Stran Company Inc

Previous wording

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our,” “Stran,” and the “Company” are to Stran & Company, Inc., a Nevada corporation.

Current wording

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our,” and the “Company” are to Stran & Company, Inc., a Nevada corporation, and its consolidated subsidiaries; references to “Stran” or “Stran & Company, Inc.” are to Stran & Company, Inc., a Nevada corporation; and references to “Stran Loyalty Solutions” or “SLS” are to Stran Loyalty Solutions, LLC, a Nevada limited liability company and a wholly-owned subsidiary of Stran & Company, Inc.

Previous wording

The majority of our revenue is derived from program business, although only a small percentage of our customers are considered programmatic. For the three and six months ended June 30, 2024, program clients accounted for 81.3% and 82.7% of total revenue, respectively. For the three and six months ended June 30, 2023, program clients accounted for 77.4% and 79.2% of total revenue, respectively. Fewer than 350 of our more than 2,000 active customers are considered to be program clients. Ouractive customers are any organizations, businesses, or divisions of a parent organization which have purchased directly or indirectly from us within the last two years, and include organizations that have bought from other organizations for which Stran acts as an established sub-contractor. We define transactional customers as customers that place an order with us and do not have an agreement with us covering ongoing branding requirements. We define program clients as clients that have a contractual obligation for specific ongoing branding needs. Program offerings include ongoing inventory, use of technology platform, warehousing, creative services, and additional client support. Those program customers are geared towards longer-lasting relationships that helps secure recurring revenue well into the future.

Current wording

For the Stran & Company, Inc. operating segment, the majority of our revenue is derived from program business, although only a small percentage of our customers are considered programmatic. For the three and nine months ended September 30, 2024, program clients accounted for 83.2% and 83.6% of total revenue, respectively. For the three and nine months ended September 30, 2023, program clients accounted for 80.5% and 79.8% of total revenue, respectively. Fewer than 350 of our more than 2,000 active customers are considered to be program clients. Our active customers are any organizations, businesses, or divisions of a parent organization which have purchased directly or indirectly from us within the last two years, and include organizations that have bought from other organizations for which Stran acts as an established sub-contractor. We define transactional customers as customers that place an order with us and do not have an agreement with us covering ongoing branding requirements. We define program clients as clients that have a contractual obligation for specific ongoing branding needs. Program offerings include ongoing inventory, use of technology platform, warehousing, creative services, and additional client support. Those program customers are geared towards longer-lasting relationships that help secure recurring revenue well into the future.

Previous wording

Our sales decreased 4.1% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, and increased 6.4% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, which we believe was primarily due to higher spending from existing clients as well as business from new customers. We benefited from the acquisition of the assets of T R Miller Co., Inc., or T R Miller, in June 2023.

Current wording

Our sales increased 2.4% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, and increased 4.9% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, which we believe was primarily due to higher spending from existing clients as well as business from new customers. We benefited from the acquisition of the assets of T R Miller Co., Inc., a Massachusetts corporation, or T R Miller, in June 2023, and from the acquisition of the assets (the “Gander Group Assets”) of Bangarang Enterprises, LLC, a California limited liability company (d/b/a Gander Group) (“Gander Group”), in August 2024.

Previous wording

As of June 30, 2024, we had approximately $46.6 million of total assets with approximately $34.3 million of total stockholders’ equity.

Current wording

As of September 30, 2024, we had approximately $48.8 million of total assets with approximately $32.3 million of total stockholders’ equity.

Previous wording

This Quarterly Report on Form 10-Q includes financial statements that restate the Company’s financial statements as of and for the three and six months ended June 30, 2023. This Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes restated financial information as of and for the three and six months ended June 30, 2023. Refer to Note B to the financial statements included in this Quarterly Report on Form 10-Q for a discussion of the restatement and the impact on the specific accounts in such financial statements.

Current wording

This Quarterly Report on Form 10-Q includes financial statements that restate the Company’s financial statements as of and for the three and nine months ended September 30, 2023. This Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes restated financial information as of and for the three and nine months ended September 30, 2023. Refer to Note B to the financial statements included in this Quarterly Report on Form 10-Q for a discussion of the restatement and the impact on the specific accounts in such financial statements.

Previous wording

On January 10, 2025, the Company entered into a seven-year lease agreement for new office space in North Quincy, Massachusetts. The Company’s existing lease agreement for its office space expires May 31, 2025. The new lease term begins on June 1, 2025 and expires on May 31, 2032 with an option to extend the lease an additional five years. The lease contains an initial base rent of approximately $21 thousand per month with 2.2% - 2.5% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property.

Current wording

On January 10, 2025, the Company entered into a seven-year lease agreement for office space in North Quincy, Massachusetts. The Company’s existing lease agreement for its office space expires May 31, 2025. The new lease term begins on June 1, 2025 and expires on May 31, 2032 with an option to extend the lease an additional five years. The lease contains an initial base rent of approximately $21 thousand per month with 2.2% - 2.5% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property.

Previous wording

Sales consist primarily of the selling price of the merchandise, service or outbound shipping and handling charges, less discounts, coupons redeemed, returns and credits.

Current wording

Sales consist primarily of the selling price of the merchandise, service or outbound shipping and handling charges, less discounts, coupons redeemed, returns and credits. Sales by segment were as follows:

Previous wording

Our sales decreased 4.1%to approximately$16.7 millionfor the three months ended June 30, 2024, from approximately$17.3 millionfor the three months ended June 30, 2023. The decrease was primarily due to lower spending from new and existing clients, partially offset from the acquisition of the assets of T R Miller in June 2023.

Current wording

Our total sales increased 2.4%to approximately$20.1 millionfor the three months ended September 30, 2024, from approximately$19.7 millionfor the three months ended September 30, 2023. For the Stran segment, the decrease was primarily due to lower spending from new and existing clients. For the SLS segment, the increase was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Our total cost of sales decreased 7.7%to approximately$11.2 millionfor the three months ended June 30, 2024, from approximately$12.2 millionfor the three months ended June 30, 2023. As a percentage of sales, cost of sales decreased to 67.2% for the three months ended June 30, 2024 from 69.9% for the three months ended June 30, 2023. The decrease in the dollar amount of cost of sales was primarily due to improvement in purchasing from suppliers along with a decrease in sales of 4.1% from period to period.

Current wording

Our total cost of sales increased 6.9%to approximately$14.2 millionfor the three months ended September 30, 2024, from approximately$13.3 millionfor the three months ended September 30, 2023. As a percentage of sales, cost of sales increased to 70.5% for the three months ended September 30, 2024 from 67.5% for the three months ended September 30, 2023. The increase in the dollar amount of cost of sales was primarily due to the increase in sales of 2.4% from period to period. For the Stran segment, the decrease was primarily dueto a decrease in sales of approximately $3.0 million for the reasons described above. For the SLS segment, the increase was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Gross profit consists of sales less total costs of sales. Our gross profit increased 4.2%to approximately$5.5 million, or 32.8%of sales, for the three months ended June 30, 2024, from approximately$5.2 million, or 30.1%of sales, for the three months ended June 30, 2023. The increase in the dollar amount of gross profit was due to a decrease in cost of sales of approximately$0.9 million for the reasons described above, which was offset by a decrease in sales of approximately$0.7 million in aggregate for the reasons described above. The increase in gross profit margin to 32.8% for the three months ended June 30, 2024 compared to 30.1% for the three months ended June 30, 2023 was primarily due to improvements in purchasing from suppliers.

Current wording

Gross profit consists of sales less total costs of sales. Our gross profit decreased 7.0%to approximately$6.0 million, or 29.5%of sales, for the three months ended September 30, 2024, from approximately$6.4 million, or 32.5%of sales, for the three months ended September 30, 2023. For the Stran segment, the decrease in the dollar amount of gross profit was due to a decrease in sales of approximately $3.0 million for the reasons described above, which was partially offset by a decrease in cost of sales of approximately $1.9 million for the reasons described above. The decrease in gross profit margin for the Stran segment to 31.8% for the three months ended September 30, 2024 compared to 32.5% for the three months ended September 30, 2023 was primarily due to increases in product costs from vendors. For the SLS segment, the increase in the dollar amount was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Operating expenses consist of general and administrative expenses. Our operating expenses increased 5.3%to approximately$6.6 millionfor the three months ended June 30, 2024, from approximately$6.2 millionfor the three months ended June 30, 2023. As a percentage of sales, operating expenses increased to 39.4% for the three months ended June 30, 2024, from 35.9% for the three months ended June 30, 2023. The increase in the dollar amount of operating expenses was primarily due to an increase in aggregate expenses related to the organic growth in our business.

Current wording

Operating expenses consist of general and administrative expenses. Our operating expenses increased 41.9%to approximately$8.1 millionfor the three months ended September 30, 2024, from approximately$5.7 millionfor the three months ended September 30, 2023. As a percentage of sales, operating expenses increased to 40.4% for the three months ended September 30, 2024, from 29.1% for the three months ended September 30, 2023. For the Stran segment, the increase in the dollar amount of operating expenses was primarily due to expenses related to Stran’s NetSuite enterprise resource planning system implementation, acquisition and integration of the Gander Group Assets, and legal and accounting expenses related to the re-audit of historical financial statements. For the SLS segment, the increase was due to the acquisition the Gander Group Assets in August 2024.

Previous wording

Other income consists of other income, interest income, and realized gain on investments. Our other income was approximately$1 thousandfor the three months ended June 30, 2024, compared to approximately$17 for the three months ended June 30, 2023. This change was primarily due to noncash accretion expense related to certain installment payment liabilities. Our interest income was approximately$82 thousandfor the three months ended June 30, 2024, compared to approximately$146 thousandfor the three months ended June 30, 2023. This change was primarily due to a decrease in interest generated from investments. Our realized gain on investments was approximately$3 thousand for the three months ended June 30, 2024, compared to approximately$9 thousand for the three months ended June 30, 2023. This change was primarily due to the recording of all investments at estimated fair value.

Current wording

Other income consists of other income (expense), interest income, and realized gain on investments. Our other expense was approximately$22 thousandfor the three months ended September 30, 2024, compared to other income of approximately$202 thousand for the three months ended September 30, 2023. This change was primarily due to noncash accretion expense related to certain installment payment liabilities. Our interest income was approximately$64 thousandfor the three months ended September 30, 2024, compared to approximately$183 thousandfor the three months ended September 30, 2023. This change was primarily due to a decrease in interest generated from investments. Our realized gain on investments was approximately$103 thousand for the three months ended September 30, 2024, compared to approximately$77 thousand for the three months ended September 30, 2023. This change was primarily due to the sale of investments above their initial value.

Previous wording

Income tax provision for the six months ended June 30, 2024 was approximately $3 thousand compared to income tax provision of approximately $0.2 million for the six months ended June 30, 2023. Income tax provision for the six months ended June 2024 and 2023 accounted for 0.2% and 12.0%, respectively, of loss before income taxes of approximately $1.5 million and approximately $1.3 million, respectively. As of June 30, 2024 and 2023, the Company recorded an income tax provision comprised of state income taxes and a valuation allowance against its net deferred tax assets as well as a minimum state tax liability. The company recorded a valuation allowance since its generated a deficit over a three-year cumulative period.

Current wording

Income tax provision for the three months ended September 30, 2024 was approximately $(1) thousand compared to income tax provision of approximately $(0.1) million for the three months ended September 30, 2023. Income tax provision for the three months ended September 30, 2024 accounted for 0.1% of loss before income taxes of approximately $2.0 million. Income tax provision for the three months ended September 30, 2023 accounted for 12.0% of income before income taxes of approximately $1.1 million. As of September 30, 2024 and 2023, the Company recorded an income tax provision comprised of state income taxes and a valuation allowance against its net deferred tax assets as well as a minimum state tax liability. The company recorded a valuation allowance since its generated a deficit over a three-year cumulative period.

Previous wording

Our net loss for the three months ended June 30, 2024 was approximately $1.0 million, compared to approximately $0.9 million for the three months ended June 30, 2023. This change was primarily due to the increase in operating expenses for the reasons described above, partially offset by the increase in gross profit.

Current wording

Our net loss for the three months ended September 30, 2024 was approximately $2.0 million, compared to net profit of approximately $1.3 million for the three months ended September 30, 2023. This change was primarily due to the increase in operating expenses along with the decrease in gross profit for the reasons described above.

Previous wording

The following table sets forth key components of our results of operations during the six months ended June 30, 2024 and 2023 both in dollars and as a percentage of our revenues.

Current wording

The following table sets forth key components of our results of operations during the nine months ended September 30, 2024 and 2023 both in dollars and as a percentage of our revenues.

Previous wording

Sales consist primarily of the selling price of the merchandise, service or outbound shipping and handling charges, less discounts, coupons redeemed, returns and credits.

Current wording

Sales consist primarily of the selling price of the merchandise, service or outbound shipping and handling charges, less discounts, coupons redeemed, returns and credits. Sales by segment were as follows:

Previous wording

Our sales increased 6.4%to approximately$35.5 millionfor the six months ended June 30, 2024, from approximately$33.4 millionfor the six months ended June 30, 2023. The increase was primarily due to higher spending from existing clients as well as business from new customers.

Current wording

Our sales increased 4.9%to approximately$55.7 millionfor the nine months ended September 30, 2024, from approximately$53.1 millionfor the nine months ended September 30, 2023. The increase was primarily due to higher spending from existing clients as well as business from new customers. For the Stran segment, the decrease was primarily due to lower spending from new and existing clients. For the SLS segment, the increase was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Our total cost of sales increased 7.5%to approximately$24.4 millionfor the six months ended June 30, 2024, from approximately$22.7 millionfor the six months ended June 30, 2023. As a percentage of sales, cost of sales decreased to 68.8% for the six months ended June 30, 2024 from 68.1% for the six months ended June 30, 2023. The increase in the dollar amount of cost of sales was primarily due to an increase in sales of 6.4% from period to period.

Current wording

Our total cost of sales increased 7.3%to approximately$38.6 millionfor the nine months ended September 30, 2024, from approximately$36.0 millionfor the nine months ended September 30, 2023. As a percentage of sales, cost of sales decreased to 69.4% for the nine months ended September 30, 2024 from 67.9% for the nine months ended September 30, 2023. The increase in the dollar amount of cost of sales was primarily due to an increase in sales of 4.9% from period to period. For the Stran segment, the decrease was primarily dueto a decrease in sales of approximately $0.9 million for the reasons described above. For the SLS segment, the increase was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Gross profit consists of sales less total costs of sales. Our gross profit increased 4.0%to approximately$11.1 million, or 31.2%of sales, for the six months ended June 30, 2024, from approximately$10.7 million, or 31.9%of sales, for the six months ended June 30, 2023. The increase in the dollar amount of gross profit was due to an increase in sales of approximately$2.1 million for the reasons described above, partially offset by an increase in cost of sales of approximately$1.7 million in aggregate for the reasons described above. The decrease in gross profit margin to 31.2% for the six months ended June 30, 2024 compared to 31.9% for the six months ended June 30, 2023 was primarily due to increases in product costs from vendors during the three months ended March 31, 2024, partially offset by improvements in purchasing from vendors in the three months ended June 30, 2024.

Current wording

For the Stran segment, the decrease in the dollar amount of gross profit was due to a decrease in sales of approximately$0.9 million for the reasons described above, which was partially offset by a decrease in cost of sales of approximately$0.2 million for the reasons described above. The decrease in gross profit margin for the Stran segment to 31.4% for the nine months ended September 30, 2024 compared to 32.1% for the nine months ended September 30, 2023 was primarily due to increases in product costs from vendors. For the SLS segment, the increase in the dollar amount was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Operating expenses consist of general and administrative expenses. Our operating expenses increased 5.1%to approximately$12.9 millionfor the six months ended June 30, 2024, from approximately$12.2 millionfor the six months ended June 30, 2023. As a percentage of sales, operating expenses decreased to 36.2% for the six months ended June 30, 2024, from 36.7% for the six months ended June 30, 2023. The increase in the dollar amount of operating expenses was primarily due to an increase in aggregate expenses related to the organic growth in our business.

Current wording

Operating expenses consist of general and administrative expenses. Our operating expenses increased 16.8%to approximately$21.0 millionfor the nine months ended September 30, 2024, from approximately$18.0 millionfor the nine months ended September 30, 2023. As a percentage of sales, operating expenses decreased to 37.7% for the nine months ended September 30, 2024, from 33.9% for the nine months ended September 30, 2023. For the Stran segment, the increase in the dollar amount of operating expenses was primarily due to expenses related to Stran’s Netsuite enterprise resource planning system implementation, acquisition and integration of the Gander Group Assets, and legal and accounting expenses related to the re-audit of historical financial statements. For the SLS segment, the increase was due to the acquisition of the Gander Group Assets in August 2024.

Previous wording

Other income consists of other income, interest income, and realized gain on investments. Our other income was approximately$16 thousandfor the six months ended June 30, 2024, compared to approximately$17 for the six months ended June 30, 2023. This change was primarily due to noncash accretion expense related to the installment payment liabilities. Our interest income was approximately$175 thousandfor the six months ended June 30, 2024, compared to approximately$284 thousandfor the six months ended June 30, 2023. This change was primarily due to a decrease in interest generated from investments. Our realized gain on investments was approximately$73 thousand for the six months ended June 30, 2024, compared to approximately$21 thousand for the six months ended June 30, 2023. This change was primarily due to the recording of all investments at estimated fair value.

Current wording

Other income consists of other income (expense), interest income, and realized gain on investments. Our other expense was approximately$(6)thousandfor the nine months ended September 30, 2024, compared to other income of approximately$219 thousand for the nine months ended September 30, 2023. This change was primarily due to noncash accretion expense related to the installment payment liabilities. Our interest income was approximately$239 thousandfor the nine months ended September 30, 2024, compared to approximately$467 thousandfor the nine months ended September 30, 2023. This change was primarily due to a decrease in interest generated from investments. Our realized gain on investments was approximately$176 thousand for the nine months ended September 30, 2024, compared to approximately$98 thousand for the nine months ended September 30, 2023. This change was primarily due to the recording of all investments at estimated fair value.

Previous wording

Income tax provision for the three months ended June 30, 2024 was approximately $3 thousand compared to income tax provision of approximately $0.1 million for the three months ended June 30, 2023. Income tax provision for the three months ended June 30, 2024 and 2023 accounted for 0.2% and 12.0%, respectively, of loss before income taxes of approximately $1.0 million and approximately $0.8 million, respectively. As of June 30, 2024 and 2023, the Company recorded an income tax provision comprised of state income taxes and a valuation allowance against its net deferred tax assets as well as a minimum state tax liability. The company recorded a valuation allowance since its generated a deficit over a three-year cumulative period.

Current wording

Income tax provision for the nine months ended September 30, 2024 was approximately $2 thousand compared to income tax provision of approximately $15 thousand for the nine months ended September 30, 2023. Income tax provision for the nine months ended September 2024 and 2023 accounted for 0.1% and 11.7%, respectively, of loss before income taxes of approximately $3.6 million and approximately $0.1 million, respectively. As of September 30, 2024 and 2023, the Company recorded an income tax provision comprised of state income taxes and a valuation allowance against its net deferred tax assets as well as a minimum state tax liability. The company recorded a valuation allowance since its generated a deficit over a three-year cumulative period.

Previous wording

Our net loss for the six months ended June 30, 2024 was approximately $1.5 million, compared to approximately $1.4 million for the six months ended June 30, 2023. This change was primarily due to an increase in costs of sales and general and administrative expenses, as described above, partially offset by the increase in sales, as described above.

Current wording

Our net loss for the nine months ended September 30, 2024 was approximately $3.6 million, compared to net loss of approximately $0.1 million for the nine months ended September 30, 2023. This change was primarily due to the increase in operating expenses for the reasons described above.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of approximately$11.9 million and investments of approximately$9.6 million. We have financed our operations primarily through cash generated from our initial public offering of common stock and warrants to purchase common stock in November 2021, our private placement of common stock and warrants to purchase common stock in December 2021, and operations.

Current wording

As of September 30, 2024, we had cash and cash equivalents of approximately$10.0 million and investments of approximately$6.9 million. We have financed our operations primarily through cash generated from our initial public offering of common stock and warrants to purchase common stock in November 2021, our private placement of common stock and warrants to purchase common stock in December 2021, and operations.

Previous wording

The following table provides detailed information about our net cash flows for the six months ended June 30, 2024 and 2023:

Current wording

The following table provides detailed information about our net cash flows for the nine months ended September 30, 2024 and 2023.

Previous wording

Net cash provided by operating activities was approximately $4.2 million for the six months ended June 30, 2024, as compared to net cash provided by operating activities of approximately $3.7 million for the six months ended June 30, 2023. The increase in net cash provided by operating activities was primarily due to a decrease in accounts receivable.

Current wording

Net cash provided by operating activities was approximately $1.4 million for the nine months ended September 30, 2024, as compared to net cash used in operating activities of approximately $1.6 million for the nine months ended September 30, 2023. The change was primarily due to a decrease in accounts receivable.

Previous wording

Net cash provided by investing activities was approximately $0.4 million for the six months ended June 30, 2024, as compared to net cash used by investing activities of approximately $3.1 million for the six months ended June 30, 2023. The change was primarily due to increased proceeds from the sale of investments, partially offset by increased purchases of investments.

Current wording

Net cash provided by investing activities was approximately $1.5 million for the nine months ended September 30, 2024, as compared to net cash used in investing activities of approximately $3.4 million for the nine months ended September 30, 2023. The change was primarily due to increased proceeds from the sale of investments, partially offset by increased purchases of investments.

Previous wording

Net cash used in financing activities was approximately $0.8 million for the six months ended June 30, 2024, as compared to approximately $0.6 million for the six months ended June 30, 2023. The increase in net cash used in financing activities was primarily due to reduced payments of contingent earn-out liabilities and increased payments of installment payment liabilities.

Current wording

Net cash used in financing activities was approximately $1.0 million for the nine months ended September 30, 2024, as compared to approximately $0.9 million for the nine months ended September 30, 2023. The increase in net cash used in financing activities was primarily due to reduced payments of contingent earn-out liabilities and increased payments of installment payment liabilities.

Previous wording

In connection with our stock repurchase program, on May 23, 2022, we announced that we had established a trading plan with B. Riley intended to qualify under Rule 10b-18. In May 2023, we renewed the trading plan. The trading plan instructs B. Riley to repurchase shares of common stock for our account in accordance with Rule 10b-18 and our instructions. Repurchases under the trading plan may continue until the trading plan terminates in June 2024 unless terminated earlier or extended.

Current wording

In connection with our stock repurchase program, on May 23, 2022, we announced that we had established a trading plan with B. Riley intended to qualify under Rule 10b-18 (the “Rule 10b-18 Plan”). In May 2023, we renewed the Rule 10b-18 Plan. The Rule 10b-18 Plan was terminated in June 2024.

Previous wording

As of June 30, 2024, we had repurchased a total of 1,815,166 shares of common stock for total payments of approximately $3.4 million, and approximately $6.6 million remained available under the stock repurchase program for future stock repurchases. During the six months ended June 30, 2024, we did not repurchase any shares.

Current wording

During the three months ended September 30, 2024, we did not repurchase any shares.

Previous wording

On November 22, 2021, we entered into the Initial Loan Agreement with Salem Five Cents, for the Revolving Line of Credit, consisting of aggregate loans of up to $7.0 million, evidenced by the Demand Note. The Revolving Line of Credit and the Demand Note were secured by a first priority security interest in all assets and property of the Company, as provided in the Security Agreement, dated November 22, 2021, between Salem Five Cents and the Company (the “Security Agreement” and together with the Initial Loan Agreement and the Demand Note, the “Loan Documents”), and as described below. Under a Commercial Loan Modification Agreement, dated as of February 12, 2024, between Salem Five Centsand the Company (the “Loan Modification Agreement”), certain terms of the Initial Loan Agreement were modified as of February 12, 2024, as described below.

Current wording

On November 22, 2021, we entered into the Revolving Demand Line of Credit Loan Agreement, dated as of November 22, 2021 (the “Initial Loan Agreement”), between the Company and Salem Five Cents Savings Bank, a Massachusetts savings bank (“Salem Five Cents“), for a revolving line of credit (the “Revolving Line of Credit”) consisting of aggregate loans of up to $7.0 million, evidenced by the Revolving Demand Line of Credit Note, dated November 22, 2021, by the Company in favor of Salem Five Cents (the “Demand Note”). The Revolving Line of Credit and the Demand Note were secured by a first priority security interest in all assets and property of the Company, as provided in the Security Agreement, dated November 22, 2021, between Salem Five Cents and the Company (the “Security Agreement”), and as described below. Under a Commercial Loan Modification Agreement, dated as of February 12, 2024, between Salem Five Centsand the Company (the “Loan Modification Agreement”), certain terms of the Initial Loan Agreement were modified as of February 12, 2024, as described below (as amended, the “Loan Agreement”and together with the Security Agreement and the Demand Note, the “Loan Documents”).

Previous wording

Stran Loyalty Solutions, LLC, a Nevada limited liability company (“Stran Loyalty Solutions”), a wholly-owned subsidiary of the Company, entered into a factoring arrangement with a third party to provide accounts receivable financing to Stran Loyalty Solutions. In connection with the factoring arrangement, the Company provided a secured guarantee of Stran Loyalty Solutions’ obligations under the factoring arrangement. Prior to this arrangement, the Company had been a party to the Revolving Demand Line of Credit Loan Agreement, dated as of November 22, 2021 (the “Initial Loan Agreement”), between the Company and Salem Five Cents Savings Bank, a Massachusetts savings bank (“Salem Five Cents”), as amended by the Commercial Loan Modification Agreement, dated as of February 12, 2024, between the Company and Salem Five Cents (as amended, the “Loan Agreement”), and the Revolving Demand Line of Credit Note, dated November 22, 2021, by the Company in favor of Salem Five Cents (the “Demand Note”). The Loan Agreement and the Demand Note provided for a secured revolving loan facility in an aggregate principal amount of up to $7.0 million (the “Revolving Line of Credit”). In discussions with Salem Five Cents prior to the establishment of the factoring arrangement, Salem Five Cents indicated that it would terminate the Revolving Line of Credit because of a policy which prohibited it from agreeing to subordination of its security interest in the Company’s assets.

Current wording

On August 23, 2024, Stran Loyalty Solutions entered into a factoring arrangement to provide accounts receivable financing to Stran Loyalty Solutions. In connection with the factoring arrangement, the Company provided a secured guarantee of Stran Loyalty Solutions’ obligations under the factoring arrangement. In discussions with Salem Five Cents prior to the establishment of the factoring arrangement, Salem Five Cents indicated that it would terminate the Revolving Line of Credit because of a policy which prohibited it from agreeing to subordination of its security interest in the Company’s assets.

Previous wording

Accordingly, on September 9, 2024, Salem Five Cents delivered a letter (the “Termination Letter”) to the Company that stated that, effective August 26, 2024 (the “Termination Date”), Salem Five Cents terminated all obligations under the Loan Agreement and the Demand Note. The Termination Letter further stated that the Loan Agreement and the Demand Note and certain related loan documents shall be considered no longer in force or effect. The Company had no funds drawn on the Revolving Line of Credit on the Termination Date.

Current wording

Accordingly, on September 9, 2024, Salem Five Cents delivered a letter (the “Termination Letter”) to the Company that stated that, effective August 26, 2024 (the “Termination Date”), Salem Five Cents terminated all obligations under the Loan Agreement and the Demand Note. The Termination Letter further stated that the Loan Agreement and the Demand Note and the Loan Documents shall no longer be considered in force or effect. The Company had no funds drawn on the Revolving Line of Credit on the Termination Date.

Previous wording

As of June 30, 2024 and December 31, 2023, we had not drawn any funds from the Revolving Line of Credit.

Current wording

As of September 30, 2024, the Revolving Line of Credit had been terminated. As of December 31, 2023, we had not drawn any funds from the Revolving Line of Credit.

Previous wording

Acquisition of Assets of Bangarang Enterprises, LLC

Current wording

Acquisition of Assets of Gander Group

Previous wording

On August 23, 2024, Stran Loyalty Solutions entered into a Secured Party Sale Agreement, dated as of August 23, 2024 (the “Sale Agreement”), between Stran Loyalty Solutions and Sallyport Commercial Finance, LLC, a Delaware limited liability company (“Secured Party”), pursuant to which Stran Loyalty Solutions agreed to purchase, on an as-is basis, all of the rights and interests of Bangarang Enterprises, LLC, a California limited liability company (d/b/a Gander Group) (“Bangarang”), in and to substantially all of the assets of Bangarang (the “Gander Group Assets”) from Secured Party as a private sale pursuant to Article 9 of the Uniform Commercial Code (the “Gander Group Transaction”).

Current wording

On August 23, 2024, Stran Loyalty Solutions entered into a Secured Party Sale Agreement, dated as of August 23, 2024 (the “Sale Agreement”), between Stran Loyalty Solutions and Sallyport Commercial Finance, LLC, a Delaware limited liability company (“Secured Party”), pursuant to which Stran Loyalty Solutions agreed to purchase, on an as-is basis, all of the rights and interests of Gander Group, in and to substantially all of the assets of Gander Group (the “Gander Group Assets”) from Secured Party as a private sale pursuant to Article 9 of the Uniform Commercial Code (the “Gander Group Transaction”).

Previous wording

At the consummation of the transactions contemplated by the Sale Agreement (the “Gander Group Transaction Closing”), Stran Loyalty Solutions paid the Cash Purchase Price, including the payment of the Transaction Expense Payment, and assumed the Gander Group Assumed Liabilities. As a result of the Gander Group Transaction Closing, the Company indirectly acquired substantially all of the assets of Bangarang, including all of the equity of Gander Group Louisiana, LLC, a Louisiana limited liability company, which became a wholly-owned subsidiary of Stran Loyalty Solutions.

Current wording

At the consummation of the transactions contemplated by the Sale Agreement (the “Gander Group Transaction Closing”), Stran Loyalty Solutions paid the Cash Purchase Price, including the payment of the Transaction Expense Payment, and assumed the Gander Group Assumed Liabilities. As a result of the Gander Group Transaction Closing, the Company indirectly acquired substantially all of the assets of Gander Group, including all of the equity of Gander Group Louisiana, LLC, a Louisiana limited liability company, which became a wholly-owned subsidiary of Stran Loyalty Solutions.

Previous wording

In addition, Stran Loyalty Solutions entered into a Release Agreement, dated as of August 23, 2024, between Bangarang and Stran Loyalty Solutions (the “Release Agreement”). Under the Release Agreement, Bangarang granted a full and complete waiver and release of Stran Loyalty Solutions and its affiliates of any non-competition, non-solicitation, or similar restrictive covenants of any parties owed to Bangarang or any of its affiliates.

Current wording

In addition, Stran Loyalty Solutions entered into a Release Agreement, dated as of August 23, 2024, between Gander Group and Stran Loyalty Solutions (the “Release Agreement”). Under the Release Agreement, Gander Group granted a full and complete waiver and release of Stran Loyalty Solutions and its affiliates of any non-competition, non-solicitation, or similar restrictive covenants of any parties owed to Gander Group or any of its affiliates.

Previous wording

The Sale Agreement and the Release Agreement included provisions for indemnification, reimbursement for returned items, handling of assets and liabilities during Bangarang’s wind-down, and certain other matters.

Current wording

The Sale Agreement and the Release Agreement included provisions for indemnification, reimbursement for returned items, handling of assets and liabilities during Gander Group’s wind-down, and certain other matters.

Previous wording

Lease costs for the three months ended June 30, 2024 and 2023 totaled approximately $0.2 million and $0.1 million, respectively. Lease costs for the six months ended June 30, 2024 and 2023 totaled approximately $0.3 million and $0.3 million, respectively. We anticipate no deficiencies in our ability to make these payments.

Current wording

Lease costs for the three months ended September 30, 2024 and 2023 totaled approximately $0.2 million and $0.2 million, respectively. Lease costs for the nine months ended September 30, 2024 and 2023 totaled approximately $0.5 million and $0.4 million, respectively. We anticipate no deficiencies in our ability to make these payments.