Stran & Company, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated May 31, 2023, reports the completion of an asset acquisition by Stran & Company, Inc. (the "Company"). The transaction involves the acquisition of substantially all assets of T R Miller Co., Inc. ("T R Miller"), a business focused on branding, marketing, and promotional products and services. The closing of the transaction occurred on June 1, 2023.
Key Financial Metrics and Transaction Details
The filing details the financial structure of the acquisition rather than the Company's general operating results for a period.
- Cash Consideration at Closing: The Company paid $2,154,230.21 in cash on June 1, 2023.
- Price Composition: The payment included a base purchase price of $1,000,000, a working capital adjustment of $1,123,071.82, and first and last month's rent totaling $31,158.39.
- Future Installment Payments: The Company agreed to make four annual installment payments: $400,000 (Year 1), $300,000 (Year 2), $200,000 (Year 3), and $200,000 (Year 4). These are subject to adjustments for uncollected accounts receivable.
- Earn-Out Payments: Four annual earn-out payments are contingent on T R Miller's annual Gross Profit exceeding $4,000,000. Payments consist of 45% of excess profit for specific customers and 25% for others, calculated on a trailing 12-month basis.
- Lease Obligations: The Company entered a lease for a warehouse facility with a base rent of $179,550.00 for the first year, increasing by 2% annually. The term runs from June 1, 2023, to May 31, 2028.
Material Changes and Agreements
The primary material change is the expansion of the Company's operations through the acquisition of T R Miller. Key agreements executed include:
- Asset Purchase Agreement: Finalized the transfer of assets and assumption of specific liabilities.
- Lease Agreement: Secured a warehouse facility previously used by T R Miller.
- Employment and Consulting: The Company entered into a three-year consulting agreement with the Miller Stockholder and an employment agreement with Stacy Miller.
Outlook, Risks, and Contingencies
The filing includes standard forward-looking statements regarding the Company's expectations for financial position and operating performance, noting that actual results may vary materially due to risks and uncertainties. Specific contingencies include:
- Working Capital and Receivables: Future installment payments are subject to adjustment based on uncollected accounts receivable after the first 12 months.
- Earn-Out Performance: Additional payments depend on the acquired business achieving gross profit targets above $4,000,000.
- Financial Statements: Required financial statements of the acquired business and pro forma financial information are not included in this filing and will be submitted by amendment within 71 days.
Investor Verification Checklist
- Verify the final working capital adjustment amount and any subsequent adjustments to the purchase price.
- Monitor the performance of the T R Miller business to determine if earn-out thresholds ($4,000,000 Gross Profit) are met.
- Review the upcoming amendment to this 8-K (due within 71 days) for the acquired business's financial statements and pro forma data.
- Assess the impact of the new lease obligations ($179,550 annual base rent) on future cash flow.
- Confirm the status of assumed liabilities and any indemnification claims arising from the transaction.