Stran & pany(US:SWAG)2023-11-06 21:15Financial Performance - Sales increased 42.2% year-over-year to approximately $19.3 million for Q3 2023, compared to $13.6 million for Q3 2022[134] - Gross profit rose 50.0% to approximately $6.4 million, representing 33.0% of sales for Q3 2023, compared to 31.3% for Q3 2022[137] - Net earnings for Q3 2023 were approximately $684,609, compared to a net loss of $688,152 for Q3 2022[130] - Recurring organic sales increased 29.5%, or approximately $3.5 million, to approximately $15.4 million for Q3 2023[135] - Sales increased by 29.3% to approximately $52.5 million for the nine months ended September 30, 2023, compared to $40.6 million for the same period in 2022, with acquisitions contributing approximately $9.4 million, or 17.9% of total sales[146] - Gross profit for the nine months ended September 30, 2023, increased by 43.8% to approximately $16.1 million, representing 30.7% of sales, compared to $11.2 million, or 27.6% of sales, for the same period in 2022[149] - The net loss for the nine months ended September 30, 2023, was approximately $0.8 million, an improvement from a net loss of approximately $1.7 million for the same period in 2022, attributed to increased sales and acquisitions[157] Expenses and Costs - Cost of sales increased 38.6% to approximately $12.9 million for Q3 2023, with cost of purchases rising to approximately $11.6 million[136] - Operating expenses increased to approximately $5.9 million for Q3 2023, up from $4.9 million in Q3 2022[130] - Operating expenses for the nine months ended September 30, 2023, rose by 39.7% to approximately $18.4 million, accounting for 35.0% of sales, up from 32.4% in the same period in 2022[150] - The total cost of sales increased by 23.8% to approximately $36.4 million for the nine months ended September 30, 2023, with cost of purchases rising to approximately $32.4 million, or 25.5%[148] Assets and Equity - Total assets as of September 30, 2023, were approximately $61.3 million, with total stockholders' equity of approximately $38.6 million[125] - As of September 30, 2023, the company had cash and cash equivalents of approximately $9.4 million and investments of approximately $10.3 million[158] Acquisitions - The acquisition of assets from G.A.P. Promotions, Trend Brand Solutions, Premier NYC, and T R Miller contributed approximately $3.9 million, or 20.4% of sales, for Q3 2023[134] - The total purchase price for the Wildman Imprints acquisition was $2,937,222, with the fair value of identifiable assets acquired including inventory of $649,433 and an intangible customer list valued at $2,253,690[181] - The G.A.P. Promotions acquisition had an aggregate purchase price of $3,245,872, with cash payments of $1,510,872 and a contingent earn-out liability of $1,635,000[188] - The Trend Brand Solutions acquisition totaled $2,193,166, with cash consideration of $1,488 and a contingent earn-out liability of $1,370,344[193] - The Premier NYC acquisition had an aggregate purchase price of $1,390,533, including cash payments of $440,025 and a contingent earn-out liability of $907,600[198] - The T R Miller acquisition involved a cash payment of $2,154,230.21, reflecting a purchase price of $1,000,000 adjusted by a $1,123,071.82 working capital adjustment[202] Financing and Credit - The company entered into a Revolving Demand Line of Credit Loan Agreement for aggregate loans of up to $7 million, secured by a first priority security interest in all assets[168] - The Line of Credit is subject to interest at the prime rate plus 0.5% per annum, with monthly interest repayments required[170] - The company must maintain a minimum net worth of $3.5 million by December 31, 2023, as part of the financial requirements under the Line of Credit[175] - The company may not incur additional indebtedness or make significant investments without the prior consent of the lender[176] Stock and Share Repurchase - The company has repurchased a total of 1,797,159 shares of common stock for total payments of $3,356,711, with $6,643,289 remaining available under the stock repurchase program[167] - The Company has established a trading plan for stock repurchases that may continue until June 2024 unless terminated earlier or extended[165] Other Financial Information - Other income rose to $242,009 for the three months ended September 30, 2023, compared to $20,471 for the same period in 2022, primarily due to adjustments related to earn-out obligations from acquisitions[140] - Other income for the nine months ended September 30, 2023, was $313,738, compared to $92,124 for the same period in 2022, largely due to adjustments related to earn-out obligations[151] - The effective tax rate is expected to remain similar to the federal tax rate of 21%, influenced by the relative proportions of revenue and income before taxes in various jurisdictions[142] - Net cash used in operating activities for the nine months ended September 30, 2023, was approximately $3.4 million, a decrease from approximately $6.5 million for the same period in 2022[161] - Net cash used in investing activities was approximately $1.8 million for the nine months ended September 30, 2023, compared to approximately $10.7 million for the same period in 2022[162] - Net cash used in financing activities was approximately $0.6 million for the nine months ended September 30, 2023, down from approximately $2.7 million for the same period in 2022[163] Accounting Policies - The Company recognizes revenue when goods or services are transferred to customers, following a five-step process as per ASC Topic 606[221] - The Company accounts for stock-based compensation under ASC Topic 718, which requires subjective assumptions that could significantly affect future expenses[223][224] - The Company evaluates its deferred tax assets based on the likelihood of recovery from future taxable income, with significant changes potentially impacting tax provisions[226][227] - The Company manages its investments, which include U.S. treasury bills and corporate bonds, recording them at fair value[217] - The Company has critical accounting policies related to investments, inventory valuation, intangible assets, revenue recognition, and stock-based compensation that could significantly impact financial statements[216]