Starco Brands Acquires Custom Bakehouse, Adding ~$20M in Revenue and Securing an $11M Term Loan
STCB sits 48% above its 52-week low of $0.016.
Summary
Starco Brands acquired Custom Bakehouse for $8M cash plus an earnout, adding ~$20M in annual revenue and a manufacturing facility. The deal was funded by an $11M term loan, with the CEO personally guaranteeing the debt and converting his own note to equity at $0.04/share.
Key Events · M&A and Partnerships · STCB
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Acquires Custom Bakehouse
Custom Foods, LLC was purchased for $8M cash plus up to $2.5M in earnout payments tied to 2027 net revenue targets. The acquired business operates a 75,000 sq ft facility and is expected to add ~$20M in annual revenue.
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Secures $11M Senior Term Loan
A Loan Agreement with Pasadena Private Lending provides an $11M term loan, a $4M accordion, and a $3M revolving line of credit. Proceeds are earmarked to fund the acquisition and repay a $5M bridge note.
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CEO Personally Guarantees Debt
CEO Ross Sklar and family trusts provided personal guarantees for the new senior debt. Sklar also subordinated his $3.47M existing note, which was amended to be convertible into Class A common stock at $0.04 per share.
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Financial Covenants and Collateral
The loan requires a Maximum Senior Debt to EBITDA ratio of 3.00x and a Fixed Charge Coverage Ratio of 2.00x, secured by substantially all assets of the company and its subsidiaries.
Analysis · STCB · Trade & Services
A micro-cap consumer products company that was running on fumes—carrying a going-concern warning and a sub-$1M cash balance—has just closed a transformative acquisition of Custom Bakehouse. The deal brings a 75,000 sq ft manufacturing facility and an estimated $20M in annual revenue, a figure that eclipses the company's entire market cap. To fund the $8M cash purchase, Starco took on $11M in senior secured debt from Pasadena Private Lending, with an additional $4M accordion and $3M revolver available. CEO Ross Sklar personally guaranteed the debt and subordinated his own $3.47M note, now convertible at $0.04/share. Together, the acquisition and financing fundamentally alter Starco's scale, debt load, and risk profile—a thesis-changing event.
At the time of this filing, STCB was trading at $0.02 on OTC in the Trade & Services sector, with a market capitalization of approximately $18M. The 52-week trading range was $0.02 to $0.08. This filing was assessed with positive market sentiment and an importance score of 9 out of 10.