Business Context and Reporting Period
Company: Research Solutions, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 4, 2015
Reporting Period: Events occurring on November 4, 2015, and the Annual Meeting held on November 6, 2015.
Key Financial Metrics and Agreements
This filing details a material amendment to a credit facility rather than standard periodic financial results. Key terms include:
- Credit Facility: Amendment to Loan and Security Agreement with Silicon Valley Bank, N.A. (SVB).
- Interest Rate: Reduced to 2.25% above the prime rate, contingent on maintaining a net account balance of at least $800,000 with SVB.
- Maturity Date: Extended to October 31, 2017.
- Termination Fees: $80,000 if terminated on or before October 31, 2016; $40,000 if terminated thereafter (unless replaced by another SVB facility).
- Anniversary Fee: $17,500 due on October 31, 2016.
- Covenants: Tangible net worth requirement increased to $600,000 plus 50% of net income (post-Dec 31, 2015) and 50% of equity issuances/subordinated debt (post-Oct 1, 2015).
- Borrowing Base: Modified to include up to 25% of eligible foreign accounts.
Note: The filing text does not provide specific values for current revenue, profit, cash flow, or total debt outstanding.
Material Changes and Corporate Actions
Amendment to Loan Agreement: The company secured more favorable interest rates and extended the maturity of its line of credit, though it accepted higher tangible net worth covenants and specific termination fees.
Annual Meeting Results (November 6, 2015):
- Attendance: 16,769,575 shares represented (91% of 18,394,125 entitled to vote).
- Board Elections: All five director nominees (John Regazzi, Peter Derycz, Merrill McPeak, Scott Ogilvie, Janice Peterson) were elected with over 99% of votes cast "For".
- Accountants: Ratification of Weinberg & Company, P.A. passed with 16,556,367 votes "For" versus 152,964 "Against".
- Executive Compensation: Non-binding advisory vote approved with 11,356,336 votes "For" versus 103,970 "Against".
Guidance, Outlook, and Risks
Management Commentary: The filing contains no forward-looking guidance regarding revenue or earnings.
Risks and Contingencies:
- Liquidity Risk: The company must maintain a minimum net balance of $800,000 with SVB to qualify for the reduced interest rate.
- Covenant Compliance: Failure to meet the new tangible net worth requirements could trigger a default.
- Termination Costs: Significant fees ($80,000 or $40,000) apply if the credit line is terminated before October 31, 2017, without replacement by an SVB division.
Investor Verification Checklist
- Verify the company's current cash balance to ensure compliance with the $800,000 SVB account balance requirement for the reduced interest rate.
- Review the most recent 10-K or 10-Q to confirm the company's tangible net worth meets the new $600,000 plus income/equity issuance threshold.
- Assess the company's ability to service the debt given the new maturity date of October 31, 2017.
- Confirm the status of the $17,500 anniversary fee obligation due in October 2016.