Business Context and Reporting Period
This Form 8-K was filed by RELM Wireless Corporation on June 14, 2006. The filing reports the entry into a material definitive agreement regarding the company's secured revolving credit facility.
Key Financial Metrics
- Credit Facility: Secured revolving credit facility with a borrowing availability of up to $3,500,000.
- Outstanding Borrowings: $0 as of June 14, 2006.
- Interest Rate Structure:
- Previous Rate: Prime plus 1% (minimum 6.25%).
- New Base Rate: Reduced initially by 0.50% from the previous rate.
- Performance Incentive: An additional 0.15% reduction applies if Net Profit for each fiscal quarter after June 30, 2006, is at least $1,700,000.
Material Changes
The company entered into the Fifth Loan Modification Agreement with Silicon Valley Bank. Key changes include:
- Maturity Extension: The maturity date of the facility was extended from January 1, 2007, to January 1, 2008.
- Cost Reduction: The interest rate was lowered, with potential for further reduction based on profitability targets.
Outlook, Risks, and Management Commentary
The filing does not provide specific forward-looking guidance, risk factors, or management commentary beyond the terms of the loan modification. The agreement establishes a profitability threshold ($1,700,000 quarterly Net Profit) required to achieve the maximum interest rate reduction.
Investor Verification Checklist
- Verify the current prime rate to calculate the exact effective interest rate under the new agreement.
- Review the company's most recent quarterly financial statements to assess the likelihood of meeting the $1,700,000 Net Profit threshold for the interest rate reduction.
- Confirm the status of the $3,500,000 credit facility availability in subsequent filings.
- Note that the filing text does not provide specific revenue, cash flow, or total debt figures beyond the credit facility details.