Insignia(LDWY) - 2025 Q1 - Quarterly Report

Explanatory Note This section clarifies the company's fiscal year change and the reporting period covered by this Form 10-Q Fiscal Year Change The company has changed its fiscal year-end from December 31 to June 30. A transition report on Form 10-K will be filed for the six-month period ending June 30, 2025. This Form 10-Q covers the quarter ending March 31, 2025, within this transition period - The Company's Board of Directors approved a change in the fiscal year end from December 31 to June 30[5] - A transition report on Form 10-K will be filed for the six-month period from January 1, 2025, to June 30, 2025[5] - Quarterly reports will be filed based on the new fiscal year, starting with the quarter ending September 30, 2025[5] PART I. FINANCIAL INFORMATION This section presents the company's financial statements, management's discussion, market risk disclosures, and internal controls Financial Statements The company's financial statements reflect a significant shift following the Bloomia acquisition in February 2024. For the quarter ended March 31, 2025, revenue surged to $12.4 million, driving a net income of $0.45 million, a stark turnaround from a net loss of $1.16 million in the prior-year quarter. Total assets grew slightly to $100.5 million, primarily financed by long-term debt of $34.7 million. Cash from operations was positive at $1.7 million, though overall cash decreased due to debt repayments Condensed Consolidated Balance Sheets Total assets increased slightly to $100.5 million as of March 31, 2025, from $100.0 million at December 31, 2024. The increase was driven by higher accounts receivable, offset by lower inventories and cash. Total liabilities decreased to $87.9 million from $88.1 million, mainly due to a reduction in long-term debt, while total stockholders' equity rose to $12.6 million from $11.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $100,514 | $99,985 | | Cash and cash equivalents | $1,308 | $1,759 | | Accounts receivable, net | $4,475 | $2,243 | | Inventories | $11,922 | $13,370 | | Goodwill | $10,860 | $10,705 | | Total Liabilities | $87,946 | $88,091 | | Total current liabilities | $13,532 | $7,812 | | Long-term debt, net | $34,665 | $36,608 | | Total Stockholders' Equity | $12,568 | $11,894 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the three months ended March 31, 2025, the company reported net revenue of $12.4 million and a net income attributable to Lendway, Inc. of $449,000. This represents a significant improvement from the same period in 2024, which saw revenues of $8.0 million and a net loss of $1.16 million. The turnaround was driven by a full quarter of operations from the Bloomia acquisition and improved gross margins Q1 2025 vs. Q1 2024 Performance (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue, net | $12,443 | $8,033 | | Gross profit | $3,889 | $1,744 | | Operating income (loss) | $1,432 | $(1,644) | | Net income (loss) attributable to Lendway, Inc. | $449 | $(1,163) | | Basic and diluted EPS | $0.25 | $(0.67) | Condensed Consolidated Statements of Cash Flows In Q1 2025, net cash provided by operating activities was $1.7 million, an increase from $1.5 million in Q1 2024. Investing activities used a minimal $68,000, compared to a significant $34.4 million outflow in the prior year due to the Bloomia acquisition. Financing activities used $2.1 million for debt repayments, in contrast to a $21.8 million inflow in Q1 2024 used to fund the acquisition. Overall, cash and cash equivalents decreased by $451,000 during the quarter Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,737 | $1,470 | | Net cash used in investing activities | $(68) | $(34,372) | | Net cash (used in) provided by financing activities | $(2,132) | $21,835 | | Net decrease in cash and cash equivalents | $(451) | $(11,064) | Notes to Condensed Consolidated Financial Statements The notes detail the company's transformation into a specialty agricultural firm following the February 2024 acquisition of Bloomia, a major tulip producer. The acquisition was funded by $53.4 million in cash and debt. Revenue is now primarily from tulip sales to supermarkets and wholesalers, with significant customer concentration. The company holds substantial debt, including a term loan, revolving credit facility, and a related-party note from major shareholder Air T Inc. A key purchase obligation requires the company to buy $1.65 million in tulip bulbs annually through 2028 - The company is now a specialty agricultural company focused on its investment in Bloomia, a significant producer of fresh-cut tulips in the U.S., acquired on February 22, 2024[16] - The Bloomia acquisition's total consideration was $53.36 million, comprising $34.9 million in cash, $15.45 million in seller bridge loans, and $2.99 million in equity issued to Bloomia's CEO (18.6% noncontrolling interest)[33] - In Q1 2025, four customers accounted for 17%, 17%, 13%, and 11% of total revenues, indicating significant customer concentration[29] - The company has a purchase obligation to buy $1.65 million of tulip bulbs annually through 2028 from a third-party[61] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant year-over-year revenue and profit growth in Q1 2025 to the inclusion of a full quarter of operations from the Bloomia acquisition, compared to only a partial quarter in Q1 2024. Gross margin improved from 21.7% to 31.3%, benefiting from higher sales volume and the absence of a one-time inventory write-up that occurred post-acquisition in 2024. SG&A expenses decreased due to non-recurring acquisition costs in the prior year. The company's liquidity is seasonal, peaking in the first half of the year. It is managed through cash from operations and debt facilities, including a credit agreement and a related-party note. A debt covenant was breached due to the timing of the Easter holiday, but a waiver was obtained from the lender Company Overview Lendway is a specialty agricultural company whose primary operations are through its majority-owned subsidiary, Bloomia, a leading producer of fresh-cut tulips in the U.S. with operations in the Netherlands and South Africa. Bloomia sources bulbs internationally for year-round production and sells primarily to large U.S. retailers. The business is seasonal, with sales peaking in the spring - The company's primary operations are through Bloomia, a leader in the fresh-cut tulip industry in the U.S., which nurtured over 75 million tulip stems in 2024[68][69] - Bloomia operates in the U.S., the Netherlands, and South Africa, and sources bulbs from the Netherlands, Chile, and New Zealand for year-round supply[69][70] - The tulip sales business is seasonal, with the strongest sales season in the spring. Inventory peaks in the first calendar quarter, while accounts receivable and inventory are lowest in the summer[74] Results of Operations Q1 2025 revenue increased to $12.4 million from $8.0 million in Q1 2024, primarily because the 2025 results include a full quarter of Bloomia's operations versus a partial quarter in 2024. Gross profit margin rose to 31.3% from 21.7%, as the prior-year period included a $1.36 million inventory fair value amortization. SG&A expenses fell to $2.5 million from $3.4 million, mainly due to $1.5 million in non-recurring acquisition costs in Q1 2024. Consequently, operating income was $1.4 million, a significant reversal from a $1.6 million loss in the prior year - Revenue increased in Q1 2025 due to a full quarter of revenue from the Bloomia acquisition, compared to only partial revenue from the acquisition date (Feb 22, 2024) through March 31, 2024[77] - Gross margin increased to 31.3% in Q1 2025 from 21.7% in Q1 2024. The prior year's margin was negatively impacted by a $1,360,000 amortization of inventory written up to fair value during the acquisition[78] - SG&A expenses decreased primarily due to $1,542,000 of acquisition-related costs incurred in Q1 2024, which were not repeated in Q1 2025[80] EBITDA Reconciliation (Non-GAAP, in thousands) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | 2025 | 2024 | | 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) | Liquidity and Capital Resources The company's liquidity is seasonal, with cash collection concentrated in the first half of the calendar year. Working capital decreased from $11.0 million to $6.3 million during the quarter as cash from sales was used to pay down debt. The company finances operations through cash flow, an $18M term loan, and a revolving credit facility (temporarily increased to $8M, now back to $6M). A covenant breach related to the senior cash flow leverage ratio occurred due to the timing of Easter sales but was waived by the lender. The company believes it has sufficient liquidity for the next 12 months from operations and existing credit facilities - Working capital was $6.3 million at March 31, 2025, a decrease from $11.0 million at December 31, 2024, as cash from sales was used to repay approximately $2.0 million on its revolving credit line[91] - The company was in breach of its maximum senior cash flow leverage ratio covenant as of March 31, 2025, due to a shift in Easter holiday sales. The lender subsequently waived this breach with no financial impact[43][101] - The company has a Delayed Draw Term Note with Air T Inc. (a related party and >10% shareholder) for up to $3.75 million to fund operations[48][104] - Management expects sufficient liquidity for at least the next 12 months from cash from operations and available credit facilities[106] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Lendway, Inc. is not required to provide the disclosure requested under this item - The company is a smaller reporting company and is not required to provide disclosure pursuant to this item[112] Controls and Procedures Based on an evaluation conducted by management, including the principal executive and financial officers, the company's disclosure controls and procedures were deemed effective as of March 31, 2025. There were no material changes to the company's internal control over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report[113] - There were no changes in the Company's internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, its internal controls[114] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other disclosures, and a list of exhibits Legal Proceedings The company was not involved in any material legal claims or actions as of March 31, 2025, that would be expected to have a material adverse effect on its financial position, operations, or liquidity - As of March 31, 2025, the Company was not involved in any material claims or legal actions[60][117] Risk Factors There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in risk factors from those previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[118] Unregistered Sales of Equity Securities and Use of Proceeds The company has a stock repurchase authorization for up to 400,000 shares, approved in August 2023. No shares were repurchased during the three months ended March 31, 2025. As of the end of the quarter, 315,792 shares remained available for repurchase under this program - The company has a stock repurchase authorization for up to 400,000 shares[119] - There was no repurchase activity for the three months ended March 31, 2025[119] - As of March 31, 2025, 315,792 shares remained available for repurchase under the existing authorization[119] Other Information During the first quarter of 2025, no director or officer of the company adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted, modified, or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the quarter[122] Exhibits This section lists the exhibits filed with the Form 10-Q, including asset purchase agreements, corporate governance documents, and certifications required by the Sarbanes-Oxley Act. Financial data is also provided in inline XBRL format - The report includes exhibits such as the Asset Purchase Agreement, Agreement for the Sale and Purchase of Shares, Certificate of Incorporation, Bylaws, and various officer certifications[123]