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What changed in Stran & Company, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Stran & Company, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+368 added−447 removedSource: 10-K (2025-04-14) vs 10-K (2024-03-28)

Top changes in Stran & Company, Inc.'s 2024 10-K

368 paragraphs added · 447 removed · 239 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

98 edited+24 added−47 removed115 unchanged
Biggest changeWe 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. Program customers are typically geared towards longer-lasting relationships that help secure recurring revenue well into the future. o Strengthen Marketing and Social Media Outreach .
Biggest changeWe 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.
We are both program managers and creative marketers, having developed multiple teams within our organization to specialize and focus our efforts on supporting customers with the specific support that they need: ● Operations and e-commerce teams create custom-tailored technology solutions that enable our clients to view, manage and distribute branded merchandise to their appropriate audience in an efficient and cost-effective manner. ● Account teams work with client stakeholders to understand goals, objectives, marketing and human-resources initiatives, and the ongoing management of the account. 6 ● In-house creative agency and product merchandising teams support the account team to provide unique and custom product ideas along with additional design services such as billboards, annual reports, and digital ad assets. ● Merchandising team as well as members of our account teams attend trade shows domestically and internationally across a variety of markets, allowing us to provide a diverse assortment of product offerings to our clients. ● Technology and program teams offer technology solutions to help efficiently manage the order process, view products and inventory available, distribute products in the most cost-effective manner, and provide reports and metrics on the activity of the account.
We are both program managers and creative marketers, having developed multiple teams within our organization to specialize and focus our efforts on supporting customers with the specific support that they need: ● Operations and e-commerce teams create custom-tailored technology solutions that enable our clients to view, manage and distribute branded merchandise to their appropriate audience in an efficient and cost-effective manner. ● Account teams work with client stakeholders to understand goals, objectives, marketing and human-resources initiatives, and the ongoing management of the account. ● In-house creative agency and product merchandising teams support the account team to provide unique and custom product ideas along with additional design services such as billboards, annual reports, and digital ad assets. ● Merchandising team as well as members of our account teams attend trade shows domestically and internationally across a variety of markets, allowing us to provide a diverse assortment of product offerings to our clients. ● Technology and program teams offer technology solutions to help efficiently manage the order process, view products and inventory available, distribute products in the most cost-effective manner, and provide reports and metrics on the activity of the account.
In addition to selling branded products, we offer our 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.
In addition to selling branded products, we offer our 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 (POS) displays; and loyalty and incentive programs.
Unlike our company, which provides comprehensive solutions to complex promotional and branding challenges, we view most of our competitors as generally falling into one of the five categories below: ● Online e-tailer. Heavily rely on marketing and online advertising to sell directly to businesses, offering little or no strategic support or program infrastructure. ● Franchise Model.
Unlike our company, which provides comprehensive solutions to complex promotional and branding challenges, we view most of our competitors as generally falling into one of the five categories below: ● Online e-tailer. Heavily rely on marketing and online advertising to sell directly to businesses, offering little or no strategic support or program infrastructure. 2 ● Franchise Model.
Do not have the financial backing, technology, or infrastructure to support growth or ability to execute comprehensive marketing programs or large opportunities. 2 Promotional Products are a High-impact, Cost-effective Advertising Medium Because promotional products are useful and appreciated by recipients, they are retained and used, repeating the imprinted message many times without added cost to the advertiser.
Do not have the financial backing, technology, or infrastructure to support growth or ability to execute comprehensive marketing programs or large opportunities. Promotional Products are a High-impact, Cost-effective Advertising Medium Because promotional products are useful and appreciated by recipients, they are retained and used, repeating the imprinted message many times without added cost to the advertiser.
We will ship out all assets with return labels for post-show logistics and establish standard operating procedures for every asset to be returned back into inventory. 5 Other strategies that we plan to implement to expand our customer base with expanded sales staff and technology resources include: o Convert Transactional Customers to Programs .
We will ship out all assets with return labels for post-show logistics and establish standard operating procedures for every asset to be returned back into inventory. 5 Other strategies that we plan to implement to expand our customer base with expanded sales staff and technology resources include: ○ Convert Transactional Customers to Programs .
Costs and fees depend on types of services provided and any special or custom work that we request on behalf of our customers. 11 In addition to continuing to use our third-party logistics partners like Harte Hanks, we are expanding our in-house warehouse, decoration, and fulfillment capabilities.
Costs and fees depend on types of services provided and any special or custom work that we request on behalf of our customers. In addition to continuing to use our third-party logistics partners like Harte Hanks, we are expanding our in-house warehouse, decoration, and fulfillment capabilities.
The shares were also subject to a market standoff provision restricting transfers and other dispositions of the shares as reasonably requested by the Company and its underwriter until the date that is two years after its initial public offering, which occurred on November 8, 2021 (the “IPO”).
The shares were also subject to a market standoff provision restricting transfers and other dispositions of the shares as reasonably requested by the Company and its underwriter until the date that is two years after its initial public offering, which occurred on November 8, 2021.
This data suggests that the potential for promotional products’ market growth is significant. Competitive Strengths We believe our key competitive strengths include: ● Superior and Distinctive Technology . We have invested in sophisticated, efficient ordering and logistics technology that provides order processing, warehousing and fulfillment functions.
This data suggests that the potential for promotional products’ market growth is significant. 3 Competitive Strengths We believe our key competitive strengths include: ● Superior and Distinctive Technology . We have invested in sophisticated, efficient ordering and logistics technology that provides order processing, warehousing and fulfillment functions.
We believe our market position and scale enhances our ability to increase sales to existing customers, attract new customers and enter into new markets. 3 ● Extensive Network . We have developed a deep network of collaborator factories, decorators, printers, and warehouses around the globe.
We believe our market position and scale enhances our ability to increase sales to existing customers, attract new customers and enter into new markets. ● Extensive Network . We have developed a deep network of collaborator factories, decorators, printers, and warehouses around the globe.
We plan to expand sales and marketing tools and campaigns to promote the Company, and enhancing our digital marketing efforts, including paid search advertising, search engine optimization (SEO), social media platforms, such as Instagram and LinkedIn, and other alternative marketing platforms. o Tradeshows and Events .
We plan to expand sales and marketing tools and campaigns to promote the Company, and enhancing our digital marketing efforts, including paid search advertising, search engine optimization (SEO), social media platforms, such as Instagram and LinkedIn, and other alternative marketing platforms. ○ Tradeshows and Events .
Customers and Markets Stran’s customer base includes approximately 2,000 active customers and over 30 Fortune 500 companies , servicing a diverse customer base, encompassing pharmaceutical and healthcare, manufacturing, technology, finance, construction and consumer goods .
Customers and Markets Stran’s customer base includes approximately 2,000 active customers and over 30 Fortune 500 companies , servicing a diverse customer base, encompassing pharmaceutical and healthcare, manufacturing, gaming, technology, finance, construction and consumer goods .
We also have sales representatives in 20 additional locations across the United States and a network of service providers in the U.S. and abroad, including factories, decorators, printers, logistics firms, and warehouses. 1 Our Industry Overview of Promotional Products Market The promotional products industry is large yet highly-fragmented, with thousands of smaller participants and indications of a lack of market power in any one firm or group of firms.
We also have sales representatives in 22 additional locations across the United States and a network of service providers in the U.S. and abroad, including factories, decorators, printers, logistics firms, and warehouses. 1 Our Industry Overview of Promotional Products Market The promotional products industry is large yet highly-fragmented, with thousands of smaller participants and indications of a lack of market power in any one firm or group of firms.
Our co-founder and Chief Executive Officer and President, Andrew Shape, was also recently named 2023 Person of the Year by promotional products industry periodical Counselor .
Our co-founder and Chief Executive Officer and President, Andrew Shape, was also named 2023 Person of the Year by promotional products industry periodical Counselor .
Facilisgroup, a buying group of fewer than 1% of distributors in the industry, processed over $1.4 billion of sales in 2022. Pursuant to our Sublicense Agreement, we may access Facilisgroup’s @ease proprietary software tools for promotional products business management and analysis and a white labelled, managed, product website which we may use to sell promotional products under our brand.
Facilisgroup, a buying group of fewer than 1% of distributors in the industry, processed over $1.4 billion of sales in 2023. Pursuant to our Sublicense Agreement, we may access Facilisgroup’s @ease proprietary software tools for promotional products business management and analysis and a white labelled, managed, product website which we may use to sell promotional products under our brand.
Our Program Management We are experienced and industry-leading program managers who integrate all aspects of a successful program. Our program team works hand in hand with our account teams to drive the processes and procedures that ensure we are effectively managing our programs. For Stran, program management is built upon six key building blocks: 10 ● Creative Products .
Our Program Management We are experienced and industry-leading program managers who integrate all aspects of a successful program. Our program team works hand in hand with our account teams to drive the processes and procedures that ensure we are effectively managing our programs. For Stran, program management is built upon six key building blocks: 11 ● Creative Products .
We have ongoing contracts with clientele in such industries as financial services, consumer packaged goods, retail clothing and accessories, pet food and medicine, fitness, child care, retail hardware, fast food franchises, health care, and environmental services. Contracts are often multi-year and auto-renewing. Our average contract lifespan is approximately 10 years.
We have ongoing contracts with clientele in such industries as financial services, casino gaming, consumer packaged goods, retail clothing and accessories, pet food and medicine, fitness, child care, retail hardware, fast food franchises, health care, and environmental services. Contracts are often multi-year and auto-renewing. Our average contract lifespan is approximately 10 years.
Our expertise in product development and sourcing, technology development, and program management combined with our various collaborators’ superior warehousing, logistics, fulfillment, distribution and print services are a competitive advantage. We offer a global solution for warehousing and fulfillment through a network of fulfillment providers including a twelve-year relationship with industry leader Harte Hanks.
Our expertise in product development and sourcing, technology development, and program management combined with our various collaborators’ superior warehousing, logistics, fulfillment, distribution and print services are a competitive advantage. We offer a global solution for warehousing and fulfillment through a network of fulfillment providers including a 14-year relationship with industry leader Harte Hanks.
However, see “ Risk Factors – Risks Related to Our Business and Industry – Climate change and increased focus by governments, stockholders and customers on sustainability issues, including those related to climate change, may have a material adverse effect on our business and operations. ” and “ Risk Factors – General Risk Factors – Environmental regulations may impact our future operating results. ” for discussion of material related risks.
However, see “ Risk Factors – Risks Related to Our Business and Industry – Increased focus by governments, vendors, stockholders, and customers on sustainability issues, including those related to climate change, may have a material adverse effect on our business and operations. ” and “ Risk Factors – Risks Related to Our Business and Industry – Environmental regulations may impact our future operating results. ” for discussion of material related risks.
For over 28 years, we have developed these strategic relationships in order to offer our clients a powerful solution for their branded merchandise needs. Together, we have experience in developing custom marketing solutions for our clients and regularly kit together promotional printed items and branded product into a single package.
For over 30 years, we have developed these strategic relationships in order to offer our clients a powerful solution for their branded merchandise needs. Together, we have experience in developing custom marketing solutions for our clients and regularly kit together promotional printed items and branded product into a single package.
The relationship between Stran and Harte Hanks has been fine-tuned over a twelve-year period and allows Stran to do what we do best, which is the creativity, product procurement, technology and account management while allowing Harte Hanks to do what they do best, which is process-driven fulfillment.
The relationship between Stran and Harte Hanks has been fine-tuned over a 14-year period and allows Stran to do what we do best, which is the creativity, product procurement, technology and account management while allowing Harte Hanks to do what they do best, which is process-driven fulfillment.
We continue to explore and pursue additional acquisition opportunities that are appropriate. Please see “— Growth Strategies – Selectively Pursue Acquisitions ” below for a discussion of our asset acquisition experience and strategy. Growth Strategies The key elements of our strategy to grow our business include: ● Selectively Pursue Acquisitions .
We continue to explore and pursue additional acquisition opportunities that are appropriate. Please see “ Growth Strategies – Selectively Pursue Acquisitions ” below for a discussion of our asset acquisition strategy. 4 Growth Strategies The key elements of our strategy to grow our business include: ● Selectively Pursue Acquisitions .
At these tradeshows, we plan to target representatives of specific industry verticals, such as the beverage industry or the cannabis market, and a variety of professionals attending events focused in the areas of marketing or procurement development.
At these tradeshows, we plan to target representatives of specific industry verticals, such as the beverage industry or the gaming market, and a variety of professionals attending events focused in the areas of marketing or procurement development.
Neither we nor any of our predecessors have been in bankruptcy, receivership or any similar proceeding.
Neither we nor any of our predecessors have been in bankruptcy, receivership or any similar proceeding. 18
Empowering our team to grow their own careers helps ensure that we are more knowledgeable, experienced, and engaged. Pricing As a large and growing firm with over 500 suppliers and due to our membership in Facilisgroup, Stran has the purchasing power to receive advantageous pricing, helping us with price-sensitive bids.
Emp owering our team to grow their own careers helps ensure that we are more knowledgeable, experienced, and engaged. Pricing As a large and growing firm with over 500 suppliers and due to our membership in Facilisgroup, Stran has the purchasing power to receive advantageous pricing, helping us with price-sensitive bids.
By offering print management with our promotional branded merchandise solutions, we help our customers create impactful presentations and mailings through the most efficient processes. 7 Warehouse and Fulfillment We offer a global solution for warehousing and fulfillment through a network of fulfillment providers including a twelve-year relationship with industry leader Harte Hanks.
By offering print management with our promotional branded merchandise solutions, we help our customers create impactful presentations and mailings through the most efficient processes. Warehouse and Fulfillment We offer a global solution for warehousing and fulfillment through a network of fulfillment providers including a 14-year relationship with industry leader Harte Hanks.
We agreed, among other things, to issue the EF Hutton’s designees warrants to purchase an aggregate of 131,158 shares of common stock, which is equal to 3.0% of the total number of shares issued in the private placement, at an exercise price of $4.97 per share. See “Item 7.
We agreed, among other things, to issue the EF Hutton’s designees warrants to purchase an aggregate of 131,158 shares of common stock, which is equal to 3.0% of the total number of shares issued in the private placement, at an exercise price of $4.97 per share.
Our headquarters are located at Quincy, Massachusetts, with additional offices located in Warsaw, Indiana; Mt. Pleasant, South Carolina; Walpole, Massachusetts; and Tomball, Texas.
Our headquarters are located at Quincy, Massachusetts, with additional offices located in Warsaw, Indiana; Mt. Pleasant, South Carolina; Walpole, Massachusetts; Tomball, Texas; and Irvine, California.
Should any of these suppliers terminate their relationship with us or fail to provide the agreed-on services, we believe that there would be sufficient alternatives to continue to meet customer demand and comply with our contractual obligations without interruption. Marketing We have a direct sales team consisting of over 36 outside sales representatives and 30 in-house sales representatives.
Should any of these suppliers terminate their relationship with us or fail to provide the agreed-on services, we believe that there would be sufficient alternatives to continue to meet customer demand and comply with our contractual obligations without interruption. 9 Marketing We have a direct sales team consisting of over 53 outside sales representatives and 25 in-house sales representatives.
Our acquisition of T R Miller provides us with an approximately 25,000-square-foot warehouse, production, and distribution center in Walpole, Massachusetts and our acquisition of Trend Brand Solutions provides us with an approximately 5,000 square-foot warehouse and distribution center in Tomball, Texas.
Our acquisition of the business and assets of T R Miller provides us with an approximately 25,000-square-foot warehouse, production, and distribution center in Walpole, Massachusetts and our acquisition of Trend Brand Solutions provides us with an approximately 5,000 square-foot warehouse and distribution center in Tomball, Texas.
The largest promotional products trade organizations are the Advertising Specialty Institute (ASI) and Promotional Products Association International (PPAI). U.S. Promotional Products is a Large and Growing Market According to ASI, the market for promotional products sales reached a record high of $26.1 billion in 2023.
The largest promotional products trade organizations are the Advertising Specialty Institute (ASI) and Promotional Products Association International (PPAI). U.S. Promotional Products is a Large and Growing Market According to ASI, the market for promotional products sales reached a record high of $26.6 billion in 2024.
As of 2023, the firm with the greatest percentage of industry sales generated $1.3 billion in sales but made up only approximately 5.1% of the $26.1 billion in sales generated in 2023 by promotional products distributors, based on information reported by ASI and the firm itself.
As of 2024, the firm with the greatest percentage of industry sales generated $1.3 billion in sales but made up only approximately 5.0% of the $26.6 billion in sales generated in 2024 by promotional products distributors, based on information reported by ASI and the firm itself.
Clever and custom packaging point of sale, or POS, displays are essentials for elevating brand awareness and critical for driving sales. From packaging of corporate merchandise and promotional products to developing custom POS displays, clients come to us when they want to stand out and show the quality that their brands offer.
Packaging and Point of Sale Presentation makes all the difference. Clever and custom packaging and POS displays are essentials for elevating brand awareness and critical for driving sales. From packaging of corporate merchandise and promotional products to developing custom POS displays, clients come to us when they want to stand out and show the quality that their brands offer.
On September 26, 2020, we acquired certain assets including the customer account managers and customer base of the Wildman Imprints promotional products business division of Wildman Business Group, LLC, or WBG .
On September 26, 2020, we acquired certain assets including the customer account managers and customer base of the Wildman Imprints promotional products business division of WBG .
Alternatively, we do have inventory guarantees where the customer must purchase any inventory held by us that has been purchased on their behalf within the contractual time periods. Our active customers may be broken into two main categories, transactional clients and program clients. During 2023, sales to our largest two customers were 13.2% and 7.8% of total revenue, respectively.
Alternatively, we do have inventory guarantees where the customer must purchase any inventory held by us that has been purchased on their behalf within the contractual time periods. Our active customers may be broken into two main categories, transactional clients and program clients. During 2024, sales to our largest two customers were 8.4% and 6.8% of total revenue, respectively.
Each whole share exercisable pursuant to the publicly-traded warrants had an initial exercise price per share of $5.1875, equal to 125% of the IPO Price.
Each whole share exercisable pursuant to the publicly-traded warrants had an initial exercise price per share of $5.1875, equal to 125% of the initial public offering price.
On November 12, 2021, we completed the IPO, in which we sold 4,337,349 units, each unit consisting of one share of common stock and a publicly-traded warrant to purchase one share of common stock at the initial public offering price (the “IPO Price”) of $4.15 per unit, plus an additional 650,602 shares of common stock and 650,602 publicly-traded warrants pursuant to the exercise of the underwriters’ over-allotment option .
On November 12, 2021, the Company completed its initial public offering, in which it sold 4,337,349 units, each unit consisting of one share of common stock and a publicly-traded warrant to purchase one share of common stock at the initial public offering price of $4.15 per unit, plus an additional 650,602 shares of common stock and 650,602 publicly-traded warrants pursuant to the exercise of the underwriters’ over-allotment option.
Today we offer a custom-built technology platform which offers a B2C (business-to-consumer) retail shopping experience combined with all of the back-end functionality required of a powerful B2B (business-to-business) marketing services platform. Our technology platform services over 280 online stores for our clients.
We launched our first online store for one of our clients in 1999. Today we offer a custom-built technology platform which offers a B2C (business-to-consumer) retail shopping experience combined with all of the back-end functionality required of a powerful B2B (business-to-business) marketing services platform. Our technology platform services over 280 online stores for our clients.
Shape and Birney may sell the shares subject to the security interest at prevailing market prices so long as such portion of the sale proceeds as is required under the promissory note to repay the note is so used to repay the note.
Shape and Birney may sell the shares subject to the security interest at prevailing market prices so long as such portion of the sale proceeds as is required under the promissory note to repay the note is so used to repay the note. 17 On May 24, 2021, Mr.
Our senior management has an average of over 20 years of experience in the promotional products industry. ● Asset Acquisition Experience . We have made five acquisitions over the past three and a half years through asset purchase agreements.
Our senior management has an average of over 20 years of experience in the promotional products industry. ● Asset Acquisition Experience . We have made six acquisitions over the past five years through asset purchase agreements.
Our acquisition strategy consists of increasing our share in existing markets, adding a presence in new or complementary regions, utilizing our scale to realize cost savings, and acquiring businesses offering synergistic services such as printing, packaging, point of sale (POS) displays, loyalty and incentive program management, and decoration, or offering additional differentiators.
Our acquisition strategy consists of increasing our share in existing markets, adding a presence in new or complementary regions, utilizing our scale to realize cost savings, and acquiring businesses offering synergistic services such as printing, packaging, POS displays, loyalty and incentive program management, and decoration, or offering additional differentiators. We also have experience acquiring and integrating six complementary businesses.
We filed preliminary and definitive information statements on Schedule 14C with the SEC on December 29, 2021 and January 11, 2022, and delivered copies of the definitive information statement to stockholders January 12, 2022. On January 31, 2022, the stockholders’ consent became effective pursuant to Rule 14c-2 under the Exchange Act.
We filed preliminary and definitive information statements on Schedule 14C with the Securities and Exchange Commission (the “SEC”) on December 29, 2021 and January 11, 2022, and delivered copies of the definitive information statement to stockholders or their nominees on January 12, 2022. On January 31, 2022, the stockholders’ consent became effective pursuant to Rule 14c-2 under the Exchange Act.
We have built the tools, processes, relationships and the blueprint to maximize the potential of these products and deliver the most value to our customers. For over 28 years we have grown into a leader in the promotional products industry, ranking 24 th on PPAI’s Top 100 Distributors 2023 list and 34 th on ASI’s Top 40 Distributors 2023 list.
We have built the tools, processes, relationships and the blueprint to maximize the potential of these products and deliver the most value to our customers. For over 30 years we have grown into a leader in the promotional products industry, ranking 20 th on PPAI’s Top 100 Distributors 2024 list and 27 th on ASI’s Top 40 Distributors 2024 list.
Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our team members, contractors, and vendors. Employees As of March 20, 2024, we employed 118 full-time employees, 3 part-time employees and 16 independent contractors.
Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our team members, contractors, and vendors. Employees As of March 25, 2025, we employed 153 full-time employees, 3 part-time employees and 15 independent contractors.
The shares were also formerly subject to a repurchase right which lapsed upon the occurrence of the IPO. Subject to the above remaining restrictions, Messrs.
The shares were also formerly subject to a repurchase right which lapsed upon the occurrence of the initial public offering. Subject to the above remaining restrictions, Messrs.
We have also invested in an internal commercial Enterprise Resource Planning (ERP) system, Oracle/NetSuite’s NetSuite ERP, which is expected to enhance the process of gathering and organizing the business data of our company through an integrated software suite, and is expected to be implemented in the second half of 2024.
We have also invested in an internal commercial Enterprise Resource Planning (ERP) system, Oracle/NetSuite’s NetSuite ERP, which is expected to enhance the process of gathering and organizing the business data of our company through an integrated software suite, and was launched in the first half of 2025.
There is no assurance of recurring revenues. We are not dependent on any particular customer or group of customers, and our highest-grossing contracts may change from year to year due to client brand initiatives.
We are not dependent on any particular customer or group of customers, and our highest-grossing contracts may change from year to year due to client brand initiatives.
For example, we worked closely with a global producer of vaccines and medicines for animals, to design and implement a two-tier incentive program in which, on one tier, veterinarians were incentivized to purchase from our customer through providing them with promotional branded products, and, on a second tier, a loyalty points program featuring prepaid debit card rewards for end-user pet owners who buy their products.
For example, we worked closely with a global producer of vaccines and medicines for animals, to design and implement a two-tier incentive program in which, on one tier, veterinarians were incentivized to purchase from our customer through providing them with promotional branded products, and, on a second tier, a loyalty points program featuring prepaid debit card rewards for end-user pet owners who buy their products. 7 In developing our loyalty and incentive offering, Stran has taken a similar approach as we have in other areas of our business.
Additional NetSuite phases will be planned and rolled out in subsequent years. ● Leading Market Position . Our over 28 years’ history and size make us a leader in the U.S. promotional products industry.
Additional NetSuite phases will be planned and rolled out in the future as necessary. ● Leading Market Position . Our over 30 years’ history and size make us a leader in the U.S. promotional products industry.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years.
Since our first year of operations in 1995, our annual revenues have gradually grown from approximately $240,000 to approximately $75.9 million in 2023, a compound annual growth rate of approximately 22.8%, and between 2018 and 2023, our revenues grew at a compound annual growth rate of approximately 25.8%.
Since our first year of operations in 1995, our annual revenues have gradually grown from approximately $240,000 to approximately $82.7 million in 2024, a compound annual growth rate of approximately 22.3%, and between 2018 and 2024, our revenues grew at a compound annual growth rate of approximately 22.8%.
We believe that it is necessary to continue focusing on the buildout of our technology offerings in order to meet the evolving needs of our customers. Additionally, our strong technology platform will support our acquisition strategy to integrate acquired businesses into our existing platforms.
Additional NetSuite phases will be planned and rolled out in the future as necessary. We believe that it is necessary to continue focusing on the buildout of our technology offerings in order to meet the evolving needs of our customers. Additionally, our strong technology platform will support our acquisition strategy to integrate acquired businesses into our existing platforms.
Products and Services Overview Since our inception over 28 years ago, we have provided clients with marketing services that help drive sales, and make an impact using custom-branded merchandise, commercial print, loyalty and incentive programs, packaging and point of sale solutions while providing a technology solution to deliver these products and services efficiently via our warehouse and fulfillment system.
Products and Services Overview Since our inception over 30 years ago, we have provided clients with marketing services that help drive sales, and make an impact using custom-branded merchandise, commercial print, loyalty and incentive programs, packaging and POS solutions while providing a technology solution to deliver these products and services efficiently via our warehouse and fulfillment system. 6 Our value to our customers is to be an extension of their own teams.
We sell our products to over 2,000 active customers and over 30 Fortune 500 companies, including long-standing programs with recurring revenue coming from well recognized brands and companies. Our largest customer accounted for 13.2% and 8.8% of overall revenue during 2023 and 2022, respectively. Our top 10 customers in 2023 and 2022 contributed 44.0% and 42.5% of revenue, respectively.
We sell our products to over 2,000 active customers and over 30 Fortune 500 companies, including long-standing programs with recurring revenue coming from well recognized brands and companies. Our largest customer accounted for 8.4% and 14.4% of overall revenue during 2024 and 2023, respectively. Our top 10 customers in 2024 and 2023 contributed 38.1% and 46.1% of revenue, respectively.
Shape and Birney paid the purchase price for the shares to Mr. Stranberg through the delivery to Mr. Stranberg of a secured promissory note effective as of May 24, 2021 . Each of the promissory notes provides for 2% simple annual interest, and principal and accrued interest must be repaid by the note’s third anniversary, May 24, 2024.
Shape and Birney paid the purchase price for the shares to Mr. Stranberg through the delivery to Mr. Stranberg of a secured promissory note effective as of May 24, 2021 . Each of the promissory notes provides for 2% simple annual interest.
Other Regulations We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the Foreign Corrupt Practices Act of 1977 (the “FCPA”), various securities laws and regulations including but not limited to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Securities Act of 1933, as amended (the “Securities Act”), the Listing Rules of The Nasdaq Stock Market LLC (“Nasdaq”), various labor, workplace and related laws, and environmental laws and regulations.
Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition. 16 Other Regulations We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the Foreign Corrupt Practices Act of 1977 (the “FCPA”), various securities laws and regulations including but not limited to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Securities Act of 1933, as amended (the “Securities Act”), the Listing Rules of The Nasdaq Stock Market LLC (“Nasdaq”), various labor, workplace and related laws, and environmental laws and regulations.
Further, we are affected by economic, political and other conditions in the United States and internationally, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on our business. 13 Laws and Regulations Relating to E-Commerce Our business is subject to a variety of laws and regulations applicable to companies conducting business on the internet.
Further, we are affected by economic, political and other conditions in the United States and internationally, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on our business.
Consistent with this strategy, we continue to evaluate potential acquisition targets, particularly with the following attributes: o Geographic balance, with a focus on acquiring a company in the branded merchandise space based in the western United States (including Texas, California, Colorado, Oregon, or Washington state) in the $5-10 million revenue range; o Smaller promotional companies in the $2-5 million revenue range who lack the programmatic capabilities but have a minimum of 30% gross margins and comparable or improved profitability; and o Businesses with complimentary offerings to increase Stran’s portfolio of services and depth of expertise in these additional industries: Packaging; Loyalty & Incentive; Decorators (for screen printer, embroidery, direct-to-garment, rub-on transfers, etc.); and Event/Tradeshow Services. ● Innovate and Invest in Technology .
Consistent with this strategy, we continue to evaluate potential acquisition targets, particularly with the following attributes: ○ Geographic balance, with a focus on acquiring a company in the branded merchandise space based in the southern and western United States (including Florida, Texas, or California) in the $5-10 million revenue range; and ○ Businesses with complimentary offerings to increase Stran’s portfolio of services and depth of expertise in these additional industries: Packaging; Loyalty & Incentive; Decorators (for screen printer, embroidery, direct-to-garment, rub-on transfers, etc.); and Event/Tradeshow Services. ● Innovate and Invest in Technology .
A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information.
Despite our security measures, it is impossible for us to eliminate this risk. 14 A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information.
Harte Hanks completes over 3 million on-time shipments of time-sensitive materials each year. Being able to integrate print, product, packaging, kitting, and direct mail, we help our client be more impactful and efficient with their promotional marketing efforts. 12 Intellectual Property We conduct our business using the registered trademark “STRÄN” and the registered trade name “Stran Promotional Solutions”.
Harte Hanks completes over 3 million on-time shipments of time-sensitive materials each year. Being able to integrate print, product, packaging, kitting, and direct mail, we help our client be more impactful and efficient with their promotional marketing efforts.
All other customers generated less than 5% of sales, and the vast majority generated less than 1% of sales. 9 While our customer contracts are typically auto-renewing and we have many long-term established customer relationships, most of our customer contracts do not have any minimum or exclusive purchase guarantees, other than as to inventory already ordered by them or their program participants.
While our customer contracts are typically auto-renewing and we have many long-term established customer relationships, most of our customer contracts do not have any minimum or exclusive purchase guarantees, other than as to inventory already ordered by them or their program participants. There is no assurance of recurring revenues.
We compete regularly with larger competitors and maintain healthy margins using this strategy for sourcing and procuring products. 8 Supplier and Fulfillment Relationships We have formed strategic relationships with fulfillment and commercial print providers in the United States in order to effectively warehouse and distribute merchandise from one or more of our warehouse facilities depending on our customer’s requirements.
Supplier and Fulfillment Relationships We have formed strategic relationships with fulfillment and commercial print providers in the United States in order to effectively warehouse and distribute merchandise from one or more of our warehouse facilities depending on our customer’s requirements.
We also compete with a multitude of foreign, regional and local competitors that vary by market. If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results .
If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results.
We serve a highly diversified customer base across many industry verticals including pharmaceutical and healthcare, manufacturing, technology, finance, construction and consumer goods. Many of our customers are household names and include some of the largest corporations in the world.
As of December 31, 2024, we had total assets of approximately $55.1 million with total stockholders’ equity of $31.6 million. We serve a highly diversified customer base across many industry verticals including pharmaceutical and healthcare, manufacturing, gaming, technology, finance, construction and consumer goods. Many of our customers are household names and include some of the largest corporations in the world.
We also use the unregistered logo “STRÄN promotional solutions”. To protect our intellectual property, we rely on a combination of laws and regulations, as well as contractual restrictions. Federal trademark law protects our registered trademark STRÄN and may protect our unregistered logo “STRÄN promotional solutions”.
Intellectual Property We conduct our business using the registered trademark “STRÄN” and “Gander Group” as well as the registered trade name “Stran Promotional Solutions”. We also use the unregistered logo “STRÄN promotional solutions”. To protect our intellectual property, we rely on a combination of laws and regulations, as well as contractual restrictions.
We plan to further expand and leverage our sales force and broad product and service offering to upsell and cross-sell to both develop new clients and further penetrate our existing customer base.
We also plan to continue to identify and exhibit at appropriate tradeshows, conferences, and events where we have had success. ● Develop and Penetrate Customer Base . We plan to further expand and leverage our sales force and broad product and service offering to upsell and cross-sell to both develop new clients and further penetrate our existing customer base.
Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. 15 Environmental Regulations We use certain plastic, glass, fabric, metal and other products in our business which may be harmful if released into the environment.
Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.
We plan to increase our exhibitor presence at appropriate shows and events such as ProcureCon Marketing, Association of National Advertisers Brand Masters Conference, Association of National Advertisers Masters of B2B Conference, National Beer Wholesalers Association (NBWA), Wine and Spirits Wholesalers of America: AccessLive, Bar Convent Brooklyn, New England Cannabis Convention (NECANN), Marijuana Business Conference and Cannabis Expo (MJBizCon). o Extend Relationships .
We plan to strategically increase our exhibitor presence at appropriate shows and events such as ProcureCon Marketing, Association of National Advertisers Masters of B2B Conference, National Beer Wholesalers Association (NBWA), Bar Convent Brooklyn, New England Cannabis Convention (NECANN), and one or more HR focused show(s).
We anticipate additional, similar legal requirements may be proposed or enacted in the future at local, state and federal levels, both in the United States and elsewhere. 14 New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the internet and e-commerce generally could result in significant additional taxes on our business.
New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the internet and e-commerce generally could result in significant additional taxes on our business.
We also use customer feedback surveys periodically to gain insight from the power users of the customer’ program and we have a formal corrective action process to address any issues that are not caught through our proactive efforts. ● Compliance and Emissions Reporting . We take issues of compliance very seriously.
We also use customer feedback surveys periodically to gain insight from the power users of the customer’ program and we have a formal corrective action process to address any issues that are not caught through our proactive efforts. 12 ● Integration . Offering our clients an industry-leading technology platform that stands alone only adds so much value.
We plan to identify and approach more print, fulfillment, and agency collaborators to sell into their customer base. o Referrals . We believe we will generate more customer referrals by offering an enhanced loyalty and customer incentive program.
In addition, Gander Group is a registered exhibitor at the Indian Gaming Tradeshow and Convention. ○ Extend Relationships . We plan to identify and approach more print, fulfillment, and agency collaborators to sell into their customer base. ○ Referrals . We believe we will generate more customer referrals by offering an enhanced loyalty and customer incentive program.
Our sales increased 28.7% year-over-year in 2023 compared to 2022, which we believe was primarily due to higher spending from existing clients as well as business from new customers. Additionally, we benefited from the acquisition of the G.A.P. Promotions, LLC, or G.A.P.
Our sales increased 8.8% year-over-year in 2024 compared to 2023, which we believe was primarily due to higher spending from existing clients as well as business from new customers.
Competition Our major competitors for our promotional products business include larger companies such as 4Imprint Group plc, Brand Addition Limited (The Pebble Group plc), BAMKO LLC (Superior Group of Companies, Inc.), Staples Promotional Products (Staples, Inc.), Boundless Network, Inc. (Zazzle Inc.), Custom Ink, Cimpress plc and HALO Branded Solutions, Inc.
Competition Our major competitors include companies such as 4Imprint Group plc (LSE: FOUR.L), Brand Addition Limited (The Pebble Group plc) (LSE: PEBB), BAMKO LLC (Superior Group of Companies, Inc.) (Nasdaq: SGC), Staples Promotional Products (Staples, Inc.), Boundless Network, Inc.
We buy promotional products from suppliers or factories both domestically and internationally as needed. We do not depend on any single supplier. However, if we are unable to continue to obtain our finished products from international locations or if our suppliers are unable to source raw materials, it could significantly disrupt our business.
However, if we are unable to continue to obtain our finished products from international locations or if our suppliers are unable to source raw materials, it could significantly disrupt our business.
We have also invested in an internal commercial ERP system, NetSuite ERP, which is expected to enhance the process of gathering and organizing the business data of our company through an integrated software suite, and is expected to be implemented in the second half of 2024. Additional NetSuite phases will be planned and rolled out in subsequent years.
We have also invested in an internal commercial Enterprise Resource Planning (ERP) system, Oracle/NetSuite’s NetSuite ERP, which is expected to enhance the process of gathering and organizing the business data of our Company through an integrated software suite, and was launched in the first half of 2025.
However, we work to blend production from factory direct manufacturing with our other suppliers to continue to drive costs down on commodity-based items.
However, we work to blend production from factory direct manufacturing with our other suppliers to continue to drive costs down on commodity-based items. We compete regularly with larger competitors and maintain healthy margins using this strategy for sourcing and procuring products.
Stranberg also transferred 700,000 shares of common stock to Theseus Capital Ltd. (“Theseus”), pursuant to a stock purchase agreement. Pursuant to a different arrangement with Mr. Stranberg from Mr. Shape and Mr. Birney’s, Theseus paid Mr. Stranberg a nominal cash purchase price of $100 for its stock.
Stranberg also transferred 700,000 shares of common stock to another third party pursuant to a stock purchase agreement subject to a different arrangement with Mr. Stranberg from Mr. Shape and Mr. Birney’s.
Online Store We have been a leader in the use of technology to offer our clients an online platform to more efficiently manage their promotional marketing programs and to give them the ability to sell branded merchandise directly to consumers. We launched our first online store for one of our clients in 1999.
We do business principally with customers based in the United States, although we also provide e-store, logistical support and other promotional services for client programs in Canada and Europe. 10 Online Store We have been a leader in the use of technology to offer our clients an online platform to more efficiently manage their promotional marketing programs and to give them the ability to sell branded merchandise directly to consumers.
As we continue to grow, we are hiring sales representatives in different geographies across the U.S. that further diversify our customer base and attract new customers.
As we continue to grow, we are hiring sales representatives in different geographies across the U.S. that further diversify our customer base and attract new customers. We will continue to build sales and marketing campaigns to promote Stran, including social media, search engine optimization (SEO), HubSpot Inbound Marketing, and other alternative platforms.
There are only two firms that have reported achieving sales above $1.0 billion in 2023. As a group, the top 40 distributors had approximately 37.5% market share as of 2022, based on total sales of approximately $9.7 billion out of total promotional products distributors’ revenues for 2022 of $25.8 billion, based on ASI’s reports.
As a group, the top 40 distributors had approximately 37.9% market share as of 2024, based on total sales of approximately $9.9 billion out of total promotional products distributors’ revenues for 2024 of $26.1 billion, based on ASI’s reports.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that: ● had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or ● in the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or ● in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.
Biggest changeRule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that: ● had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or ● in the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or ● in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available. 37 If a company determines that it does not qualify for smaller reporting company status because it exceeded one or more of the above thresholds, it will remain unqualified unless when making its annual determination it meets certain alternative threshold requirements which will be lower than the above thresholds if its prior public float or prior annual revenues exceed certain thresholds.
We do not expect to declare or pay dividends in the foreseeable future. We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business.
We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business.
If our customers or stockholders were to require us to use vendors that source, manufacture, or supply their products in accordance with certain sustainability standards, we expect that such standards would likewise force us to incur additional costs and we may fail to pass such additional costs on to our customers, which could also have a material adverse effect on our business. 25 On March 6, 2024, the SEC adopted rules that will require us to disclose: ● Climate-related risks that have had or are reasonably likely to have a material impact on our business strategy, results of operations, or financial condition; ● The actual and potential material impacts of any identified climate-related risks on our strategy, business model, and outlook; ● If, as part of our strategy, we have undertaken activities to mitigate or adapt to a material climate-related risk, a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities; ● Specified disclosures regarding our activities, if any, to mitigate or adapt to a material climate-related risk including the use, if any, of transition plans, scenario analysis, or internal carbon prices; ● Any oversight by our board of directors of climate-related risks and any role by management in assessing and managing our material climate-related risks; ● Any processes we have for identifying, assessing, and managing material climate-related risks and, if we are managing those risks, whether and how any such processes are integrated into our overall risk management system or processes; ● Information about our climate-related targets or goals, if any, that have materially affected or are reasonably likely to materially affect our business, results of operations, or financial condition; required disclosures would include material expenditures and material impacts on financial estimates and assumptions as a direct result of the target or goal or actions taken to make progress toward meeting such target or goal; ● The capitalized costs, expenditures expensed, charges, and losses incurred as a result of severe weather events and other natural conditions, such as hurricanes, tornadoes, flooding, drought, wildfires, extreme temperatures, and sea level rise, subject to applicable one percent and de minimis disclosure thresholds, disclosed in a note to the financial statements; ● The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates if used as a material component of our plans to achieve our disclosed climate-related targets or goals, disclosed in a note to our financial statements; and ● If the estimates and assumptions we use to produce our financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions was impacted, disclosed in a note to our financial statements.
If our customers or stockholders were to require us to use vendors that source, manufacture, or supply their products in accordance with certain sustainability standards, we expect that such standards would likewise force us to incur additional costs and we may fail to pass such additional costs on to our customers, which could also have a material adverse effect on our business. 27 On March 6, 2024, the SEC adopted rules that will require us to disclose: ● Climate-related risks that have had or are reasonably likely to have a material impact on our business strategy, results of operations, or financial condition; ● The actual and potential material impacts of any identified climate-related risks on our strategy, business model, and outlook; ● If, as part of our strategy, we have undertaken activities to mitigate or adapt to a material climate-related risk, a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities; ● Specified disclosures regarding our activities, if any, to mitigate or adapt to a material climate-related risk including the use, if any, of transition plans, scenario analysis, or internal carbon prices; ● Any oversight by our board of directors of climate-related risks and any role by management in assessing and managing our material climate-related risks; ● Any processes we have for identifying, assessing, and managing material climate-related risks and, if we are managing those risks, whether and how any such processes are integrated into our overall risk management system or processes; ● Information about our climate-related targets or goals, if any, that have materially affected or are reasonably likely to materially affect our business, results of operations, or financial condition; required disclosures would include material expenditures and material impacts on financial estimates and assumptions as a direct result of the target or goal or actions taken to make progress toward meeting such target or goal; ● The capitalized costs, expenditures expensed, charges, and losses incurred as a result of severe weather events and other natural conditions, such as hurricanes, tornadoes, flooding, drought, wildfires, extreme temperatures, and sea level rise, subject to applicable one percent and de minimis disclosure thresholds, disclosed in a note to the financial statements; ● The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates if used as a material component of our plans to achieve our disclosed climate-related targets or goals, disclosed in a note to our financial statements; and ● If the estimates and assumptions we use to produce our financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions was impacted, disclosed in a note to our financial statements.
See also above, “— We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our stockholders could receive less information than they might expect to receive from more mature public companies. ” 34 We are a “smaller reporting company” within the meaning of the Exchange Act, and if we take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
See also above, “— We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our stockholders could receive less information than they might expect to receive from more mature public companies. ” We are a “smaller reporting company” within the meaning of the Exchange Act, and if we take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We face the risk of our competition following a strategy of selling its products at or below cost in order to cover some amount of fixed costs, especially in stressed economic times. 23 Global, national or regional economic slowdowns, high unemployment levels, fewer jobs, changes in tax laws or cost increases might have an adverse effect on our operating results.
We face the risk of our competition following a strategy of selling its products at or below cost in order to cover some amount of fixed costs, especially in stressed economic times. Global, national or regional economic slowdowns, high unemployment levels, fewer jobs, changes in tax laws or cost increases might have an adverse effect on our operating results.
In addition, these disclosure rules will not require compliance by us until our fiscal year beginning in 2027, with certain requirements not becoming effective until our fiscal year beginning in 2028, if we remain a smaller reporting company or emerging growth company. A number of petitions have been filed in federal courts seeking to challenge the SEC’s climate disclosure rules.
In addition, these disclosure rules will not require compliance by us until our fiscal year beginning in 2027, with certain requirements not becoming effective until our fiscal year beginning in 2028, if we remain a smaller reporting company or emerging growth company. 28 A number of petitions have been filed in federal courts seeking to challenge the SEC’s climate disclosure rules.
We cannot predict if investors will find our securities less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our securities. As a non-accelerated filer, we are not required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act.
We cannot predict if investors will find our securities less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our securities. 36 As a non-accelerated filer, we are not required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act.
Volatility in the market prices of our securities may prevent investors from being able to sell their securities at or above their purchase price. As a result, you may suffer a loss on your investment. 30 We may not be able to maintain a listing of our common stock and publicly-traded warrants on Nasdaq.
Volatility in the market prices of our securities may prevent investors from being able to sell their securities at or above their purchase price. As a result, you may suffer a loss on your investment. We may not be able to maintain a listing of our common stock and publicly-traded warrants on Nasdaq.
These proceedings could cause us to incur costs and may require us to devote resources to defend against these claims and could ultimately result in a loss or other remedies, such as product recalls, which could adversely affect our financial position and results of operations. 28 Volatility in the global financial markets could adversely affect results.
These proceedings could cause us to incur costs and may require us to devote resources to defend against these claims and could ultimately result in a loss or other remedies, such as product recalls, which could adversely affect our financial position and results of operations. Volatility in the global financial markets could adversely affect results.
The delisting of our common stock and publicly-traded warrants could significantly impair our ability to raise capital and the value of your investment. Our publicly-traded warrants may not have any value. Our publicly-traded warrants are exercisable for five years from the date of initial issuance and currently have an exercise price of $4.81375 per share.
The delisting of our common stock and publicly-traded warrants could also significantly impair our ability to raise capital and the value of your investment. Our publicly-traded warrants may not have any value. Our publicly-traded warrants are exercisable for five years from the date of initial issuance and currently have an exercise price of $4.81375 per share.
Notwithstanding the foregoing, these provisions of the warrant certificate will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Notwithstanding the foregoing, these provisions of the warrant certificate will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States are the sole and exclusive forum.
Compromising and/or loss of information could result in loss of sales or legal or regulatory claims which could adversely affect our revenues and profits or damage our reputation. We rely on software and services from other parties.
Compromising and/or loss of information could result in loss of sales or legal or regulatory claims which could adversely affect our revenues and profits or damage our reputation. 21 We rely on software and services from other parties.
This potential dependency could threaten the sustainability of our growth and have a material adverse effect on our financial condition or results of operations if we are unable to retain such major contracts or replace them with similarly major contracts on a regular basis. 22 Our business incurs significant freight and transportation costs.
This potential dependency could threaten the sustainability of our growth and have a material adverse effect on our financial condition or results of operations if we are unable to retain such major contracts or replace them with similarly major contracts on a regular basis. 24 Our business incurs significant freight and transportation costs.
These products include both natural and synthetic materials derived from plants, animal products, and organic and petroleum-based raw materials. Disruptions to the global supply chain due to climate-related impacts or geopolitical events are possible and exist as external risk factors that the Company can respond to but not control.
These products include both natural and synthetic materials derived from plants, animal products, and organic and petroleum-based raw materials. Disruptions to the global supply chain due to climate-related impacts or geopolitical events are possible and exist as external risk factors that we can respond to but not control.
Rule 12b-2 under the Exchange Act defines a “large accelerated filer” in the same way except that the company meeting the definition must have a public float of $700 million or more as of the last business day of the company’s most recently completed second fiscal quarter.
Rule 12b-2 under the Exchange Act defines a “large accelerated filer” in the same way as an “accelerated filer” except that the company meeting the definition must have a public float of $700 million or more as of the last business day of the company’s most recently completed second fiscal quarter.
Growth of our business through acquisition generally increases our operating complexity and the level of responsibility for both existing and new management personnel. Managing and sustaining our growth and expansion may require substantial enhancements to our operational and financial systems and controls, as well as additional administrative, operational and financial resources.
Growth of our business through acquisitions generally increases our operating complexity and the level of responsibility for both existing and new management personnel. Managing and sustaining our growth and expansion may require substantial enhancements to our operational and financial systems and controls, as well as additional administrative, operational and financial resources.
Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations. 21 Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.
Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations. 23 Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.
If we are unable to retain our current customers or finding new major customers or gain major new engagements from existing customers to replace any nonrecurring contracts, there may be material adverse effects on our financial condition or results of operations.
If we are unable to retain our current customers or find new major customers or gain major new engagements from existing customers to replace any nonrecurring contracts, there may be material adverse effects on our financial condition or results of operations.
These events could limit the supply of key raw materials to the Company, or could have significant impacts to pricing. We work with multiple raw material suppliers to mitigate lack of availability from a single supplier, however in some cases products with limited numbers of suppliers may become difficult to obtain.
These events could limit our supply of key raw materials, or could have significant impacts to pricing. We work with multiple raw material suppliers to mitigate lack of availability from a single supplier, however in some cases products with limited numbers of suppliers may become difficult to obtain.
Our success is largely dependent on the skills, experience and efforts of our senior management and other key personnel, including Andrew Shape, our Chief Executive Officer and President, Andrew Stranberg, our Executive Chairman, David Browner, our Chief Financial Officer, Sheila Johnshoy, our Chief Operating Officer, Ian Wall, our Chief Information Officer, and John Audibert, our Vice President of Growth and Strategic Initiatives.
Our success is largely dependent on the skills, experience and efforts of our senior management and other key personnel, including Andrew Shape, our Chief Executive Officer and President, Andrew Stranberg, our Executive Chairman, David Browner, our Chief Financial Officer, Ian Wall, our Chief Information Officer, and John Audibert, our Vice President of Growth and Strategic Initiatives.
Changes to trade regulation, quotas, duties, tariffs or other restrictions caused by the changing U.S. and geopolitical environments or otherwise, such as those with respect to China, may materially harm our revenue and results of operations, such as by increasing our costs and/or limiting the amount of products that we can import.
Risks Related to Our Business and Industry Changes to trade regulation, quotas, duties, tariffs or other restrictions caused by the changing U.S. and geopolitical environments or otherwise, such as those with respect to China, may materially harm our revenue and results of operations, such as by increasing our costs and/or limiting the amount of products that we can import.
Holders of publicly-traded warrants have no rights as stockholders until such holders exercise their publicly-traded warrants and acquire our shares of common stock. Until holders of our publicly-traded warrants acquire shares of common stock upon exercise thereof, such holders will have no rights with respect to the shares of common stock underlying the publicly-traded warrants.
Until holders of our publicly-traded warrants acquire shares of common stock upon exercise thereof, such holders will have no rights with respect to the shares of common stock underlying the publicly-traded warrants.
Although our common stock and publicly-traded warrants are listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our common stock and publicly-traded warrants may be delisted.
Although our common stock and publicly-traded warrants are listed on Nasdaq, we must meet certain financial, liquidity, SEC reporting, corporate governance, and other continuing listing requirements to maintain such listing. If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our common stock and publicly-traded warrants may be delisted.
We attempt to address the potential risks inherent in assessing the attractiveness of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.
We have evaluated, and may continue to evaluate, potential acquisition transactions. We attempt to address the potential risks inherent in assessing the attractiveness of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.
Deterioration in these general economic conditions may result in: declining revenue, which can lead to excess capacity and declining operating cash flow; reductions in management’s estimates for future revenue and operating cash flow growth; increases in borrowing rates and other deterioration in factors that impact our weighted average cost of capital; and deteriorating real estate values.
Deterioration in these general economic conditions may result in a number of adverse consequences, including: Declining revenue, which can lead to excess capacity and declining operating cash flow; reductions in management’s estimates for future revenue and operating cash flow growth; and increases in borrowing rates and other deterioration in factors that impact our weighted average cost of capital.
Generally, these trade agreements and regulations benefit our business by reducing or eliminating the quotas, duties and/or tariffs assessed on products manufactured in a particular country.
Our operations are subject to various international trade agreements and regulations. Generally, these trade agreements and regulations benefit our business by reducing or eliminating the quotas, duties and/or tariffs assessed on products manufactured in a particular country.
The principal components in our promotional products are plastic, glass, fabric and metal. The prices we pay for these fabrics and components and our merchandise are dependent on the market price for the raw materials used to produce them, primarily cotton and chemical components of synthetic fabrics including raw materials such as chemicals and dyestuffs.
The prices we pay for these fabrics and components and our merchandise are dependent on the market price for the raw materials used to produce them, primarily cotton and chemical components of synthetic fabrics including raw materials such as chemicals and dyestuffs.
In the event that the stock price of our shares of common stock does not exceed the exercise price of the publicly-traded warrants during the period when the publicly-traded warrants are held and exercisable, the publicly-traded warrants may not have any value to their holders.
In the event that the stock price of our shares of common stock does not exceed the exercise price of the publicly-traded warrants during the period when the publicly-traded warrants are held and exercisable, the publicly-traded warrants may not have any value to their holders. 33 Holders of publicly-traded warrants have no rights as stockholders until such holders exercise their publicly-traded warrants and acquire our shares of common stock.
Failure to anticipate, identify or promptly react to changing trends or styles may result in decreased demand for our products, as well as excess inventories and markdowns, which could have a material adverse effect on our business, results of operations and financial condition. In addition, if we misjudge consumer preferences, our brand image may be impaired.
Failure to anticipate, identify or promptly react to changing trends or styles may result in decreased demand for our products, as well as excess inventories and markdowns, which could have a material adverse effect on our business, results of operations and financial condition.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.
A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations or financial condition.
A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations or financial condition. 20 We may be unable to identify or to complete acquisitions or to successfully integrate the businesses we acquire.
During the years ended December 31, 2023 and 2022, many promotional products companies saw increases in the cost of finished goods and raw materials purchased, as well as in the average cost of finished goods and raw materials purchased, as compared to the prior year, driven by rising inflation rates and challenges in the supply chain which continue to persist.
During the years ended December 31, 2024 and 2023, many promotional products companies saw increases in the cost of finished goods and raw materials purchased, as well as in the average cost of finished goods and raw materials purchased, as compared to the prior year, driven by rising inflation rates and shipping costs.
While the Company has various cost control measures in place and employs an outside consultant to review larger claims, employee health benefits have been and are expected to continue to be a significant cost to the Company. Medical costs will continue to be a significant expense to the Company and may increase due to factors outside the Company’s control.
While the Company has various cost control measures in place and employs an outside consultant to review larger claims, employee health benefits have been and are expected to continue to be a significant cost to the Company.
Even if this strategy is successful, the results may be offset by reductions in demand or price declines due to competitors’ pricing strategies or other micro- or macroeconomic factors.
Our marketing strategy is to differentiate ourselves by providing quality service and quality products to our customers. Even if this strategy is successful, the results may be offset by reductions in demand or price declines due to competitors’ pricing strategies or other micro- or macroeconomic factors.
Assuming that the SEC climate disclosure rules are ultimately upheld in their present form, and even in light of the exemptions and accommodations made for smaller reporting companies and emerging growth companies described above, the costs to adopt the necessary disclosure controls and procedures to disclose all required information, the potential costs to make changes in our operations to allow us to improve our climate change-related disclosures, or the potential loss of revenues from these disclosure requirements due to investor, customer, or vendor requirements to disclose and meet certain climate change-related targets pursuant to these disclosure rules, may still have a material adverse effect on our business and operations. 26 General Risk Factors Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.
Assuming that the SEC climate disclosure rules are ultimately upheld in their present form, and even in light of the exemptions and accommodations made for smaller reporting companies and emerging growth companies described above, the costs to adopt the necessary disclosure controls and procedures to disclose all required information, the potential costs to make changes in our operations to allow us to improve our climate change-related disclosures, or the potential loss of revenues from these disclosure requirements due to investor, customer, or vendor requirements to disclose and meet certain climate change-related targets pursuant to these disclosure rules, may still have a material adverse effect on our business and operations.
Further, our suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States. 18 Increases in the price of merchandise and raw materials used to manufacture our products could materially increase our costs and decrease our profitability.
Further, our suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States.
Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to the U.S. healthcare system.
Unfavorable changes in the cost of such benefits could impact our financial results and cash flow. Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to the U.S. healthcare system.
We also compete with a multitude of foreign, regional and local competitors that vary by market. If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results .
If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results .
In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability at any of our facilities, or at facilities we may acquire. 29 If we are unable to accurately predict our future tax liabilities, become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected.
If we are unable to accurately predict our future tax liabilities, become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected.
We are unable to predict the likely duration and severity of any disruption in financial markets and adverse economic conditions and the effects they may have on our business and financial condition. Failure to achieve and maintain effective internal control over financial reporting could adversely affect our business and price of our securities.
We are unable to predict the likely duration and severity of any disruption in financial markets and adverse economic conditions and the effects they may have on our business and financial condition. 29 We identified material weaknesses in our internal control over financial reporting as of December 31, 2024.
Similarly, if customers or potential customers perceive the products or services offered by our existing or future competitors to be of higher quality than ours or part of a broader product mix, our revenues may decline, which would adversely affect our operating results.
Similarly, if customers or potential customers perceive the products or services offered by our existing or future competitors to be of higher quality than ours or part of a broader product mix, our revenues may decline, which would adversely affect our operating results. 25 We face intense competition to gain market share, which may lead some competitors to sell substantial amounts of goods at prices against which we cannot profitably compete.
If our estimates or assumptions to value the acquired assets and liabilities are not accurate, we may be exposed to losses, and/or unexpected usage of cash flow to fund the operations of the acquired operations that may be material. 19 Even if we are able to acquire businesses on favorable terms, managing growth through acquisition is a difficult process that includes integration and training of personnel, combining facility and operating procedures, and additional matters related to the integration of acquired businesses within our existing organization.
Even if we are able to acquire businesses on favorable terms, managing growth through acquisitions is a difficult process that includes integration and training of personnel, combining facility and operating procedures, and additional matters related to the integration of acquired businesses within our existing organization.
In response, in part, to tariffs levied on products imported from China we have shifted some production out of China and may seek to shift additional production out of China, which may result in additional costs and disruption to our operations.
In response, in part, to tariffs levied on products imported from China we have shifted away from Chinese or other foreign manufacturers of some of our products and may seek to increase this shift due to U.S. tariffs or other aspects of U.S. trade policy, which may result in additional costs and disruption to our operations.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our securities, and therefore stockholders may have difficulty selling their securities. 33 We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our stockholders could receive less information than they might expect to receive from more mature public companies.
We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our stockholders could receive less information than they might expect to receive from more mature public companies.
In the event we are covered by new analysts, and one or more analyst downgrades our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our securities could be negatively affected. 32 Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our securities to decline and would result in the dilution of your holdings.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our securities to decline and would result in the dilution of your holdings.
Any such quotas, duties, tariffs or restrictions could have a material adverse effect on our business, results of operations or financial condition. 24 The apparel industry, including corporate identity apparel, is subject to changing fashion trends and if we misjudge consumer preferences, the image of one or more of our brands may suffer and the demand for our products may decrease.
The apparel industry, including corporate identity apparel, is subject to changing fashion trends and if we misjudge consumer preferences, the image of one or more of our brands may suffer and the demand for our products may decrease.
Our major competitors for our promotional products business include companies such as 4Imprint Group plc, Brand Addition Limited (The Pebble Group plc), BAMKO LLC (Superior Group of Companies, Inc.), Staples Promotional Products (Staples, Inc.), Boundless Network, Inc. (Zazzle Inc.), Custom Ink, Cimpress plc and HALO Branded Solutions, Inc.
Our major competitors include companies such as 4Imprint Group plc (LSE: FOUR.L), Brand Addition Limited (The Pebble Group plc) (LSE: PEBB), BAMKO LLC (Superior Group of Companies, Inc.) (Nasdaq: SGC), Staples Promotional Products (Staples, Inc.), Boundless Network, Inc.
During the fiscal year ended December 31, 2023, our top ten customers accounted for 44.0% of revenues, and our top customer accounted for 13.2% of revenues. During the fiscal year ended December 31, 2022, our top ten customers accounted for 42.5% of revenues, and our top customer accounted for 8.8% of revenues.
During the fiscal year ended December 31, 2024, our top ten customers accounted for 38.1% of revenues, and our top customer accounted for 8.4% of revenues. During the fiscal year ended December 31, 2023, our top ten customers accounted for 46.1% of revenues, and our top customer accounted for 14.4% of revenues.
In addition, the laws of some foreign countries do not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the United States.
We cannot assure that third parties will not assert claims against us on any such basis or that we will be able to successfully resolve such claims. In addition, the laws of some foreign countries do not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the United States.
Further, in the event a court finds the exclusive forum provision contained in our warrant certificates to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations. 31 Risks Related to our Common Stock and Publicly-Traded Warrants Although we adopted a stock repurchase program, we have discretion to not repurchase your shares, to suspend the program, and to cease repurchases.
Further, in the event a court finds the exclusive forum provision contained in our warrant certificates to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations. 34 We do not expect to declare or pay dividends in the foreseeable future.
Risks Related to Our Business and Industry Shortages of supply of merchandise from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we source goods and materials could adversely affect our results of operations.
Any such quotas, duties, tariffs or restrictions could have a material adverse effect on our business, results of operations or financial condition. Shortages of supply of merchandise from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we source goods and materials could adversely affect our results of operations.
Increases in the cost of employee benefits could impact our financial results and cash flow. Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of such benefits could impact our financial results and cash flow.
As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our shares, may be adversely affected. Increases in the cost of employee benefits could impact our financial results and cash flow. Our expenses relating to employee health benefits are significant.
We rely on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal for our promotional products.
However, an unexpected interruption in any of the sources or facilities may temporarily adversely affect our results of operations until alternate sources or facilities can be secured. We rely on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal for our promotional products.
In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any shares of authorized preferred stock, there can be no assurance that we will not do so in the future.
In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company.
Our success depends upon the continued protection of our intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights. Our owned intellectual property and certain of our licensed intellectual property have significant value and are instrumental to our ability to market our products.
In addition, if we misjudge consumer preferences, our brand image may be impaired. 26 Our success depends upon the continued protection of our intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights.
These accounting principles require that we record an impairment charge if circumstances indicate that the asset carrying values exceed their estimated fair values. The estimated fair value of these assets is impacted by general economic conditions in the locations in which we operate.
The estimated fair value of these assets is impacted by general economic conditions in the locations in which we operate.
In that event, the Lender could enforce its security interest in all of our assets, potentially resulting in a material adverse effect on our business, results of operations and financial condition. Risks Related to Ownership of Our Securities The market prices of our securities may fluctuate, and you could lose all or part of your investment.
Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition. 31 Risks Related to our Common Stock and Publicly-Traded Warrants The market prices of our securities may fluctuate, and you could lose all or part of your investment.
Certain inbound products to the United States are subject to tariffs assessed on the manufactured cost of goods at the time of import.
Certain inbound products to the United States are subject to tariffs assessed on the manufactured cost of goods at the time of import. For example, during the prior Trump administration, increased tariffs were implemented on goods imported into the U.S., particularly from China, Canada, and Mexico.
We cannot assure that our owned or licensed intellectual property or the operation of our business does not infringe on or otherwise violate the intellectual property rights of others. We cannot assure that third parties will not assert claims against us on any such basis or that we will be able to successfully resolve such claims.
Our owned intellectual property and certain of our licensed intellectual property have significant value and are instrumental to our ability to market our products. We cannot assure that our owned or licensed intellectual property or the operation of our business does not infringe on or otherwise violate the intellectual property rights of others.
We may recognize impairment charges, which could adversely affect our financial condition and results of operations. We assess our goodwill, intangible assets and long-lived assets for impairment when required by generally accepted accounting principles in the United States (“U.S. GAAP”).
We assess our goodwill, intangible assets and long-lived assets for impairment when required by generally accepted accounting principles in the United States (“U.S. GAAP”). These accounting principles require that we record an impairment charge if circumstances indicate that the asset carrying values exceed their estimated fair values.
Both factors have increased shipping times as well as the price of shipping, whether by sea, air, rail, or vehicle. Shipping delays combined with significant increases in orders for our products have recently created, and are expected to continue to create, inventory pressure for us.
Both factors have increased shipping times as well as the price of shipping, whether by sea, air, rail, or vehicle.
If our securities become subject to the penny stock rules, it would become more difficult to trade our shares. The Securities and Exchange Commission (the “SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data/information continue to evolve.
Outside of the U.S., data protection laws, including the GDPR, also might apply to some of our operations or business collaborators. Legal requirements in the European Union and United Kingdom relating to the collection, storage, processing and transfer of personal data/information continue to evolve.
As a distributor, we buy merchandise both from multiple supply sources and from a network of factories in which we have developed direct relationships around the globe over the past 28 years. However, an unexpected interruption in any of the sources or facilities may temporarily adversely affect our results of operations until alternate sources or facilities can be secured.
Shipping delays combined with significant increases in orders for our products have recently created, and are expected to continue to create, inventory pressure for us. 19 As a distributor, we buy merchandise both from multiple supply sources and from a network of factories in which we have developed direct relationships around the globe over the past 30 years.
Removed
The challenges in the supply chain, which include shipping and logistics issues, also delayed the arrival of product that many promotional products companies could sell; this challenge also persists.
Added
The current Trump administration has implemented additional tariffs, some of which apply to goods imported from China and other countries from which we import goods.
Removed
We may be unable to identify or to complete acquisitions or to successfully integrate the businesses we acquire. We have evaluated, and may continue to evaluate, potential acquisition transactions.
Added
Increases in the price of merchandise and raw materials used to manufacture our products could materially increase our costs and decrease our profitability. The principal components in our promotional products are plastic, glass, fabric and metal.
Removed
Despite our security measures, it is impossible for us to eliminate this risk. 20 A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information.
Added
If our estimates or assumptions to value the acquired assets and liabilities are not accurate, we may be exposed to losses, and/or unexpected usage of cash flow to fund the operations of the acquired operations that may be material.
Removed
For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information.
Added
U.S. federal data privacy laws include the CAN-SPAM Act, which, among other things, restricts data collection and use in connection with CAN-SPAM Act’s opt-out process requirements for senders of commercial emails; and COPPA, which regulates the collection of information by operators of websites and other electronic solutions that are directed to children under 13 years of age, although our website and app user terms of service and privacy policy expressly prohibit children under 13 from submitting information to or on our website or app.
Removed
Other state laws, such as the CCPA, among other things, contain disclosure obligations for businesses that collect personal information about residents in their state and affords those individuals new rights relating to their personal information that may affect our ability to collect and/or use personal information.
Added
These laws and regulations promulgated under these laws restrict our collection, processing, storage, use and disclosure of personal information, may require us to notify individuals of our privacy practices and provide individuals with certain rights to prevent the use and disclosure of protected information, and mandate certain procedures with respect to safeguarding and proper description of stored information.
Removed
Moreover, on January 28, 2022, the California Attorney General announced that certain consumer loyalty programs are subject to the CCPA, which may affect some of our customers who use our loyalty program services if they are found not to comply with the CCPA’s requirements. The CDPA also establishes rights for Virginia consumers to control how companies use individuals’ personal data.
Added
Moreover, certain laws and regulations of U.S. states and the EU impose similar or greater data protection requirements and may also subject us to scrutiny or attention from regulatory authorities.
Removed
The CDPA dictates how companies must protect personal data in their possession and respond to consumers exercising their rights, as prescribed by the law, regarding such personal data. The CDPA went into effect on January 1, 2023.
Added
For example, the EU and California have passed comprehensive data privacy laws, the EU GDPR and the CCPA and regulations promulgated under the CCPA, respectively, which impose data protection obligations on enterprises, including limitations on data uses and constraints on certain uses of sensitive data.
Removed
Effective January 1, 2023, we also became subject to the CPRA, which expands upon the consumer data use restrictions, penalties and enforcement provisions under the California Consumer Privacy Act. Effective July 1, 2023, we also became subject to the Colorado Privacy Act and Connecticut’s An Act Concerning Personal Data Privacy and Online Monitoring, which are also comprehensive consumer privacy laws.
Added
Of particular importance, the CCPA, which became effective on January 1, 2020, limits how we may collect and use personal information, including by requiring companies that process information relating to California residents to make disclosures to consumers about their data collection, use and sharing practices, provide consumers with rights to know and delete personal information and allow consumers to opt out of certain data sharing with third parties.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Biggest changeThis approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties. 39 Risks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Governance Board of Directors Oversight Our board of directors oversees the management of risks associated with cybersecurity threats. 36 Management’s Role Managing Risk The Company’s Chief Information Officer is primarily responsible for assessing, monitoring and managing our cybersecurity risks.
Governance Board of Directors Oversight Our board of directors oversees the management of risks associated with cybersecurity threats. Management’s Role Managing Risk The Company’s Chief Information Officer is primarily responsible for assessing, monitoring and managing our cybersecurity risks.
We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes regular assessments by our Chief Information Officer. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties.
We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes regular assessments by our Chief Information Officer.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeUnder a lease agreement dated May 31, 2023 (the “Miller Lease Agreement”) with Miller Family Walpole LLC, as landlord (the “Miller Landlord”), for a warehouse facility in Walpole, Massachusetts, we will pay base rent of $179,550.00 in the first year of the lease and an increase of 2% per annum in each subsequent year.
Biggest changeThe lease contains an initial base rent of $21 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. 40 Under a lease agreement dated May 31, 2023 (the “Miller Lease Agreement”) with Miller Family Walpole LLC, as landlord (the “Miller Landlord”), for a warehouse facility in Walpole, Massachusetts, the initial lease term commenced on June 1, 2023 and terminates on May 31, 2028.
Our aggregate rent payments for these facilities is $204,615 per year. Our employees also work remotely from 20 additional locations around the United States using other facilities. We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our businesses.
Our aggregate rent payments for these facilities was approximately $743.000 during the fiscal year ended December 31, 2024. Our employees also work remotely from 22 additional locations around the United States using other facilities. We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our businesses.
We may assign our rights to the lease and property at the facility as collateral to a lender. The Miller Landlord is also required to execute a landlord lien waiver and collateral access agreement upon request.
We will be responsible for all property and other taxes and expenses related to the facility except for maintenance of certain structural elements. We may assign our rights to the lease and property at the facility as collateral to a lender. The Miller Landlord is also required to execute a landlord lien waiver and collateral access agreement upon request.
The Miller Lease Agreement contains provisions for minimum insurance, mutual indemnification from certain claims relating to the Miller Lease Agreement, and customary default and related termination and remedy provisions.
The Miller Lease Agreement contains provisions for minimum insurance, mutual indemnification from certain claims relating to the Miller Lease Agreement, and customary default and related termination and remedy provisions. We also lease satellite office space in Warsaw, Indiana; Mt. Pleasant, South Carolina; Walpole, Massachusetts; Tomball, Texas; and Irvine, California.
We may also be required to pay certain taxes and expenses to the landlord under the lease agreement.
We may also be required to pay certain taxes and expenses to the landlord under the lease agreement. On January 10, 2025, the Company entered into a seven-year lease agreement for new office space in North Quincy, Massachusetts.
We may extend the term for an additional five years upon the same base rent terms upon 12 months’ notice. We will be responsible for all property and other taxes and expenses related to the facility except for maintenance of certain structural elements. The initial lease term commenced on June 1, 2023 and terminates on May 31, 2028.
We paid base rent of $179,550.00 in the first year of the lease and will pay an increase of 2% per annum in each subsequent year. We may extend the term for an additional five years upon the same base rent terms upon 12 months’ notice.
Removed
The foregoing description of the lease agreement and amendment to the lease agreement is qualified in its entirety by reference to the full text of such agreements which are filed as Exhibit 10.3 and Exhibit 10.4 to this Annual Report, respectively, and which are incorporated herein by reference.
Added
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.
Removed
The foregoing description of the Miller Lease Agreement is qualified in its entirety by reference to the full text of the agreement, a copy of which is filed as Exhibit 10.37 to this Annual Report. We also lease satellite office space in Warsaw, Indiana; Mt. Pleasant, South Carolina; Walpole, Massachusetts; and Tomball, Texas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Biggest changeWe are not currently aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 41 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change“Risk Factors—Risks Related to Our Common Stock and Publicly-Traded Warrants— We do not expect to declare or pay dividends in the foreseeable future .” Recent Sales of Unregistered Securities We did not sell any equity securities during the 2023 fiscal year that were not previously disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K that was filed during the 2023 fiscal year . 38 Purchases of Equity Securities The following table provides information about our repurchases of common stock during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) October 1, 2023 – October 31, 2023 - $ - 1,797,159 $ 6,643,289 November 1, 2023 – November 30, 2023 4,505 $ 1.31 1,801,664 $ 6,637,399 December 1, 2023 – December 31, 2023 13,502 $ 1.47 1,815,166 $ 6,617,594 (1) For a description of the Company’s stock repurchase program, see Item 2.
Biggest change“Risk Factors—Risks Related to Our Common Stock and Publicly-Traded Warrants— We do not expect to declare or pay dividends in the foreseeable future .” Recent Sales of Unregistered Securities We did not sell any equity securities during the 2024 fiscal year that were not previously disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K that was filed during the 2024 fiscal year .
Number of Holders of Our Common Stock As of March 28, 2024, there were approximately 66 holders of record of our common stock, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions.
Number of Holders of Our Common Stock As of April 8, 2025, there were approximately 64 holders of record of our common stock, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions.
Removed
“ Management’s Discussion and Analysis of Financial Condition and Results of Operations. – Liquidity and Capital Resources – Stock Repurchase Program ”. ITEM 6. [RESERVED]
Added
Purchases of Equity Securities No repurchases of our common stock were made during the fourth quarter of 2024. 42 ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYears Ended December 31, 2023 2022 Amount % of Revenues Amount % of Revenues Sales $ 75,893,871 100.0 % $ 58,953,467 100.0 % Cost of Sales: Purchases 45,399,202 59.8 % 37,391,939 63.4 % Freight 5,613,169 7.4 % 4,991,854 8.5 % Total Cost of Sales $ 51,012,371 67.2 % $ 42,383,793 71.9 % Gross Profit $ 24,881,500 32.8 % $ 16,569,674 28.1 % Operating Expenses: General and Administrative Expenses 26,030,030 34.3 % 18,075,369 30.7 % Total Operating Expenses $ 26,030,030 34.3 % $ 18,075,369 30.7 % Earnings (Loss) from Operations $ (1,148,530 ) (1.5 )% $ (1,505,695 ) (2.6 )% Other Income and (Expense): Other Income 375,063 0.5 % 112,507 0.2 % Interest Income 570,387 0.8 % 94,680 0.2 % Unrealized Gain (Loss) on Investments 269,587 0.4 % (179,120 ) (0.3 )% Total Other Income and (Expense) $ 1,215,037 1.6 % $ 28,067 0.0 % Earnings (Loss) Before Income Taxes $ 66,507 0.1 % $ (1,477,628 ) (2.5 )% Provision for Income Taxes $ 31,449 0.0 % $ (699,187 ) (1.2 )% Net Earnings (Loss) $ 35,058 0.0 % $ (778,441 ) (1.3 )% Sales Sales consist primarily of the selling price of the merchandise, service or outbound shipping and handling charges, less discounts, coupons redeemed, returns and credits.
Biggest changeYears Ended December 31, 2024 2023 Amount (in thousands) % of Revenues Amount (in thousands) % of Revenues SALES Sales $ 82,194 99.4 % $ 75,147 98.9 % Sales – related parties 460 0.6 % 853 1.1 % Total sales 82,654 100.0 % 76,000 100.0 % COST OF SALES: Cost of sales 56,487 68.3 % 50,492 66.4 % Cost of sales - related parties 354 0.4 % 656 0.9 % Total cost of sales 56,841 68.8 % 51,148 67.3 % GROSS PROFIT 25,813 31.2 % 24,852 32.7 % OPERATING EXPENSES: General and administrative expenses 30,707 37.2 % 25,310 33.3 % Goodwill impairment — — % 810 1.1 % Total operating expenses 30,707 37.2 % 26,120 34.4 % LOSS FROM OPERATIONS (4,894 ) (5.9 )% (1,268 ) (1.7 )% OTHER INCOME: Other income 38 — % 186 0.2 % Interest income 305 0.4 % 570 0.8 % Change in fair value of contingent earn-out liability 208 0.3 % 65 0.1 % Realized gain on investments 208 0.3 % 103 0.1 % Total other income 759 0.9 % 924 1.2 % LOSS BEFORE INCOME TAXES (4,135 ) (5.0 )% (344 ) (0.5 )% Provision for income taxes 5 — % 41 0.1 % NET LOSS $ (4,140 ) (5.0 )% $ (385 ) (0.5 )% 45 Sales Sales consist primarily of the selling price of the merchandise, service or outbound shipping and handling charges, less discounts, coupons redeemed, returns and credits.
We believe that our current levels of cash will be sufficient to meet our anticipated cash needs for our operations and cash payment obligations for both the 12 months ended December 31, 2024 and in the long-term beyond this period, including our anticipated costs associated with being a public reporting company.
We believe that our current levels of cash will be sufficient to meet our anticipated cash needs for our operations and cash payment obligations for both the 12 months ended December 31, 2025 and in the long-term beyond this period, including our anticipated costs associated with being a public reporting company.
In addition to selling branded products, we offer 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.
In addition to selling branded products, we offer 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; POS displays; and loyalty and incentive programs.
GAAP. ● The Company must maintain a “Minimum Debt Service Coverage Ratio” of 1.20:1, tested annually beginning with the fiscal year ending December 31, 2025, defined as follows: EBITDA, less cash taxes, distributions, dividends, stockholder withdrawals in any form, and unfinanced capital expenditures (as defined below), divided by all scheduled principal payments on all debt, plus cash interest payments made on all debt, plus cash payments made on contingent earn-out liabilities.
GAAP. ● The Company was required to maintain a “Minimum Debt Service Coverage Ratio” of 1.20:1, tested annually beginning with the fiscal year ending December 31, 2025, defined as follows: EBITDA, less cash taxes, distributions, dividends, stockholder withdrawals in any form, and unfinanced capital expenditures (as defined below), divided by all scheduled principal payments on all debt, plus cash interest payments made on all debt, plus cash payments made on contingent earn-out liabilities.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the IPO, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the Company’s initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period.
“Eligible Accounts” are defined as accounts that meet a number of requirements, including, unless otherwise approved by the Lender, being less than 90 days from the date of invoice not subject to any prior assignment, claim, lien, or security interest, not subject to set-off, credit, allowance or adjustment by the account debtor, arose in the ordinary course of the Company’s business, not an intercompany obligation, not subject to notice of bankruptcy or insolvency of the account debtor, not owed by an account debtor whose principal place of business is outside the United States, not a government account, not be evidenced by promissory notes, and not one of the accounts owed by an account debtor 25% or more of whose accounts are 90 or more days past invoice date; or otherwise not deemed acceptable by the Lender in accordance with its normal credit policies.
“Eligible Accounts” was defined as accounts that meet a number of requirements, including, unless otherwise approved by Salem Five Cents, being less than 90 days from the date of invoice not subject to any prior assignment, claim, lien, or security interest, not subject to set-off, credit, allowance or adjustment by the account debtor, arose in the ordinary course of the Company’s business, not an intercompany obligation, not subject to notice of bankruptcy or insolvency of the account debtor, not owed by an account debtor whose principal place of business was outside the United States, not a government account, not be evidenced by promissory notes, and not one of the accounts owed by an account debtor 25% or more of whose accounts were 90 or more days past invoice date; or otherwise not deemed acceptable by Salem Five Cents in accordance with its normal credit policies.
Under the Warehouseman’s Waiver, the Warehouse Provider disclaimed any interest in the property of the Company stored on the premises (the “Collateral”), and agreed not to interfere with the Lender’s enforcement of its rights in the Collateral.
Under the Warehouseman’s Waiver, the Warehouse Provider disclaimed any interest in the property of the Company stored on the premises (the “Collateral”), and agreed not to interfere with Salem Five Cents’ enforcement of its rights in the Collateral.
The Company also may not, without the prior approval by the Lender, incur any additional indebtedness, secured or unsecured, except in the ordinary course of business; make loans or advances to others or guarantee others’ obligations except for certain ordinary advances to employees or ordinary customer credit terms; make investments; acquire any business; make capital expenditures except in the ordinary course of business; sell any material assets except in the ordinary course of business; or grant any security interests or mortgages in its properties or assets.
The Company also could not incur any additional indebtedness, secured or unsecured, except in the ordinary course of business; make loans or advances to others or guarantee others’ obligations except for certain ordinary advances to employees or ordinary customer credit terms; make investments; acquire any business; make capital expenditures except in the ordinary course of business; sell any material assets except in the ordinary course of business; or grant any security interests or mortgages in its properties or assets.
“EBITDA” is defined as the trailing year’s total of net income before total interest expense, tax expense, and depreciation and amortization expense. EBITDA will be adjusted for extraordinary and/or non-cash items as defined in accordance with U.S.
“EBITDA” was defined as the trailing year’s total of net income before total interest expense, tax expense, and depreciation and amortization expense. EBITDA was required to be adjusted for extraordinary and/or non-cash items as defined in accordance with U.S.
The Warehouse Provider further agreed to provide notice to the Lender of any default by the Company of its obligations as to the Warehouse Provider, and to give the Lender at least 30 days to exercise its rights, which period may be extended by the Lender up to 60 days upon its payment of the per-diem rental amount.
The Warehouse Provider further agreed to provide notice to Salem Five Cents of any default by the Company of its obligations as to the Warehouse Provider, and to give Salem Five Cents at least 30 days to exercise its rights, which period could be extended by Salem Five Cents up to 60 days upon its payment of the per-diem rental amount.
“Risk Factors” and “Introductory Notes – Note Regarding Forward-Looking Statements. ” Overview We are an outsourced marketing solutions provider that sells branded products to customers. We purchase products and branding through various third-party manufacturers and decorators and resell the finished goods to customers.
“ Risk Factors ” and “ Introductory Notes – Note Regarding Forward-Looking Statements .” Overview We are an outsourced marketing solutions provider that sells branded products to customers. We purchase products and branding through various third-party manufacturers and decorators and resell the finished goods to customers.
Principal Factors Affecting Our Financial Performance Our operating results are primarily affected by the following factors: ● our ability to acquire new customers or retain existing customers; ● our ability to offer competitive product pricing; ● our ability to broaden product offerings; ● industry demand and competition; ● our ability to leverage technology and use and develop efficient processes; ● our ability to attract and retain talented employees; and ● market conditions and our market position. 41 Results of Operations The following table sets forth key components of our results of operations during the years ended December 31, 2023 and 2022, both in dollars and as a percentage of our revenues.
Principal Factors Affecting Our Financial Performance Our operating results are primarily affected by the following factors: ● our ability to acquire new customers or retain existing customers; ● our ability to offer competitive product pricing; ● our ability to broaden product offerings; ● industry demand and competition; ● our ability to leverage technology and use and develop efficient processes; ● our ability to attract and retain talented employees; ● our ability to identify or to complete acquisitions or to successfully integrate the businesses we acquire; and ● market conditions and our market position. 44 Results of Operations Comparison of Years Ended December 31, 2024 and 2023 The following table sets forth key components of our results of operations during the years ended December 31, 2024 and 2023 both in dollars and as a percentage of our revenues.
Under the Security Agreement and the other Line of Credit Documents, the Company granted the Lender a first priority security interest in all of its assets, including both assets owned as of the date of the Line of Credit and afterwards, as collateral for full repayment of the Line of Credit.
Under the Security Agreement and the other Loan Documents, the Company granted Salem Five Cents a first priority security interest in all of its assets, including both assets owned as of the date of the Revolving Line of Credit and afterwards, as collateral for full repayment of the Revolving Line of Credit.
“Eligible Inventory” means all finished goods, work in progress and raw materials and component parts of inventory owned by the Company.
“Eligible Inventory” was defined as all finished goods, work in progress and raw materials and component parts of inventory owned by the Company.
Upon the receipt of written notice from the Lender and until such notice is rescinded, the Warehouse Provider shall only honor instructions from the Lender with respect to the Collateral, including any direction from the Lender to dispose of all or any portion of the Collateral at any time, without any further consent or instruction from Company.
Upon the receipt of written notice from Salem Five Cents and until such notice was rescinded, the Warehouse Provider was required to honor only instructions from Salem Five Cents with respect to the Collateral, including, any direction from Salem Five Cents to dispose of all or any portion of the Collateral at any time, without any further consent or instruction from Company.
The amount available under the Line of Credit is the lesser of $7.0 million or the sum of (x) 80% of the then-outstanding amount of Eligible Accounts (as defined below), plus (y) 50% of Eligible Inventory (as defined below); minus 100% of the aggregate amount then drawn under the Line of Credit for the account of the Company.
The amount available under the Revolving Line of Credit was the lesser of $7.0 million or the sum of (x) eighty percent (80.0%) of the then-outstanding amount of Eligible Accounts (as defined below), plus (y) fifty percent (50.0%) of Eligible Inventory (as defined below); minus one hundred (100.0%) percent of the aggregate amount then drawn under the Revolving Line of Credit for the account of the Company.
The Lender may file Uniform Commercial Code financing statements with any jurisdiction and with sufficient descriptions of the property to perfect its security interest in all of the Company’s current and future assets.
Salem Five Cents had the right to file Uniform Commercial Code financing statements with any jurisdiction and with sufficient descriptions of the property to perfect its security interest in all of the Company’s current and future assets.
Upon default of the Line of Credit, the Lender may accelerate repayment of the Line of Credit, take possession of the Company’s assets, assign a receiver over the Company’s assets, and enforce other rights as to the Company’s assets as secured creditor.
Upon default of the Revolving Line of Credit, Salem Five Cents could accelerate repayment of the Revolving Line of Credit, take possession of the Company’s assets, assign a receiver over the Company’s assets, and enforce other rights as to the Company’s assets as secured creditor.
The majority of our revenue is derived from program business, although only a small percentage of our customers are considered programmatic. For the years 2023 and 2022, program clients accounted for 77.2% and 82.2% of total revenue, respectively. Fewer than 350 of our more than 2,000 active customers are considered to be program clients.
The majority of our revenue is derived from program business, although only a small percentage of our customers are considered programmatic. For the years ended December 31, 2024 and 2023, program clients accounted for 83.3% and 81.4% of total revenue, respectively. Fewer than 350 of our more than 2,000 active customers are considered to be program clients.
Those program customers are geared towards longer-lasting relationships that helps secure recurring revenue well into the future. Our sales increased 28.7% year-over-year in 2023 compared to 2022, which we believe was primarily due to higher spending from existing clients as well as business from new customers. Additionally, we benefited from the acquisition of the assets of G.A.P.
Those program customers are geared towards longer-lasting relationships that helps secure recurring revenue well into the future. Our sales increased 8.8% year-over year in 2024 compared to 2023 , which we believe was primarily due to higher spending from existing clients as well as business from new customers.
Income Taxes Provision Income tax provision reflects statutory tax rates in the jurisdictions in which we operate adjusted for permanent book/tax differences. Income tax provision for the year ended December 31, 2023 was approximately $0.03 million compared to income tax provision of approximately $(0.7) million for the year ended December 31, 2022.
Income Tax Provision Income tax provision reflects statutory tax rates in the jurisdictions in which we operate adjusted for permanent book/tax differences. Income tax provision for the year ended December 31, 2024 was approximately $5 thousand compared to income tax provision of approximately $41 thousand for the year ended December 31, 2023.
“Unfinanced capital expenditures” is defined as the current fiscal-year-end net fixed assets, plus current fiscal-year-end depreciation, less prior fiscal-year-end net fixed assets, less the long-term debt increase. ● The Company’s “Ratio of Debt to Tangible Net Worth” must not exceed 1.50:1, tested at financial year-end, defined as total liabilities divided by “tangible net worth,” defined as total assets, less total labilities, less intangible assets and amounts due from stockholder/related parties. ● The Company must maintain a “Minimum Liquidity” of $7,500,000 at all times, defined as cash and short-term investments, less rewards program liabilities. ● Any future investments or acquisitions will continue to require prior approval by the Lender, and any future contingent earn-out obligations must be subordinated to Lender debt.
“Unfinanced capital expenditures” was defined as the current fiscal-year-end net fixed assets, plus current fiscal-year-end depreciation, less prior fiscal-year-end net fixed assets, less the long-term debt increase. ● The Company’s “Ratio of Debt to Tangible Net Worth” was required not to exceed 1.50:1, tested at financial year-end, defined as total liabilities divided by “tangible net worth,” defined as total assets, less total liabilities, less intangible assets and amounts due from stockholder/related parties. ● The Company was required to maintain a “Minimum Liquidity” of $7.5 million at all times, defined as cash and short-term investments, less rewards program liabilities.
The Company must use the proceeds of the Line of Credit only in connection with the general and ordinary operations of its business and for the purpose of general working capital for accounts receivable and inventory purchases. 46 The Line of Credit was also initially subject to the following ongoing affirmative obligations of the Company: Making punctual repayment of the Line of Credit amount; maintaining proper accounting books and records in accordance with the opinion of LMHS, P.C. or another Certified Public Accountant acceptable to the Lender; allowing the Lender to inspect its accounting books and records; furnishing audited, quarterly, monthly and other financial statements to the Lender; making payment of Lender’s reasonable expenses for a field exam in 2022 (see “— Recent Developments – Modification of Line of Credit Terms ” as to the recent modification of this term); allowing the Lender to communicate with its accountants; maintaining its properties in good repair subject to ordinary wear and tear; obtaining replacement-cost insurance for its property with the Lender as Mortgagee/Loss Payee; causing management contracts for the Company’s properties to be subordinated to the rights of the Lender; and allowing no change of property management company without the prior written consent of the Lender..
The Revolving Line of Credit was also subject to ongoing affirmative obligations of the Company, including: Making punctual repayment of the Revolving Line of Credit amount; maintaining proper accounting books and records in accordance with the opinion of LMHS, P.C. or another Certified Public Accountant acceptable to Salem Five Cents; allowing Salem Five Cents to inspect its accounting books and records; furnishing audited, quarterly, monthly and other financial statements to Salem Five Cents; prior to the date of the Loan Modification Agreement, making payment of Salem Five Cents’ reasonable expenses for a field exam in 2022; and following the date of the Loan Modification Agreement, making payment of Lender’s reasonable expenses for a field exam in 2024; allowing Salem Five Cents to communicate with its accountants; maintaining its properties in good repair subject to ordinary wear and tear; obtaining replacement-cost insurance for its property with Salem Five Cents as Mortgagee/Loss Payee; causing management contracts for the Company’s properties to be subordinated to the rights of Salem Five Cents; and allowing no change of property management company without the prior written consent of Salem Five Cents.
The Company may freely draw upon the Line of Credit subject to the Lender’s right to demand complete repayment of the Line of Credit at any time. Late payments are subject to a late payment charge of 5%.
The Company could freely draw upon the Revolving Line of Credit subject to Salem Five Cents’ right to demand complete repayment of the Revolving Line of Credit at any time. Late payments were subject to a late payment charge of 5.0%.
Under the Line of Credit Agreement, the Company is required to continue its current business of outsourced marketing solutions, and, without the prior consent of the Lender, the Company may not acquire in whole or in part any other company or business and shall not engage in any other business or open any other locations.
Under the Initial Loan Agreement, the Company was required to continue its current business of outsourced marketing solutions, and, without the prior consent of Salem Five Cents, the Company could not acquire in whole or in part any other company or business or engage in any other business or open any other locations.
The Line of Credit was also initially subject to the Company meeting the following financial requirements: (a) “Debt Service Coverage Ratio” defined as cash flow to be calculated on an annual basis of at least 1.20 times EBITDA less cash taxes, distributions, dividends, shareholder withdrawals in any form, and unfinanced CAPEX divided by all scheduled principal payments on all debt plus cash interest payments made on all debt; and (b) “Minimum Net Worth” defined as minimum net worth of $2,000,000 at December 31, 2021, $2,750,000 at December 31, 2022, and $3,500,000 at December 31, 2023.
Prior to the date of the Loan Modification Agreement, the Revolving Line of Credit was further subject to the following financial requirements: (a) Debt Service Coverage Ratio: Cash flow to be calculated on an annual basis of at least 1.20 times EBITDA less cash taxes, distributions, dividends, shareholder withdrawals in any form, and unfinanced CAPEX divided by all scheduled principal payments on all debt plus cash interest payments made on all debt; and (b) Minimum Net Worth thresholds: The Company was required to meet the following minimum net worth thresholds: $2,000,000 at December 31, 2021, $2,750,000 at December 31, 2022, and $3,500,000 at December 31, 2023. 49 Following the date of the Loan Modification Agreement, the Revolving Line of Credit was no longer subject to the Company’s compliance with the Debt Service Coverage Ratio and the Minimum Net Worth terms described above.
Our gross profit increased 50.2% to approximately $24.9 million, or 32.8% of sales, for the year ended December 31, 2023, from approximately $16.6 million, or 28.1% of sales, for the year ended December 31, 2022.
Our total gross profit increased 3.9% to approximately $25.8 million, or 31.2% of sales, for the year ended December 31, 2024 , from approximately $24.9 million, or 32.7% of sales, for the year ended December 31, 2023 .
In the event of failure to repay the Line of Credit after the Lender makes demand for full repayment, the interest rate will increase by 10%. The Note may be prepaid at any time without penalty. The Lender may assign the Note without the Company’s consent.
In the event of failure to repay the loan after Salem Five Cents made demand for full repayment, the interest rate would increase by 10.0%. The Demand Note could be prepaid at any time without penalty. Salem Five Cents could assign the Demand Note without the Company’s consent.
We anticipate no deficiencies in our ability to make these payments. 51 Other Cash Obligations The Company manages reward card programs for clients. Under these programs, the Company receives cash and simultaneously records a liability for the total amount received.
We anticipate no deficiencies in our ability to make these payments. Other Cash Obligations The Company manages reward card programs for clients. Under these programs, the Company receives cash and simultaneously records a liability for the total amount received. These accounts are adjusted on a periodic basis as reward cards are funded or reduced at the direction of the customers.
In addition, advances based upon Eligible Inventory must be capped at all times at $2,000,000.
In addition, advances based upon Eligible Inventory were required to be capped at all times at $2.0 million.
The Line of Credit and Note are secured by a first priority security interest in all assets and property of the Company, as provided in the Security Agreement, also dated November 22, 2021, between the Lender and the Borrower (the “Security Agreement” and together with the Line of Credit Agreement and the Note, the “Line of Credit Documents”), and as described below.
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.
The Company must pay for all of the Lender’s reasonable legal fees and expenses incurred to enforce its rights under the Line of Credit Documents.
The Company was required to pay for all of Salem Five Cents’s reasonable legal fees and expenses incurred to enforce its rights under the Loan Documents.
After that period, unless the default has been cured by the Lender, the Warehouse Provider may dispose of such Collateral as it deems fit.
After that period, unless the default had been cured by Salem Five Cents, the Warehouse Provider could dispose of such Collateral as it deemed fit.
Our operating expenses increased 44.0%, or approximately $8.0 million, to approximately $26.0 million for the year ended December 31, 2023, from approximately $18.1 million for the year ended December 31, 2022. As a percentage of sales, operating expenses increased to 34.3% for the year ended December 31, 2023, from 30.7% for the year ended December 31, 2022.
Operating expenses of our SLS segment increased to approximately $ 3.1 million for the year ended December 31, 2024 from $0 for the year ended December 31, 2023. As a percentage of sales, operating expenses increased to 37.2% for the year ended December 31, 2024 , from 34.4% for the year ended December 31, 2023 .
It does not include any inventory held on consignment or not otherwise owned by the Company; any inventory which has been returned by a customer or is damaged or subject to any legal encumbrances other than a first priority security interest held by the Company; any inventory which is not in the possession of the Company; any inventory which is held by the Company on property leased by the Company unless the Lender has received a landlord lien waiver and collateral access agreement from the lessor of such property satisfactory to the Lender; any inventory which is not located within the United States; any inventory which the Lender reasonably deems to be obsolete or non-marketable; and any inventory not subject to a first priority fully perfected lien held by the Lender.
Eligible Inventory did not include any inventory held on consignment or not otherwise owned by the Company; any inventory which had been returned by a customer or was damaged or subject to any legal encumbrances other than a first priority security interest held by the Company; any inventory which was not in the possession of the Company; any inventory which was held by the Company on property leased by the Company unless Salem Five Cents had received a Landlord’s Waiver and Consent from the lessor of such property satisfactory to Salem Five Cents; any inventory which was not located within the United States; any inventory which Salem Five Cents reasonably deemed to be obsolete or non-marketable; and any inventory not subject to a first priority fully perfected lien held by Salem Five Cents. 48 The Revolving Line of Credit was subject to interest at the prime rate plus 0.5% per annum.
Income tax provision for the years ended December 31, 2023 and 2022 accounted for 47.3% and 47.3% of earnings (loss) before income taxes of approximately $0.1 million and approximately $(1.5) million for the years ended December 31, 2023 and 2022, respectively.
Income tax provision for the year ended December 31, 2024 accounted for 0.1% of loss before income taxes of approximately $4.1 million. Income tax provision for the year ended December 31, 2023 accounted for 11.9% of income before income taxes of approximately $0.3 million.
Our total cost of sales increased 20.4% to approximately $51.0 million for the year ended December 31, 2023, from approximately $42.4 million for the year ended December 31, 2022. As a percentage of sales, cost of sales decreased to 67.2% for the year ended December 31, 2023 from 71.9% for the year ended December 31, 2022.
As a percentage of sales, total cost of sales increased to 68.8% for the year ended December 31, 2024 from 67.3% for the year ended December 31, 2023 . Cost of sales by our Stran segment decreased to approximately $ 49.0 million for the year ended December 31, 2024 from approximately $51.1 million for the year ended December 31, 2023.
Recent Accounting Pronouncements For a discussion of recently adopted accounting pronouncements, see Recently Issued Accounting Pronouncements in Note A to our financial statements beginning on page F-1 of this Annual Report. 53
Recent Accounting Pronouncements For a discussion of recently adopted accounting pronouncements, see Recently Issued Accounting Pronouncements in Note A.27 to our financial statements beginning on page F-1 of this Annual Report on Form 10-K. 52 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.
The Line of Credit is subject to interest at the prime rate plus 0.5% per annum. The Company must repay interest on Line of Credit proceeds on a monthly basis. The Line of Credit will continue indefinitely, subject to the Lender’s demand rights and the Company’s ongoing affirmative and other obligations under the Line of Credit Documents, as summarized below.
The Company was required to repay interest on the Revolving Line of Credit proceeds on a monthly basis. The Revolving Line of Credit continued indefinitely, subject to Salem Five Cents’ demand rights and the Company’s ongoing affirmative and other obligations under the Loan Documents, as summarized below.
Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects. 47 Summary of Cash Flows The following table provides detailed information about our net cash flows for the years ended December 31, 2024 and 2023.
Net cash used in financing activities was approximately $0.8 million for the year ended December 31, 2023, as compared to net cash provided by financing activities of approximately $2.7 million for the year ended December 31, 2022.
The change was primarily due to increased proceeds from the sale of investments, partially offset by increased purchases of investments. Net cash used in financing activities was approximately $0.9 million for the year ended December 31, 2024, as compared to approximately $0.9 million for the year ended December 31, 2023.
Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statements presentation, financial condition, results of operations, and cash flows will be affected.
To the extent that there are differences between our estimates and actual results, our future financial statements presentation, financial condition, results of operations, and cash flows will be affected. 51 We believe that the assumptions and estimates associated with the valuation of goodwill and intangible assets have the greatest potential impact on our financial statements.
The change in net cash used in operating activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 occurred in the normal course of business due to growth in organic business. 44 Net cash used in investing activities was approximately $2.1 million for the year ended December 31 , 2023, as compared to net cash used in investing activities of approximately $11.3 million for the year ended December 31, 2022.
The change was primarily due to an increase in rewards program liability. Net cash used in investing activities was approximately $0.5 million for the year ended December 31, 2024, as compared to net cash used in investing activities of approximately $3.7 million for the year ended December 31, 2023.
As stated above, as of December 31, 2023 and December 31, 2022, we had not drawn any funds from the Line of Credit under the Line of Credit Agreement.
As stated above, as of December 31, 2024 and December 31, 2023, we had not drawn any funds from the Revolving Line of Credit under the Loan Documents. Critical Accounting Estimates We prepare our financial statements in accordance with U.S. GAAP.
Property Leases The following is a schedule by years of future minimum lease payments: 2024 $ 569,236 2025 387,618 2026 188,981 2027 192,672 2028 64,784 Total Future Non-Cancelable Minimum Lease Payments $ 1,403,291 Lease cost for the years ended December 31, 2023 and 2022 totaled $557,687 and $466,895, respectively.
Contractual Obligations Property Leases The following is a schedule by years of future minimum lease payments (in thousands): 2025 $ 361 2026 189 2027 185 2028 65 Total future non-cancelable minimum lease payments $ 800 Lease cost for the years ended December 31, 2024 and 2023 totaled approximately $0.7 million and $0.5 million, respectively.
These accounts are adjusted on a periodic basis as reward cards are funded or reduced at the direction of the customers. At December 31, 2023 and December 31, 2022, the Company had net deposits totaling $875,000 and $6,000,000, respectively. Our other principal cash payment obligations have consisted principally of obligations under the Line of Credit described above.
As of December 31, 2024 and December 31, 2023, the Company had net deposits totaling approximately $6.0 million and $0.9 million, respectively. Our other principal cash payment obligations have consisted principally of obligations under the Revolving Line of Credit.
These factors were partially offset by the reasons described above for the increase in operating expenses and the increase in purchasing costs. Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of approximately $8.0 million and investments of approximately $10.5 million.
This change was primarily due to the increase in operating expenses along with the decrease in gross profit for the reasons described above. Liquidity and Capital Resources As of December 31, 2024 , we had cash and cash equivalents of approximately $9.4 million and investments of approximately $8.9 million .
“ Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. – Purchases of Equity Securities ” for further information about repurchases of common stock during the three months ended December 31, 2023. 45 Debt On November 22, 2021, we entered into a Revolving Demand Line of Credit Loan Agreement (the “Line of Credit Agreement”), with Salem Five Cents Savings Bank (the “Lender”), for aggregate loans of up to $7 million (the “Line of Credit”), evidenced by a Revolving Demand Line of Credit Note, also dated November 22, 2021 (the “Note”).
Debt 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 ”) .
For further information on all of our significant accounting policies, see the notes to our financial statements beginning on page F-1 of this Annual Report. Investments Our investments consist of U.S. treasury bills, corporate bonds, and money market funds. We classify our investments as available-for-sale and record these investments at fair value.
For further information on all of our significant accounting policies, see the notes to our financial statements beginning on page F-1 of this Annual Report on Form 10-K.
In connection with the Line of Credit Agreement, on November 22, 2021, the Company, the Lender and Harte Hanks Response Management/Boston, Inc. (the “Warehouse Provider”), the lessor of certain warehouse facilities to the Company, executed a Warehouseman’s Waiver in favor of the Lender (the “Warehouseman’s Waiver”).
(the “Warehouse Provider”), the lessor of certain warehouse facilities to the Company, executed a Warehouseman’s Waiver in favor of Salem Five Cents (the “Warehouseman’s Waiver”).
Our sales increased 28.7% to approximately $75.9 million for the year ended December 31, 2023, from approximately $59.0 million for the year ended December 31, 2022. The increase was primarily due to higher spending from existing clients as well as business from new customers. Additionally, the acquisitions of the G.A.P.
Sales by our SLS segment (which consists of the former Gander Group business) increased to approximately $ 9.9 million for the year ended December 31, 2024 from $0 for the year ended December 31, 2023. For the Stran segment, the decrease in sales was primarily due to lower spending from new and existing clients.
The increase in the dollar amount of gross profit was due to an increase in sales of approximately $16.9 million for the reasons described above, partially offset by an increase in purchasing and freight costs of approximately $8.6 million in aggregate for the reasons described above. Operating Expenses Operating expenses consist of general and administrative expenses.
For the Stran segment, the decrease in the dollar amount of gross profit was due to a decrease in sales of approximately $3.3 million for the reasons described above, which was partially offset by a decrease in cost of sales of approximately $2.2 million for the reasons described above.
This change was primarily due to interest generated from investments. Our unrealized gain (loss) on investments was $269,587 for the year ended December 31, 2023, compared to $(179,120) for the year ended December 31, 2022. This change was primarily due to the recording of all investments at estimated fair value.
Our interest income was approximately $305 thousand for the year ended December 31, 2024 , compared to approximately $570 thousand for the year ended December 31, 2023 . This change was primarily due to a decrease in interest generated from investments.
More specifically, cost of purchases increased to approximately $45.4 million for the year ended December 31, 2023, or 21.4%, from approximately $37.4 million for the year ended December 31, 2022. As a percentage of sales, cost of purchases decreased to 59.8% for the year ended December 31, 2023, from 63.4% for the year ended December 31, 2022.
As a percentage of sales, operating expenses of our Stran segment increased to 37.9% for the year ended December 31, 2024 from 34.4% for the year ended December 31, 2023. As a percentage of sales, operating expenses of our SLS segment were 31.4% for the year ended December 31, 2024.
For 2023 and 2022, the Company recorded an income tax provision comprised substantially of a deferred tax asset in the form of an operating loss carryforward. No valuation allowance against the deferred tax asset was accounted for due to the indefinite life of the asset.
As of December 31, 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. The Company recorded a valuation allowance due to a cumulative loss over a three-year period.
The June 2023 acquisition of the T R Miller assets generated approximately $7.0 million of sales for the year ended December 31, 2023, compared to no sales from such assets for the year ended December 31, 2022.
Sales by our Stran segment decreased to approximately $72.7 million for the year ended December 31, 2024 from approximately $76.0 million for the year ended December 31, 2023.
Net Earnings and Losses Our net earnings for the year ended December 31, 2023 was approximately $0.04 million, compared to a net loss of approximately $0.8 million for the year ended December 31, 2022. This change was primarily due to the increase in sales during 2023 from the acquisition of the assets of each of G.A.P.
Cost of s ales by our SLS segment increased to approximately $ 7.9 million for the year ended December 31, 2024 from $0 for the year ended December 31, 2023. The increase in the dollar amount of total cost of sales was primarily due to the increase in sales of 8.8% from period to period.
For the year ended December 31, 2023, net cash used in financing activities consisted primarily of payments related to a contingent earn-out liability of approximately $0.8 million and the repurchase of our common stock under our stock repurchase program for approximately $0.05 million.
The increase in net cash used in financing activities was primarily due to reduced payments of contingent earn-out liabilities of approximately $0.6 million and increased payments of installment payment liabilities of approximately $0.6 million.
In addition, freight costs increased to approximately $5.6 million for the year ended December 31, 2023, or 12.4%, from approximately $5.0 million for the year ended December 31, 2022. As a percentage of sales, freight costs decreased to 7.4% for the year ended December 31, 2023, from 8.5% for the year ended December 31, 2022.
Sales by segment and in total were as follows (in thousands): Year Ended Year Ended Increase / (Decrease) 12/31/2024 % of Total 12/31/2023 % of Total $ % Stran $ 72,712 88.0 % $ 76,000 100 % $ (3,288 ) (4.3 )% SLS 9,942 12.0 % — — % 9,942 100.0 % Total sales $ 82,654 100.0 % $ 76,000 100 % $ 6,654 8.8 % Our total sales increased 8.8% to approximately $82.7 million for the year ended December 31, 2024 , from approximately $76.0 million for the year ended December 31, 2023 .
As of December 31, 2023, we had $61.6 million of total assets with $39.5 million of total stockholder equity. 39 Recent Developments Modification of Line of Credit Terms Under a Commercial Loan Modification Agreement, dated as of February 12, 2024, between the Lender (as defined in “— Liquidity and Capital Resources – Debt ”) and the Company (the “Loan Modification Agreement”), certain obligations and requirements of the Company under the Line of Credit Agreement (as defined in “— Liquidity and Capital Resources – Debt ”) were modified, superseding the initial applicable terms, including as follows (as described in “— Liquidity and Capital Resources – Debt ”): ● The Company must make payment of Lender’s reasonable expenses for a field exam in 2024; ● The Line of Credit (as defined in “— Liquidity and Capital Resources – Debt ”) will now be subject to the Company meeting the following financial requirements: ● The Company must maintain a “Minimum Interest Coverage” of 1.25:1, tested for fiscal year ending December 31, 2024 only, and defined as follows: EBITDA (as defined below), divided by cash interest payments made on all debt.
Instead, the Company was required to meet the following financial requirements: ● The Company was required to maintain a “Minimum Interest Coverage” of 1.25:1, tested for fiscal year ending December 31, 2024 only, and defined as follows: EBITDA (as defined below), divided by cash interest payments made on all debt.
Summary of Cash Flow The following table provides detailed information about our net cash flow for fiscal years ended December 31, 2023 and December 31, 2022: Cash Flow Years Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ (4,365,089 ) $ (2,949,602 ) Net cash provided by (used in) investing activities (2,074,559 ) (11,329,536 ) Net cash provided by (used in) financing activities (825,305 ) (2,693,774 ) Net increase ( decrease) in cash and cash equivalents (7,264,953 ) (16,972,912 ) Cash and cash equivalents at beginning of year 15,253,756 32,226,668 Cash and cash equivalents at end of year $ 7,988,803 $ 15,253,756 Net cash used in operating activities was approximately $4.4 million for the year ended December 31, 2023, as compared to net cash used in operating activities of approximately $2.9 million for the year ended December 31, 2022.
Years Ended December 31, 2024 (in thousands) 2023 (in thousands) Net cash provided by (used in) operating activities $ 2,760 $ (2,550 ) Net cash used in investing activities (533 ) (3,736 ) Net cash used in financing activities (928 ) (909 ) Net increase (decrease) in cash 1,299 (7,195 ) Cash and cash equivalents - beginning 8,059 15,254 Cash and cash equivalents - ending $ 9,358 $ 8,059 Net cash provided by operating activities was approximately $2.8 million for the year ended December 31, 2024, as compared to net cash used in operating activities of approximately $2.6 million for the year ended December 31, 2023.
Our effective tax rate is directly affected by the relative proportions of revenue and income before taxes in the jurisdictions in which we operate. Based on management’s expectations of future earnings, we anticipate that our effective tax rate will remain similar to the federal tax rate of 21%.
Based on management’s expectations of future earnings and recognition of a valuation allowance, we anticipate that our effective tax rate will remain similar to the rate recorded in 2024. Net Loss Our net loss for the year ended December 31, 2024 was approximately $4.1 million, compared to approximately $0.4 million for the year ended December 31, 2023.
Wall’s compensation package is described in Item 11. “ Executive Compensation – Executive Officer Employment and Consulting Agreements – Employment Agreement with Ian Wall ”. 40 Emerging Growth Company and Smaller Reporting Company We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
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. 43 Emerging Growth Company and Smaller Reporting Company We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
The increase in the dollar amount of cost of purchases and freight was primarily due to an increase in sales of 28.7% from period to period. Gross Profit Gross profit consists of sales less total costs of sales.
The increase in the dollar amount of t otal gross profit was primarily due to the acquisition of the Gander Group Assets in August 2024.
The December 2022 acquisition of the Premier NYC assets generated approximately $1.1 million of sales for the year ended December 31, 2023, compared to no sales from such assets for the year ended December 31, 2022.
Our total operating expenses increased 17.6% to approximately $30.7 million for the year ended December 31, 2024 , from approximately $26.1 million for the year ended December 31, 2023 . Operating expenses of our Stran segment increased to approximately $ 27.6 million for the year ended December 31, 2024 from approximately $26.1 million for the year ended December 31, 2023.
Removed
Promotions in January 2022, the assets of Trend Brand Solutions in August 2022, the assets of Premier NYC in December 2022, and the assets of T R Miller in June 2023 .
Added
Additionally, we benefited from the acquisition of the assets of T R Miller in June 2023, and the Gander Group Assets in August 2024, respectively . As of December 31, 2024, we had approximately $55.1 million of total assets with approximately $31.6 million of total stockholders’ equity.
Removed
The foregoing description of the Loan Modification Agreement is qualified in its entirety by reference to the full text of the Loan Modification Agreement, a copy of which is attached as Exhibit 10.42 to this Annual Report, which is incorporated herein by reference.
Added
Recent Developments Lease Agreement 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.
Removed
Annual Executive Bonuses On February 15, 2024, the Company awarded annual bonuses for the fiscal year ended December 31, 2023 to Andrew Shape, David Browner, John Audibert, and Sheila Johnshoy. The bonus compensation is described in Item 11. “ Executive Compensation ”. Chief Information Officer Compensation Effective January 2, 2024, Ian Wall became our Chief Information Officer. Mr.
Added
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.
Removed
Promotions assets in January 2022, the Trend Brand Solutions assets in August 2022, the Premier NYC assets in December 2022, and the T R Miller assets in June 2023 accounted for approximately $14.7 million, or 19.4%, of sales, for 2023, compared to approximately $6.5 million, or 11.0%, of sales for 2022, as described in more detail immediately below.
Added
For the SLS segment, the increase in sales was due to the acquisition of the Gander Group Assets in August 2024.
Removed
The January 2022 acquisition of the G.A.P. Promotions assets generated approximately $3.5 million of sales for the year ended December 31, 2023, compared to approximately $5.4 million from such assets for the year ended December 31, 2022.
Added
Cost of Sales Cost of sales by segment and in total were as follows (in thousands): Year Ended Year Ended Increase / (Decrease) 12/31/2024 % of Total 12/31/2023 % of Total $ % Stran $ 48,970 86.2 % $ 51,148 100.0 % $ (2,178 ) (4.3 )% SLS 7,871 13.8 % — — % 7,871 100.0 % Total cost of sales $ 56,841 100.0 % $ 51,148 100.0 % $ 5,693 11.1 % Our total cost of sales increased 11.1% to approximately $56.8 million for the year ended December 31, 2024 , from approximately $51.1 million for the year ended December 31, 2023 .
Removed
The August 2022 acquisition of the Trend Brand Solutions assets generated approximately $3.1 million of sales for the year ended December 31, 2023 compared to approximately $1.1 million from such assets for the year ended December 31, 2022.
Added
For the Stran segment, the decrease was primarily due to a decrease in sales of approximately $3.3 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.
Removed
Our recurring organic sales, defined as sales excluding revenue from the G.A.P Promotions, Trend Brand Solutions, Premier NYC, and T R Miller asset acquisitions, increased 16.6%, or approximately $8.7 million, to approximately $61.2 million for the year ended December 31, 2023, from approximately $52.5 million for the year ended December 31, 2022. 42 Cost of Sales Cost of sales consists of the costs of purchasing merchandise and freight charges.
Added
Gross Profit Gross profit and gross margin percentages by segment and in total were as follows (in thousands): Year Ended Year Ended Increase / (Decrease) 12/31/2024 % of Total 12/31/2023 % of Total $ % Stran $ 23,742 92.0 % $ 24,852 100.0 % $ (1,110 ) (4.5 )% SLS 2,071 8.0 % — — % 2,071 100.0 % Total gross profit $ 25,813 100.0 % $ 24,852 100.0 % $ 961 3.9 % Gross profit consists of sales less total cost of sales.
Removed
The increase in the dollar amount of operating expenses was due to an increase in general and administrative expenses of approximately $8.0 million, or 44.0%, which in turn was primarily due to aggregate expenses related to the organic growth in our business.

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