STRAN & COMPANY, INC.

(STRN)
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Delayed Nasdaq  -  04:00 2022-06-24 pm EDT
1.720 USD   -2.27%
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STRAN & COMPANY, INC. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Other Events, Financial Statements and Exhibits (form 8-K)

11/26/2021 | 04:23pm EDT

Item 1.01 Entry into a Material Definitive Agreement.

On November 22, 2021, Stran & Company, Inc. (the "Company") entered into a Revolving Demand Line of Credit Loan Agreement (the "Loan Agreement"), with Salem Five Cents Savings Bank (the "Lender"), for aggregate loans of up to $7 million (the "Loan" or "Line of Credit"), evidenced by a Revolving Demand Line of Credit Note, also dated November 22, 2021 (the "Note"). The Line of Credit and Note are secured by a first priority security interest in all assets and property of the Company, as more fully described in the Security Agreement, also dated November 22, 2021, between the Lender and the Borrower (the "Security Agreement" and together with the Loan Agreement and the Note, the "Loan Documents").

The amount available under the Line of Credit is the lesser of $7 million or the sum of (x) eighty percent (80%) of the then-outstanding amount of Eligible Accounts (as defined below), plus (y) fifty percent (50%) of Eligible Inventory (as defined below); minus one hundred (100%) percent of the aggregate amount then drawn under the Line of Credit for the account of the Company. In addition, advances based upon Eligible Inventory must be capped at all times at $2,000,000. "Eligible Accounts" are defined as accounts that meet a number of requirements, including, unless otherwise approved by the Lender, being less than ninety (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 of America, 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 Inventory" means all finished goods, work in progress and raw materials and component parts of inventory owned by the Company. 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's Waiver and Consent 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.

The Loan is subject to interest at the prime rate plus 0.5% per annum. The Company must repay interest on Loan proceeds on a monthly basis. The Loan is expected to continue for 12 months, subject to the Lender's demand rights and the Company's ongoing affirmative and other obligations under the Loan Documents, as summarized below.

The Company may freely drawn upon the Loan subject to the Lender's right to demand complete repayment of the Loan at any time. Late payments are subject to a late payment charge of 5%. In the event of failure to repay the loan 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.

Under the Security Agreement and the other Loan Documents, the Company granted the Lender a first priority security interest in all of its assets, both owned now and in the future, as collateral for full repayment of the Loan. 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. Upon default of the Loan, the Lender may accelerate repayment of the Loan, 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 Company must pay for all of the Lender's reasonable legal fees and expenses incurred to enforce its rights under the Loan Documents.

Under the Loan Agreement, the Company is required to continue its current business of outsourced marketing solutions and without the prior consent of the Lender will 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, and will use the proceeds of the Loan only in connection with the general and ordinary operations of its business and for the following purpose: general working capital for accounts receivable and inventory purchases.

The Loan is also subject to ongoing affirmative obligations of the Company, including punctual repayment of the Loan amount, maintaining proper accounting books and records in accordance with the opinion of LMHS, P.C. or another a 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, payment of Lender's reasonable expenses for a field exam in 2022, allow the Lender to communicate with its accountants; maintain its properties in good repair subject to ordinary wear and tear; and obtain replacement-cost insurance for its property with the Lender as Mortgagee/Loss Payee; and management contracts for the Company's properties must be subordinated to the rights of the Lender and there shall be no change of management company without the prior written consent of the Lender.



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The Loan is 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; (b) Minimum Net Worth: The Company will be 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.

The Company may also 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; grant any security interests or mortgages in its properties or assets.

The foregoing summary of the Loan Agreement, the Note, and the Security . . .

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As a result of the Loan, under the Loan Documents, the Company became obligated on a direct financial obligation as of November 22, 2021. A description of the Loan and the Loan Documents creating the obligation, the amount of the obligation, including the terms of its payment and a description of the material terms under which it may be accelerated or increased and other terms and conditions of the Loan and the Loan Documents are provided in Item 1.01 above and incorporated by reference herein.


Item 8.01 Other Events.


On November 22, 2021, the Company issued a press release announcing the Loan. A copy of the press release is attached to this report as Exhibit 99.1. The press release furnished in this report as Exhibit 99.1 shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.



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Item 9.01 Financial Statements and Exhibits.




(d) Exhibits



Exhibit No.   Description of Exhibit
10.1            Revolving Demand Line of Credit Loan Agreement, dated November 22,
              2021, by and between Stran & Company, Inc. and Salem Five Cents Savings
              Bank
10.2            Revolving Demand Line of Credit Note, dated November 22, 2021, by
              Stran & Company, Inc. in favor of Salem Five Cents Savings Bank
10.3            Security Agreement, dated November 22, 2021, by and between Stran &
              Company, Inc. in favor of Salem Five Cents Savings Bank
10.4            Warehouseman's Waiver, dated November 4, 2021 and executed November
              22, 2021, by and among Harte Hanks Response Management/ Boston, Inc.,
              Stran & Company, Inc. and Salem Five Cents Savings Bank
99.1            Press Release dated November 22, 2021




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Financials (USD)
Sales 2022 54,6 M - -
Net income 2022 -0,63 M - -
Net Debt 2022 - - -
P/E ratio 2022 -57,3x
Yield 2022 -
Capitalization 34,4 M 34,4 M -
Capi. / Sales 2022 0,63x
Capi. / Sales 2023 0,55x
Nbr of Employees 67
Free-Float 46,8%
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Number of Analysts 1
Last Close Price 1,72 $
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Spread / Average Target 220%
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Managers and Directors
Andrew Shape President, Chief Executive Officer & Director
Christopher Rollins Chief Financial Officer
Andrew Stranberg Executive Chairman, Treasurer & Secretary
Jason Nolley Chief Technology Officer
Sheila Johnshoy Chief Operating Officer
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