UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2024

☐ 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: 001-41038

STRAN & COMPANY, INC.

(Exact name of registrant as specified in its charter)

Nevada		04-3297200
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

2 Heritage Drive, Suite 600, Quincy, MA		02171
(Address of principal executive offices)		(Zip Code)

800-833-3309

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SWAG	The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one share of Common Stock at an exercise price of $4.81375	SWAGW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 6, 2025, there were 18,608,408 shares of the registrant’s common stock outstanding.

STRAN & COMPANY, INC.

Quarterly Report on Form 10-Q

Period Ended June 30, 2024

TABLE OF CONTENTS

	PART I
	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II
OTHER INFORMATION

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

STRAN & COMPANY, INC.

UNAUDITED CONDENSED FINANCIAL STATEMENTS

	Page

Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	2
Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) (Restated)	3
Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) (Restated)	4
Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) (Restated)	5
Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited) (Restated)	6
Notes to Unaudited Condensed Financial Statements (unaudited) (Restated)	8

STRAN & COMPANY, INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

	June 30, 2024			December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,874		$	8,059
Investments		9,603			10,393
Accounts receivable, net		12,015			16,223
Accounts receivable - related parties		828			853
Inventory		3,974			4,782
Prepaid corporate taxes		32			62
Prepaid expenses		617			953
Deposits		1,910			1,717
Total current assets		40,853			43,042

Property and equipment, net		1,715			1,521

OTHER ASSETS:
Intangible assets - customer lists, net		2,943			3,114
Other assets		23			23
Right of use asset - office leases		1,061			1,336
Total other assets		4,027			4,473
Total assets	$	46,595		$	49,036

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	3,875		$	4,745
Accrued payroll and related		1,211			2,568
Unearned revenue		854			1,116
Rewards program liability		3,350			875
Sales tax payable		227			344
Current portion of contingent earn-out liabilities		224			224
Current portion of installment payment liabilities		398			786
Current portion of lease liability		519			528
Total current liabilities		10,658			11,186

LONG-TERM LIABILITIES:
Long-term contingent earn-out liabilities		763			763
Long-term installment payment liabilities		339			639
Long-term lease liability		550			798
Total long-term liabilities		1,652			2,200
Total liabilities		12,310			13,386

Commitments and contingencies (Note K)

STOCKHOLDER’S EQUITY:
Preferred stock, $0.0001 par value; 50,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized, 18,589,086 and 18,539,000 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		2			2
Additional paid-in capital		38,433			38,263
Accumulated deficit		(4,118	)		(2,602	)
Accumulated other comprehensive loss		(32	)		(13	)
Total stockholders’ equity		34,285			35,650
Total liabilities and stockholders’ equity	$	46,595		$	49,036

The accompanying notes are an integral part of these unaudited condensed financial statements.

STRAN & COMPANY, INC.

STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(in thousands, except share and per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023
				(Restated)						(Restated)
SALES
Sales	$	16,693		$	17,285		$	35,474		$	33,256
Sales – related parties		—			130			46			130
Total sales		16,693			17,415			35,520			33,386

COST OF SALES:
Cost of sales		11,226			12,067			24,405			22,629
Cost of sales - related parties		—			100			35			100
Total cost of sales		11,226			12,167			24,440			22,729

GROSS PROFIT		5,467			5,248			11,080			10,657

OPERATING EXPENSES:
General and administrative expenses		6,575			6,245			12,857			12,236
Total operating expenses		6,575			6,245			12,857			12,236

LOSS FROM OPERATIONS		(1,108	)		(997	)		(1,777	)		(1,579	)

OTHER INCOME:
Other income		1			17			16			17
Interest income		82			146			175			284
Realized gain on investments		3			9			73			21
Total other income		86			172			264			322

LOSS BEFORE INCOME TAXES		(1,022	)		(825	)		(1,513	)		(1,257	)

Provision for income taxes		3			99			3			151

NET LOSS	$	(1,025	)	$	(924	)	$	(1,516	)	$	(1,408	)

NET LOSS PER COMMON SHARE
Basic	$	(0.06	)	$	(0.05	)	$	(0.08	)	$	(0.08	)
Diluted	$	(0.06	)	$	(0.05	)	$	(0.08	)	$	(0.08	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic		18,589,086			18,532,342			18,581,957			18,504,761
Diluted		18,589,086			18,532,342			18,581,957			18,504,761

The accompanying notes are an integral part of these unaudited condensed financial statements.

STRAN & COMPANY, INC.

STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(in thousands)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023
				(Restated)						(Restated)
Net loss	$	(1,025	)	$	(924	)	$	(1,516	)	$	(1,408	)

Other comprehensive income (loss):
Change in unrealized gain (loss) on investments (net of tax)		48			(43	)		(19	)		77
Total other comprehensive income (loss)		48			(43	)		(19	)		77

Comprehensive loss (income)	$	(977	)	$	(967	)	$	(1,535	)	$	(1,331	)

The accompanying notes are an integral part of these unaudited condensed financial statements.

STRAN & COMPANY, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(in thousands, except share amounts)

	Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Stockholders’
	Shares		Value		Shares		Value		Capital		Loss			Deficit			Equity
Balance, January 1, 2024		—	$	—		18,539,000	$	2	$	38,263	$	(13	)	$	(2,602	)	$	35,650
Stock-based compensation		—		—		50,086		—		150		—			—			150
Other comprehensive loss		—		—		—		—		—		(67	)		—			(67	)
Net loss		—		—		—		—		—		—			(491	)		(491	)
Balance, March 31, 2024		—	$	—		18,589,086	$	2	$	38,413	$	(80	)	$	(3,093	)	$	35,242
Stock-based compensation		—		—		—		—		20		—			—			20
Other comprehensive loss		—		—		—		—		—		48			—			48
Net loss		—		—		—		—		—		—			(1,025	)		(1,025	)
Balance, June 30, 2024		—	$	—		18,589,086	$	2	$	38,433	$	(32	)	$	(4,118	)	$	34,285

	Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Stockholders’
	Shares		Value		Shares		Value		Capital		Income Loss			Deficit			Equity
Balance, January 1, 2023		—	$	—		18,475,336	$	2	$	38,113	$	(179	)	$	(2,217	)	$	35,719
Stock-based compensation		—		—		7,812		—		27		—			—			27
Other comprehensive income		—		—		—		—		—		120			—			120
Net loss		—		—		—		—		—		—			(484	)		(484	)
Balance, March 31, 2023 (Restated)		—	$	—		18,483,148	$	2	$	38,140	$	(59	)	$	(2,701	)	$	35,382
Stock-based compensation		—		—		57,500		—		110		—			—			110
Other comprehensive loss		—		—		—		—		—		(43	)		—			(43	)
Net loss		—		—		—		—		—		—			(924	)		(924	)
Balance, June 30, 2023 (Restated)		—	$	—		18,540,648	$	2	$	38,250	$	(102	)	$	(3,625	)	$	34,525

The accompanying notes are an integral part of these unaudited condensed financial statements.

STRAN & COMPANY, INC.

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(in thousands)

	2024			2023
				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,516	)	$	(1,408	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		341			407
Adjustment to reconcile operating lease expense to cash paid		18			26
Change in allowance for credit losses		(288	)		(59	)
Noncash interest accretion		72			—
Stock-based compensation		170			137
Changes in operating assets and liabilities:
Accounts receivable		4,496			1,407
Accounts receivable – related parties		25			—
Inventory		808			1,546
Prepaid taxes		30			122
Prepaid expenses		336			(304	)
Deposits		(193	)		(1,066	)
Accounts payable and accrued expenses		(871	)		(1,480	)
Accrued payroll and related		(1,357	)		389
Unearned revenue		(262	)		1,221
Rewards program liability		2,475			2,875
Sales tax payable		(117	)		(74	)
Net cash provided by operating activities		4,167			3,739

CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired		—			(2,123	)
Purchases of property and equipment		(364	)		(579	)
Proceeds from sale of investments		4,608			1,000
Purchase of investments		(3,836	)		(1,355	)
Net cash provided by (used in) investing activities		408			(3,057	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of contingent earn-out liabilities		—			(424	)
Payment of installment payment liabilities		(760	)		(175	)
Net cash used in financing activities		(760	)		(599	)

NET INCREASE IN CASH		3,815			83

CASH AND CASH EQUIVALENTS - BEGINNING		8,059			15,254
CASH AND CASH EQUIVALENTS - ENDING	$	11,874		$	15,337

The accompanying notes are an integral part of these unaudited condensed financial statements.

STRAN & COMPANY, INC.

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(CONTINUED)

(in thousands)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	2024		2023
			(Restated)
Cash paid during the period for:
Interest	$	—	$	6
Income taxes	$	29	$	48

Noncash investing and financing activities:
Assets acquired in T R Miller business acquisition	$	—	$	5,236
Liabilities assumed in T R Miller business acquisition	$	—	$	3,113
Lease liabilities arising from obtaining right-of-use assets	$	—	$	1,034

The accompanying notes are an integral part of these unaudited condensed financial statements.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization - Stran & Company, Inc., (the “Company”) was incorporated under the laws of the Commonwealth of Massachusetts and commenced operations on November 17, 1995. The Company re-incorporated under the laws of the State of Nevada on May 24, 2021.

Operations - The Company is an outsourced marketing solutions provider that sells branded products to customers. The Company purchases products and branding through various third-party manufacturers and decorators and resells the finished goods to customers.

In addition to selling branded products, the Company offers clients custom sourcing capabilities; a flexible and customizable e-commerce solution for promoting branded merchandise and other promotional products, managing promotional loyalty and incentives, print collateral, and event assets, order and inventory management, and designing and hosting online retail popup shops, fixed public retail online stores, and online business-to-business service offerings; creative and merchandising services; warehousing/fulfillment and distribution; print-on-demand; kitting; point of sale displays; and loyalty and incentive programs.

Method of Accounting - The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. (“U.S. GAAP”).

Basis of Presentation - The accompanying unaudited condensed financial statements as of and for the three and six months ended June 30, 2024, include the accounts of the Company and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on January 22, 2024.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, and we believe that the disclosures are adequate to make the information presented not misleading. In our opinion, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the information in the following unaudited condensed financial statements of the Company have been included. The results of operations for interim periods are not necessarily indicative of the results for the full year.

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosure of certain assets, liabilities and expenses. The most significant estimates in the Company’s financial statements relate to the fair value of assets and liabilities assumed in acquisitions and the fair value of the contingent earnout liability. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Fair Value Measurements and Fair Value of Financial Instruments - The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

	Level 1:	Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

	Level 2:	Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

	Level 3:	Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

The carrying value of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Concentration of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable and deposits in excess of federally insured limits. These risks are managed by performing ongoing credit evaluations of customers’ financial condition and by maintaining all deposits in high quality financial institutions.

As of June 30, 2024 and December 31, 2023, the Company maintained deposits in three banks that exceeded the federal insured deposit limit of the Federal Deposit Insurance Corporation (FDIC).

For the three and six months ended June 30, 2024, the Company had two major customers to which sales accounted for approximately 12.7% and 10.0% of the Company’s revenues, respectively. The Company had accounts receivable from these customers amounting to 17.3% of the total accounts receivable balance.

For the three and six months ended June 30, 2023, the Company had three major customers to which sales accounted for approximately 13.4% and 21.3% of the Company’s revenues, respectively. The Company had accounts receivable from these customers amounting to 8.6% of the total accounts receivable balance.

Revenue Recognition - The Company accounts for revenue under ASC 606, Revenue for Contracts with Customers (“ASC 606”). Revenue is generated through various types of transactions, including promotional product sales, administering a customer’s rewards program, facilitating redemption code programs, and additional contract add-ons to enhance customer experience. The Company follows the five step model of revenue recognition:

identify the contract(s) with a customer;

ii.

identify the performance obligations in the contract;

iii.

determine the transaction price;

iv.

allocate the transaction price to the performance obligations within the contract; and

recognize revenue when (or as) the entity satisfies a performance obligation.

The Company’s contract assessment and approval varies based on whether the customer requests a one-time sale or a long-term contract. Customers with long-term contracts require signed Master Sales Agreements, while one-time sales contracts may be approved via email, electronic signature, or verbally. Once the contract is identified and approved, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The Company identifies each piece of promotional product as an individual performance obligation based on the following fact pattern. Customers can benefit from each item of promotional product produced on its own. Each piece of promotional product does not significantly modify or customize other promotional products and are not highly interdependent or interrelated with each other. The Company can, and frequently does, break portions of contracts into separate shipments to meet Customer demands. As such, each piece of promotional product is considered a separate and distinct performance obligation.

The transaction price for the majority of the Company’s sales can be clearly identified in a significant majority of the contracts due to an observable selling price. The transaction price is then allocated to the performance obligation(s), i.e. promotional product. The agreements include clearly identified prices.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

The Company recognizes revenue when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Stran evaluates transfer of control primarily from the customer’s perspective. Considering the transaction from the customer’s perspective reduces the risk that revenue is recognized for activities that do not transfer control of a good or service to the customer. Management determines, at contract inception, whether control of a good or service transfers to a customer over time or at a point in time. The assessment of whether control transfers over time or at a point in time is critical to the timing of revenue recognition.

Accounts Receivable and Allowance for Credit Losses - Accounts receivable as of June 30, 2024 and December 31, 2023, includes allowance for credit losses of $438 and $317, respectively.

	June 30, 2024			December 31, 2023
Trade accounts receivable	$	13,281		$	17,393
Less: allowance for credit losses on accounts receivable		(438	)		(317	)
Total accounts receivable, net	$	12,843		$	17,076

The Company evaluates our accounts receivable through a continuous process of assessing our portfolio on an individual customer and overall basis. This process consists of a thorough review of historical collection experience, current aging status of the customer accounts and the financial condition of our customers. The Company also considers the economic environment of our customers, both from a marketplace and geographic perspective, in evaluating the need for an allowance. Based on our review of these factors, we establish or adjust allowances for specific customers. Credit losses can vary substantially over time and the process involves judgment and estimation that require a number of assumptions about matters that are uncertain. Accordingly, our results of operations can be affected by adjustments to the allowance due to actual write-offs that differ from estimated amounts. See Note P, “Credit Losses,” to our financial statements included in this report for more information.

10.

Uncertainty in Income Taxes - As of June 30, 2024 and December 31, 2023, the Company determined it had uncertain tax positions of $2,448. The Company believes the impact will not be material as it will be able to utilize net operating losses to offset a majority of the risk. The Company recorded a nominal amount of interest expense which is included as part of income tax expense.

11.

Income Taxes - Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are provided for differences between the basis of assets and liabilities for financial statements and income tax purposes offset by a valuation allowance.

12.

Stock-Based Compensation - The Company accounts for its stock-based awards in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all stock-based payments to employees to be recognized in the consolidated statements of operations based on their fair values. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted. The Company is recognizing compensation costs only for those stock-based awards expected to vest after considering expected forfeitures. Cumulative compensation expense is at least equal to the compensation expense for vested awards. Stock-based compensation is recognized on a straight-line basis over the service period of each award. The Company records compensation cost as an element of general and administrative expense in the accompanying statements of operations.

13.

Stock Option and Warrant Valuation - Stock option and warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices for comparable entities. For warrants and stock options issued to non- employees, the Company accounts for the expected life based on the contractual life of the warrants and stock options. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.

14.

Reclassifications - Certain reclassifications have been made to the Company’s previously issued Statements of Operations whereby amounts relating to (i) cost of sales, previously reflected as multiple components, have been aggregated and reclassified as a single line item, cost of sales. Additionally, certain reclassifications have been made to the Company’s previously issued Statements of Cash Flows whereby amounts relating to the payment of contingent earn-out and installment payments, previously aggregated and reflected as a single line item in the cash flows from financing activities, have been shown gross and shown as separate line items, payment of contingent earn-out liabilities and payment of installment payment liabilities. These reclassifications had no impact on previously reported net income, cash flows, or shareholders’ equity.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

15.

Recent Accounting Pronouncements - Management has reviewed the following recent accounting pronouncements:

2023-07 – Segment Reporting (Topic 280)

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, which amends the guidance on segment reporting. This update enhances the disclosure requirements for reportable segments, primarily by requiring more detailed information about significant segment expenses. The amendments also clarify the circumstances under which an entity can disclose multiple measures of segment profit or loss and provide new segment disclosure requirements for entities with a single reportable segment.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impacts of adoption of this ASU, and expects to adopt ASU 2023-07 effective for the fiscal year 2024 as required under the standard..

2023-09 – Income Taxes (Topic 740)

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, which amends the guidance on income tax disclosures. This update aims to improve the transparency and usefulness of income tax disclosures by requiring entities to provide more detailed information about the nature and effects of income tax uncertainties, the components of income tax expense, and the effective tax rate reconciliation. Additionally, the ASU mandates enhanced disclosures about deferred tax assets and liabilities, including the valuation allowance and the impact of tax law changes.

The guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the timing and impacts of adoption of this ASU.

2024-01 – Compensation – Stock Compensation (Topic 718)

In March 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-01, which clarifies the accounting for profits interest awards. This update provides guidance on determining whether a profits interest or similar award falls within the scope of ASC 718 (Compensation—Stock Compensation) or other guidance. The ASU aims to ensure consistency and transparency in the accounting for these awards by providing clearer criteria and illustrative examples.

The guidance is effective for fiscal years and interim periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the timing and impacts of adoption of this ASU.

2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires the disaggregation, in the notes to the financial statements, of certain cost and expense captions presented on the face of the Company’s Statement of Operations, to provide enhanced transparency to investors. The update may be applied either prospectively or retrospectively. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted.

The Company is currently evaluating the impact ASU 2024-03 will have on its disclosures.

16.

Subsequent Events - Management has evaluated events occurring after the balance sheet date through the date on which the financial statements were filed.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS:

In connection with the re-audit of the financial statements of the Company, as of and for the fiscal years ended December 31, 2023 and 2022, which were previously audited by the Company’s prior independent registered public accounting firm, BF Borgers CPA PC, the Company identified certain accounting errors relating to compliance with U.S. GAAP in connection with the Company’s accounting of certain assets and liabilities as well as acquisition accounting. As a result of the re-audit, the Audit Committee, in consultation with the Company’s management, concluded that the Company’s previously issued unaudited consolidated financial statements and the notes thereto as of and for the three and six months ended June 30, 2023 require restatement and should not be relied upon.

The following include descriptions of the significant adjustments to the Company’s previously reported June 30, 2023 financial statements included in this quarterly report.

1. Business Acquisitions

The Company incorrectly accounted for the Wildman Imprints former promotional products business division of Wildman Business Group, LLC, G.A.P. Promotions, LLC, Trend Promotional Marketing Corporation (d/b/a Trend Brand Solutions), Premier Business Services, and T R Miller Co., Inc. (“T R Miller”) acquisitions (“Acquisitions”) as asset acquisitions that would properly be accounted for as business combinations in accordance with ASC Topic 805, Business Combinations.

The Company improperly determined the fair value of certain assets acquired and liabilities assumed and the fair value of contingent earn-out payments, which was part of the total consideration, in accordance with ASC Topic 820, Fair Value Measurement.

As a part of the restatement process, the Company performed a separate assessment of each acquisition in accordance with the relevant guidance of ASC Topic 805, Business Combinations, and completed a purchase price allocation analysis, including the proper calculation of the fair value of the certain assets acquired and liabilities assumed and the fair value of contingent earn-out payments.

To correct the error, the Company adjusted the final purchase price accounting for inventory, identifiable intangibles, goodwill and contingent earn-out liabilities, including associated mark-to-market adjustments subsequent to the acquisition dates.

2. Goodwill Impairment

As a result of the incorrect accounting treatment of the Acquisitions, the Company omitted the recognition of goodwill and failed to perform an annual goodwill impairment analysis as of October 1, 2023 and 2022.

As a part of the restatement process, the Company performed quantitative goodwill impairment testing in accordance with ASC 350, Intangibles - Goodwill and Other as of October 1, 2023 and October 1, 2022. The Company determined that the carrying value of its reporting unit was in excess of its fair value.

To correct the error, the Company recorded a non-cash goodwill impairment charge during the fourth quarter of fiscal years 2022 and 2023.

3. Income Taxes

The Company improperly calculated deferred tax asset and liability balances. The Company also established several improper methods of accounting for income taxes with respect to the Acquisitions, bad debt reserve, capitalized research, and inventory capitalization as well as other book to tax adjustments that needed to be corrected such as charitable contributions and stock option expense.

As a part of the restatement process, the Company calculated the correct tax adjustments for the 2021 through 2023 tax years and the impact to the income tax provision and deferred tax asset/(liability) balances.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

To correct the error, the Company recorded journal entries to correct end of the year deferred tax asset/(liability) balances. With respect to improper methods of tax accounting, the Company recorded an uncertain tax position (“FIN 48”) reserve for each of these items and will correct the improper methods of tax accounting by filing an automatic method change in its 2024 U.S. federal income tax return, which will be filed in 2025. The Company generated tax losses in 2021 and 2022, these losses were able to offset the effects of the improper methods for both 2021 and 2022. In addition, the Company plans to amend its 2023 U.S. federal income tax return, which will include a statement explaining additional adjustments such as charitable contributions and stock option expense to its 2021 and 2022 net operating loss carryforward balances. All tax entries have been booked as of June 30, 2024 and 2023, to reflect the correct income tax provision and deferred tax asset/(liability) balances. The Company recorded a valuation allowance as well in 2022 as the Company was in a cumulative deficit at that time.

4. Related Party Presentation

Certain amounts relating to the accounts receivable from related parties, previously reflected in Accounts Receivable, Net on the Company’s Balance Sheet, have been reclassified to Accounts Receivable – Related Parties. These reclassifications had no impact on the previously reported net earnings, cash flows or shareholders’ equity.

5. Accounts Receivable and Unearned Revenue Adjustment

The Company incorrectly recorded certain amounts in Accounts Receivable for products that were shipped but not billed as of June 30, 2023, rather than reducing Unearned Revenue for the customer deposits that were received prior to June 30, 2023.

As a part of the restatement process, the Company performed reconciliations of unbilled receivables and unearned revenue and adjusted overstated Accounts Receivable and Unearned Revenue balances.

6. Sales Adjustment

The Company incorrectly recognized Sales relating to freight charges for certain orders.

As a part of the restatement process, the Company conducted a thorough analysis of sales including freight charges. Multiple reviews were carried out to ensure all potential errors were addressed.

To correct the error, the Company adjusted overstated freight revenue and corresponding freight expenses for the three and six months ended June 30, 2023.

7. Inventory Adjustment

The Company failed to perform a proper full physical inventory count.

As a part of the restatement process, the Company performed a physical inventory count and corresponding rollback analysis. The Company identified discrepancies between recorded and actual inventory levels.

To correct the error, the Company adjusted its inventory records and reduced its reported inventory value as of June 30, 2023, to accurately reflect the findings.

8. Subsequent Measurement of Available-for-Sale Securities

The Company incorrectly recorded unrealized holding gains and losses for available-for-sale securities that should be excluded from earnings and reported in other comprehensive income (loss).

As a part of the restatement process, the Company performed a separate analysis related to subsequent measurement of available-for-sale securities in accordance with the relevant guidance of ASC Topic 320, Investments – Debt Securities.

To correct the error, the Company adjusted realized gain (loss) on investment and corresponding other comprehensive income (loss) for the three and six months ended June 30, 2023.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

9. Unearned Revenue and Sales Adjustment

The Company failed to recognize certain amounts as Sales for the products that were included in Unearned Revenue but shipped as of June 30, 2023. In addition, the Company did not reduce the inventory balance for the products that were shipped as of June 30, 2023. As a part of the restatement process, the Company performed reconciliations of unearned revenue and adjusted overstated Unearned Revenue and Inventory balances for the products that were shipped as of June 30, 2023.

Represents revision for immaterial error correction.

The following tables summarize the effect of the restatement on each financial statement line item as of the dates indicated:

Balance Sheet as of June 30, 2023	As Reported			Adjustment			As Restated			Reference
Cash and cash equivalents	$	15,271		$	66		$	15,337				*
Investments		10,278			(67	)		10,211				*
Accounts receivable, net		13,959			(65	)		13,894			4,5
Accounts receivable – related parties		—			130			130			4
Deferred income taxes		1,542			(1,542	)		—			3
Inventory		5,821			(558	)		5,263			7,9
Prepaid corporate taxes		87			(87	)		—			3
Total current assets		49,630			(2,123	)		47,507			3,4,5,7,9,	*

Intangible assets, net		10,712			(7,427	)		3,285			1
Goodwill		—			810			810			1,2
Other assets		—			23			23			1
Right of use asset - office leases		1,470			122			1,592			1
Total other assets		12,182			(6,472	)		5,710			1,2
Total assets	$	63,107		$	(8,595	)	$	54,512			1,2,3,4,5,7,9,	*

Accounts payable and accrued expenses	$	3,012		$	183		$	3,195			3
Accrued payroll and related		997			2			999				*
Unearned revenue		2,291			(152	)		2,139			5
Current portion of contingent earn-out liabilities		3,187			(2,793	)		394			1
Current portion of installment payment liabilities		—			750			750			1
Current portion of lease liability		676			(145	)		531			1
Total current liabilities		19,491			(2,155	)		17,336			1,3,5,	*

Long-term contingent earn-out liabilities		4,883			(4,008	)		875			1
Long-term installment payment liabilities		—			707			707			1
Long-term lease liability		763			306			1,069			1
Total long-term liabilities		5,646			(2,995	)		2,651			1
Total liabilities		25,137			(5,150	)		19,987			1,3,5,	*

Additional paid-in capital		38,417			(167	)		38,250			1
Accumulated deficit		(449	)		(3,176	)		(3,625	)		1,2,3,6,7,	*
Accumulated other comprehensive loss		—			(102	)		(102	)		8
Total stockholders’ equity		37,970			(3,445	)		34,525			1,2,3,6,7,8,	*
Total liabilities and stockholders’ equity	$	63,107		$	(8,595	)	$	54,512			1,2,3,5,6,7,8,	*

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Statement of Operations for the Three Months Ended June 30, 2023	As Reported			Adjustment			As Restated			Reference
Sales	$	17,470		$	(185	)	$	17,285			6
Sales – related parties		—			130			130			4
Total sales		17,470			(55	)		17,415			6,4

Cost of sales		12,393			(326	)		12,067			6
Cost of sales – related parties		—			100			100			4
Total cost of sales		12,393			(226	)		12,167			6

GROSS PROFIT		5,077			171			5,248			6

General and administrative expenses		6,351			(106	)		6,245			1,	*
Total operating expenses		6,351			(106	)		6,245			1,	*

LOSS FROM OPERATIONS		(1,274	)		277			(997	)		1,6,	*

Other income		15			2			17			1
Unrealized gain (loss) on investments		(33	)		33			—			8
Realized gain on investments		—			9			9			8
Total other income		128			44			172			1,8

LOSS BEFORE INCOME TAXES		(1,146	)		321			(825	)		1,6,8,	*

Provision for income taxes		(308	)		407			99			3

NET LOSS	$	(838	)	$	(86	)	$	(924	)		1,3,6,8	*

NET LOSS PER COMMON SHARE
Basic	$	(0.05	)	$	0.00		$	(0.05	)		1,3,6,8	*
Diluted	$	(0.05	)	$	0.00		$	(0.05	)		1,3,6,8	*

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic		18,540,648			(8,306	)		18,532,342				*
Diluted		18,540,648			(8,306	)		18,532,342				*

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Statement of Operations for the Six Months Ended June 30, 2023	As Reported			Adjustment			As Restated			Reference
Sales	$	33,246		$	10		$	33,256			6
Sales – related parties		—			130			130			4
Total sales		33,246			140			33,386			6

Cost of sales		23,476			(847	)		22,629			6,9
Cost of sales – related parties		—			100			100			4
Total cost of sales		23,476			(747	)		22,729			6

GROSS PROFIT		9,770			887			10,657			6

General and administrative expenses		12,430			(194	)		12,236			1,	*
Total operating expenses		12,430			(194	)		12,236			1,	*

LOSS FROM OPERATIONS		(2,660	)		1,081			(1,579	)		1,6,	*

Other income		72			(55	)		17			1
Unrealized gain (loss) on investments		99			(99	)		—			8
Realized gain on investments		—			21			21			8
Total other income		455			(133	)		322			1,8

LOSS BEFORE INCOME TAXES		(2,205	)		948			(1,257	)		1,6,8	*

Provision for income taxes		(672	)		823			151			3

NET LOSS	$	(1,533	)	$	125		$	(1,408	)		1,3,6,8,	*

NET LOSS PER COMMON SHARE
Basic	$	(0.08	)	$	0.00		$	(0.08	)		1,3,6,8,	*
Diluted	$	(0.08	)	$	0.00		$	(0.08	)		1,3,6,8,	*

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic		18,540,834			(36,073	)		18,504,761				*
Diluted		18,540,834			(36,073	)		18,504,761				*

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

	Common Stock
Statement of Stockholders’ Equity for the Six Months Ended June 30, 2023	Shares			Value		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Stock-holders’ Equity
Balance, June 30, 2023 (As Reported)		18,540,834		$	2	$	38,417		$	—		$	(449)		$	37,970
Adjustments		(186	)		—		(167	)		(102	)		(3,176	)		(3,445	)
Balance, June 30, 2023 (As Restated)		18,540,648		$	2	$	38,250		$	(102	)	$	(3,625	)	$	34,525

Statement of Cash Flows for the Six Months Ended June 30, 2023	As Reported			Adjustment			As Restated			Reference
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,533	)	$	125		$	(1,408	)		1,3,4,6,8,	*
Deferred Income Taxes (Credit)		(701	)		701			—
Depreciation and amortization		654			(247	)		407			1,7
Adjustment to reconcile operating lease expense to cash paid		—			26			26				*
Change in allowance for credit losses		—			(59	)		(59	)		5,	*
Intangible asset impairment, net		(68	)		68			—			1
Stock-based compensation		110			27			137
Unrealized gain (loss) on investments		(99	)		99			—			8
Changes in operating assets and liabilities:
Accounts receivable, net		484			923			1,407			5
Inventory		1,047			499			1,546			7
Prepaid taxes		—			122			122
Prepaid expenses		(309	)		5			(304	)			*
Accounts payable and accrued expenses		(1,039	)		(441	)		(1,480	)			*
Unearned revenue		1,657			(436	)		1,221			5
Net cash used in operating activities		2,327			1,412			3,739			1,3,5,6,7,8,	*

CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired		(741	)		(1,382	)		(2,123	)		1
Proceeds from sale of investments		—			1,000			1,000			8
Purchase of investments		(403	)		(952	)		(1,355	)		8
Net cash used in investing activities		(1,723	)		(1,334	)		(3,057	)		1,8

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of contingent earn-out liabilities		(586	)		162			(424	)		1
Payment of installment payment liabilities		—			(175	)		(175	)		1
Net cash used in financing activities		(586	)		(13	)		(599	)		1

NET DECREASE IN CASH		18			65			83			1,3,5,6,7,8,	*
CASH - ENDING	$	15,272		$	65		$	15,337			1,3,5,6,7,8,	*

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

FAIR VALUE MEASUREMENTS:

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2024 and December 31, 2023. The carrying amount of accounts payable approximated fair value as they are short term in nature. The fair value of stock options are estimated based on the Black-Scholes model during the six months ended June 30, 2024 and the year ended December 31, 2023.

Fair Value on a Recurring Basis

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The estimated fair value of the Company’s investments and money market accounts represent Level 1 measurements. The estimated fair value of the earn-out liabilities represent Level 3 measurements. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description	Level	June 30, 2024		December 31, 2023
Assets:
Investments	1	$	9,603	$	10,393

Liabilities:
Earn-out liabilities	3	$	987	$	987

Investments

The Company’s investments consisted of the following as of June 30, 2024:

	Cost		Unrealized Gain (Loss)			Fair Value
Money market fund	$	440	$	—		$	440
Corporate bonds		3,169		(66	)		3,103
Mutual funds		747		12			759
US Treasury bills		5,279		22			5,301
	$	9,635	$	(32	)	$	9,603

Earn-Out Liabilities

For the three and six months ended June 30, 2024 and 2023, the Company did not recognize any change in fair value of contingent earn-out liability as it was deemed immaterial in both periods.

STRAN & COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

SEC Form 10-Q filed by Stran & Company Inc.