20](index=20&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=5&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) Q1 2025 Net Income of $0.6 million is reconciled to Adjusted EBITDA of $2.6 million, reflecting adjustments for interest, taxes, D&A, and non-recurring costs Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net income (loss) from continuing operations | $617 | $(1,486) | | Interest expense, net | $970 | $225 | | Income tax expense (benefit) | $156 | $(347) | | Depreciation and amortization | $835 | $300 | | **EBITDA** | **$2,578** | **$(1,308)** | | Acquisition and integration-related costs | $24 | $1,542 | | Non-cash step-up inventory write-off | $— | $1,360 | | **Adjusted EBITDA** | **$2,641** | **$1,594** | [Reconciliation of Bloomia Adjusted EBITDA](index=6&type=section&id=Reconciliation%20of%20Bloomia%20Adjusted%20EBITDA) This reconciliation shows Bloomia's Q1 2025 Adjusted EBITDA of $3.0 million, contributing significantly to the total company's $2.6 million Adjusted EBITDA after corporate overhead Bloomia vs. Lendway Overhead Adjusted EBITDA for Q1 2025 (in thousands) | Segment | Adjusted EBITDA (in thousands) | | :--- | :--- | | Bloomia | $2,981 | | Lendway Overhead | ($340) | | **Total Company** | **$2,641** |

Financial Performance - Net revenue for Q4 2024 was $6.2 million, with all revenue coming from the Bloomia acquisition[6]. - Gross loss in Q4 2024 was $0.6 million, representing 9.4% of sales[5]. - Operating loss for Q4 2024 was $3.9 million, an increase from a loss of $0.5 million in Q4 2023[10]. - Net loss attributable to Lendway for Q4 2024 was $2.9 million, or a loss of $1.66 per share, compared to a loss of $0.3 million, or $0.19 per share in Q4 2023[13]. - Adjusted EBITDA for Q4 2024 was a loss of $2.7 million, compared to a loss of $0.6 million in Q4 2023[16]. - Full year 2024 net revenue was $37.8 million, with a gross profit of $6.5 million, or 17.2% of sales[7][9]. - Operating loss for the full year 2024 was $6.7 million, compared to a loss of $3.5 million in 2023[10]. - Net loss from continuing operations for 2024 was $6.9 million, up from a loss of $3.0 million in 2023[12]. - Revenue for Q4 2024 was $6,192,000, compared to $0 in Q4 2023, indicating a significant increase[21]. - Gross loss for Q4 2024 was $(582,000), while the gross profit for the year ended December 31, 2024 was $6,509,000[21]. - Operating loss for Q4 2024 was $(3,888,000), compared to $(536,000) in Q4 2023, reflecting increased operational challenges[21]. - Net loss from continuing operations for the year ended December 31, 2024 was $(6,901,000), compared to $(3,021,000) in 2023[26]. - Adjusted EBITDA for the year ended December 31, 2024 was $1,013,000, a recovery from $(3,512,000) in 2023[26]. Cash and Liquidity - Cash and cash equivalents as of December 31, 2024, were $1.8 million, down from $16.1 million a year prior[18]. - Cash and cash equivalents decreased to $1,759,000 in 2024 from $16,077,000 in 2023, indicating liquidity challenges[23]. Assets and Liabilities - Total assets as of December 31, 2024 were $99,985,000, a significant increase from $16,673,000 in 2023[23]. - Total debt as of December 31, 2024 was $42,090,000, with total liabilities at $88,091,000[23]. Acquisition Impact - Bloomia generated $3.7 million of adjusted EBITDA since its acquisition, with stronger sales expected in the first half of the year[17]. - The company reported a net loss attributable to Lendway, Inc. of $(2,940,000) for Q4 2024, compared to $(324,000) in Q4 2023[21]. - The company is focusing on acquisition-related costs and integration, with $2,877,000 in costs reported for the year ended December 31, 2024[26].

PART I. [Business and Risk Factors](index=4&type=section&id=PART%20I.) This section details Lendway, Inc.'s strategic shift to a specialty agricultural company, focusing on its Bloomia acquisition, and outlines various competitive, economic, and operational risks [Business Overview](index=4&type=section&id=Item%201.%20Business) Lendway, Inc. transformed into a specialty agricultural company, acquiring Bloomia, a leading U.S. fresh-cut tulip producer, and divesting its legacy businesses to focus on the agricultural sector - Lendway, Inc. changed its name from "Insignia Systems, Inc." effective August 4, 2023, and its common stock now trades under the symbol "LDWY" on The Nasdaq Stock Market LLC[10](index=10&type=chunk) - The Company has evolved into a specialty agricultural ("ag") company, focusing on making and managing ag investments in the U.S. and internationally[11](index=11&type=chunk) - On February 22, 2024, Lendway acquired Bloomia B.V., a significant producer of fresh cut tulips in the U.S., nurturing over **75 million stems annually**. The acquisition was for **$47.5 million**, financed with company cash, a new credit facility, promissory notes, and an equity interest[12](index=12&type=chunk)[16](index=16&type=chunk) - The Company sold its legacy In-Store Marketing Business for **$3,500,000** and discontinued its non-bank lending business to focus solely on the ag business[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk) - Bloomia operates from three strategically positioned locations: the United States, the Netherlands, and South Africa, and holds a **30% interest** in a greenhouse business in Chile[18](index=18&type=chunk) - Bloomia nurtured over **95 million tulip stems in 2024**, a **25% increase** over the prior year, sourcing approximately **80% of bulbs from the Netherlands** and **20% from the Southern Hemisphere**[18](index=18&type=chunk)[28](index=28&type=chunk) - Bloomia's business model of shipping bulbs for local production significantly lowers its carbon footprint compared to importers who air ship stems[34](index=34&type=chunk) Bloomia's U.S. Revenue Concentration (FY2024) | Customer Type | % of U.S. Revenue | | :-------------- | :------------------ | | Customer 1 | 34% | | Customer 2 | 20% | | Customer 3 | 11% | U.S. Cut Flower Market (2024 Estimates) | Metric | Value | | :---------------------- | :---------------- | | Total Market Size | ~$8 billion | | Imported Share | ~80% | | U.S. Produced Share | ~20% | | Tulip Stems Share | ~15% of total | | Bloomia's Tulip Market Share (U.S. grown) | ~20% | [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including intense competition, high customer concentration, economic volatility, dependence on Bloomia's success, operational complexities, and cybersecurity threats - Bloomia's revenue is highly concentrated, with **three customers accounting for approximately 65% of its revenue** in calendar 2024, posing a significant risk if one or more reduce purchases[44](index=44&type=chunk) - The majority of the Company's debt carries floating interest rates (Term SOFR + 3.0%), making it vulnerable to interest rate fluctuations[46](index=46&type=chunk) - The Company's cash flow and ability to service debt are highly dependent on Bloomia's performance due to substantial capital committed to its acquisition and growth[49](index=49&type=chunk) - The Credit Agreement restricts Tulp 24.1's ability to make distributions to Lendway, potentially constraining cash available for corporate expenses and future acquisitions[57](index=57&type=chunk) - The Company's success is highly dependent on Bloomia's CEO, Werner Jansen, and the loss of key management could adversely affect business strategy and financial results[58](index=58&type=chunk) - Bloomia's international operations (South Africa, Chile, Netherlands) expose the Company to risks such as foreign currency fluctuations, adverse tax consequences, and compliance with diverse foreign laws[62](index=62&type=chunk)[63](index=63&type=chunk) - The agricultural business is subject to inherent risks like insects, plant diseases, and quality issues; in June 2023, Bloomia wrote off **$900,000 of tulip bulb inventory** due to quality problems[68](index=68&type=chunk)[70](index=70&type=chunk) - Significant stockholders, particularly Air T Inc. and its affiliates, collectively own approximately **40% of outstanding common shares**, potentially exerting control over matters requiring stockholder approval[82](index=82&type=chunk)[143](index=143&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) As a smaller reporting company, Lendway, Inc. is not required to provide disclosure regarding unresolved staff comments [Cybersecurity](index=17&type=section&id=Item%201C.%20Cybersecurity) Lendway manages cybersecurity through outsourced IT services, conducting annual vulnerability scans and employee training, with Board oversight, and identified no material threats as of December 31, 2024 - Lendway's cyber environment primarily consists of outsourced IT operations, with providers implementing a cybersecurity framework including multiple products[88](index=88&type=chunk) - Annual internal and external vulnerability scans are completed, and regular phishing exercises and employee awareness training are conducted by the outsourced provider[89](index=89&type=chunk) - The full Board of Directors and the Audit Committee provide oversight of the risk management program, including cybersecurity and monitoring third-party IT providers[91](index=91&type=chunk) - As of December 31, 2024, no cybersecurity threats that materially affected or are reasonably likely to materially affect the Company were identified[92](index=92&type=chunk) [Properties](index=17&type=section&id=Item%202.%20Properties) Lendway leases its corporate headquarters in Minneapolis and its primary greenhouse facility in King George, Virginia, along with international office and greenhouse spaces in the Netherlands and South Africa - The Company leases **1,700 square feet** for its corporate headquarters in Minneapolis, Minnesota through September 30, 2025[94](index=94&type=chunk) - Fresh Tulips USA, LLC leases a **360,000 square foot greenhouse facility** in King George, Virginia through 2028[94](index=94&type=chunk) - Bloomia leases a **107,000 square foot office and warehouse space** in the Netherlands through 2027 and operates a **21,000 square foot greenhouse** in South Africa through 2028[94](index=94&type=chunk) [Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) Lendway's legal proceedings are detailed in Note 14 to the financial statements, with no material claims identified as of December 31, 2024, that would adversely affect its financial position - A description of legal proceedings is contained in Note 14 to the consolidated financial statements[95](index=95&type=chunk) - 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[278](index=278&type=chunk) [Mine Safety Disclosures](index=18&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Lendway, Inc. PART II. [Financial Information](index=19&type=section&id=PART%20II.) This section provides an overview of Lendway's financial performance, market information, management's discussion and analysis, and the consolidated financial statements [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Lendway's common stock trades on Nasdaq under LDWY, with approximately 122 record holders, no regular dividends, and an active stock repurchase authorization - The Company's common stock is listed on the Nasdaq Capital Market under the symbol **LDWY**[99](index=99&type=chunk) - As of March 21, 2025, there were approximately **122 holders of record** for the common stock[100](index=100&type=chunk) - The Company has not historically paid dividends, other than two one-time special dividends in 2011 and 2016[101](index=101&type=chunk) - A stock repurchase authorization for up to **400,000 shares** was approved on August 28, 2023; as of December 31, 2024, **315,792 shares remained available** for repurchase[102](index=102&type=chunk) [Item 6. [Reserved]](index=19&type=section&id=Item%206.%20[Reserved]) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Lendway's financial performance in 2024 reflects its transformation into an agricultural company, with significant Bloomia revenue, a net loss from acquisition costs and increased expenses, and reduced liquidity - The Company acquired majority ownership in Bloomia on February 22, 2024, for a total consideration of **$53,360,000**, funded by cash, seller bridge loans, and equity issued as noncontrolling interest[107](index=107&type=chunk)[132](index=132&type=chunk) - The Company sold its In-Store Marketing Business in August 2023 for **$3,500,000** and discontinued its non-bank lending business to focus solely on the ag business[109](index=109&type=chunk)[110](index=110&type=chunk) Consolidated Statements of Operations Highlights (Year Ended December 31) | Metric | 2024 ($000) | 2023 ($000) | Change ($000) | Change (%) | | :----------------------------------------- | :---------- | :---------- | :------------ | :--------- | | Revenue, net | 37,773 | — | 37,773 | — | | Cost of goods sold | 31,264 | — | 31,264 | — | | Gross profit | 6,509 | — | 6,509 | — | | Gross profit as a percent of revenue | 17.2% | NA | | | | Sales, general and administrative expenses | 13,226 | 3,519 | 9,707 | 276 | | Operating loss | (6,717) | (3,519) | (3,198) | 91 | | Interest expense (income), net | 2,969 | (518) | 3,487 | NA | | Net loss from continuing operations | (6,901) | (3,021) | (3,880) | 128 | | Income from discontinued operations, net of tax | 224 | 5,435 | (5,211) | (96) | | Net (loss) income attributable to Lendway, Inc. | (5,743) | 2,414 | (8,157) | (338) | - Sales, general and administrative expenses increased by **$9,707,000 (276%)** in 2024, primarily due to the Bloomia acquisition, including **$1,542,000 in acquisition costs** and **$1,335,000 in integration-related costs**[117](index=117&type=chunk) - Interest expense, net, was **$2,969,000 in 2024**, compared to interest income of **$518,000 in 2023**, due to new debt incurred for the Bloomia acquisition[118](index=118&type=chunk) EBITDA Reconciliation (Year Ended December 31) | Metric | 2024 ($000) | 2023 ($000) | | :----------------------------------- | :---------- | :---------- | | Net loss from continuing operations | (6,901) | (3,021) | | Interest expense (income), net | 2,969 | (518) | | Income tax (benefit) expense | (2,329) | 20 | | Depreciation and amortization | 2,641 | 7 | | **EBITDA** | **(3,620)** | **(3,512)** | - Working capital decreased from **$15,525,000 at December 31, 2023, to $11,026,000 at December 31, 2024**. Cash and cash equivalents decreased by **$14,318,000 to $1,759,000**[128](index=128&type=chunk) - Net cash used in operating activities was **$4,120,000 in 2024**, primarily due to **$12,200,000 used to purchase tulip bulbs**[129](index=129&type=chunk) - Net cash used in investing activities was **$35,148,000 in 2024**, mainly for the Bloomia acquisition[130](index=130&type=chunk) - Net cash provided by financing activities was **$24,882,000 in 2024**, primarily from the Credit Agreement for the Bloomia acquisition, including an **$18,000,000 term loan** and a **$6,000,000 revolving credit facility** (temporarily increased to **$8,000,000**)[131](index=131&type=chunk)[133](index=133&type=chunk) - The Company also entered into a related party unsecured Delayed Draw Term Note with Air T Inc. for up to **$3,500,000** (increased to **$3,750,000 in January 2025**) to fund operations[141](index=141&type=chunk)[142](index=142&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Lendway, Inc. is not required to provide quantitative and qualitative disclosures about market risk [Financial Statements and Supplementary Data](index=30&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Lendway's audited consolidated financial statements for 2024 and 2023, reflecting the Bloomia acquisition and discontinued operations, along with key accounting policies and detailed financial notes - The consolidated financial statements include all wholly and majority-owned subsidiaries, with Bloomia's operations included since its acquisition date of February 22, 2024[191](index=191&type=chunk) - The In-Store Marketing Business operations are presented as discontinued operations for all periods presented, following its sale on August 3, 2023[194](index=194&type=chunk) Consolidated Balance Sheet Highlights (As of December 31) | Metric | 2024 ($000) | 2023 ($000) | | :--------------------------- | :---------- | :---------- | | Total current assets | 18,838 | 16,621 | | Total assets | 99,985 | 16,673 | | Total current liabilities | 7,812 | 1,096 | | Total Long-term liabilities | 80,279 | 45 | | Total Stockholders' equity | 11,894 | 15,532 | Consolidated Statements of Cash Flows Highlights (Year Ended December 31) | Metric | 2024 ($000) | 2023 ($000) | | :---------------------------------------------- | :---------- | :---------- | | Net cash used in operating activities | (4,052) | 518 | | Net cash (used in) provided by investing activities | (35,148) | 1,508 | | Net cash provided by (used in) financing activities | 24,882 | (473) | | Net (decrease) increase in cash and cash equivalents | (14,318) | 1,553 | | Cash and cash equivalents, end of period | 1,759 | 16,077 | - The preliminary allocation of the Bloomia acquisition purchase price of **$53,360,000** included **$10,888,000 in goodwill** and **$26,870,000 in intangible assets** (trade name and customer relationships)[234](index=234&type=chunk) - For the year ended December 31, 2024, Bloomia contributed **$37,773,000 in revenue** and a net loss before taxes of approximately **$5,022,000** to the consolidated statements[235](index=235&type=chunk) - Total long-term debt, net, increased significantly to **$36,608,000 at December 31, 2024**, from zero in 2023, primarily due to the Credit Agreement and seller notes for the Bloomia acquisition[181](index=181&type=chunk)[248](index=248&type=chunk) - The Company recorded an income tax benefit of **$2,329,000 in 2024**, with an effective tax rate of **25.2%**, compared to an expense of **$20,000 in 2023**[119](index=119&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) [Report of Independent Registered Public Accounting Firm](index=31&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Boulay PLLP issued an unqualified opinion on Lendway's 2024 and 2023 consolidated financial statements, identifying the valuation of acquired intangible and long-lived assets as a critical audit matter - Boulay PLLP audited the consolidated financial statements for Lendway, Inc. for the years ended December 31, 2024 and 2023, issuing an unqualified opinion that the statements present fairly, in all material respects, the financial position and results of operations in conformity with GAAP[171](index=171&type=chunk)[172](index=172&type=chunk) - A critical audit matter identified was the valuation of acquired intangible and certain long-lived assets in the Bloomia acquisition, due to significant judgment required in determining estimated fair values[177](index=177&type=chunk) [Consolidated Balance Sheets](index=33&type=section&id=Consolidated%20Balance%20Sheets) This section presents Lendway's consolidated balance sheets, detailing assets, liabilities, and equity as of December 31, 2024, and 2023, reflecting the impact of the Bloomia acquisition Consolidated Balance Sheet (As of December 31) | Assets/Liabilities/Equity | 2024 ($000) | 2023 ($000) | | :------------------------ | :---------- | :---------- | | Cash and cash equivalents | 1,759 | 16,077 | | Inventories | 13,370 | — | | Property and equipment, net | 11,316 | 35 | | Goodwill | 10,705 | — | | Intangible assets, net | 25,568 | — | | Operating lease right-of-use assets | 32,942 | 7 | | Total assets | 99,985 | 16,673 | | Accounts payable | 3,019 | 32 | | Long-term debt, net | 36,608 | — | | Related party note payable | 3,569 | — | | Deferred tax liabilities, net | 7,642 | — | | Total Long-term liabilities | 80,279 | 45 | | Total Stockholders' equity | 11,894 | 15,532 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=34&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section provides Lendway's consolidated statements of operations and comprehensive income (loss) for 2024 and 2023, highlighting revenue, expenses, and net income (loss) from continuing and discontinued operations Consolidated Statements of Operations and Comprehensive Income (Loss) (Year Ended December 31) | Metric | 2024 ($000) | 2023 ($000) | | :----------------------------------------- | :---------- | :---------- | | Revenue, net | 37,773 | — | | Cost of goods sold | 31,264 | — | | Gross profit | 6,509 | — | | Sales, general and administrative expenses | 13,226 | 3,519 | | Operating loss | (6,717) | (3,519) | | Interest expense (income), net | 2,969 | (518) | | Net loss from continuing operations | (6,901) | (3,021) | | Income from discontinued operations, net of tax | 224 | 2,474 | | Gain from sale of discontinued operations, net of tax | — | 2,961 | | Net (loss) income including noncontrolling interest | (6,677) | 2,414 | | Net (loss) income attributable to Lendway, Inc. | (5,743) | 2,414 | | Basic and diluted earnings per share | (3.24) | 1.36 | [Consolidated Statements of Stockholders' Equity](index=35&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in Lendway's stockholders' equity for 2024 and 2023, including the impact of noncontrolling interests, stock-based compensation, and net income (loss) Consolidated Statements of Stockholders' Equity (Year Ended December 31) | Metric | 2024 ($000) | 2023 ($000) | | :----------------------------------------- | :---------- | :---------- | | Balance at December 31, 2023 | 15,532 | 13,401 | | Issuance of noncontrolling interests in acquisition | 2,990 | — | | Value of stock based compensation | 60 | 44 | | Net loss | (6,677) | 2,414 | | Other comprehensive loss | (11) | — | | Balance at December 31, 2024 | 11,894 | 15,532 | [Consolidated Statements of Cash Flows](index=36&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents Lendway's consolidated statements of cash flows for 2024 and 2023, categorizing cash movements from operating, investing, and financing activities Consolidated Statements of Cash Flows (Year Ended December 31) | Activity | 2024 ($000) | 2023 ($000) | | :------------------------------------------------ | :---------- | :---------- | | Net cash used in operating activities of continuing operations | (4,120) | (2,905) | | Net cash provided by operating activities of discontinued operations | 68 | 3,423 | | Net cash (used in) provided by operating activities | (4,052) | 518 | | Net cash (used in) provided by investing activities of continuing operations | (35,148) | 1,532 | | Net cash used in investing activities of discontinued operations | — | (24) | | Net cash (used in) provided by investing activities | (35,148) | 1,508 | | Net cash provided by (used in) financing activities | 24,882 | (473) | | Net (decrease) increase in cash and cash equivalents | (14,318) | 1,553 | | Cash and cash equivalents, end of period | 1,759 | 16,077 | [Notes to Consolidated Financial Statements](index=37&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to Lendway's consolidated financial statements, covering significant accounting policies, the Bloomia acquisition, debt, and other financial disclosures - The Company's Board of Directors approved a change in the fiscal year end from December 31 to June 30, effective July 1, 2025, requiring a transition report for the six-month period ending June 30, 2025[8](index=8&type=chunk) - The Company adopted ASU 2023-07 (Segment Reporting) as of January 1, 2024, determining it has one reporting segment focused on tulips, with over **95% of sales in the U.S.**[197](index=197&type=chunk) - The total consideration for the Bloomia acquisition was **$53,360,000**, comprising **$34,919,000 cash**, **$15,451,000 seller bridge loans**, and **$2,990,000 equity issued as noncontrolling interest (18.6% ownership)**[232](index=232&type=chunk)[234](index=234&type=chunk) - Goodwill recognized from the Bloomia acquisition was **$10,888,000**, primarily attributable to growth potential and not deductible for tax purposes[234](index=234&type=chunk) - Other intangible assets from the Bloomia acquisition include a tradename (**$8,570,000, indefinite life**) and customer relationships (**$18,300,000, 12-year useful life**)[247](index=247&type=chunk) - The Company's long-term debt, net, totaled **$36,608,000 at December 31, 2024**, including an **$18,000,000 term loan**, **$7,961,000 revolving credit facility**, and **$12,750,000 in seller notes**[248](index=248&type=chunk) - A related party note payable with Air T Inc. (a significant stockholder) for up to **$3,500,000** (later increased to **$3,750,000**) was outstanding at December 31, 2024, bearing **8.0% fixed interest**[264](index=264&type=chunk)[265](index=265&type=chunk) - The Company had a Federal pre-tax net operating loss (NOL) carryforward of approximately **$8,110,000** and state NOLs of **$7,185,000** as of December 31, 2024[273](index=273&type=chunk) - A purchase obligation exists to buy **25% of a third-party's annual tulip bulb production through 2028** for **$1,650,000 annually**, totaling **$8,000,000**[279](index=279&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=56&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) Lendway dismissed Baker Tilly US, LLP and appointed Boulay PLLP as its independent auditor on November 20, 2023, with no disagreements or reportable events noted - On November 20, 2023, Baker Tilly US, LLP was dismissed as the Company's independent registered public accounting firm[282](index=282&type=chunk) - Boulay PLLP was appointed as the new independent registered public accounting firm to audit the consolidated financial statements for the fiscal year ending December 31, 2023[282](index=282&type=chunk) - There were no disagreements with Baker Tilly on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, and no 'reportable event' occurred[283](index=283&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Lendway's management concluded its disclosure controls and internal control over financial reporting were effective as of December 31, 2024, excluding the newly acquired Bloomia business - The Company's co-principal executive officers and principal accounting and finance officer concluded that disclosure controls and procedures were effective as of December 31, 2024[285](index=285&type=chunk) - Management believes its internal control over financial reporting was effective as of December 31, 2024, based on the 2013 COSO framework[286](index=286&type=chunk) - The acquired Bloomia business was excluded from management's assessment of internal control over financial reporting for the first year post-acquisition, as permitted by SEC guidelines[287](index=287&type=chunk) - The Bloomia acquisition represents a material change in internal control, leading to the adoption of new controls related to impairment of long-lived assets and determination of weighted-average interest rates[289](index=289&type=chunk) [Other Information](index=57&type=section&id=Item%209B.%20Other%20Information) No director or officer of Lendway, Inc. adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2024 - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2024[290](index=290&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=57&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Lendway, Inc. PART III. [Directors, Executive Officers, and Compensation](index=58&type=section&id=PART%20III.) This section outlines Lendway's executive leadership, Board of Directors, corporate governance practices, and details executive and director compensation for the fiscal year [Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Lendway's leadership includes Co-CEOs Mark R. Jundt and Daniel C. Philp, CFO Elizabeth E. McShane, and Bloomia CEO Werner F. Jansen, with a majority-independent Board providing governance oversight Executive Officers as of Form 10-K Filing Date | Name | Age | Position | | :---------------- | :-- | :------------------------------------- | | Mark R. Jundt | 44 | Co-Chief Executive Officer | | Daniel C. Philp | 40 | Co-Chief Executive Officer | | Elizabeth E. McShane | 47 | Chief Financial Officer, Treasurer and Secretary | | Werner F. Jansen | 34 | Chief Executive Officer of Bloomia B.V. | Directors as of Form 10-K Filing Date | Director & Nominee | Age | Position | Director Since | | :----------------- | :-- | :----------------------------------------- | :------------- | | Mark R. Jundt | 44 | Director, Chairman of the Board and Co-Chief Executive Officer | 2022 | | Mary H. Herfurth | 63 | Director | 2023 | | Chad B. Johnson | 54 | Director | 2020 | | Matthew R. Kelly | 49 | Director | 2023 | | Daniel C. Philp | 40 | Director and Co-Chief Executive Officer | 2022 | | Nicholas J. Swenson | 56 | Director | 2021 | - The Board has determined that Mary H. Herfurth qualifies as an 'audit committee financial expert' based on her experience as a bank regulator and credit evaluator[309](index=309&type=chunk) - The Audit Committee provides independent oversight of financial reporting, reviews audits, evaluates internal controls, and is solely responsible for appointing and compensating independent auditors[310](index=310&type=chunk)[311](index=311&type=chunk) - The Company has a Code of Ethics applicable to senior financial management and an insider trading policy governing securities transactions by directors, officers, and employees[312](index=312&type=chunk)[313](index=313&type=chunk) - A majority of the Board members (Mary Herfurth, Chad Johnson, Matthew Kelly, and Nick Swenson) are considered 'independent directors' as defined by Nasdaq Rules[361](index=361&type=chunk) [Executive Compensation](index=61&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2024 included base salaries, cash bonuses, and stock awards, with Bloomia's CEO receiving the highest salary, and non-employee directors receiving cash retainers Summary Compensation Table (Year 2024) | Name and Position | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--------- | :-------- | :--------------- | :------------------------- | :-------- | | Mark R. Jundt, Co-CEO | 53,462 | 50,000 | - | 22,173 | 125,635 | | Daniel C. Philp, Co-CEO | 53,462 | - | 152,280 | 17,750 | 223,492 | | Elizabeth E. McShane, CFO | 134,135 | 66,399 | - | 2,383 | 202,917 | | Werner F. Jansen, CEO Bloomia | 521,284 | - | - | 2,637 | 523,921 | | Randy D. Uglem, Former CEO | 111,923 | 146,250 | - | 17,878 | 276,051 | | Zackery A. Weber, Former VP Finance | 71,385 | 218,000 | - | 84,341 | 373,725 | - Mr. Jundt received a **$50,000 cash payment** for extraordinary contributions to the Bloomia Acquisition[323](index=323&type=chunk) - Mr. Philp was awarded a restricted stock award of **$152,280** related to his role in acquiring Bloomia[322](index=322&type=chunk) - Ms. McShane's employment agreement provides an initial base salary of **$225,000** and eligibility for discretionary quarterly cash incentives[330](index=330&type=chunk) - Former VP of Finance, Mr. Weber, received a **$150,000 retention bonus** in April 2024 and a **$80,000 severance payment** upon his departure[328](index=328&type=chunk)[334](index=334&type=chunk) Non-Employee Director Compensation (Fiscal Year 2024) | Name | Fees Earned or Paid Cash ($) | | :---------------- | :--------------------------- | | Mary H. Herfurth | 22,000 | | Chad B. Johnson | 17,000 | | Mark R. Jundt | 22,000 | | Matthew R. Kelly | 17,000 | | Daniel C. Philp | 17,000 | | Nicholas J. Swenson | 22,000 | - Non-employee directors receive an annual cash retainer of **$17,000**, with an additional **$5,000** for the Chairman of the Board and Committee Chairs[339](index=339&type=chunk) - Directors are eligible to participate in a deferred compensation plan, allowing deferrals of cash retainers into common stock equivalents[340](index=340&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=66&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details the beneficial ownership of Lendway's common stock, highlighting Air T Inc. and its affiliates as a significant stockholder group with approximately 39.6% ownership Equity Compensation Plan Information (As of December 31, 2024) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | | :------------------------------------------ | :-------------------------------------------------------------------------- | :-------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------- | | Equity Compensation plans approved by security holders | - | $ - | 102,521 | | Equity Compensation plans not approved by security holders | - | - | - | | Total | - | $ - | 102,521 | - As of December 31, 2024, **22,945 shares** were reserved for future employee purchases under the Employee Stock Purchase Plan, and **77,138 shares** were available for future awards under the 2018 Plan[349](index=349&type=chunk) Security Ownership of Certain Beneficial Owners and Management (As of March 21, 2025) | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Shares | | :----------------------------------- | :---------------------------------------- | :---------------- | | Daniel C. Philp | 59,071 | 3.3% | | Nicholas J. Swenson | 214,456 | 12.1% | | All directors and current executive officers as a group (8 persons) | 280,527 | 15.9% | | Air T. Inc., et al. (the "Stockholder Group") | 701,275 | 39.6% | - Nicholas J. Swenson's beneficial ownership includes shares held indirectly through AO Partners I, L.P., Groveland Capital LLC, and Glenhurst Co[352](index=352&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=68&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Lendway engaged in related-party transactions, including a note with Air T Inc. and a bridge loan with Bloomia's CEO, all reviewed by the Audit Committee, while maintaining a majority of independent directors - The Company entered into an unsecured Delayed Draw Term Note with Air T Inc. (a greater than 10% stockholder) for up to **$3,500,000** (later increased to **$3,750,000**) to fund operations, bearing **8.0% fixed interest**[355](index=355&type=chunk)[356](index=356&type=chunk) - A bridge loan agreement for the Bloomia acquisition included approximately **$400,000** provided by Mr. Jansen, Bloomia's CEO, with interest starting at **8% annually**[357](index=357&type=chunk) - Mr. Jansen holds an **18.6% ownership interest** in Tulp 24.1, LLC, the subsidiary that acquired Bloomia, while Lendway holds **81.4%**[358](index=358&type=chunk) - The Audit Committee has a written policy to review and approve all related-party transactions, ensuring they are beneficial and fair to the Company[359](index=359&type=chunk) - The Board of Directors maintains a majority of 'independent directors' as defined by Nasdaq Rules, including Mary Herfurth, Chad Johnson, Matthew Kelly, and Nick Swenson[361](index=361&type=chunk) [Principal Accountant Fees and Services](index=70&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details the audit fees paid to Boulay PLLP for 2024 and 2023, all of which were pre-approved by Lendway's Audit Committee Fees Paid to Independent Registered Public Accounting Firm (Boulay PLLP) | Fee Type | 2024 ($) | 2023 ($) | | :--------- | :------- | :------- | | Audit fees | 578,000 | 58,200 | | Total | 578,000 | 58,200 | - All fees paid in 2024 and 2023 were pre-approved by the Company's Audit Committee, as mandated by its charter[364](index=364&type=chunk) PART IV. [Exhibits and Signatures](index=70&type=section&id=PART%20IV.) This section lists all financial statements and provides a comprehensive index of exhibits filed with the Form 10-K, including acquisition agreements, employment contracts, and corporate governance documents [Exhibits and Financial Statement Schedules](index=70&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements from Item 8 and provides a detailed index of exhibits, including acquisition agreements, employment contracts, and equity plans - The section includes a list of financial statements from Item 8, such as Consolidated Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows, along with Notes to Consolidated Financial Statements[366](index=366&type=chunk) - A detailed table of exhibits is provided, including the Asset Purchase Agreement, Agreement for the Sale and Purchase of Shares (Bloomia acquisition), Credit Agreement, employment agreements, and equity incentive plans[367](index=367&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk) [Item 16. Form 10-K Summary](index=73&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided [SIGNATURES](index=74&type=section&id=SIGNATURES) The Form 10-K report is signed by Lendway, Inc.'s Co-Chief Executive Officers and Chief Financial Officer, along with its directors, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by Mark R. Jundt (Co-Chief Executive Officer), Daniel C. Philp (Co-Chief Executive Officer), and Elizabeth E. McShane (Chief Financial Officer), as well as the directors[378](index=378&type=chunk)[379](index=379&type=chunk) - Elizabeth E. McShane also signed on behalf of the named directors pursuant to Powers of Attorney[379](index=379&type=chunk)[380](index=380&type=chunk)

Financial Performance - The Company reported net revenue of $8,033,000 for the three months ended March 31, 2024, all from the Bloomia segment, compared to $nil for the same period in 2023[110]. - Bloomia generated an income before taxes of $1,091,000 during the acquisition period, despite significant acquisition-related expenses[110]. - The Lending Business reported no revenue and a net loss of $325,000 from continuing operations before income taxes for the same period[111]. - For the three months ended March 31, 2024, the company reported no revenue and a net loss of $2,449,000 from continuing operations before income taxes[137]. - Adjusted EBITDA from continuing operations for the three months ended March 31, 2024, was $1,745,000, reflecting the impact of acquisition-related costs[112]. Acquisition Details - The Bloomia acquisition was completed for a total purchase price of $53,360,000, funded through a combination of debt and cash[106]. - The company financed the Bloomia acquisition with an $18,000,000 term loan and a revolving credit facility of up to $6,000,000, resulting in a working capital decrease from $15,483,000 at December 31, 2023 to $11,148,000 at March 31, 2024[138]. - The company used $34,372,000 in investing activities primarily for the Bloomia acquisition, which had a total purchase price of $53,360,000[140][142]. - Financing activities generated $21,835,000, mainly from the Credit Agreement proceeds to fund the Bloomia acquisition[141]. - The company has an indefinite-lived intangible asset for trade name valued at $8,570,000 from the Bloomia acquisition, which will be assessed for impairment annually[162]. Financial Position - The Company’s cash and cash equivalents decreased by $11,064,000 from $16,077,000 at December 31, 2023, to $5,013,000 at March 31, 2024[113]. - Total debt under the Credit Agreement and Bridge Loans amounted to $37,425,000 as of March 31, 2024[113]. - Net cash provided by operating activities was $1,470,000, with a significant contribution from changes in operating assets and liabilities, particularly a $3,322,000 decrease in inventories[139]. - As of March 31, 2024, the company was in compliance with financial covenants under the Credit Agreement and expects to maintain compliance for at least the next twelve months[148]. - The company anticipates that its cash balance, cash generated by operations, and borrowings available under its Credit Agreement will provide adequate liquidity and capital resources for at least the next twelve months[168]. Business Outlook - The Bloomia segment is expected to experience strong sales during the first and second quarters, benefiting from seasonal events like Valentine's Day and Easter[134]. - The Company anticipates minimal revenue and operating losses from the Lending Business during the remainder of 2024 due to capital allocation towards the Bloomia acquisition[109]. - The company anticipates that the new credit facility will support ongoing operations and capital expenditures for at least the next 12 months[142]. Risks and Challenges - The company acknowledges substantial risks associated with lending, including market conditions that may restrict or delay opportunities[169]. - The company is subject to various risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including changes in interest rates and compliance with the Credit Agreement[169]. - The company has a limited history in its Lending Business, which adds to the uncertainty of future performance[169]. - The company may need to record additional tax liabilities or reverse previously recorded tax liabilities due to changes in tax laws and regulations[167]. - The company may need to raise additional capital through equity offerings or debt financings, which could dilute existing stockholders' ownership[151]. Operational Focus - The company is focused on successfully integrating and operating the newly acquired Bloomia business, which has historically concentrated revenue among a small number of customers[169]. - The company emphasizes the importance of attracting and retaining highly qualified managerial, operational, and sales personnel to support its business operations[169]. - The company recognizes the potential for growth and other opportunities within its business, although these are subject to various risks[168]. - The company does not provide disclosures regarding market risk as it qualifies as a smaller reporting company[170]. - The company assumes no responsibility to update forward-looking statements unless required by law[169].

Financial Performance - Q1 2024 revenue from continuing operations was $8,033,000, with all revenue attributed to Bloomia, compared to $0 in Q1 2023[6] - Gross profit for Q1 2024 was $1,894,000, representing 23.6% of revenue, up from $0 in Q1 2023[7] - Q1 2024 operating loss from continuing operations was $1,494,000, compared to a loss of $628,000 in Q1 2023[9] - Q1 2024 net loss from continuing operations was $1,336,000, or $0.77 per share, compared to a net loss of $528,000, or $0.29 per share in Q1 2023[12] - Adjusted EBITDA for Q1 2024 was $1,745,000, compared to a loss of $614,000 in Q1 2023[20] Cash and Working Capital - Cash and cash equivalents as of March 31, 2024, totaled $5.0 million, down from $16.1 million as of December 31, 2023[14] - Working capital was $11.1 million at March 31, 2024, compared to $15.5 million at December 31, 2023[14] Acquisition Details - Bloomia was acquired for a total purchase price of $53.4 million, including $34.9 million in cash[3] - Q1 2024 included $1,542,000 in acquisition-related costs and $1,360,000 in amortization expense[4] Sales Seasonality - The company anticipates continued seasonality in sales, with stronger performance expected in the first and second quarters of the year[12]

Part I [Business](index=2&type=section&id=Item%201.%20Business) Lendway, Inc. has strategically transformed into a specialty agricultural and finance company through divestitures and key acquisitions, now operating in Specialty Ag and Non-bank Lending segments with a near-term focus on Bloomia - Effective August 4, 2023, the company changed its name from Insignia Systems, Inc. to Lendway, Inc. and its stock symbol to "**LDWY**"[11](index=11&type=chunk) - On August 3, 2023, the company sold its legacy In-Store Marketing Business for **$3.5 million**, now reported as discontinued operations[14](index=14&type=chunk)[15](index=15&type=chunk) - On February 22, 2024, the company acquired a majority ownership (**81.4%**) of Bloomia B.V., a leading U.S. producer of fresh cut tulips, for **$47.5 million**[16](index=16&type=chunk)[18](index=18&type=chunk) - The company launched a non-bank lending business, FarmlandCredit.com, in April 2023, initially focusing on loans secured by agricultural real estate[12](index=12&type=chunk)[13](index=13&type=chunk)[41](index=41&type=chunk) [Specialty Ag Segment](index=3&type=section&id=Specialty%20Ag%20Segment) The Specialty Ag segment, comprising Bloomia's operations, is a leading U.S. producer of fresh cut tulips, focusing on domestic hydroponic growing for quality and efficiency - Bloomia produced over **75 million tulip stems annually** in 2023 and 2022[21](index=21&type=chunk) - The U.S. cut flower market is estimated at **$8 billion for 2023**, with tulips representing about **15% of sales**, and Bloomia holding a **20% market share** of U.S.-grown cut tulips[28](index=28&type=chunk) - Three customers accounted for **37.7%, 16.2%, and 10.4%** of Bloomia's U.S. revenue in 2023, indicating significant customer concentration[27](index=27&type=chunk) - Bloomia sources bulbs from the Netherlands, Chile, and New Zealand, enabling year-round production and reducing reliance on importing stems by air[22](index=22&type=chunk)[39](index=39&type=chunk) [Non-Bank Lending Segment](index=5&type=section&id=Non-Bank%20Lending%20Segment) The Non-Bank Lending segment, launched in April 2023, aims to build a scalable collateral-secured lending business, but its near-term growth is constrained by capital allocation to the Bloomia acquisition - The lending business was launched in April 2023 with the hiring of a Senior Vice President of Lending[41](index=41&type=chunk) - Due to capital being allocated to the Bloomia acquisition, the lending business is expected to have minimal revenue and operating losses in 2024[45](index=45&type=chunk) [Human Capital Resources](index=5&type=section&id=Human%20Capital%20Resources) As of March 1, 2024, the company and its subsidiaries employed 156 individuals, including 54 seasonal workers, with a focus on supporting peak demand through temporary worker programs and employee well-being - As of March 1, 2024, the company had **156 employees**, with **54 being seasonal**[50](index=50&type=chunk) - Approximately **50% of hourly workers** in 2023 were hired for seasonal support during the peak period from January to May[50](index=50&type=chunk) [Risk Factors](index=6&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from its new business model, including high dependency on Bloomia, customer concentration, floating interest rate debt, and operational challenges in agriculture and international management - The company's results are highly dependent on the success of the Bloomia business, as a substantial portion of capital has been committed to it[60](index=60&type=chunk) - In 2023, three customers accounted for approximately **64.3% of Bloomia's revenue**, posing a concentration risk[56](index=56&type=chunk) - The majority of the company's debt carries floating interest rates tied to SOFR, exposing it to interest rate fluctuations[58](index=58&type=chunk) - The Credit Agreement restricts Bloomia's ability to make distributions to Lendway, which may constrain cash available for corporate expenses and the Lending Business[67](index=67&type=chunk) - A significant stockholder group holds approximately **38.9% of outstanding common shares**, which may allow them to exercise a degree of control over stockholder matters[92](index=92&type=chunk) [Cybersecurity](index=10&type=section&id=Item%201C.%20Cybersecurity) Lendway's cybersecurity, primarily managed by an outsourced IT provider, is overseen by the Board and Audit Committee, with Bloomia's IT environment now integrated into corporate oversight following its acquisition - The company's IT operations and cybersecurity were primarily outsourced as of year-end 2023[97](index=97&type=chunk) - The Board of Directors and Audit Committee provide oversight of the cybersecurity risk management program[98](index=98&type=chunk) - Following the acquisition, Bloomia's IT environment will be included in the company's cybersecurity processes and oversight[99](index=99&type=chunk) [Properties](index=10&type=section&id=Item%202.%20Properties) The company's facilities are deemed adequate for current and future needs, including a corporate headquarters in Minneapolis and key leased properties for Bloomia's operations in Virginia, the Netherlands, and South Africa - The company leases its corporate headquarters in Minneapolis, MN (**1,700 sq. ft.**)[103](index=103&type=chunk) - Bloomia's key leased facilities include a **360,000 sq. ft. greenhouse** in Virginia, a **107,000 sq. ft. facility** in the Netherlands, and a **21,000 sq. ft. greenhouse** in South Africa[103](index=103&type=chunk) [Legal Proceedings](index=10&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal actions, but their outcomes are not anticipated to materially affect its financial position or operational results - The company states that the outcome of current legal matters is not expected to have a material effect on its financial position or results of operations[106](index=106&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=11&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under LDWY, with approximately 115 record holders, and a stock repurchase program was approved in August 2023, though regular dividends are not historically paid - The company's common stock is listed on the Nasdaq Capital Market under the symbol **LDWY**[109](index=109&type=chunk) - A stock repurchase authorization for up to **400,000 shares** was approved on August 28, 2023[112](index=112&type=chunk) Share Repurchase Activity (Q4 2023) | Period | Total shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans | Approximate dollar value of shares purchased under the plans | | :--- | :--- | :--- | :--- | :--- | | October 1 - 31, 2023 | 5,546 | $5.09 | 5,546 | $27,864 | | November 1 - 30, 2023 | 3,137 | $4.99 | 3,137 | $16,267 | | December 1 - 31, 2023 | - | - | - | - | | **Total** | **8,683** | | **8,683** | **$44,131** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=11&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's FY2023 financial results reflect its strategic transformation, with a net loss from continuing operations offset by gains from discontinued operations, maintaining strong liquidity despite significant post-year-end cash usage for the Bloomia acquisition [Results of Operations](index=12&type=section&id=Results%20of%20Operations) For FY2023, the company reported an increased net loss from continuing operations of $3.02 million, primarily due to higher G&A expenses, while total net income decreased significantly from 2022 due to lower income from discontinued operations Consolidated Statements of Operations Summary (Continuing Operations) | | Year Ended December 31, 2023 | Year Ended December 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | General and administrative | $3,323,000 | $2,442,000 | 36.1% | | Operating loss | ($3,519,000) | ($2,442,000) | 44.1% | | Interest income | $518,000 | $154,000 | 236.4% | | Net loss from continuing operations | ($3,021,000) | ($2,294,000) | 31.7% | | Income from discontinued operations, net of tax | $2,474,000 | $12,340,000 | -80.0% | | Gain from sale of discontinued operations, net of tax | $2,961,000 | - | 100.0% | | **Net income** | **$2,414,000** | **$10,046,000** | **-76.0%** | - The increase in G&A expenses was primarily due to **$926,000** in transaction-related severance and separation benefits for the former CEO[129](index=129&type=chunk) - Interest income increased significantly due to higher invested balances from a 2022 litigation settlement and proceeds from the business sale, coupled with higher interest rates[130](index=130&type=chunk) [Liquidity and Capital Resources](index=13&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, the company maintained strong liquidity with $16.1 million in cash, which was subsequently used along with new debt to fund the $47.5 million Bloomia acquisition, ensuring sufficient liquidity for the next 12 months Key Liquidity Metrics (Year-End) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,077,000 | $14,524,000 | | Working Capital | $15,525,000 | $13,379,000 | - Net cash used in continuing operating activities was **$2.9 million** in 2023[135](index=135&type=chunk) - The Bloomia acquisition was funded with **$9.2 million** of company cash, a **$22.8 million credit facility**, and **$15.5 million in seller notes**[138](index=138&type=chunk) [Credit Agreement](index=13&type=section&id=Credit%20Agreement) To finance the Bloomia acquisition, the company secured a new credit agreement comprising an $18.0 million term loan and a $6.0 million revolving facility, with interest at Term SOFR plus 3.0% and financial covenants restricting Bloomia's distributions - The credit facility consists of an **$18.0 million term loan** and a **$6.0 million revolving line of credit**[140](index=140&type=chunk) - Interest is charged at **Term SOFR plus 3.0%**[141](index=141&type=chunk) - The agreement includes financial covenants such as a minimum fixed charge coverage ratio of **1.25 to 1.00** and a maximum senior cash flow leverage ratio of **3.0 to 1.0** initially[143](index=143&type=chunk) [Financial Statements and Supplementary Data](index=14&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements for 2023 and 2022 reflect the company's strategic shift, showing decreased total assets and liabilities but increased stockholders' equity following the sale of its legacy business Consolidated Balance Sheet Summary | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $16,621,000 | $20,753,000 | | Total Assets | $16,673,000 | $20,968,000 | | Total Current Liabilities | $1,096,000 | $7,374,000 | | Total Liabilities | $1,141,000 | $7,567,000 | | Total Stockholders' Equity | $15,532,000 | $13,401,000 | Consolidated Statement of Operations Summary | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net loss from continuing operations | ($3,021,000) | ($2,294,000) | | Income from discontinued operations, net of tax | $2,474,000 | $12,340,000 | | Gain from sale of discontinued operations, net of tax | $2,961,000 | - | | **Net Income** | **$2,414,000** | **$10,046,000** | | **Basic and diluted EPS** | **$1.36** | **$5.61** | [Notes to Consolidated Financial Statements](index=20&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and significant events, including the $3.04 million gain from the sale of the In-Store Marketing Business, the company's tax situation with NOL carryforwards and a valuation allowance, and the subsequent $47.5 million Bloomia acquisition and its financing - The sale of the In-Store Marketing Business on August 3, 2023 resulted in a pre-tax gain of **$3,044,000**[187](index=187&type=chunk)[188](index=188&type=chunk) - As of Dec 31, 2023, the company had a federal net operating loss (NOL) carryforward of approximately **$1.6 million** and state NOLs of **$2.9 million**[212](index=212&type=chunk) - A valuation allowance of **$645,000** was recorded against deferred tax assets as of Dec 31, 2023, as their realization is not more likely than not[212](index=212&type=chunk)[213](index=213&type=chunk) - Subsequent to year-end, on February 22, 2024, the company acquired Bloomia for **$47.5 million**, financed with cash, a new credit facility, and seller notes[218](index=218&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=26&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) On November 20, 2023, the company changed its independent registered public accounting firm from Baker Tilly US, LLP to Boulay PLLP, reporting no disagreements on accounting or auditing matters - On November 20, 2023, the company changed its independent registered public accounting firm from Baker Tilly US, LLP to Boulay PLLP[227](index=227&type=chunk) - There were no disagreements with the former auditor, Baker Tilly, on accounting or auditing matters[228](index=228&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2023, management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective, with no material changes reported in the most recent fiscal quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[229](index=229&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[230](index=230&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=27&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section outlines the company's executive officers, including Randy D. Uglem (President and CEO), Zackery A. Weber (VP of Finance), and Werner F. Jansen (CEO of Bloomia B.V.), with further details on directors and governance incorporated by reference from the 2024 Proxy Statement - Information regarding directors and corporate governance is incorporated by reference from the 2024 Annual Meeting Proxy Statement[236](index=236&type=chunk) Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Randy D. Uglem | 46 | President, Chief Executive Officer and Secretary | | Zackery A. Weber | 44 | Vice President of Finance | | Werner F. Jansen | 33 | Chief Executive Officer of Bloomia B.V. | [Executive Compensation](index=28&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - All information related to executive compensation is incorporated by reference from the 2024 Proxy Statement[242](index=242&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=28&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, along with details on equity compensation plans, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - All information related to security ownership is incorporated by reference from the 2024 Proxy Statement[243](index=243&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=28&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information regarding related-party transactions and director independence is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - All information related to certain relationships and director independence is incorporated by reference from the 2024 Proxy Statement[244](index=244&type=chunk) [Principal Accountant Fees and Services](index=28&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - All information related to principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement[245](index=245&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=28&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements from Item 8 and the exhibits filed with the Annual Report on Form 10-K, including key agreements for the sale of the legacy business, the Bloomia acquisition, and the new Credit Agreement - Key exhibits filed include the Asset Purchase Agreement (Exhibit 2.1), the Bloomia Share Purchase Agreement (Exhibit 2.2), and the new Credit Agreement (Exhibit 10.22)[247](index=247&type=chunk)[251](index=251&type=chunk)

[Company Overview and Strategic Transformation](index=1&type=section&id=Company%20Overview%20and%20Strategic%20Transformation) Lendway has strategically transformed into a specialty agriculture and finance company, focusing on agricultural investments and marking a key growth moment with the Bloomia acquisition, with seamless integration as the immediate priority [Strategic Business Operations Update](index=1&type=section&id=Strategic%20Business%20Operations%20Update) Lendway has strategically transformed into a specialty agriculture and finance company, focusing on agricultural investments and marking a key growth moment with the Bloomia acquisition, with seamless integration as the immediate priority - The company has strategically evolved into a specialty agriculture and finance company over the past 12 months, with operations focused on its agricultural investments[3](index=3&type=chunk) - The acquisition of a majority stake in Bloomia B.V., one of the largest fresh-cut tulip producers in the U.S., for **$47.5 million**, marks a pivotal moment in the company's growth trajectory[3](index=3&type=chunk)[4](index=4&type=chunk) - In the short term, the company's primary focus remains the successful integration of Bloomia[3](index=3&type=chunk) [Key Strategic Milestones](index=1&type=section&id=EXHIBIT%2099.1) Lendway experienced significant strategic milestones from 2023 to early 2024, including launching non-bank lending, selling its in-store marketing business, rebranding, and becoming the majority owner of Bloomia - April 2023: The company launched its lending business by hiring Randy Uglem, aiming to build a scalable non-bank lending operation[7](index=7&type=chunk) - August 2023: The company completed the sale of assets and liabilities related to its in-store marketing business, reported as discontinued operations, rebranded as Lendway, Inc., reincorporated in Delaware, and changed its ticker to LDWY[7](index=7&type=chunk) - February 2024: The company became the majority owner of Bloomia B.V. and its affiliated entities, one of the largest fresh-cut tulip producers in the U.S.[7](index=7&type=chunk) [About Lendway, Inc.](index=2&type=section&id=About%20Lendway%2C%20Inc.) Lendway, Inc. is a specialty agriculture and finance company focused on managing agricultural investments domestically and internationally, fully owning FarmlandCredit.com, and holding a majority stake in Bloomia - Lendway, Inc. is a specialty agriculture and finance company focused on making and managing its agricultural investments in the U.S. and internationally[13](index=13&type=chunk) - The company wholly owns and operates FarmlandCredit.com, a non-bank lending business designed to purchase existing loans and/or originate and fund new loans domestically[13](index=13&type=chunk) - The company is also the majority owner of Bloomia, one of the largest fresh-cut tulip producers in the U.S.[13](index=13&type=chunk) [Business Segment Updates](index=1&type=section&id=Business%20Segment%20Updates) Lendway has acquired a majority stake in Bloomia, a major U.S. fresh-cut tulip producer, which reported strong Q1 2024 momentum due to automation investments, while its non-bank lending business faces limited capital and expected operating losses for the remainder of 2024 [Specialty Ag Business Update (Bloomia)](index=1&type=section&id=Specialty%20Ag%20Business%20Update) Lendway acquired a majority stake in Bloomia, a major U.S. fresh-cut tulip producer, which reported preliminary unaudited net sales of approximately **$45 million** in 2023 and **$43 million** in 2022, showing strong Q1 2024 momentum due to automation investments - Lendway acquired a majority stake in Bloomia B.V., one of the largest fresh-cut tulip producers in the U.S., for **$47.5 million**[4](index=4&type=chunk) Bloomia Preliminary Unaudited Net Sales | Year | Net Sales (approx.) | | :--- | :------------------ | | 2023 | $45.0 million | | 2022 | $43.0 million | - Bloomia's CEO reported a strong start to Q1 2024, with strategic automation investments yielding significant improvements in operational quality, productivity, and efficiency[6](index=6&type=chunk) [Non-Bank Lending Business Update](index=2&type=section&id=Non-Bank%20Lending%20Business%20Update) The company aims to develop a scalable non-bank lending business but completed no loan transactions in 2023, with minimal revenue and operating losses expected for the remainder of 2024 due to capital allocation to Bloomia - The company is committed to building a scalable non-bank lending business but, despite negotiations with multiple prospective clients, did not close any loan transactions in 2023[8](index=8&type=chunk) - Capital and management resources available for developing the non-bank lending business are limited in the short term due to the allocation of capital to the Bloomia acquisition and operations[8](index=8&type=chunk) - The lending business is expected to generate minimal revenue and incur operating losses for the remainder of 2024[10](index=10&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) Lendway reported a full-year 2023 net income of **$2,414,000**, a significant decrease from 2022, primarily due to reduced income from discontinued operations, while net loss from continuing operations increased and total liabilities significantly decreased [Financial Results Overview](index=2&type=section&id=Financial%20Results%20Overview) Lendway reported operating expenses from continuing operations (lending business) and significant income from discontinued operations, including a gain from the 2023 sale of its in-store marketing business, with **$16.077 million** in cash and cash equivalents at year-end 2023 subsequently used for the Bloomia acquisition Operating Expenses from Continuing Operations (Lending Business) | Period | Amount | | :----------- | :--------- | | Q4 2023 | $536,000 | | Full Year 2023 | $3,519,000 | Net Income from Discontinued Operations (After Tax) | Year | Amount | | :--- | :------------ | | 2023 | $2,474,000 | | 2022 | $12,340,000 | - In 2023, the company recorded a pre-tax gain of **$3,044,000** from the sale of discontinued operations[11](index=11&type=chunk) - As of December 31, 2023, Lendway's cash and cash equivalents totaled **$16,077,000**, subsequently reduced by the Bloomia acquisition, which was financed through **$9.2 million** in cash, **$22.8 million** in new credit facility borrowings, and a **$15.5 million** seller note payable[12](index=12&type=chunk) [Condensed Statements of Operations](index=3&type=section&id=CONDENSED%20STATEMENTS%20OF%20OPERATIONS) Lendway reported a full-year 2023 net income of **$2,414,000**, a significant decrease from **$10,046,000** in 2022, primarily due to reduced income from discontinued operations, while net loss from continuing operations increased Condensed Statements of Operations (Selected Data) | Metric | Q4 2023 | Q4 2022 | Full Year 2023 | Full Year 2022 | | :-------------------------------------- | :----------- | :----------- | :------------- | :------------- | | Operating Loss | $(536,000)$ | $(779,000)$ | $(3,519,000)$ | $(2,442,000)$ | | Net Loss from Continuing Operations | $(367,000)$ | $(681,000)$ | $(3,021,000)$ | $(2,294,000)$ | | Net Income (Loss) from Discontinued Operations, After Tax | $52,000$ | $(52,000)$ | $2,474,000$ | $12,340,000$ | | Gain (Loss) on Sale of Discontinued Operations, After Tax | $(9,000)$ | — | $2,961,000$ | — | | Net (Loss) Income | $(324,000)$ | $(733,000)$ | $2,414,000$ | $10,046,000$ | | Basic and Diluted Earnings Per Share | $(0.19)$ | $(0.41)$ | $1.36$ | $5.61$ | - Full-year 2023 net income was **$2,414,000**, a significant decrease from **$10,046,000** in 2022, primarily due to reduced income from discontinued operations[16](index=16&type=chunk) - Net loss from continuing operations increased from **($2,294,000)** in 2022 to **($3,021,000)** in 2023[16](index=16&type=chunk) [Selected Balance Sheet Data](index=3&type=section&id=SELECTED%20BALANCE%20SHEET%20DATA) As of December 31, 2023, Lendway's cash and cash equivalents and restricted cash increased to **$16.077 million**, shareholder equity rose to **$15.532 million**, while total liabilities significantly decreased Selected Balance Sheet Data | Metric | December 31, 2023 | December 31, 2022 | Year-over-Year Change | | :-------------------------------------- | :---------------- | :---------------- | :-------------------- | | Cash and Cash Equivalents and Restricted Cash | $16,077,000 | $14,524,000 | +$1,553,000 | | Working Capital | $15,525,000 | $13,379,000 | +$2,146,000 | | Total Assets | $16,673,000 | $20,968,000 | -$4,295,000 | | Total Liabilities | $1,141,000 | $7,567,000 | -$6,426,000 | | Shareholders' Equity | $15,532,000 | $13,401,000 | +$2,131,000 | - Total liabilities significantly decreased from **$7,567,000** in 2022 to **$1,141,000** in 2023[18](index=18&type=chunk) - Shareholders' equity increased by **$2,131,000**, reaching **$15,532,000** at the end of 2023[18](index=18&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=2&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section provides standard cautionary language regarding forward-looking statements, highlighting various risks and uncertainties that could cause actual results to differ materially from projections, including business integration challenges, market competition, interest rate fluctuations, and capital availability [Forward-Looking Statements](index=2&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section provides standard cautionary language regarding forward-looking statements, highlighting various risks and uncertainties that could cause actual results to differ materially from projections, including business integration challenges, market competition, interest rate fluctuations, and capital availability - Statements in this press release regarding the short-term and long-term benefits of the Bloomia acquisition, potential growth, allocation of capital resources between businesses, and timing of future financial reporting are forward-looking statements[14](index=14&type=chunk) - Factors that could cause actual results to differ materially from estimates and assumptions include the ability to successfully integrate and operate the Bloomia business, competitive capabilities, changes in interest rates, ability to comply with credit agreements, limited history of the lending business, market conditions, and availability of additional capital[14](index=14&type=chunk) - Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release and are based on current information that may change rapidly[14](index=14&type=chunk)

[Explanatory Note](index=2&type=section&id=EXPLANATORY%20NOTE) This section provides key information regarding Lendway, Inc.'s name change, reincorporation, the sale of its In-Store Marketing Business, and its strategic shift to a non-bank lending model - **Lendway, Inc.** (formerly Insignia Systems, Inc.) changed its name and reincorporated from Minnesota to Delaware on August 4, 2023, with its common stock now trading under **'LDWY' on Nasdaq**[7](index=7&type=chunk)[25](index=25&type=chunk) - On August 3, 2023, the company sold its In-Store Marketing Business for **$3.5 million** (subject to post-closing adjustment), and its operations are now presented as discontinued[8](index=8&type=chunk)[9](index=9&type=chunk)[26](index=26&type=chunk) - The company is building a scalable **non-bank lending business** focused on purchasing or originating collateral-secured loans[10](index=10&type=chunk)[25](index=25&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | ASSETS / LIABILITIES AND SHAREHOLDERS' EQUITY | September 30, 2023 (Unaudited) | December 31, 2022 | | :-------------------------------------------- | :----------------------------- | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $ 14,954,000 | $ 14,439,000 | | Other current assets related to discontinued operations | $ 2,199,000 | $ 6,171,000 | | Total Current Assets | $ 17,587,000 | $ 20,753,000 | | Total Assets | $ 17,638,000 | $ 20,968,000 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Current liabilities related to discontinued operations | $ 547,000 | $ 6,666,000 | | Total Current Liabilities | $ 1,695,000 | $ 7,374,000 | | Total Shareholders' Equity | $ 15,902,000 | $ 13,401,000 | | Total Liabilities and Shareholders' Equity | $ 17,638,000 | $ 20,968,000 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss from continuing operations | $ (1,511,000) | $ (434,000) | $ (2,654,000) | $ (1,613,000) | | (Loss) Income from discontinued operations, net of tax | $ (333,000) | $ 12,235,000 | $ 2,422,000 | $ 12,392,000 | | Gain from sale of discontinued operations, net of tax | $ 2,970,000 | $ - | $ 2,970,000 | $ - | | Net Income | $ 1,126,000 | $ 11,801,000 | $ 2,738,000 | $ 10,779,000 | | Basic and diluted earnings per share | $ 0.63 | $ 6.58 | $ 1.53 | $ 6.02 | [Condensed Consolidated Statements of Stockholders' Equity](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Condensed Consolidated Statements of Stockholders' Equity | Item | December 31, 2022 | September 30, 2023 | | :---------------------------------- | :---------------- | :----------------- | | Total Shareholders' Equity (Balance) | $ 13,401,000 | $ 15,902,000 | | Net income (9 months ended Sep 30, 2023) | | $ 2,738,000 | | Repurchase of common stock (9 months ended Sep 30, 2023) | | $ (437,000) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Nine Months Ended September 30) | 2023 | 2022 | | :-------------------------------------------------- | :------------ | :------------- | | Net cash used in operating activities of continuing operations | $ (2,325,000) | $ (2,142,000) | | Net cash provided by operating activities of discontinued operations | $ 1,735,000 | $ 12,530,000 | | Net cash (used in) provided by operating activities | $ (590,000) | $ 10,388,000 | | Net cash provided by investing activities of continuing operations | $ 1,557,000 | $ - | | Net cash provided by (used in) investing activities | $ 1,533,000 | $ (25,000) | | Net cash (used in) provided by financing activities | $ (428,000) | $ 39,000 | | Increase in cash and cash equivalents and restricted cash | $ 515,000 | $ 10,402,000 | | Cash and cash equivalents and restricted cash at end of period | $ 15,039,000 | $ 14,253,000 | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Description of Business and Basis of Presentation](index=6&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes Lendway, Inc.'s strategic shift to a scalable non-bank lending business, its recent name change and reincorporation, and the reclassification of its former In-Store Marketing Business as discontinued operations - **Lendway, Inc.** is building a scalable **non-bank lending business** to purchase existing loans or originate and fund new loans, all secured by collateral[25](index=25&type=chunk) - The company changed its name from **"Insignia Systems, Inc."** and reincorporated from Minnesota to Delaware on **August 4, 2023**[25](index=25&type=chunk) - The **In-Store Marketing Business** was sold on **August 3, 2023**, and its operations are presented as discontinued in the financial statements[26](index=26&type=chunk)[28](index=28&type=chunk) [Note 2. Sale of In-Store Marketing Business and Presentation as Discontinued Operations](index=6&type=section&id=Note%202.%20Sale%20of%20In-Store%20Marketing%20Business%20and%20Presentation%20as%20Discontinued%20Operations) This note details the sale of the In-Store Marketing Business for $3.5 million, including the calculation of the gain on sale and the reclassification of its financial results as discontinued operations, also highlighting a significant litigation settlement in the prior year's discontinued operations - The **In-Store Marketing Business** was sold on **August 3, 2023**, for **$3.5 million** to **TIMIBO LLC**, subject to a post-closing adjustment and a **$200,000** escrow[31](index=31&type=chunk) Gain on Sale of In-Store Marketing Business | Item | Amount | | :---------------------------------------- | :---------- | | Sale price | $ 3,500,000 | | Carrying value of assets sold, less liabilities | $ (247,000) | | Transaction costs not previously expensed | $ (209,000) | | Gain on sale of In-Store Marketing Business | $ 3,044,000 | - Transaction-related severance, retention awards, and employee bonuses totaled approximately **$1,923,000** in Q3 2023, with **$949,000** recorded in discontinued operations[33](index=33&type=chunk)[72](index=72&type=chunk) Results of Discontinued Operations (Selected Items) | Item | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :-------------------------------------------- | :------------------------------ | :------------------------------ | | Net services revenues | $ 1,976,000 | $ 4,869,000 | | Gross Profit | $ 408,000 | $ 838,000 | | Operating Income (Loss) | $ (354,000) | $ 12,027,000 | | (Loss) income from discontinued operations, net of tax | $ (333,000) | $ 12,235,000 | | Gain from sale of discontinued operations, net of tax | $ 2,970,000 | $ - | - The 2022 income from discontinued operations included a **$12,000,000** gain from a litigation settlement with **News America**[37](index=37&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=8&type=section&id=Note%203.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's accounting policies for cash, restricted cash, stock-based compensation, and net (loss) income per share, highlighting the release of restricted cash post-period and the anti-dilutive nature of stock awards due to continuing operational losses Cash, Cash Equivalents and Restricted Cash | Item | September 30, 2023 | December 31, 2022 | | :-------------------------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $14,954,000 | $14,439,000 | | Restricted cash | $85,000 | $85,000 | | Total cash, cash equivalents and restricted cash | $15,039,000 | $14,524,000 | - The restriction on cash was released after **September 30, 2023**, as it was related to a lease transferred to the buyer of the **In-Store Marketing Business**[40](index=40&type=chunk) Stock-Based Compensation Expense | Period | 2023 | 2022 | | :------------------------------------ | :------ | :------ | | Three months ended September 30 | $ 7,000 | $ 32,000 | | Nine months ended September 30 | $ 43,000 | $ 91,000 | - Due to a net loss from continuing operations, all outstanding stock awards were considered **anti-dilutive** for the three and nine months ended September 30, 2023 and 2022[48](index=48&type=chunk)[50](index=50&type=chunk) - The Company recorded **$926,000** in severance and separation benefits for its prior CEO, Kristine A. Glancy, who departed on **August 31, 2023**, with **$650,000** remaining to be paid as of September 30, 2023[52](index=52&type=chunk) [Note 4. Leases](index=10&type=section&id=Note%204.%20Leases) This note describes the company's current lease arrangements, noting the termination of a significant lease and the assignment of the headquarters lease as part of the In-Store Marketing Business sale, with the company now operating under a month-to-month lease with a related party - As part of the **In-Store Marketing Business** sale, the headquarters lease was assigned to the buyer, and another significant lease was terminated[53](index=53&type=chunk) - The Company now has a **month-to-month operating lease** with a related party, with monthly payments of **$375**[53](index=53&type=chunk) Total Operating Lease Costs (Continuing Operations) | Period | 2023 | 2022 | | :------------------------------------ | :------ | :------ | | Three months ended September 30 | $ 6,000 | $ 3,000 | | Nine months ended September 30 | $ 15,000 | $ 11,000 | [Note 5. Income Taxes](index=10&type=section&id=Note%205.%20Income%20Taxes) This note details the income tax (benefit) expense for continuing operations, the effective tax rates, and the impact of valuation allowances and unrecognized tax benefits, also providing an update on the company's Federal Net Operating Loss (NOL) carryforwards Income Tax (Benefit) Expense from Continuing Operations | Period | 2023 | 2022 | | :------------------------------------ | :---------- | :--------- | | Three months ended September 30 | $ (11,000) | $ 1,000 | | Nine months ended September 30 | $ (4,000) | $ 5,000 | Effective Federal Income Tax Rate Reconciliation (Nine Months Ended September 30) | Item | 2023 | 2022 | | :------------------------ | :---- | :---- | | Federal statutory rate | 21.0% | 21.0% | | Valuation allowance | (24.5)% | (24.6)% | | Effective federal income tax rate | 0.1% | (0.3)% | - Unrecognized tax benefits totaled **$41,000** as of September 30, 2023, a decrease from **$53,000** at December 31, 2022[58](index=58&type=chunk) - Estimated Federal NOL carryforwards decreased from approximately **$2,900,000** at December 31, 2022, to approximately **$1,390,000** at September 30, 2023[59](index=59&type=chunk) [Note 6. Stock Repurchase Plan](index=11&type=section&id=Note%206.%20Stock%20Repurchase%20Plan) This note outlines the Board's authorization of a stock repurchase plan for up to 400,000 shares and details the repurchase activity during the three months ended September 30, 2023 - The Board of Directors authorized the repurchase of up to **400,000 shares** of common stock on **August 28, 2023**[60](index=60&type=chunk) - During the three months ended September 30, 2023, the company repurchased **75,345 shares** for **$437,000**[61](index=61&type=chunk) [Note 7. Legal Proceedings](index=11&type=section&id=Note%207.%20Legal%20Proceedings) This note states that the company is subject to various legal matters in the normal course of business, but their outcome is not expected to have a material effect on its financial position or results of operations - The company is involved in routine legal matters, but their outcome is not expected to **materially affect** its financial position or results of operations[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=11&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results, emphasizing the new lending business and discontinued operations [Company Overview](index=11&type=section&id=Company%20Overview) - The company is building a scalable **non-bank lending business** (Lending Business) to purchase or originate collateral-secured loans, launched in **April 2023**[64](index=64&type=chunk) - Initial focus is on **real estate-secured loans**, primarily for agricultural purposes, with plans to expand product offerings[65](index=65&type=chunk) - Primary revenue sources are expected to be **interest income** on secured loans (net of funding costs) and **fee income** from origination and servicing[66](index=66&type=chunk) - Competition includes commercial/investment banks, insurance companies, Farm Credit System institutions, and financial funds[67](index=67&type=chunk) - The company anticipates minimal revenue and losses from continuing operations for the remainder of **2023**[68](index=68&type=chunk) [Recent Developments](index=12&type=section&id=Recent%20Developments) - On **August 4, 2023**, the company changed its name to **Lendway, Inc.** and reincorporated from Minnesota to Delaware, with its common stock now trading under **'LDWY'**[70](index=70&type=chunk) - The **In-Store Marketing Business** was sold on **August 3, 2023**, for **$3.5 million**, with a post-closing adjustment reducing the cash consideration by **$1.5 million**[71](index=71&type=chunk) - Transaction-related severance, retention awards, and bonuses totaled **$1,923,000** in Q3 2023, with **$974,000** attributed to continuing operations and **$949,000** to discontinued operations[72](index=72&type=chunk) [Results of Operations](index=13&type=section&id=Results%20of%20Operations) - Continuing operations (the **Lending Business**) had **no revenue** for the three and nine months ended September 30, 2023[73](index=73&type=chunk)[76](index=76&type=chunk) Operating Expenses (Continuing Operations) | Operating Expenses (Continuing Operations) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales and marketing | $ 69,000 | $ - | $ 134,000 | $ - | | General and administrative | $ 1,564,000 | $ 488,000 | $ 2,849,000 | $ 1,663,000 | | Total operating expenses | $ 1,633,000 | $ 488,000 | $ 2,983,000 | $ 1,663,000 | - General and administrative expenses increased by **220.5%** for the three months and **71.3%** for the nine months ended September 30, 2023, primarily due to **$926,000** in severance for the former CEO[79](index=79&type=chunk) Interest Income (Continuing Operations) | Interest Income (Continuing Operations) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income | $ 111,000 | $ 55,000 | $ 325,000 | $ 55,000 | - Interest income increased significantly due to higher invested balances (including **$12 million** litigation proceeds from July 2022) and higher interest rates on short-term treasury bills[80](index=80&type=chunk) Net Loss from Continuing Operations | Net Loss from Continuing Operations | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Loss from continuing operations | $ (1,511,000) | $ (434,000) | $ (2,654,000) | $ (1,613,000) | [Liquidity and Capital Resources](index=14&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital increased by **$2,513,000** to **$15,892,000** at September 30, 2023, from **$13,379,000** at December 31, 2022[76](index=76&type=chunk)[87](index=87&type=chunk) - Cash and cash equivalents and restricted cash increased by **$515,000** to **$15,039,000** at September 30, 2023, primarily from collections of accounts receivable from discontinued operations and proceeds from its sale[76](index=76&type=chunk)[87](index=87&type=chunk) - Net cash used in continuing operating activities for the nine months ended September 30, 2023, was **$2,325,000**, largely due to severance-related payments[88](index=88&type=chunk) - Net cash provided by investing activities from continuing operations was **$1,557,000**, primarily from the proceeds of the **In-Store Marketing Business** sale[89](index=89&type=chunk) - Net cash used in financing activities was **$428,000**, mainly due to common stock repurchases[90](index=90&type=chunk) - The company believes its current cash and cash equivalents will be sufficient for its cash requirements for at least the next **12 months**[91](index=91&type=chunk) - The Board authorized the repurchase of up to **400,000 shares** of common stock on **August 28, 2023**; **75,345 shares** were repurchased for **$437,000** in Q3 2023[92](index=92&type=chunk) - Future growth of the **Lending Business** may require additional equity or debt financing, which could dilute stockholders or impose restrictive covenants[93](index=93&type=chunk) [Critical Accounting Estimates](index=15&type=section&id=Critical%20Accounting%20Estimates) - The company's most critical accounting estimates include allowance for doubtful accounts, sales taxes, income taxes, and stock-based compensation expense[96](index=96&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=15&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) - Forward-looking statements in the report involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[95](index=95&type=chunk) - Key risks include the availability of strategic alternatives, the limited history of the **Lending Business**, substantial risk of loss in lending, market conditions, ability to develop necessary processes and controls, reliance on a small number of employees, and potential adverse classifications[97](index=97&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=16&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - This item is **not applicable**[98](index=98&type=chunk) [Item 4. Controls and Procedures](index=16&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that the company's disclosure controls and procedures were effective as of September 30, 2023, and that no material changes in internal control over financial reporting occurred during the third quarter - Management concluded that the company's disclosure controls and procedures were **effective** as of **September 30, 2023**[100](index=100&type=chunk) - No changes in the company's internal control over financial reporting occurred during the third quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[101](index=101&type=chunk) [PART II. OTHER INFORMATION](index=16&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=16&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, that would significantly impact the company's financial position or results of operations - There are no material pending legal proceedings expected to have a **material effect** on the company's financial position or results of operations[104](index=104&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, emphasizing those related to the company's new lending business, the broader economic and market conditions, and operational challenges inherent in its new strategic direction [Risks Relating to Our Business](index=16&type=section&id=RISKS%20RELATING%20TO%20OUR%20BUSINESS) - The new **Non-Bank Lending business** has limited operating history and has generated **no revenues** through September 30, 2023, making it difficult to evaluate future prospects and risks[106](index=106&type=chunk) - Non-bank lending involves a **substantial risk of loss** from borrower defaults, which could materially and adversely affect operations if collateral value does not cover exposure[107](index=107&type=chunk) [Risks Relating to Economy and Market Conditions](index=17&type=section&id=RISKS%20RELATING%20TO%20ECONOMY%20AND%20MARKET%20CONDITIONS) - Operating results can be materially and adversely affected by external factors such as disruptions in debt or equity capital markets, competitive pressures, changes in interest rates, and market or customer perception of the company's reputation[108](index=108&type=chunk)[112](index=112&type=chunk) [Operational Risks](index=17&type=section&id=OPERATIONAL%20RISKS) - The **Lending Business** requires the development of new processes and controls, exposing it to risks from inadequate systems, failed execution, internal control failures, or external events like cyber incidents[109](index=109&type=chunk)[113](index=113&type=chunk) - The success of the **Lending Business** initially depends on a small number of employees, posing a risk if the company cannot retain and attract motivated and qualified personnel[110](index=110&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=17&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's common stock repurchase program, including the Board's authorization and the actual repurchase activity during the third quarter of 2023 - On **August 28, 2023**, the Board of Directors authorized the repurchase of up to **400,000 shares** of the company's common stock[111](index=111&type=chunk) Common Stock Repurchase Activity (Three Months Ended September 30, 2023) | Period | Total number of shares purchased | Average price paid per share | Total dollar value of shares purchased | Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs | | :--------------------- | :------------------------------- | :--------------------------- | :------------------------------------- | :----------------------------------------------------------------------------- | | July 1 - 31, 2023 | - | $ - | $ - | 400,000 | | August 1 - 31, 2023 | 66,108 | $ 5.76 | $ 380,782 | 333,892 | | September 1 - 30, 2023 | 9,237 | $ 5.94 | $ 54,868 | 324,655 | | **Total** | **75,345** | | **$ 435,650** | | [Item 3. Defaults upon Senior Securities](index=18&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the period - None[115](index=115&type=chunk) [Item 4. Mine Safety Disclosures](index=18&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Not applicable[116](index=116&type=chunk) [Item 5. Other Information](index=18&type=section&id=Item%205.%20Other%20Information) This section reports that no director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2023 - No director or officer adopted, modified, or terminated a **Rule 10b5-1** or non-**Rule 10b5-1** trading arrangement during the three months ended September 30, 2023[117](index=117&type=chunk) [Item 6. Exhibits](index=18&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including key agreements, corporate documents, certifications, and XBRL data - Exhibits include the **Asset Purchase Agreement**, **Certificate of Incorporation**, **Bylaws**, **Letter Agreements**, **Certifications of Principal Executive and Financial Officers**, and **XBRL data**[118](index=118&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for June 30, 2023, reflect the company's financial position, operational results, and cash flows, highlighting its strategic shift to non-bank lending [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to **$19.76 million** from **$20.97 million** at year-end 2022, while shareholders' equity increased to **$15.06 million** from **$13.40 million** Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $11,419,000 | $14,439,000 | | Accounts receivable, net | $7,583,000 | $5,557,000 | | Total Current Assets | $19,556,000 | $20,753,000 | | Total Assets | $19,760,000 | $20,968,000 | | Total Current Liabilities | $4,525,000 | $7,374,000 | | Total Shareholders' Equity | $15,057,000 | $13,401,000 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2023, the company achieved net income of **$1.61 million**, a significant improvement from a **$1.02 million** net loss year-over-year, driven by increased net services revenues Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net services revenues | $6,211,000 | $3,254,000 | $19,042,000 | $9,402,000 | | Gross Profit | $1,623,000 | $416,000 | $4,543,000 | $1,696,000 | | Operating (Loss) Income | ($167,000) | ($1,101,000) | $1,372,000 | ($1,028,000) | | Net (Loss) Income | ($36,000) | ($1,084,000) | $1,612,000 | ($1,022,000) | | Diluted EPS | ($0.02) | ($0.61) | $0.89 | ($0.57) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash used in operating activities was **$3.01 million**, leading to a **$3.02 million** decrease in cash, ending at **$11.50 million** Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,009,000) | ($1,475,000) | | Net cash used in investing activities | ($19,000) | ($28,000) | | Net cash provided by financing activities | $8,000 | $39,000 | | **Decrease in cash** | **($3,020,000)** | **($1,464,000)** | | Cash at end of period | $11,504,000 | $2,387,000 | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant corporate changes, including the company's reincorporation as Lendway, Inc., the **$3.5 million** sale of its legacy business, and accounting policies, including a **$1.3 million** Federal NOL carryforward - Effective August 4, 2023, the company changed its name to **Lendway, Inc.**, reincorporated to Delaware, and is now focused on building a non-bank lending business[24](index=24&type=chunk) - On August 3, 2023, the company sold its legacy in-store advertising business for **$3.5 million** to TIMIBO LLC, with operations to be presented as discontinued starting Q3 2023[25](index=25&type=chunk)[28](index=28&type=chunk) - For the six months ended June 30, 2023, two customers accounted for **27%** and **18%** of legacy business net sales, with one customer representing **70%** of total accounts receivable at period-end[65](index=65&type=chunk) - As of June 30, 2023, the company estimates approximately **$1.3 million** in Federal net operating loss (NOL) carryforwards are available to offset future taxable income[65](index=65&type=chunk)[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic transformation to a non-bank lending business, highlighting strong legacy business revenue growth, a shift to profitability, and the sufficiency of its **$11.5 million** cash position for the next 12 months [Company Overview and Recent Developments](index=14&type=section&id=Company%20Overview%20and%20Recent%20Developments) The company is building a non-bank lending business focused on agricultural real estate, following the **$3.5 million** sale of its legacy advertising business and its reincorporation as Lendway, Inc - The company is launching a non-bank lending business focused on purchasing, originating, and funding collateral-secured loans, initially targeting agricultural real estate[72](index=72&type=chunk)[73](index=73&type=chunk) - On August 3, 2023, the company sold its legacy in-store advertising business for **$3.5 million** cash to TIMIBO LLC[78](index=78&type=chunk) - The asset sale incurred approximately **$350,000** in transaction costs and **$1.54 million** in severance and separation benefits, to be expensed in Q3 2023[82](index=82&type=chunk) [Results of Operations](index=15&type=section&id=Results%20of%20Operations) Net sales for H1 2023 increased **102.5%** to **$19.0 million**, driven by a large display program, significantly improving gross profit margins to **23.9%** for the period, despite increased operating expenses Financial Performance Comparison | Metric | Q2 2023 | Q2 2022 | Y/Y Change | H1 2023 | H1 2022 | Y/Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $6,211,000 | $3,254,000 | +90.9% | $19,042,000 | $9,402,000 | +102.5% | | Gross Profit | $1,623,000 | $416,000 | +290.1% | $4,543,000 | $1,696,000 | +167.9% | | Gross Margin | 26.1% | 12.8% | +13.3pp | 23.9% | 18.0% | +5.9pp | - General and administrative expenses in Q2 2023 increased **19.1%** to **$1.13 million**, driven by **$339,000** in legacy business sale costs and **$101,000** for the new lending business[97](index=97&type=chunk) - Interest income significantly increased in 2023 due to higher invested balances from the **$12 million** litigation settlement received in July 2022 and higher interest rates[99](index=99&type=chunk) [Supplemental Operating Results on a Pro Forma Basis](index=17&type=section&id=Supplemental%20Operating%20Results%20on%20a%20Pro%20Forma%20Basis) Pro forma results for continuing operations (new lending business) show no revenue and a **$422,000** loss before taxes for Q2 2023, with minimal revenue and continued losses anticipated for the remainder of the year Pro Forma Results for Continuing Operations (Q2) | Metric | 2023 Pro Forma | 2022 Pro Forma | | :--- | :--- | :--- | | General and administrative | $557,000 | $432,000 | | Operating loss from continuing operations | ($557,000) | ($432,000) | | Interest income | $135,000 | $31,000 | | Loss before taxes from continuing operations | ($422,000) | ($401,000) | - The increase in pro forma G&A expenses was primarily due to **$101,000** in incremental expenses for the new non-bank lending business in Q2 2023[111](index=111&type=chunk) - The company anticipates minimal revenue and continued losses from its continuing non-bank lending operations for the rest of the year[106](index=106&type=chunk)[113](index=113&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, the company had **$15.0 million** in working capital and **$11.5 million** in cash, deemed sufficient for the next 12 months, though future growth may require additional capital - At June 30, 2023, the company had **$11.5 million** in cash and cash equivalents plus restricted cash[118](index=118&type=chunk) - Working capital increased to **$15.0 million** at June 30, 2023, from **$13.4 million** at December 31, 2022[114](index=114&type=chunk) - The company believes its current cash balances will be sufficient for its cash requirements for at least the next 12 months[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable for the reporting period - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[125](index=125&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with new controls implemented for the non-bank lending business - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2023[127](index=127&type=chunk) - The company implemented new controls related to its non-bank lending business during the quarter[128](index=128&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=20&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings beyond ordinary routine litigation incidental to its business - There are no material pending legal proceedings to which the company is a party[130](index=130&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company highlights new risk factors for its non-bank lending business, including limited operating history, substantial loss risk, market restrictions, operational development needs, and dependence on key employees - The new non-bank lending business has a limited operating history, making future prospects and risks difficult to evaluate[132](index=132&type=chunk) - Non-bank lending involves a substantial risk of loss from borrower defaults, potentially materially affecting business operations and financial condition[134](index=134&type=chunk) - The new business requires developing new processes, systems, and controls, exposing it to operational risks such as failed execution or fraud[136](index=136&type=chunk)[141](index=141&type=chunk) - The success of the lending business will initially depend on a small number of key employees[137](index=137&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the reporting period - None reported for the period[138](index=138&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________ to ____________ Commission File Number: 1-13471 INSIGNIA SYSTEMS INC/MN (Exact name of registrant as specified in its charter) (State or other jurisdiction ...