Business Context and Reporting Period
Research Solutions, Inc. (Nevada) filed this Form 8-K on December 28, 2017, to report the entry into a Material Definitive Agreement. The company is headquartered in Encino, California.
Key Financial Metrics and Debt Structure
The filing details a new revolving line of credit with Silicon Valley Bank. The facility is capped at the lesser of $2,500,000 or 80% of eligible accounts receivable. The agreement matures on December 31, 2019, and is secured by the registrant's consolidated assets.
- Interest Rate: Prime rate plus 2.25% during a "Streamline Period" (adjusted quick ratio of 1.3 to 1.0); Prime rate plus 5.25% otherwise.
- Default Rate: 5% above the applicable rate during an event of default.
- Financial Covenants:
- Adjusted quick ratio (unrestricted cash and net accounts receivable divided by current liabilities plus debt less deferred revenue) of at least 1.15 to 1.0.
- Tangible net worth of $1,500,000 plus 50% of net income for each fiscal quarter ended after December 31, 2017, plus 50% of equity issuances and subordinated debt received after October 1, 2017.
The filing text does not provide current values for revenue, profit, cash flow, margins, or total debt outstanding as of the filing date.
Material Changes Versus Prior Period
The New Loan Agreement amends and restates in its entirety a previous Loan and Security Agreement dated July 23, 2010. While the credit facility terms have been updated, existing security documents, including those related to intellectual property, letters of credit, and UCC-1 financing statements, remain in full force and effect.
Guidance, Outlook, and Risks
The agreement is subject to financial and performance covenants. Failure to maintain the required adjusted quick ratio or tangible net worth could result in higher interest rates or an event of default. The filing does not contain specific management commentary on future revenue guidance or operational outlook beyond the terms of the loan agreement.
Important Facts for Investor Verification
- Verify the company's current adjusted quick ratio to determine if it qualifies for the lower interest rate tier (1.3 to 1.0) or is subject to the higher rate (5.25% over prime).
- Confirm the company's tangible net worth against the covenant requirement of $1,500,000 plus applicable adjustments.
- Review the amount of eligible accounts receivable to understand the actual borrowing capacity under the 80% limit.
- Check for any existing events of default that may have triggered the penalty interest rate.