Value Investors Club / LENDWAY INC (LDWY)

Description

This is a tiny company so suitable for small accounts only. Its also a fast moving situation so the write up will be brief.

Lendway “LDWY” – On Aug 3 the company sold its operating assets and now its major assets are $11.4 mm of cash and $7.5mm of a/r. With $4.5mm of liabilities, book value is $15mm. There are 1.8mm shares. So this $5 stock has $8.30 of book (most of which is cash and a/r which we believe is money good). The Pro forma balance sheet is below.

Last week the company’s stock got hit on massive volume for some unknown reason (maybe because it fell below $5 and couldn’t be margined or held in some accounts) and 2.6mm shares traded on Friday (there are only 1.8mm shares outstanding and the CEO controls 40 % of those shares!). This morning the company responded with a buyback for 400k shares or 22% of shares outstanding. https://finance.yahoo.com/news/lendway-inc-announces-authorization-repurchase-130000231.html

LDWY company is “controlled” by a board member Nick Swenson who is also the Chairman and CEO of AIR T (AIRT). We doubt he was selling any stock. (Note his personal ownership of 11.8% is included in the 38.9% owned by AirT.) The former CEO, Kristine Glancy, was recently let go so maybe she sold her stock but even if she did, it wouldn’t account for the massive selling.

We are digging deeper into the a/r but a “risk” would be if they couldn’t be collected. Now that it sold its old business, LDWY will focus on building a scalable non-bank lending platform to purchase existing loans and/or originate and fund new loans

Nicholas J. Swenson has served as President and Chief Executive Officer of Air T, Inc. (Nasdaq:AIRT) since 2014, having previously served in those roles on an interim basis since 2013. Mr. Swenson is also the managing member of AO Partners, LLC, which is the general partner of AO Partners I, L.P. Mr. Swenson has served on the boards of directors of Air T, Inc. since 2013, Pro-Dex, Inc. since 2012 and Delphax Technologies Inc. since 2015. Nick previously served as a portfolio manager and partner of Whitebox Advisers, LLC; as a distressed debt analyst at Varde Partners; and as a financial institutions investment banker at Piper Jaffray, Inc. He has a BA in History from Middlebury College and an MBA from the University of Chicago. Mr. Swenson’s experience in general management and capital allocation are relevant to the Company.

The company’s largest shareholders are

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership^(a)			Percent of Shares
*Directors, Nominees and Named Executive Officers*
Kristine A. Glancy		44,463	(b)		2.5	%
Adam D. May		16,228	(c)		*
Zackery A. Weber		9,693	(d)		*
Jacob J. Berning		16,523	(e)		*
Mary H. Herfurth		–			–
Chad B. Johnson		7,462	(e)		*
Mark R. Jundt		–			–
Matthew R. Kelly		–			–
Daniel C. Philp		–			–
Nicholas J. Swenson		214,456	(e)(f)		11.8	%
Loren A. Unterseher		13,373	(e)		*
All current directors, nominees and executive officers as a group (12 persons)		322,198	(g)		17.6	%

*Significant Shareholders*
Air T, Inc., et al. (the “Shareholder Group”)		701,275	(h)		38.9	%
5930 Balsom Ridge Road
Denver, NC 28037
David E. Lazar		174,355	(i)		9.7	%
Villa 1, 14-43^rd Street, Jumeirah 2
Dubai, United Arab Emirates

The unaudited pro forma condensed consolidated balance sheet illustrates the impact at June 30, 2023 had discontinued operations presentation been used (unaudited). The amounts held for sale represent the assets that will be purchased by the Buyer and liabilities which will be assumed by the Buyer:

	Historical		Discontinued Operations Adjustments			Pro Forma Continued Operations
ASSETS
Current Assets:
Cash and cash equivalents	$	11,419,000	$	-		$	11,419,000
Restricted cash		85,000		-			85,000
Accounts receivable, net		7,583,000		-			7,583,000
Inventories		28,000		(28,000	)		-
Income tax receivable		90,000		-			90,000
Prepaid production costs		143,000		(143,000	)		-
Other prepaid expense		208,000		(19,000	)		189,000
Current assets held for sale		-		190,000			190,000
Total Current Assets		19,556,000		-			19,556,000

Other Assets:
Property and equipment, net		71,000		(71,000	)		-
Operating lease right-of-use assets		123,000		(123,000	)		-
Other, net		10,000		-			10,000
Non-current assets held for sale		-		194,000			194,000

Total Assets	$	19,760,000	$	-		$	19,760,000

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable		1,324,000		(72,000	)		1,252,000
Accrued liabilities		2,031,000		-			2,031,000
Current portion of operating lease liabilities		16,000		(16,000	)		-
Deferred revenue		1,154,000		(1,154,000	)		-
Current liabilities held for sale		-		1,242,000			1,242,000
Total Current Liabilities		4,525,000		-			4,525,000

Long-Term Liabilities:
Accrued income taxes		55,000		-			55,000
Operating lease liabilities		123,000		(123,000	)		-
Non-current liabilities held for sale		-		123,000			123,000
Total Long-Term Liabilities		178,000		-			178,000

Commitments and Contingencies		-		-			-

Shareholders' Equity:
Total Shareholders' Equity		15,057,000		-			15,057,000

Total Liabilities and Shareholders' Equity	$	19,760,000	$	-		$	19,760,000

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

Buyback

end of selling pressure

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			2023	2024
Price:	5.45	EPS	0	0
Shares Out. (in M):	2	P/E	0	0
Market Cap (in $M):	10	P/FCF	0	0
Net Debt (in $M):	-15	EBIT	0	0
TEV (in $M):	-5	TEV/EBIT	0	0