Craftom, Inc., (the “Issuer”, “The Company”, “Craftom”, or “Borrower”) is issuing up to $1,500,000 in secured promissory notes (the “Notes” or “Securities”) to finance i) investment in internal systems and platforms, ii) hire additional sales staff to support robust pipeline of customers, iii) purchase warehouse to meet growing demand.
Loan Amount: Up to $1,500,000.
Final maturity: August 31, 2025, upon which time all outstanding Note principal and interest are due and payable.
Interest: 14.0% payable at the beginning of each month.
Amortization: Mortgage style amortization beginning on the first day of the month following the initial closing of this offering.
Craftom, Inc. is a B2B buying platform that resells physical goods, software and services to midsize and enterprise companies. Established in 2019, the business has quickly established a reputation for providing high-quality products and customer service.
Craftom's user-friendly software platform enables businesses to source and purchase a wide array of products, from computer equipment and software products to branded merchandise and office supplies in minutes instead of days. The company distinguishes itself in the enterprise products market due to its robust marketplace of products, competitive pricing, and fast fulfillment. These advantages make Craftom an ideal choice for companies seeking a dependable technology-powered reseller.
The company has earned a reputation for its commitment to delivering exceptional customer service and a vast product range. A number of prominent companies, including Hitachi, Workday, NetApp, TD Synnex, Tanium, Arrow Electronics and others have come to trust Craftom as their preferred and established supplier for their technological requirements.
Craftom provides a B2B software-powered platform that enables reselling of Physical Goods, Software Products, and Gig Services. Currently, their marketplace offers over 1 million products and services. Craftom is reshaping the reseller space for midsize and enterprise companies in Revenue, IT, and HR sectors with its advanced software, strong marketplace, and faster fulfillment compared to legacy resellers.
As evidenced by the chart below provided by Statista, global IT spending has historically averaged around $3.5 trillion. However, as a consequence of the pandemic, there has been a significant surge, surpassing $4.4 trillion in expenditures. This upward trajectory is projected to endure and experience sustainable growth in the years ahead as Statista is projecting global spending to be slightly above $5 trillion in 2024.
The global sales of devices in the IT sector are anticipated to reach a significant milestone, surpassing $759 billion in 2024. Within this sector, the device segment holds great relevance for Craftom, as businesses inquire Craftom on a recurring basis to fulfill their technology device needs. Craftom has established itself as a reliable source for acquiring technological devices, attracting regular inquiries from companies. Craftom has laid strong groundwork by building a reputable brand and implementing an efficient operational framework, strategically positioning itself to leverage the growth presented by the overall market.
Craftom has a significant revenue growth opportunity within the realm of enterprise technology goods and services, as it can penetrate the +$1 trillion total addressable market (TAM).
This Term Sheet summarizes the principal terms of the Secured Promissory Notes (the "Notes" or “Loans”) of Craftom, Inc., a Delaware corporation (the “Company”, with the issuance and sale of the Notes referred to herein as the “Offering”). The information below is summary in nature and shall be subject to the final terms in those documents governing the Notes (the “Loan Documents”).
The Company shall issue secured promissory notes (the “Notes”) including fully amortizing interest and principal payments on the 1st day of each month until their maturity on August 31st, 2025. The proceeds from the Offering facilitate (i) investment in internal systems and platforms, (ii) hiring of additional sales staff to support a robust pipeline of customers, and (iii) purchasing or leasing a warehouse to meet growing demand.
Craftom, Inc., a Delaware corporation (the “Company”).
A minimum of $500,000 (the “Minimum Offering Amount”) and up to $1,500,000 from investors identified by the Company (the “Investors”, each an “Investor”). Funds will be placed in an escrow account until the Minimum Offering Amount is received in such escrow account (the “First Closing”). Thereafter, funds will be set directly to the Company in one or more closings.
The minimum investment amount for the Notes is $30,000, subject to exception at the Issuer’s full and absolute discretion.
The Minimum Offering Amount must be received in the Escrow Account (as further defined herein) on or before October 31, 2023 (the “Escrow Termination Date”). Following the First Closing, the Issuer may continue to receive investment funds at its full and absolute discretion.
Until the Minimum Offering Amount is aggregated in an escrow account with U.S. Bank serving as escrow agent (the “Escrow Account"), all Investor funds will be aggregated in the Escrow Account and, if the Minimum Offering Amount is not reached on or before the Escrow Termination Date, returned to Investors without interest thereon. Investment funds shall not accrue interest until the First Closing. If a single investor wishes to subscribe for an amount equal or greater than the Minimum Offering Amount and no funds are currently in the Escrow Account, the funds from such Investor, and any funds committed thereafter, will be sent directly to the Company in lieu of the escrow account.
Funds counted towards the Minimum Offering Amount may include the funds advanced by Investors in the Offering along with certain “Alternative Consideration”, such as the conversion of other outstanding debt.
For more information concerning the contribution from affiliates and other parties with a financial interest in the Offering, see the “Purchases by Affiliates of the Issuer and Other Parties with a Financial Interest in the Offering” section of the Risk Factors.
The "Maturity Date" shall be August 31st, 2025.
The Notes will pay Investors an annual interest rate equaling the higher of (i) 14.00 %, or (ii) the U.S. Prime Rate as published in the Wall Street Journal plus 5.0%, calculated on an actual/365-day basis, provided that the annual interest rate shall not exceed 17.0% (the “Interest Rate”). If necessary, the applicable rate shall be reset July 1 and January 1 of each year for each subsequent monthly payment the Notes are outstanding. Each payment will be due on the first day of each month or, if occurring on a weekend or holiday, on the next business day and calculated on a 30/360 basis.
Equal monthly payments of interest and principal following a mortgage-style amortization shall begin on the first day of the month following the month in which the Initial Closing occurs and shall continue until the Maturity Date, at which point all outstanding interest and principal is due.
The principal and accrued interest may be prepaid by the Company at any time and for any reason, provided that the Investor receives, at the time of such pre-payment, the aggregate of (i) such Investor’s original investment principal, plus (ii) an amount equal to their original investment principal times the annual Interest Rate then in effect at the time of such prepayment, with such aggregate amount then being reduced by any payments previously received by such Investor.
The Notes shall rank senior to any and all other indebtedness of the Company, except for the “Permitted Encumbrances” as defined below:
“Permitted Encumbrances” shall mean those liens, if appropriately perfected, created by way of (i) that certain indebtedness to Grow Financial Credit Union for vehicle financing, (ii) that certain line of credit with TowneBank, which amount outstanding shall not exceed $100,000 during the life of the Loans, and (iii) purchase money secured interests and bona fide leases.
The Notes shall be secured by all assets of the Company (the "Collateral") and the Investors shall, except for Collateral secured by a Permitted Lien, hold a first-priority secured interest in such Collateral. The secured interest granted pursuant to the Notes shall be shared amongst Investors pro-rata to their outstanding principal amount and regardless of their investment date. A financing statement perfecting this secured interest shall name CFG Financial Services, LLC, as the secured party.
At any time following the one year anniversary of the First Closing, the Company may issue a second tranche of Notes (the “Second Tranche”) with terms substantially similar to and of equal rank with this first tranche, provided that the maturity date for such Second Tranche shall be the two year anniversary of the first closing of such Second Tranche.
The Second Tranche may be issued in an amount that, when aggregated with the outstanding principal of this first tranche. Shall not exceed $2,500,000.
Standard for this type of financing, which may include (i) delivery of reporting requirements, including unaudited monthly and annual financial statements, (ii) Collateral requirements, (iii) notices, (iv) financial records, (v) existence/nature of business, (vi) insurance, (viii) payment of expenses, (viii) payment of taxes, (ix) Maintenance of properties, (x) field examinations, (xi) appraisals, (xii) material contracts, and (xiii) compliance with laws, (xiv) Licenses, Permits and protection of Collateral, (xv) control of accounts, and (xvi) use of proceeds.
At any point in time, the revenue to be earned over the next 12 months from the Company’s executed customer contracts shall equal at least three times the value of the Notes’ outstanding principal at such point in time.
On the first day of each month the Company shall deliver to the Administrative Agent a Compliance Certificate signed by the Company’s Chief Financial Officer detailing (i) the number of executed contracts for which revenue is pending, (ii) the remaining term of each such contract, and (iii) the revenue to be earned from such contract in the next 12 months, including the month in which such Compliance Certificate is delivered.
Standard for this type of financing, which may include (i) Loans and investments, (ii) liens, (iii) limitation on indebtedness, (iv) articles of organization or operating agreement, (v) transactions among affiliates, (vi) prepayments of indebtedness, (vi) distributions, (vii) change in accounting principles or fiscal year, (viii) sale and leaseback, (ix) maintenance of corporate existence and nature of business, (x) special covenants as to Collateral, (xi) disposal of assets, and (xii) anti-corruption laws.
If the Investor does not receive any payment by the end of the date on which it is due or an Event of Default is outstanding, the Company will pay the Investor a “Default Charge” calculated as if it were additional interest on the outstanding principal balance at the rate of 6% per annum until such payment is received by the Investor or an Event of Default no longer exists.
The following events shall constitute an “Event of Default” under the Notes:
(i) Failure by the Company to pay any amounts when due, subject to a 5-business day cure period, and accompanied by the Default Charge;
(ii) Failure to comply with any provision of the Loan Documents, including affirmative and negative covenants;
(iii) The filing by the company for relief under any bankruptcy or similar protection scheme; or
(iv) The filing of an involuntary petition against the company pursuant to any bankruptcy statute.
The Loan Documents may be amended by written consent of the Investors holding a Majority (i.e., 50.01%) of the principal outstanding at any time such amendment is sought.
Notwithstanding the foregoing, the written consent of Investors holding a Super Majority (i.e., 66.67%) of the then outstanding principal is required to (i) change the Maturity Date, change the Interest Rate, Default Charge, or any other fees payable, (ii) release or subordinate any Collateral, or (iv) waive or release in writing any claim against or obligation of the Company.
CFG Financial Services, LLC (“CFG FS”), an affiliate of CFS and Carofin, shall be appointed as Administrative Agent by the Company and the Investors regarding the Notes purchased by Investors.
Carolina Financial Securities, LLC ("CFS") shall receive a cash placement fee equal to 6% of the gross proceeds received by the Company in this Offering, with such fee being payable by the Company simultaneously with the closing of any investment. Up to 50% of such placement fee may be shared with Carofin, LLC, an affiliated Broker-Dealer, for its assistance in the placement of the Offering.
Carofin is a FINRA broker dealer, an investment bank headquartered in Brevard, North Carolina, that specializes in financing smaller businesses. Carofin’s parent company Carolina Financial Group, LLC, was established in 1995 and its affiliates have privately placed over $1 billion of debt and equity securities.
No. It is being privately placed under Rule 506c of Regulation D of the S.E.C.
Yes. They must have household income of $300,000 (for married couples) OR a net worth of $1,000,000, excluding the value of their primary residence, OR qualify for an institutional category of investor.’
Interest is paid in cash to investors on a monthly basis by CFG Financial Services, an affiliate of Carofin and administrative agent of the Note. If any interest payable date falls on a weekend or holiday the distribution will be made on the subsequent business day.
In the event of a default CFG Financial Services, an affiliate of Carofin and administrative agent during the life of the Notes, will notify the Issuer of such default or violation, interface with the Issuer to understand the underlying causes of such default and expected curing timeline, and work with Investors on any required forbearance or recovery of collateral.
Given its role as the administrative agent, CFG Financial Services is able to keep Investors informed about any unexpected changes in the Issuer's business, covenant compliance, or any potential prepayments or defaults.
AN INVESTMENT IN THE NOTES IS SPECULATIVE AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT AND HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. AN INVESTMENT IN THE SECURITIES OFFERED HEREIN SHOULD NOT BE A MAJOR PART OF YOUR INVESTMENT PORTFOLIO. YOU SHOULD REVIEW THE RISKS OF THIS INVESTMENT WITH YOUR LEGAL OR FINANCIAL ADVISORS.
THIS OFFERING INVOLVES SUBSTANTIAL RISKS. THESE RISKS INCLUDE, BY WAY OF ILLUSTRATION AND NOT LIMITATION, THE FOLLOWING: RISKS ASSOCIATED WITH THE FACT THAT THE MEMBERS WILL NOT HAVE THE RIGHT TO VOTE ON OR APPROVE MOST DECISIONS REGARDING THE BUSINESS AND, AS SUCH, WILL NOT BE IN CONTROL OF THEIR INVESTMENTS IN NOTES OF THE COMPANY AND THE BUSINESS; AND THE OPERATION OF THE COMPANY INVOLVES TRANSACTIONS BETWEEN THE COMPANY, THE MANAGER, AND THE OWNER WHICH MAY INVOLVE CONFLICTS OF INTEREST.
THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM, AND WITH THE PRIOR CONSENT OF THE MANAGER, WHICH CONSENT MAY BE WITHHELD IN THE MANAGER’S SOLE DISCRETION. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
SOME OF THE INFORMATION IN THIS PRESENTATION MAY CONTAIN “FORWARD-LOOKING” STATEMENTS. YOU CAN IDENTIFY SUCH STATEMENTS BY THE USE OF FORWARD-LOOKING WORDS SUCH AS “MAY,” “ANTICIPATE,” “ESTIMATE,” “COULD,” “SHOULD,” “WOULD,” “EXPECT,” “BELIEVE,” “WILL,” “PLAN,” “INTEND,” “PROJECT,” “PREDICT,” “POTENTIAL” OR OTHER SIMILAR WORDS. THESE TYPES OF STATEMENTS DISCUSS FUTURE EXPECTATIONS OR CONTAIN PROJECTIONS OR ESTIMATES WHICH MAY OR MAY NOT HAPPEN AS PROJECTED HEREIN. WHEN CONSIDERING SUCH FORWARD-LOOKING STATEMENTS, YOU SHOULD KEEP IN MIND THE RISK FACTORS LISTED BELOW, WHICH COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT.
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION WITH THE OTHER INFORMATION ABOUT THE NOTES BEFORE PARTICIPATING IN THIS OFFERING. THE RISKS DISCUSSED IN THIS PRESENTATION CAN ADVERSELY AFFECT THE COMPANY’S OPERATION, OPERATING RESULTS, FINANCIAL CONDITION AND PROSPECTS FOR SUCCESS. THIS COULD CAUSE THE VALUE OF THE SECURITIES OFFERED HEREIN TO DECLINE AND COULD CAUSE YOU TO LOSE PART OR ALL OF YOU INVESTMENT. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES THE COMPANY FACES BUT DO REPRESENT THOSE RISKS AND UNCERTAINTIES KNOWN TO THE COMPANY AND THAT THE COMPANY BELIEVES ARE MATERIAL TO THE COMPANY’S FUTURE OPERATING PERFORMANCE
The Loan being offered should be considered a speculative investment. The ability of the Borrower to achieve its objectives may be determined by factors beyond its control that cannot be predicted at this time. Consequently, there can be no assurance that the Borrower’s efforts to continue its business operations will prove to be sufficient to enable the Borrower to generate the funds required to repay the Loan. Anyone investing in the Loan should do so only if they are financially able to sustain the loss of their entire investment and should recognize that such a possibility exists.
A fundamental risk, relating to all Loans, is a chance that the Borrower will fail to make a principal and interest payment when due. Borrowers with higher credit risks typically offer higher yields for this added risk, such as the Borrower. Changes in financial conditions of the Borrower, changes in economic and political conditions in general, changes in economic or political conditions specific to the Borrower are factors that may have an adverse impact on the Borrower’s credit quality and security values.
This offering is predicated upon the Loan and Security Agreement between the Borrower and the Lenders for the repayment of its borrowings from Lenders, and, if necessary, on the third-party sale of the Collateral, which secures the Loan. If the Agreement becomes unenforceable or is not honored by the Borrower for any reason it will have a severe adverse effect on the sale of the collateral.
Notes may be purchased by the affiliates of the Issuer, or by other persons who will receive fees or other compensation or gain dependent upon the success of the Offering. Such purchases may be made at any time and will be counted in determining whether the required minimum level of purchases has been met for the closing of the Offering. Therefore, Investors should not expect that the sale of sufficient Notes to reach the specified minimum, or in excess of that minimum, indicates that such sales have been made to investors who have no financial or other interest in the Offering, or who otherwise are exercising independent investment discretion.
The sale of the specified minimum, while necessary to the business operations of the Issuer, is not designed as a protection to investors, or to indicate that their investment decision is shared by other unaffiliated investors. Because there may be substantial purchases by affiliates of the Issuer, or other persons who will receive fees or other compensation or gain dependent upon the success of the Offering, no individual investor should place any reliance on the sale of the specified minimum as an indication of the merits of the Offering. Each investor must make his own investment decision as to the merits of this Offering.
The Borrower’s business is initially dependent on the enterprise technology industry. If demand were greatly diminished, it could affect the Borrower’s ability to sell product to its current customers and it would have to seek new markets for its product.
As this Loan is a private transaction, there is currently no public market for the Borrower’s Loans being offered herein. This Loan is not a publicly registered security and will have no secondary sale liquidity.
Any substantial decline in the demand for products sold by the Borrower, but not limited to, the introduction of substitute products, may cause a decline in the market value of Borrower’s product and negatively impact the Borrower’s financial performance.
Outbreaks of disease and other events, which may be beyond the company’s control, producers who sell goods to Craftom, could significantly affect demand for its products, consumer perceptions of products, the availability of materials for purchase and its ability to conduct its operations.
The Borrower competes with other companies in the industry. Competitors include companies that may have greater financial and other resources than the Borrower. Additionally, these competitors may use pricing or other strategies to prevent the Borrower from achieving its business development objectives. This may have a material adverse impact on the financial position and prospects of the Borrower.
The efficiency and effectiveness of the supply chain directly impact critical business factors such as cost, quality, delivery time, and customer satisfaction. The inability to source and deliver goods and services may have a material impact on the financial performance of the business.
Due to the size of the organization, the Borrower has a significant reliance on certain key employees, particularly Caleb Musser and Glenn Chambers. If the Borrower is unable to retain key employees it could jeopardize the Borrower’s ability to implement its business plan, its relationships with its customers, and its financial stability.
The Borrower expects to continue to grow its overall operations and this may strain the Borrower’s resources. Any inability to manage growth effectively would have a material adverse effect on the Borrower’s business.
The Borrower reserves the right to accept or reject any proposed investment in its sole discretion. Subject to this discretion, it intends to accept investments on a “first-come, first-served” basis, with the consequence that Lenders will be allocated a portion of the total Offering, based upon the amounts they have committed, in the order in which such commitments have been accepted. The Borrower is not required to accept all commitments tendered to it. There is no assurance, therefore, that your commitment will necessarily be accepted in whole or in part by it should it raise more or less funds than are needed to make its investments.
The financial projections contained in this Offering Summary and any supplements represent the Borrower’s estimated results of operations. The financial projections have been prepared upon the basis of assumptions and estimates which may differ from actual events and/or circumstances.
Certain aspects of the Loan Documents may be amended by certain Investors without the unanimous consent of all Investors. The Investors seeking or agreeing to such an amendment may have different risk profiles and may delay the repayment of the Notes or effect an amendment that is adverse to the interests of other Investors.
The Borrower has not requested and will not request any tax ruling from the IRS regarding the tax consequences of the Borrower’s activities. Accordingly, there is no certainty as to the tax consequences of participating in the Loan. The Borrower has not sought or obtained a legal opinion with respect to the tax treatment of the offering proceeds or issuance of the Loan. Accordingly, Lenders are urged to consult your own tax advisor with respect to the federal and state tax consequences arising from participation in this Offering.
There is a possibility that the IRS will audit the Borrower’s income tax returns. If the Borrower’s income tax returns are audited, your return might also be audited.
No assurance can be given that the current Congress or any future Congress will not enact federal income tax legislation that could adversely affect the tax consequences of participating in the Loan.
Potential investors should not rely exclusively on one aspect of the security structure, such as the debt service capacity of the Company when making an investment decision on whether or not to participate in this Offering.
In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. Prospective investors reviewing this Offering Summary should keep in mind other possible risks that could be important to the success of their investment in the Notes.
A Carofin representative will be in touch soon.