STANLEY FURNITURE CO INC.

On April 20, 2021, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with National Consumer Title Insurance Company, a Florida corporation (“NCTIC”), National Consumer Title Group LLC, a Florida limited liability company (“NCTG”), Southern Fidelity Insurance Company, a Florida corporation (“SFIC”), Southern Fidelity Managing Agency, LLC, a Florida limited liability company (“SFMA”), and Preferred Managing Agency, LLC, a Florida limited liability company (“PMA” and together with SFIC and SFMA, each, a “Seller” and collectively, the “Sellers”). Under the Purchase Agreement, the Company is purchasing 100% of the stock of NCTIC and 100% of the membership interest in NCTG for $5.5 million, less the debt of NCTIC and NCTG, subject to a customary working capital adjustment (the “Purchase Price”). The Company will also pay up to $75,000 of the transaction expenses of the Sellers, with any such expenses above that amount being deducted from the Purchase Price. The Company expects to fund these amounts from cash on hand.

Assuming the transaction closes, under the Purchase Agreement, the Company will effectively be purchasing (i) 100% of the stock of NCTIC, a Florida title insurer formed in 2017, and (ii) a 100% membership interest in NCTG, which owns a 50% non-controlling membership interest in Title Agency Ventures, LLC (“TAV”), and by virtue thereof, owns 50% of the membership interest in Omega National Title Agency (“Omega”), also a Florida based title agency. NCTIC provides title insurance, closing and/or escrow services and similar or related services in the state of Florida in connection with residential real estate transactions. Omega operates 10 title agency locations in Florida providing title agency services for residential real estate transactions.

As a closing condition, all necessary regulatory approvals and governmental consents must be obtained, including those from the Florida Office of Insurance Regulation.  Further, the consummation of the transactions contemplated by the Purchase Agreement is subject to certain specified closing conditions, including the receipt of certain third-party consents or approvals, the absence of a “material adverse effect” with respect to the NCTIC, NCTG, Omega and TAV (taken as a whole), and other customary closing conditions, including the accuracy of each party’s representations and warranties and each party’s compliance with its obligations and covenants under the Purchase Agreement. The Purchase Agreement also provides the Sellers and the Company with customary termination rights, including the right to terminate the Purchase Agreement if (to no fault of the terminating party) the closing conditions are not fulfilled by 120 days after the signing date. The transactions contemplated by the Purchase Agreement are not subject to any additional approvals by the Sellers’ owners or the Company’s stockholders.

The Company generated interest income of $12,000 and $224,000 for the three month periods ending March 31, 2021 and 2020, respectively. The decrease was primarily a result of decreased interest income from the Second A&R Note pursuant to the Forbearance Agreement and payoff of that note in March 2020, decreased interest income from the HC Realty Loan Agreement as a result of the payoff of that note in August 2020, ceasing to accrete interest income on the S&L Note in third quarter 2020, and lower interest rates on our cash deposits. Interest income for the three month period ending March 31, 2021 consisted of cash interest income on our cash deposits and income tax receivable. The Company generated dividend income of $256,000 and $50,000 for the three month periods ending March 31, 2021 and 2020, respectively. The increase resulted primarily from the April 3, April 29, and June 29, 2020 acquisitions of additional HC Realty Series B Stock.

General and administrative expenses decreased to $340,000 for the three month period ending March 31, 2021 from $439,000 for the three month period ended March 31, 2020 primarily due to reduced legal and professional fees incurred in connection with the Company’s registration statement and amendments with respect to the Rights Offering in June 2020. General and administrative expenses for the three month period ending March 31, 2021 consisted of $161,000 of professional fees, $63,000 of wages, $21,000 of insurance expense, $21,000 of stock based compensation expense, $12,000 of franchise tax expense, and $62,000 of other operating expenses. Included in the expenses incurred in the three month period ended March 31, 2021 were approximately $94,000 of legal and professional fees and other due diligence costs related to the pursuit of potential acquisitions, including the transactions contemplated by the Purchase Agreement.