Executive Summary / Key Takeaways

• Strategic Pivot to Agriculture: Lendway, Inc. (LDWY) has undergone a profound transformation, shifting from its legacy in-store advertising business (as Insignia Systems) to become a specialty agricultural company focused on fresh-cut tulip production through its Bloomia acquisition. This strategic pivot aims to capitalize on higher margins from domestic growing and a year-round supply chain.
• Seasonal Financial Dynamics: The company's recent Q1 FY2026 results (ended September 30, 2025) reflect significant seasonality and strategic decisions, showing a revenue decline and gross loss attributed to accelerated growing for Mother's Day demand and fewer bulbs available in the quarter. Management anticipates revenue and gross margin improvement in subsequent quarters as inventory is converted to sales.
• Technological Edge in Cultivation: Bloomia leverages hydroponic growing methods and automation in its U.S. greenhouses, enhancing production efficiency and enabling the cultivation of premium, longer-shelf-life tulips. This technological approach, combined with global bulb sourcing, underpins its competitive positioning.
• Leveraged Growth and Liquidity Management: Lendway has significantly increased its debt to finance the Bloomia acquisition and ongoing operations, including substantial related-party notes. While management expects sufficient liquidity for the next 12 months, the high debt levels and reliance on credit facilities warrant close monitoring.
• Key Risks and Competitive Pressures: Significant risks include customer concentration, dependency on seasonal labor (H-2A program), foreign currency fluctuations (Euro-priced bulbs), tariffs, and the ability to secure additional capital. The company operates in a competitive agricultural market where efficiency and supply chain management are paramount.

The Seed of Transformation: From Advertising to Agronomy

Lendway, Inc. (LDWY) has embarked on a remarkable journey, fundamentally reshaping its identity from its origins as Insignia Systems, Inc., an in-store advertising solutions provider, to a specialty agricultural powerhouse. For years, Insignia Systems navigated the competitive landscape of retail marketing with its POPS business and ventures like "The Like Machine," facing inconsistent revenue and profitability tied to the spending patterns of large consumer packaged goods (CPG) customers. The company invested in its IT operational infrastructure during this period, aiming to streamline operations and support future product expansion.

A pivotal shift occurred in August 2023 with the company's rebranding to Lendway, Inc., followed by the strategic acquisition of Bloomia B.V. and its subsidiaries in February 2024. This move marked a complete reorientation, transforming Lendway into a significant producer of fresh-cut tulips. This strategic pivot was driven by the potential for higher margins through domestic growing, which substantially reduces freight costs and tariffs associated with importing fully grown stems. Bloomia's operations, now Lendway's primary focus, are strategically positioned across the United States, the Netherlands, and South Africa, complemented by a 30% interest in a Chilean greenhouse business, Araucania Flowers S.A.

Cultivating Efficiency: The Technological Edge in Tulip Production

Lendway's competitive advantage in the fresh-cut tulip market is significantly bolstered by Bloomia's technological and operational differentiators. The company employs hydroponic growing methods in its U.S. and South Africa greenhouses, a modern agricultural technique that allows for precise control over nutrient delivery and water usage, optimizing growth conditions. Furthermore, Lendway has invested in automation within its U.S. greenhouse operations, which has demonstrably increased production efficiency.

These technological advancements translate into tangible benefits. The ability to grow tulips hydroponically year-round, combined with a global sourcing strategy for bulbs from the Netherlands, Chile, and New Zealand, ensures a consistent supply regardless of seasonal variations. This year-round availability is crucial for meeting continuous market demand. The domestic growing strategy, facilitated by these technologies, allows Bloomia to offer premium tulip stems with a longer shelf life, while simultaneously achieving higher margins due to reduced freight costs for importing bulbs (versus stems) and lower tariffs. In 2024, Bloomia nurtured over 75 million tulip stems, with its South Africa facility alone producing an average of approximately 3.50 million tulip stems annually over the last five years. This operational scale and efficiency are critical in a market sensitive to freshness and cost.

Financial Harvest: Navigating Seasonality and Investment

Lendway's financial performance for the three months ended September 30, 2025 (the first quarter of its fiscal year 2026, following a change in fiscal year end to June 30), reflects the inherent seasonality of the tulip business and recent strategic decisions. Revenue for the quarter decreased to $5.15 million from $6.63 million in the prior year period. This decline was primarily a result of strategically accelerating tulip growth earlier in the calendar year to meet peak demand around Mother's Day, which left fewer stems available for sale in the September quarter. Additionally, fewer Dutch bulbs purchased in 2024 contributed to reduced stem availability later in the season.

The company reported a gross loss of $60,000, or 1.2% of revenue, for the quarter, a significant shift from a gross profit of $1.44 million (21.7% of revenue) in the same period of 2024. This gross loss was attributed to the strategic timing of stem growth, which impacted the ability to cover fixed costs in the quarter, alongside increases in average bulb prices, tariffs, and freight costs, partially offset by a price increase. Operating loss widened to $3.04 million from $1.35 million year-over-year. Interest expense also increased to $822,000, driven by higher debt levels from accrued interest on seller notes and related party notes. Consequently, Lendway reported a net loss attributable to shareholders of $2.85 million, compared to a loss of $1.12 million in the prior year. Despite these losses, EBITDA for the quarter improved to $2.39 million from $574,000, indicating some operational leverage before non-cash and interest expenses.

Liquidity and Capital Structure: Fueling Growth

Lendway's liquidity and capital resources are crucial for funding its capital-intensive agricultural operations. As of September 30, 2025, the company's working capital significantly increased to $11.26 million from $1.10 million at June 30, 2025. This improvement was largely due to the purchase of approximately $11.00 million in Dutch tulip bulbs, with $4.00 million financed through long-term notes, though partially offset by lower accounts receivable due to seasonality.

Net cash used in operating activities for the quarter was $9.93 million, an increase from $7.55 million in the prior year, primarily due to higher Euro prices for bulbs and an unfavorable Euro to dollar exchange rate. To support these operations and bulb purchases, Lendway secured $10.88 million in financing activities, including $8.57 million drawn from its revolving credit facility and $4.00 million from new notes. The company recently amended its Credit Agreement, temporarily increasing its revolving facility capacity to $10.00 million until April 30, 2026, and expanding eligible inventory to include holdings in the Netherlands.

Lendway's debt structure includes a $15.30 million term loan and $12.75 million in notes payable to sellers. Additionally, the company has related party notes payable, including a $2.15 million unsecured Delayed Draw Term Note and new unsecured Promissory Notes totaling $4.00 million, bearing a 13.50% interest rate, with proceeds earmarked for Bloomia operations. Management projects that existing cash, combined with available credit facilities and related party notes, will provide sufficient liquidity for at least the next 12 months.

Competitive Landscape and Strategic Positioning

Lendway operates in a competitive agricultural market for fresh-cut flowers, where efficiency, supply chain resilience, and customer relationships are paramount. The company's strategic positioning is built on its ability to offer premium, domestically grown tulips with a longer shelf life, differentiating itself from competitors reliant on importing fully grown stems. This domestic growing model, supported by hydroponics and automation, provides a cost advantage through reduced freight and tariffs.

However, Lendway faces competitive pressures, including pricing dynamics for tulip bulbs and the impact of tariffs and freight costs on its gross margins. The company's customer base in the U.S. is concentrated, with three customers accounting for a significant portion of its Q1 FY2026 revenues (32%, 19%, and 18% respectively). This concentration presents a vulnerability, as the loss of a major customer could materially impact financial performance. While direct quantitative comparisons with all niche agricultural competitors are challenging to ascertain, Lendway's focus on operational efficiency and year-round supply aims to secure its market share and profitability.

Risks and Outlook

While Lendway's strategic pivot offers significant potential, several risks warrant investor attention. The company's dependency on seasonal labor, particularly through the H-2A agricultural guest worker program, poses a risk. A federal government shutdown, as seen on October 1, 2025, could disrupt the processing of H-2A certificates, leading to potential labor shortages, reduced production, or increased labor costs. Foreign currency exchange rate fluctuations, particularly the Euro to dollar rate, directly impact the cost of bulbs purchased from the Netherlands, affecting operating cash flow and profitability. Tariffs also contribute to cost pressures.

The company's substantial debt load, including related party notes, and the covenants within its Credit Agreement, require careful management. While management expects compliance with financial covenants for the next 12 months, the ability to incur additional indebtedness is restricted. Furthermore, the availability of additional capital on reasonable terms, if needed for future growth, could be impacted by global economic conditions.

Looking ahead, management is optimistic about the remainder of fiscal year 2026. They anticipate revenue to increase in subsequent quarters as more bulbs in inventory are grown into stems for sale, subject to normal agricultural risks. Correspondingly, gross margin is also expected to improve. The company does not foresee any income or loss from discontinued operations in fiscal year 2026. This outlook hinges on successful execution of its growing and sales strategies, effective management of its supply chain, and favorable market conditions for fresh-cut tulips.

Conclusion

Lendway, Inc. is in the midst of a compelling transformation, having successfully pivoted from its legacy advertising business to establish itself as a specialized agricultural player in the fresh-cut tulip market. The company's investment in hydroponic technology and automation, coupled with a global sourcing strategy, underpins its ability to deliver premium products and achieve higher margins through domestic cultivation. While recent financial results reflect the inherent seasonality and strategic decisions to meet peak demand, management's outlook for improved revenue and gross margin in the coming quarters suggests a path towards greater profitability as inventory cycles through.

However, investors must weigh this growth potential against significant risks, including customer concentration, labor dependencies, foreign exchange volatility, and a leveraged capital structure. Lendway's success will ultimately depend on its ability to consistently execute its operational efficiencies, manage its debt obligations, and navigate the competitive dynamics of the agricultural sector. The company's strategic shift represents a bold move, and its future performance will be a testament to its ability to cultivate sustainable growth in this new, fertile ground.