Business Context and Reporting Period
Where Food Comes From, Inc. filed this Form 8-K on September 2, 2014, to disclose the entry into a material definitive agreement. The company is a Colorado corporation headquartered in Castle Rock, Colorado.
Key Financial Metrics and Debt
- New Credit Facility: Entered into a revolving line of credit with Castle Rock Bank for up to $500,000.
- Interest Rate: 3.750% per annum, payable monthly.
- Term: September 2, 2014, to September 2, 2015.
- Collateral: Secured by a $250,000 certificate of deposit and a security interest in 500,000 shares of common stock owned by significant shareholders John and Leann Saunders.
- Debt Repayment: The company paid off an existing loan with Great Western Bank with an outstanding principal balance of approximately $150,000 prior to securing the new line of credit.
The filing text does not provide clear values for revenue, profit, cash flow, or operating margins as this is a current report regarding a specific agreement rather than a periodic financial statement.
Material Changes
The primary material change is the refinancing of debt. The company replaced an existing obligation of approximately $150,000 with Great Western Bank with a new, larger revolving credit facility of up to $500,000 with Castle Rock Bank. This action increases the company's available liquidity and alters its debt structure and collateral requirements.
Outlook, Risks, and Contingencies
The agreement includes customary affirmative and negative covenants. Borrowed amounts must be repaid by September 2, 2015, though prepayment is allowed without penalties. The reliance on collateral provided by significant shareholders (the Saunders family) represents a specific contingency regarding the security of the loan.
Investor Verification Checklist
- Verify the full terms of the Business Loan Agreement and Promissory Note filed as Exhibit 10.1.
- Confirm the status of the $250,000 certificate of deposit pledged as collateral.
- Review the specific affirmative and negative covenants to understand operational restrictions.
- Assess the impact of the new debt structure on the company's future cash flow requirements.