Stran & Company, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.

Use of Terms

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

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

• evolving trade matters, including tariffs on goods that we purchase from manufacturers in other countries, and how they could impact our ability to compete cost-effectively;
• our goals and strategies;
• our business development, financial condition and results of operations;
• expected changes in our revenue, costs or expenditures;
• growth and competition trends in our industry;
• our expectations regarding demand for, and market acceptance of, our products or services;
• our expectations regarding our relationships with investors, institutional funding sources and other parties with whom we collaborate;
• our expectations regarding the availability and use of financing from credit facilities or sales of equity or debt securities;
• future fluctuations in general economic and business conditions in the markets in which we operate; and
• future relevant government policies and regulations relating to our industry.

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A. “Risk Factors” included in our Annual Reports on Form 10-K filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

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.

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.

We earn the majority of our revenue from the sale of unique, quality promotional products for a wide variety of industries primarily to support marketing efforts. We also derive revenues from service fees from loyalty programs, event management, print services, fulfillment services, and technology services.

The majority of our revenue is derived from program business, although only a small percentage of our customers are considered programmatic. For the three months ended March 31, 2026 and 2025, program clients accounted for 85.3% and 83.8% of total revenue, respectively. Fewer than 350 of our more than 2,000 active customers are considered to be program clients. Our active customers are any organizations, businesses, or divisions of a parent organization which have purchased directly or indirectly from us within the last two years, and include organizations that have bought from other organizations for which Stran acts as an established sub-contractor. We define transactional customers as customers that place an order with us and do not have an agreement with us covering ongoing branding requirements. We define program clients as clients that have a contractual obligation for specific ongoing branding needs. Program offerings include ongoing inventory, use of technology platform, warehousing, creative services, and additional client support. Those program customers are geared towards longer-lasting relationships, which we believe will help secure recurring revenue well into the future.

We have historically imported many of the goods or components used in our promotional products business from China in particular and to some extent from other countries. Since February 2025 and as of the date of this report, the United States has implemented and repeatedly amended additional country-specific tariffs on goods imported from other countries, with significant changes affecting imports from China. In May 2025, the United States temporarily reduced previously-imposed additional “reciprocal” and fentanyl-related tariffs at a combined rate of 145% on most goods imported from China to a combined rate of 30%, and in August 2025 extended this temporary combined rate on Chinese imports until November 10, 2025. In November 2025, these tariffs were further reduced to a combined rate of approximately 20%. For low-value items of Chinese or Hong Kong origin valued at or below $800 and moving via the international postal stream, duty-free treatment ended May 2, 2025. Since May 14, 2025, such postal shipments have generally been subject to either a 54% ad valorem duty or a $100 per-item postal fee. Separately, the United States eliminated duty-free de minimis treatment for imports from all other countries effective August 29, 2025. In addition, the United States has introduced and adjusted reciprocal tariff rates on imports from numerous trading partners. Since August 7, 2025, additional “reciprocal” tariff rates applicable to most goods from covered countries vary by country between approximately 10% and 41%, with many commonly in the 15%-40% range after later adjustments and exemptions. These additional country-specific tariffs were effected alongside a general increase in separate U.S. tariffs against imports based on product type or sector, as well as, in certain cases, country of origin, in some cases modified by exemptions or other adjustments.

On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to impose tariffs, invalidating both the reciprocal tariffs and the fentanyl-related tariffs on Chinese imports described above as well as all other tariffs imposed under IEEPA. In response, the President immediately revoked the IEEPA tariff orders and, invoking Section 122 of the Trade Act of 1974, imposed a temporary 10% global import surcharge on most imports effective February 24, 2026, for 150 days, which the President subsequently announced would be increased to 15%. On April 20, 2026, U.S. Customs and Border Protection launched an internet portal to allow importers to process IEEPA duty refund requests (the “CBP Portal”). However, we cannot predict whether we will be able to collect any refunds of our payments of any such tariffs. At March 31, 2026, we have not recorded a tariff refund receivable due to the uncertainty of the amounts and collection of such tariff refunds.

As a result of the above tariffs and tariff amendments and the ongoing uncertainties as to tariff refunds and future tariff rates, we have had to increase prices for certain products, and may be required to raise those prices further, which may result in the loss of customers. If prices cannot be increased, it may result in a negative impact on our gross margin. We have also attempted to shift away from Chinese suppliers in particular, and other foreign suppliers in general, and may seek to increase this shift due to U.S. tariffs or other aspects of U.S. trade policy, in an effort to reduce the effect of tariff increases on our product prices. However, due to the limited availability of competitive pricing from suppliers whose goods are not currently subject to tariffs or that are subject to relatively lower tariffs, and the possibility that some of the current or planned additional U.S. tariffs may increase, decrease, or become subject to exceptions or suspensions, with little or no prior notice, our ability to cost-effectively mitigate some of the effects of current and future scheduled U.S. tariffs may be significantly limited. These trends and uncertainties may result in additional costs and disruption to our operations, which may have a significant negative effect on the Company’s sales and gross margins in future periods. As a result, investors should not assume that any trends reflected in our past results that relate to periods preceding the increases in applicable U.S. tariffs since February 2025, including those that may be indicated below for the three months ended March 31, 2025, may be expected to continue to occur in future periods.

During the quarter ended March 31, 2026, global crude oil and refined product markets were impacted by heightened geopolitical tensions in the Middle East, including the ongoing conflict involving Iran, Israel, and the United States. These developments have not had a direct material impact on our results. However, we are exposed to volatility in energy and oil markets, which could impact manufacturing, transportation, and packaging costs. Maritime restrictions in the Strait of Hormuz will continue to influence this risk. Significant increases in fuel, utilities, and petroleum-based inputs may materially increase our cost of goods sold and logistics expenses, and these increases may not be fully offset through pricing actions, which could adversely impact our margins and operating results.

Our sales for the three months ended March 31, 2026 increased 8.9% compared to sales for the three months ended March 31, 2025, which was due to higher spending from existing clients as well as business from new customers.

As of March 31, 2026, we had approximately $53.2 million of total assets with approximately $31.4 million of total stockholders’ equity.

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”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

• have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
• present three years, and may instead present only two years, of audited financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this report;
• comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
• comply with certain greenhouse gas emissions disclosure and related third-party assurance requirements;
• submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
• disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.235 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 (subject to certain exceptional circumstances) 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.

To the extent that we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions and accommodations available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including as to: (i) the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act; (ii) scaled executive compensation disclosures; (iii) presenting three years of audited financial statements; and (iv) compliance with certain greenhouse gas emissions disclosure and related third-party assurance requirements.

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.

Results of Operations

Comparison of Three Months Ended March 31, 2026 and 2025

The following table sets forth key components of our results of operations during the three months ended March 31, 2026 and 2025 both in dollars and as a percentage of our revenues.

24

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. Sales by segment and in total were as follows (in thousands):

Our total sales increased 8.9% to approximately $31.2 million for the three months ended March 31, 2026, from approximately $28.7 million for the three months ended March 31, 2025. Sales by our Stran segment increased to approximately $23.4 million for the three months ended March 31, 2026 from approximately $20.9 million for the three months ended March 31, 2025. Sales by our SLS segment (which consists of the business of Gander Group Louisiana) remained flat at approximately $7.8 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. For the Stran segment, the increase in sales was primarily due to higher spending from existing clients as well as business from new customers. For the SLS segment, the increase in sales was primarily attributable to new business from new customers.

Cost of Sales

Cost of sales by segment and in total were as follows (in thousands):

Our total cost of sales increased 6.9% to approximately $21.6 million for the three months ended March 31, 2026, from approximately $20.2 million for the three months ended March 31, 2025. As a percentage of sales, total cost of sales decreased to 69.1% for the three months ended March 31, 2026 from 70.4% for the three months ended March 31, 2025. Cost of sales by our Stran segment increased to approximately $16.0 million for the three months ended March 31, 2026 from approximately $14.1 million for the three months ended March 31, 2025. Cost of sales by our SLS segment decreased to approximately $5.6 million for the three months ended March 31, 2026 from approximately $6.1 million for the three months ended March 31, 2025. The increase in the dollar amount of total cost of sales was primarily due to the increase in sales of 8.9% from period to period. For the Stran segment, the increase was primarily due to the increase in sales described above. For the SLS segment, the decrease was primarily attributable to effective cost management.

Gross Profit

Gross profit and gross profit margin by segment and in total were as follows (in thousands):

Gross profit consists of sales less total cost of sales. Our total gross profit increased 13.7% to approximately $9.6 million, or 30.9% of sales, for the three months ended March 31, 2026, from approximately $8.5 million, or 29.6% of sales, for the three months ended March 31, 2025. Gross profit of our Stran segment increased to approximately $7.4 million for the three months ended March 31, 2026 from approximately $6.8 million for the three months ended March 31, 2025. Gross profit of our SLS segment increased to approximately $2.2 million for the three months ended March 31, 2026 from approximately $1.7 million for the three months ended March 31, 2025. The increase in the dollar amount of total gross profit was primarily attributable to customer mix and effective cost management. For the Stran segment, the increase in the dollar amount of gross profit was due to an increase in sales of approximately $2.5 million for the reasons described above, which was partially offset by an increase of cost of sales of approximately $1.9 million for the reasons described above. For the SLS segment, the increase in the dollar amount of gross profit was primarily attributable to improved customer mix and effective cost management.

Gross profit margin is defined as gross profit as a percentage of sales. The increase in total gross profit margin to 30.9% for the three months ended March 31, 2026 from 29.6% for the three months ended March 31, 2025 was primarily due to a shift in our customer mix and margin contribution. The gross profit margin for the Stran segment decreased to 31.6% for the three months ended March 31, 2026 from 32.4% for the three months ended March 31, 2025 due to customer mix. The gross profit margin for the SLS segment increased to 28.7% for the three months ended March 31, 2026 from 21.8% for the three months ended March 31, 2025 due to improved customer mix and effective cost management.

The gross profit and gross profit margin for the remainder of 2026 will be largely dependent on revenue levels.

Operating Expenses

Operating expenses by segment and in total were as follows (in thousands):

Operating expenses consist of general and administrative expenses. Our total operating expenses decreased (0.2)% to approximately $9.0 million for the three months ended March 31, 2026, from approximately $9.0 million for the three months ended March 31, 2025. Operating expenses of our Stran segment increased to approximately $6.2 million for the three months ended March 31, 2026 from approximately $5.6 million for the three months ended March 31, 2025. Operating expenses of our SLS segment decreased to approximately $1.7 million for the three months ended March 31, 2026 from approximately $2.2 million for the three months ended March 31, 2025. As a percentage of sales, total operating expenses decreased to 28.8% for the three months ended March 31, 2026, from 31.4% for the three months ended March 31, 2025. As a percentage of sales, operating expenses of our Stran segment decreased to 26.6% for the three months ended March 31, 2026 from 26.9% for the three months ended March 31, 2025. As a percentage of sales, operating expenses of our SLS segment decreased to 21.9% for the three months ended March 31, 2026 from 27.7% for the three months ended March 31, 2025. For the Stran segment, the increase in the dollar amount of operating expenses was primarily due to investment in STRAN Digital Solutions to provide enhanced functionality and offerings to scale client programs, higher expenses related to our e-commerce platform, Magento Open Source, and higher sales and marketing-related costs. For the SLS segment, the decrease in the dollar amount of operating expenses was primarily attributable to a small reduction in headcount and lower sales-related costs. Operating expenses for “Other” consists of unallocated corporate costs, including salaries for our corporate officers, audit-related fees, board of director compensation, and other stock-related charges. Such costs decreased by approximately $0.2 million to approximately $1.1 million for the three months ended March 31, 2026, from approximately $1.2 million for the three months ended March 31, 2025. The decrease was primarily due to lower legal and accounting expenses related to the re-audit of historical financial statements.

Other Income (Expense)

Other income consists of other income (expense), interest income, and realized gain on investments. Our other income was approximately $78 thousand for the three months ended March 31, 2026, compared to other expense of approximately $(5) thousand for the three months ended March 31, 2025. This change was primarily attributable to a payment received from a settlement administrator. Our interest income was approximately $67 thousand for the three months ended March 31, 2026, compared to approximately $42 thousand for the three months ended March 31, 2025. This increase was primarily attributable to higher interest rates earned on program deposit balances, partially offset by slightly lower average program deposit balances compared to the same period in the prior year. Our realized gain on investments was $0 thousand for the three months ended March 31, 2026, compared to approximately $67 thousand for the three months ended March 31, 2025, since no investments were sold during the three months ended March 31, 2026.

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 three months ended March 31, 2026 was approximately $46 thousand compared to an income tax benefit of approximately $38 thousand for the three months ended March 31, 2025. The effective tax rate for the three months ended March 31, 2026 was 5.81%, based on income before income taxes of approximately $0.7 million. The effective tax rate for the three months ended March 31, 2025 was 8.9%, based on the loss before income taxes of approximately $0.4 million.

The change in the effective tax rate from the comparison of 2026 and 2025 as noted above primarily relates to our estimated earnings and the Company’s position that its deferred tax assets require a full valuation allowance.

Net Income (Loss)

Our net income for the three months ended March 31, 2026 was approximately $0.7 million, compared to net loss of approximately $0.4 million for the three months ended March 31, 2025. This change was primarily due to an increase in gross profit, and a decrease in operating expenses, for the reasons described above.

Liquidity and Capital Resources

As of March 31, 2026, we had cash and cash equivalents of approximately $7.6 million and investments of approximately $5.1 million. We have largely financed our operations primarily through cash generated from our initial public offering of common stock and warrants to purchase common stock in November 2021, our private placement of common stock and warrants to purchase common stock in December 2021, and positive cash flow this quarter.

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 March 31, 2027 and in the long-term beyond this period, including our anticipated costs associated with being a public reporting company. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. 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.

Summary of Cash Flows

The following table provides detailed information about our net cash flows for the three months ended March 31, 2026 and 2025 (in thousands).

Net cash provided by operating activities was approximately $1.2 million for the three months ended March 31, 2026, as compared to net cash used in operating activities of approximately $5.9 million for the three March 31, 2025. The change was primarily due to net income this quarter, a decrease in cash used from the rewards program, and higher accounts payable and accruals as a result of timing. These increases were offset by higher vendor deposits for customer orders.

Net cash used in investing activities was approximately $0.3 million for the three months ended March 31, 2026, as compared to net cash provided by investing activities of approximately $0.8 million for the three months ended March 31, 2025. The change was primarily due to non-recurring redemptions of our investments from 2025.

Net cash used in financing activities was approximately $43 thousand for the three months ended March 31, 2026, as compared to approximately $40 thousand for the three months ended March 31, 2025. Net cash used in financing activities was primarily related to payments of installment loan liabilities, which remained consistent from period to period.

Contractual Obligations

Property Leases

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

On November 26, 2024, the Company entered into a lease for a 6,500-square foot office space in Irvine, California. The lease commenced on January 1, 2025 and is for a term of 36 months from the commencement date. The lease contains an initial base rent of approximately $17 thousand per month. The lease included an escalation clause with annual increases of approximately 4% per year.

The following is a schedule by years of future minimum lease payments (in thousands):

Lease costs for the three months ended March 31, 2026 and 2025 totaled approximately $0.2 million and $0.2 million, respectively. 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. As of March 31, 2026 and December 31, 2025, the Company had net reward card program liabilities totaling approximately $0.9 million and $1.5 million, respectively.

Critical Accounting Estimates

We prepare our financial statements in accordance with U.S. GAAP. The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. 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.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our unaudited consolidated financial statements that require estimation but are not deemed critical, as defined above.

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 11 of this Quarterly Report on Form 10-Q.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) prior to the filing of this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective due to the following material weaknesses in our internal control over financial reporting:

• There was a material weakness in our internal controls related to the proper design and implementation of certain controls over the review and approval of journal entries.
• There was a material weakness in our internal controls related to the proper selection and development of certain information technology general controls related to user access, vendor management and change management controls that led to deficiencies in the design and operation of control activities.

Changes in Internal Control Over Financial Reporting

Following the identification and communication of the material weaknesses described above, management continued to implement the following remediation actions relating to these material weaknesses during the three months ended March 31, 2026 as follows:

• Management, with the assistance of a third party, continued to perform an evaluation of the processes and procedures around our processes, internal control design gaps, and recommend process enhancements.
• Management is implementing enhanced policies and procedures governing the preparation, review, and approval of journal entries. These efforts include the implementation of improved approval workflows within the Company’s NetSuite system, the establishment of more clearly defined review criteria, and the refinement of user roles and responsibilities to strengthen segregation of duties and ensure appropriate review and authorization of journal entries.
• We continued to implement enhancements and process improvements, including the design and implementation of reporting systems relating to the January 2025 launch of our NetSuite enterprise resource planning system. These enhancements include refinements to user access controls, enhancements to vendor setup and management procedures and improvements to the documentation and review of system configuration changes.

The material weaknesses identified above will not be considered fully remediated until these additional controls and procedures have operated effectively for a sufficient period of time and management has concluded, through testing, that these controls are effective. Our management will monitor the effectiveness of our remediation plans and will make changes that management determines to be appropriate.

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than those described above.

Inherent Limitation on the Effectiveness of Internal Control

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with our policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

PART II

OTHER INFORMATION

There are no material changes from the risk factors previously disclosed in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025.